The tobacco story is an example of what happens when drug companies are allowed to create millions of addicts' markets and what governments can do to curb those markets without making a drug illegal, & # 39; – Professor David Nutt, former chief advisor on drug policy to the British government and author of Drugs Without The Hot Air.
There are more than a billion cigarette smokers in the world and tobacco will claim its billionth of life by the end of the next decade. Despite the industry's indisputable damage to the world's population, Big Tobacco (the five largest tobacco companies) continues to fight for its right to survive as it has done for more than half a century.
The vapor industry and the transition of tobacco
The tobacco industry has actually been crippled on the Western markets since governments finally realized that smoking had to be discouraged in the 1970s. They first restricted the industry's right to advertise and then completely dispose of and start restricting where smokers could enjoy their cigarette, and banned it in offices and impractical places such as hospitals and airplanes. It is a slow realization, but government efforts have accelerated in the last 15 years. Nowadays many countries do not allow smoking in public buildings at all, they have increased the legal age that someone can buy tobacco products and cigarettes extremely expensive due to higher taxes. Many have even forced the tobacco industry to use generic packaging that has been flooded with graphic health warnings and they have been banned from exhibiting.
But Big Tobacco has resisted any effort by governments and health authorities to harm their business. Their tacts had to change over the decades because they had no choice but to accept the irrefutable modern proof of the damage their products cause.
Nobody really began to understand the real health implications of smoking until the 1950s. Ironically, the tobacco industry would like to claim that cigarettes had no health benefit without evidence, but it was not surprising that the first doubts were about the validity of the investigation that began to condemn smoking as harmful to people's health. Politicians (many who smoked) were lobbied and doctors were used in advertisements to quote how one brand of cigarettes was healthier than the other: a famous slogan was even: & # 39; More doctors smoke camels than any other cigarette & # 39; 39 ;. A campaign at the end of the 1920s connected cigarettes with female empowerment, & # 39; a torch of freedom & # 39; for oppressed women, helping the industry to encourage women to smoke. Soldiers even got cigarettes as part of basic rations in both World Wars, which catch those who managed to survive war with a lethal addiction and cunning for the profits of the tobacco industry for the coming decades.
Big Tobacco continues to fight for survival as it has done for decades
While the industry flourished in ignorance, she had to begin to accept that she sold a lethal product in 1953, when a simple study opened the eyes of the public in a way that earlier studies on the effect of tobacco content could not. Instead of collecting data and causative effects of smoking and diseases, such as cancer, Dr. Ernst Wynder smeared on mice that subsequently developed tumors: a very real picture that both the press and consumers could understand, in contrast to previous scientific studies.
The impact of Wynder's research was so devastating that the following year the emergency industry & # 39; 1954 & # 39; was named. Big Tobacco made his decision and it was to fight. The American industry has made a joint statement in the national newspapers about the validity of the research, which rightly claims that at that time there was no concrete evidence to suggest smoking-induced diseases and that many elements of modern life just as well can be blamed. There even became a & # 39; independent & # 39; task force was set up to send 200,000 politicians, doctors and journalists a booklet in which all dubious and unclear data about the case were collected.
In the 1960s, however, Big Tobacco was forced to resign slowly to the evidence, but at that time it began its attempts to market smoking, not as a healthy choice but as a link with rebellion.
Their ability to compete and do something other than store their products in Western markets has almost disappeared, so the industry has focused on emerging economies in countries like Asia and the Pacific, where regulation is much more lax and the growing middle class with ever increasing amounts. of disposable income.
Smoking reaches its peak, but still more than a billion smokers worldwide
But the tobacco industry knows that it will not have free rein on these new markets as long as it happens in the West, and that the tobacco industry has been staring at its own demise for years. Worldwide, the number of smokers has peaked, from around 1.14 billion in 2000 to 1.1 billion today, according to the World Health Organization (WHO).
In many countries, tobacco can not compete on anything other than brand loyalty before the ban on advertising, packaging and displays and on the price (which is more difficult because of high taxes). For example, it is not necessary to work in the marketing department for a tobacco operation in the United Kingdom. This is partly the reason why tobacco companies, as far as investors are concerned, have become known for their reliable and progressive dividends, because the industry has less and less to invest in.
