The once-promising e-cigarette market continues to slow dramatically with yet another drop of 21 percent in sales of “cigalike” during the 12-week period ending October 31, according to Nielsen and Wells Fargo.
This past September, Reynolds American Inc., the second-largest tobacco company in America, already anticipated posting $100 million in asset write-downs and exit charges in order to bring its e-cigarette manufacturing in line with customer demand.
E-Cigarettes Disappoint Instead of Deliver
Between safety concerns, customer dissatisfaction with the product and increasing pressure from the FDA regarding regulating the manufacture and sale of e-cigarettes and the nicotine liquid they use, e-cigarette growth is expected to be half of what it was last year — just 57 percent. This is understandably disappointing to both manufacturers and distributors after having experienced an annual growth of about 114 percent per year for the last five years.
“Customers are disenchanted right now with these products,” Bonnie Herzog, Wells Fargo analyst, explained in the Wall Street Journal. Customers, she says, won’t switch until e-cigarettes better mimic real cigarettes. “It’s not that different from diet soda,” she added.
Smokers Not Thrilled with e-Cigs
Current devices are failing both to deliver nicotine as quickly into the bloodstream as traditional cigarettes and lack the so called “throat hit” that smokers expect. Even smokers who have tried to switch to e-cigarettes for health benefits are having second thoughts as the devices fail to deliver for them. Cigarette volumes are still down this year, but only a half of a percent, as opposed to the more typical declines of three to four percent since e-cigarettes hit the market.
Whether the FDA’s scrutiny of e-cigarettes will be a blessing or a curse remains to be seen. On one hand, with additional regulation the FDA may be able to ensure that problems resulting from the release of formaldehyde found by a January study released in the New England Journal of Medicine are eliminated or minimized. On the other hand, over-regulation may drive prices higher or eliminate preferred manufacturers entirely, causing another mass exodus of customers.
What seems clear is that until e-cigarettes manufacturers do more to make them work like a traditional cigarette, customers will run hot and cold about them. Better nicotine delivery and more accurate mimicry of a cigarette smoking experience is what it’s going to take to win back customers who remain on the fence about this potentially passing fad.