Electronic Cigarettes Eat into Traditional Cigarette Sales
The Wall Street Journal has reported that the electronic cigarette has ‘cannibalised’ the traditional cigarette as the latter takes a sales hit. The ever-growing popularity of the electronic cigarette as a genuine alternative to the tobacco cigarette has led to industry leaders such as Lorillard and Reynolds American recording first quarter profit drops in 2013.
E cigs were listed as a major factor as to the 6.2% drop suffered by Lorillard and Reynolds alongside increasing energy prices and payroll taxes. The former suggested that the majority of the electronic cigarette industry’s custom comes from ex-smokers and their advent significantly impacts upon tobacco sales.
Lorillard has long championed the electronic cigarette despite the competition that it provides. The company spent $135 million last year to invest in electronic cigarettes and has recently expanded its endeavours in the industry and increased the marketing power.
This investment has led to Lorillard recording increased profits despite the hit that its tobacco sector suffered. The $21 million of gross profit made from the e cig industry raised the companies first quarter profits to $57 million, a significant increase from the previous recorded profit of $39 million. Their Chairman and Chief Executive Murray Kessler enthused: "There is no doubt in my mind that eCigs have tapped into a real consumer need [and] that this could become a very big category."
It has been predicted that the e cig market has already eclipsed more traditional and long-serving industries such as snuff and other smokeless options.
Ready to Eclipse Cigarettes
Banking analyst Bonnie Herzog has predicted that this pattern will continue as the rise of e cigs marks the fall of the traditional cigarette: “I’m expecting consumption of e-cigarettes to surpass consumption of regular cigarettes in the next decade.”
The multi-billion dollar tobacco industry has seen off many challengers and detractors over the decades but has survived them all. Prohibitions placed upon their use, their presentation and their sale have been designed to restrict the size of the industry but have had only limited effect. Could the electronic cigarette be the challenge that finally knocks the cigarette off its lofty perch?
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