Vapen: the saving agent for Big Tobacco
But the rise of the vape appears to be the taste of the industry and Big Tobacco has invested billions of dollars over the past ten years. Branding, packaging, design and even flavors – including menthol that is increasingly prohibited in tobacco form – are all on the table again. The tobacco industry has succeeded in pressing reset and is now starting all over again.
Vapen and alternatives to traditional tobacco products were initially the spearhead of small, independent companies, as Big Tobacco looked from the sidelines to what future regulations for e-cigarettes might contain. But when the consensus in favor of the vapors grew, the largest tobacco companies started to consolidate the market. Today, while many of the most popular brands have escaped the clutches of Big Tobacco, they still own the majority of the best-selling vape brands thanks to their financial firepower and global scale.
The consensus in support of people is growing, but the debate grows
The US, UK and Japan are (in that order) the top three largest vapor markets leading their respective geographic regions, but the attitudes in these countries are different and in some countries vaping and products such as e-cigarettes absolutely forbidden, including in Brazil and Saudi Arabia. New Zealand embodied the state of affairs last year when it reversed and reversed its total ban on vape devices with policies that appear to have been inspired by British policy.
The debate about vapen is still controversial today. Those who support the vape in the UK claim above all that it is a safer alternative to traditional tobacco products and that it is the key to stop people & # 39; stop & # 39; smoking, and not encouraging a new generation of vapers. The idea that is put forward is that vapors or other alternatives should be marketed as health products, in other words, an assistant in stopping smoking. UK health authorities suggest that they are made available on prescription and supportive calls from some MPs who focus on non-vapers who need to accommodate vapers & # 39 ;. Moreover, the growing consensus is that there is little evidence that children start with vape or that vape is a gateway to other drugs, an important point in view of the fact that smoking is a habit that most people pick up in their teenage years. The US, where the market for vendors is much more commercial, is less convinced of this and regulators are still investigating the relationship between sheep and children.
The World Health Organization (WHO) sums up the crucial point of the debate about animals in just one sentence from its cautious but very reasonable attitude towards the vape: the long-term effects are unknown. But just like in the 1950s, Big Tobacco and the rest of industry in the narcotics industry benefited from the confusion and debate that continues to rumble.
The role of people in society raises a number of important questions for the industry
We're trying to help the current generation of smokers … I'm not occupied with myself in 100 years, & # 39; – BAT Scientific and Research & Development Director, David O & Reilly.
If vaping is to be launched on the basis that only those who smoke traditional tobacco products will use it and that they stop smoking, then this raises another question that, regardless of an investor's opinion on the health debate of a concern. If the amount of people smoking traditional tobacco peaks and decreases, how can the vapor market be sustainable? Many would say that it can not be sustained indefinitely for this model, but the industry is far from being concerned about it with more than a billion people to focus on.
Juul: shows the real intention of the farming industry?
Juul, one of the largest brands of e-cigarettes in the US recently introduced in the UK, embodies several problems for the industry. Although there are many different types of vaping devices, they usually meet a select number of models that focus on functionality. Juul, on the other hand, is a sleek and stylish e-cigarette that increasingly e-cigarettes & # 39; iPhone & # 39; is called.
This reveals the idea that smoking for smoking cessation is nothing but smoke and mirrors. Juul sells itself as a stylish product and some have argued that it encourages young people to go fumes and when you look at the variety of sweet flavors and the growing & # 39; hobbies & # 39; customer base that learns things like how you can blow smoke rings using their vapor. device, it is fair to argue against claims that the industry is not trying to create a new generation of vapers and does not focus on young people either. If you saw a Juul device on a school desk, you would think it was just a fairly long USB drive.
This shows the lack of agreement between the governments of the largest vapor markets. While the UK embraces the idea to stop people from smoking in the US, it is much more a commercial opportunity that encapsulates Juul in its entirety.
Big Tobacco does not monopolize the vaping scene as tobacco does, and if there is a lack of agreement on how to market your vape, whether as a health therapist or as a recreational device, then it could be the whole industry undermine. However, it is worth considering that the argument to fumes as a health tool is already undermined by the fact that Big Tobacco still sells billions of cigarettes a year, and that the idea of accepting it as a recreational activity at this stage. make the same mistakes as with cigarettes.
