Just when you thought smoking was dead, e-cigarettes have breathed life into a business that had all but given up on its future.
Euromonitor predicts that 4% of the global smoking market will be smoking e-cigarettes by 2050. E-cigarette sales are likely to outsell regular cigarettes by 2047, according to Bloomberg. Some industry experts calculate that the e-cigarette business will reach nearly $2-billion this year.
As a multitude of new e-cigarette players come to market and battle to position themselves, old tobacco giants quietly make plans to conquer the nascent industry that has so much potential.
Sleeping Giant Wide Awake
Lorillard, Inc. (NYSE: LO), the third largest manufacturer of cigarettes in the United States, is one of the thought to be sleeping giants that has proven it is very much awake and ready to compete in the e-cigarette marketplace.
On Oct. 1, 2013, the Greensboro, NC tobacco company acquired all of the assets and operations of SKYCIG®, a British-based electronic cigarette (e-cigarette) business for approximately $49 million in cash paid at closing and additional contingent consideration of up to an additional $49 million to be paid in 2016 based on the achievement of certain financial performance benchmarks.
The acquisition provides Lorillard with a major UK electronic cigarette brand and, along with its leading U.S. electronic cigarette brand – blu eCigs®, a global presence in the rapidly growing worldwide e-cigarette category, according to the company’s release. SKYCIG is expected to benefit from Lorillard's significant sales, marketing, regulatory, research and development expertise to further strengthen its competitive position in the UK e-cigarette market.
SKYCIG is a leading premium brand of electronic cigarettes in the UK, according to Lorillard. From its formation in 2011, it has achieved strong growth and has procured exceptional control over the manufacturing process, providing it with a unique ability to develop and commercialize high quality products and meet continued developments in the regulatory environment. SKYCIG will operate as a separate operating subsidiary under Lorillard's ownership and it is Lorillard's intention to retain SKYCIG's current management team and its current business locations in Great Britain.
“It has been Lorillard's mission to be first and best in the electronic cigarette category, and with the acquisition of SKYCIG, our mission is now a global one,” said Murray Kessler, Lorillard Chairman, President and CEO.
On Jan. 31, LO’s share price closed at $49.22, unchanged from its close the previous day.
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Phillip Morris Not Far Behind
Tobacco giant Philip Morris International Inc. (NYSE: PMI) entered the e-cigarette two months later.
On Dec. 20, 2013, the New York Tobacco company announced its partnership with Altria Group, Inc. to sell e-cigarettes. Under the terms of a set of licensing, supply and cooperation agreements, Altria will make available its e-cigarette products exclusively to Philip Morris for commercialization outside the United States and Philip Morris will make available two of its candidate reduced-risk tobacco products exclusively to Altria for commercialization in the.
The agreements also provide for cooperation on the scientific assessment and regulatory engagement and authorization related to these products with the FDA, and for a similar framework for e-cigarettes with the relevant regulatory authorities in international markets. In addition, the agreements provide for the sharing of improvements to the existing generation of products.
On Jan. 31, PMI’s share price closed at $78.14, down 95 cents from its close of $79.09 the previous day.
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Meanwhile, here are two small but agile e-cigarette companies that are scrambling to position themselves in the marketplace they essentially recognized and created.
Unveils Store-In-Store Concept
On Jan, 29, Vapor Corp. (OTCQB: VPCO) unveiled its store-in-store marketing strategy at the Tobacco Plus Convenience Expo in Las Vegas.
In a release, the Dania, Beach-Fla.-based e-cigarette maker showcased its new authorized dealer store-in-store kiosk concept that brings what it describes as the “vaping” experience to retail stores, pharmacies and convenience stores nationwide.
The store-in-store concept is designed to support the retail sales of VaporX vaporizers and accessories. Earlier this year, at the 2014 International Consumer Electronics Show, Vapor unveiled proprietary, patent-pending fingerprint technology to enhance parental controls and improve theft protection of the VaporX product line, which is expected to be available in the second half of 2014.
Pop-Up Vapor Lounge
“The knowledge gained from years of maintaining a diverse national retail presence has pointed towards the real need for a branded 'authorized dealer' concept where consumers can shop the full line of VaporX vaporizers and accessories,” said Vapor Corp. CEO Kevin Frija, in the release. "Our goal is to bring the authorized dealer store-in-store concept, pop-up vapor lounge experience to retailers everywhere. The design of the kiosk will greatly enhance the visibility of the VaporX brand with consumers, who in turn will gain broader access to a variety of disposable and rechargeable vaporizers and accessories."
In addition to the full line of VaporX products and new retail model, Vapor said it will also showcase its full line of disposable and rechargeable electronic cigarettes from its flagship brand Krave, which introduced redesigned packaging in December 2013.
While the concept sounds good, it execution will be critical in Vapor’s long-term chances of growth and success.
On Jan. 31, VPCO’s share price closed at $7.85, down 10 cents from its close of $7.95 cents the previous day.
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Already Taking Orders for Low-Cost Vaporizer
mCig, Inc. (OTCQB: MCIG) is an Australian vaporizer manufacturer that is making an aggressive entry into e-cigarette and the legal marijuana markets.
One of the ways mCig is making its play is by recently introducing an herb vaporizer that only retails for $10. On Jan. 10, the company announced that it expected to fulfill all incoming orders within 5-to-10 business days with order lead time declining to 3-to-5 business days by January 21, 2014.
“Today marks an important milestone for our company. In less than six months we have transitioned from a development stage company to launching two iterations of a device that is quickly cementing itself as the most efficient and affordable way to vaporize plant material,” stated mCig, Inc. CEO Paul Rosenberg said, in a written statement.
Strategic Acquisition
On Jan. 24, mCig announced that it acquired Vapolution, Inc., an herbal vaporizer company based in Northern California in a non-dilutive transaction that consolidates an industry leader with over $1.3 million (unaudited aggregate revenue since 2010) in sales. The company contends that the acquisition transforms mCig, Inc. into a formidable competitor in two high growth categories: Personal Vaporizers (mCig 2.0, Vapolution PocketVape) and traditional home-use Vaporizers (Vapolution 2.0).
On Jan. 31, MCIG’s share price closed at 31cents, up 1 cent from its close of 30 cents the previous day.
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