Tobacco maker Philip Morris/Altria revealed that it will be entering the fast-rising market of electronic cigarettes. Lorillard and Reynolds American have already entered the market that is bound to grow to $350 billion. Suddenly, Big Tobacco makers are cashing into a market that is safer and healthier after offering a product that destroyed millions of lives and killed millions of people for a great number of years. With the development, why is it that Big Tobacco is going into the market? What will be the benefit of having moneyed competition throwing the weight around against small players in the industry?
The biggest reason why Big Tobacco companies are going into electronic cigarettes is to stay significant. Tobacco has become more expensive thanks to the additional taxes levied by the government. The tobacco products have been suffering from shrinking sales in the past years or so. The fact that tobacco could no longer get advertised make it very difficult to market to potential new customers and to remind how “good the flavor is” to current customers. Smokers know that tobacco smoking is bad for the health. They can’t miss the fact because it says so right on the carton. In fact, Philip Morris the makers of L&M and Marlboro has trimmed its annual profit earnings in the light of sagging sales. Big Tobacco companies know that if they don’t catch up they will be at the losing end.
One of the biggest implications is continued innovation. Big Tobacco makers will use their cash reserves to fuel innovation on the electronic cigarette space. This will lead to better products and possibly healthier and safer ones. It is projected that 10 to 15 years from now, electronic cigarettes will dominate the space and finally ease out tobacco. Although long-term effects of electronic cigarettes are yet to be determined it is clear that there is a demand for the product. Suddenly, there is a product that looks like a cigarette and feels like one does not carry the same dangers as tobacco.
The price and the harm reduction feature of electronic cigarettes will be the biggest selling points. Smoking-cessation abilities will come in as a distant third. Experts believe that smokers will not likely withdraw from nicotine if electronic cigarettes will be declared as safe by the US Food and Drugs Administration. The future of electronic cigarettes really depends on how the FDA will call vapes. The proposed regulation of electronic cigarettes is expected by year’s end as it would create a wave of changes across the world. The call will redefine the game that both small players and Big Tobacco will play.
Despite the looming regulations, it is expected that the market will grow to $3 billion in two years. Today, the global sales of electronic cigarettes have hit $1 billion and are expected to hit $2 billion next year. The consumption is expected to grow to 50 percent next year. Big Tobacco is expected to smoke out the small players. Lorillard acquired the blu electronic cigarette brand and spent a lot of money expanding the vape brand’s distribution channel. Now, blu is the American market electronic cigarette brand leader after overtaking such brands as NJOY, Logic, Fin and Mystic.
It is only natural for business to stay afloat and embrace alternatives to their main source of income. However, it remains to be seen how smokers see the entry of Big Tobacco into the picture. They are now going to sell a healthier product after years of duping the public about the rich flavor of tobacco without being honest about its harmful effects to the body.