How big is the vape industry and how fast will it grow?
The vape industry has experienced exponential growth and is expected to continue to grow in the near future. Data from BIS Research show that the e-cigarette and garment market was worth $ 11.4 billion in 2016 and would grow by more than 23% between 2017 and 2025 with a composite annual growth rate (CAGR), while it estimates that the $ 86.4 billion will be worth.
Separate data from Euromonitor shows that there were approximately 35 million vapers in 2016, with a growth of only seven million in 2011, with estimates for up to 55 million vapers in 2021.
What are the different types of sheep and tobacco products?
There are different types of vape and tobacco alternative products to choose from and different markets have proven to have different tastes. Broadly speaking, the two main types: e-cigarettes, which are the vaping devices that are more accustomed in the United States and the United Kingdom, and heated tobacco products (also known as heat-non-fires), which are conventional cigarettes is supposed to be safer because the tobacco, as the name suggests, is heated to create a vapor instead of burning, which is thought to release less toxic chemicals. These are especially popular in Asia, led by Japan.
The biggest players develop both types, suggesting that they are not completely outdated yet which product will dominate.
The nature of vape has the demand for brick and mortar stores where users can try out devices before they commit to buying one. These stores, some of which also function as vape coffee houses, are also the place where hobbyists interact. However, there is the suggestion that while many want to try their first device, people eventually switch online, where sales are growing.
Top five vape shares
Big Tobacco is aware that its nuclear industry is in decline, has snapped up designers, manufacturers and distributors of vaping devices and consumables and has used its financial firepower and scale to keep up with its leadership in the most advanced markets.
Philip Morris International and vaping: leading heat-not-burn
Philip Morris currently has four & # 39; smoke-free & # 39; products at different stages of development, one of which has already been launched. The product for the heating of the company's tobacco business, IQOS, has made progress in several important markets, particularly in Japan and South Korea, where it has a 13.9% and 5.5% market share respectively.
Although these two markets have set high expectations for growth in other markets (particularly since it was only introduced in Korea in May 2017), it reported growth in IQOC volumes in almost all other markets with significant increases in the Czech Republic, Greece, Portugal. and Romania. That comes after it began to fuse its factories in most of these markets from producing cigarettes to heated tobacco products last year. Distribution was an important part of the success of IQOS, with a significant market share in Asia, stimulated by competitors who suffered from supply shortages last year.
However, the missing piece of the puzzle still has to be put in place. Philip Morris is still waiting for approval for the launch of IQOS in the US.
Philip Morris has other products in the pipeline, some of which are actively being tested in the market. In addition to the tobacco-heating IQOS product, it has created TEEPS, a & # 39; breakthrough & # 39; carbon-heated tobacco product that uses patented technology, and MESH, what a completely new approach & # 39; is for vapor products. The fourth product, STEEM, aims to form a nicotine-containing vapor in the form of a nicotine salt.
These next-generation products account for only 5% of volumes, but represent 13% of the total net revenue, which proves the supply. Almost 75% of research and development expenditure is channeled into this area. The total portfolio of products of the next generation generated net sales of $ 3.6 billion in 2017 compared to just $ 733 million in 2016. That certainly seems to grow even further in 2018, with revenue for the first half of $ 2.1 billion.
Altria Group and vaping: strong position in the US.
The strength of Altria Group lies in the US, where it is an important player in both the tobacco and the next generation markets. The company's MarkTen vapor brand has taken a leading position, with a national market share of 12.5%. The strategy for the market for heated tobacco, however, depends on the approval of Philip Morris of IQOS in the US, because Altria has already signed exclusive distribution rights for the product in the US.
The distribution channels in the US are strong, with MarkTen in 25,000 stores, accounting for about 70% of the stores selling e-cigarettes.
Although Altria currently has a strong position in the largest market for arms, it lacks firepower abroad, which could pose a problem in the future as growth shifts to Asia.
BAT-Reynolds American merger makes & # 39; the world's largest vapor company & # 39;
British American Tobacco (BAT) acquired full ownership of Reynolds American in 2017 to become the world's leading vapor company & # 39; to create. The flagship brand of BAT, Vype, was launched in 2013 and has now become the leading brand in the UK and is now available in almost all major markets. The acquisition of Reynolds American, however, added the market-leading vapor product in the US, Vuse, which was launched in 2012.
BAT expects Western markets to absorb these types of vapor products in the future, which means that it is already well positioned in countries such as the US and Europe, where absorption will be the greatest. However, the company also aims for the market for non-burns. The main product for global warming, glo, was launched in Japan at the end of 2016 and has since expanded to new areas, some of which immediately challenge the Philip Morris IQOS.
Last year BAT's steam and heat products generated £ 397 million, but if the results of Reynolds American were included for the full year 2017, this would have been £ 500 million. BAT originally expected this to double to £ 1 billion in 2018, but halfway through it said it should exceed its target because it is preparing to launch new heated tobacco products before the year is over. In the six months to the end of June, revenues from vapor products doubled to £ 116 million, while sales of heated tobacco rose by more than sixfold to £ 289 million.
BAT expects annual sales of vapors and heated tobacco products to rise to £ 5 billion by 2022. For the perspective, BAT's total annual turnover in 2017 was £ 20.29 billion, suggesting that the next generation of products will account for a substantial proportion of its sales in the near future.
Imperial Brands and vapen: increasing blu-brand extension
Imperial Brands sheds its efforts behind vapor products and concentrates on expanding its blu-brand, which is currently sold in the US, the UK, France, Germany and Russia. It has stepped up its efforts this year with plans to open in another five markets by the end of the year and another ten by 2019. The company has offered a variety of vapor types and plans to introduce new flavors to customers in the market. near future.
Imperial Brands has been building its possibilities for many years. It still earns royalties from other companies that use technology developed by Dragonite and which it took over in 2013. Last year, the company bought Nerudia, which produces e-cigarettes and other similar products on behalf of third parties.
The company does not ignore the heated tobacco market, but the company describes it as a much smaller & # 39; opportunity, albeit one that grows. It launched trials with its own heated tobacco products at the end of last year, but investments in the future will still be channeled into its vapor products.
Turning Points brands: small but growing vapor effect
Turning Point Brands bought VaporBeast at the end of 2016 and acquired a company with strong distribution channels that supply e-liquids and devices to thousands of retailers in the United States. This was followed by the acquisition of Vapor Shark, which produces their own brand products and sells them through 35 stores.
In April of this year, the company bought Vapor Supply, an e-commerce marketing and distribution platform at the service of companies. The company also manufactures its own e-liquids under the DripCo brand and has a small retail network of eight stores. It has resulted in cost savings and synergies by integrating the small brands it has purchased, especially in the logistics department.
Although Turning Point Brands is a small player, the company is more focused on next-generation products than the big players who have a long way to go before their earnings are no longer dependent on cigarette sales. Turning Point Brands accounts for more than a third of its total revenues from next-generation products, accounting for $ 53.6 million in the first half of 2018, with growth accelerating in the second quarter (Q2) compared to the first quarter .
Many doubt the vapor industry and take a more cautious approach
Although the largest tobacco manufacturers have quickly consolidated the fragmented market in the hope that this new industry can prevent the death of their core activities, not every company is convinced that this is the best route to go, and some believe the market is more challenging than others.
Supreme: owner of 88vape and KiK publishes the IPO of London
Supreme would be the first vaping company to list its shares on the London Stock Exchange (LSE) when it announced in May that it was preparing for an initial public offering (IPO), but then stopped due to market conditions & # 39; in spite of receiving encouraging institutional support & # 39;
Although the company is one of the UK's largest distributors of batteries (distribution for Duracell, Panasonic, Eveready, Energizer and JCB) and sells tens of millions of lighting products every year internationally, the company said it expected around 60% of its profits to come from his armed division.
In March 2018, the company sold 130,000 e-liquids bottles in the UK every working day. It also sold 690,000 devices that month, indicating that sales have accelerated rapidly in the course of 2017 with a monthly run rate of approximately 333,333.
Again, logistics has played its part in building its two brands, 88vape and KiK. In addition to owning an e-liquid manufacturing plant in Manchester (which it describes as a "differentiator"), it owns strong retail outlets such as customers, including discount chains such as B & M, national retailers, including Walmart ASDA ( which merges with Sainsbury & # 39; s) and wholesalers such as the Booker Group of Tesco.
More information about the Sainsbury & # 39; s-Asda fusion
Vector group of caution with e-cigarettes due to American uncertainties
Vector Group is the fourth largest cigarette manufacturer in the US and although its subsidiary, Zoom E-Cigs, was launched in the country in 2013, it has not got a grip. Vector Group is deliberately cautious and cramped with investments because it is concerned about the changing regulatory landscape in the US and the emergence of new technologies, where consumers still decide which type of next-generation product they want. Zoom E-Cigs is still in the red, but the operating losses have dropped significantly, from $ 13 million in 2015 to $ 900,000 in 2017.
For now, Vector Group is still running cigarettes. Her strategy for e-cigarettes is to remain willing to pursue opportunities as they arise & # 39 ;.
22nd Century Group: looking for monopolization with an alternative approach
While others believe that vaping is the place where money is, while people are looking for an alternative to cigarette smoking, 22nd Century Group offers investors an alternative. The company is genetically designing plants to regulate the nicotine content of tobacco plants. This has seen that it focuses on producing extremely low nicotine cigarettes that are sold as "stoppers", as well as cigarettes with particularly high levels of nicotine. 22nd Century Group is not a friend of Big Tobacco.
The company sells its "very low nicotine & # 39; cigarettes under brands such as Magic 0, Magic 2, Red Sun and Moonlight outside the US. 22nd Century Group is also developing a very low nicotine brand of cigarettes called X-22, which it is trying to develop as a smoking cessation remedy, found in US pharmacies rather than in the local supermarket or vape store.
The company is in a unique position as the only company that is able to produce very low nicotine cigarettes. This made niche work safe, such as manipulating the contents of cigarettes that had to be used for research. This has also given it a way to encourage the American government to support its products. 22nd Century Group could wait to take advantage of proposals to have all cigarettes in the US contain very low levels or minimal amounts of nicotine, after tests carried out with 22nd Century Group products.
The company aggressively urges the Food and Drug Administration to approve the proposals and argues that all tobacco companies need technology to improve the health of Americans and save the industry billions of dollars they would need to develop low nicotine cigarettes by themselves. For big tobacco, this is bad news on all fronts, because it would force them to turn to 22nd Century Group to reduce their nicotine content and to present more direct competition for heated tobacco products that others develop. If 22nd Century Group says it will be interesting to see which Big Tobacco companies genuinely care about smokers … and who are determined to keep their customers addicted to the deadliest consumer product available on the market & # 39; .
What are the biggest challenges for the vape industry?
The two direct threats confronting the vape industry are how government policy develops and how public perception evolves. The US is perhaps the largest market for sheep, but regulators are far from convinced and still question their role in society, starting with those who violate the rules that apply to cigarettes with regard to flavors and branding. .
How the government is shaping its policy on the subject of arms and how the public sees it will depend on each other. The last headline of the BBC about the animals shows the message that consumers (in the UK at least) receive: & # 39; Vape – good, bad or not clear? & # 39; The answer: it is a "clouded cloud with uncertainty."
Moreover, both BAT and Philip Morris have admitted that consumers already believe that current vaping devices reach their performance limits. If the vape industry stays ahead and product development, something that Big Tobacco has not done for a while, it will be of the utmost importance to compete in what would become a more competitive market.
Conclusion: will the vape industry be the history that repeats itself?
It took centuries before the world realized what the devastating effect tobacco has on the world. Smoking was not recognized as an addiction in the US until 1989, because it is simply & # 39; just & # 39; was classified. But it is those governments that have taken the most extreme measures against the tobacco industry that are the proponents of vape.
It is worth considering that although the overall smoking levels are decreasing, the effects will last much longer and the costs to the government will continue to grow after the world, if it ever succeeds, completely eradicates smoking. Governments earn billions of tax revenues from tobacco, but the costs for health services and other facilities would swallow up all those revenues, and more.
Big Tobacco has already seen a possible move from future governments. BAT has bravely warned: "As income from traditional cigarette taxes is decreasing in the longer term, there is a clear risk of increased taxation [next-generation products] that does not take into account their relative risks compared to traditional cigarettes. & # 39; But if people are used to stop smoking, why not use the same high-tax deterrent that has proven successful so far?