The e-cigarette industry is booming and in just seven years since they were first introduced in the United Kingdom, these devices have grown into a market with sales of £193 million last year and £340 million sales prediction for 2015. But don’t let yourself be fooled, because this is not yet a mature market. Instead, it resembles a jungle, where Jacob Fuller, CEO of Blu, Britain’s largest eCig-maker, cannot anticipate what might happen. ‘Until regulations start coming in from 2016, the market will continue to be the wild west, precisely because there are just so many brands at play,’ he says.
Jacob Fuller started reselling e-cigarettes online to UK customers in 2009 after coming in contact with them and understanding their potential them at a US trade show in Las Vegas. Soon after sales escalated, Fuller co-founded ‘Skycig’, and started marketing his own branded ecigs online. Back in October 2013 Lorillard bought Skycig in a £60 million transaction and the company was rebranded as Blu. However in July 2014 Imperial Tobacco bought Blu as part of a $7.1bn sale of a number of Lorillard’s assets.
But to better understand the market, just in the United Kingdom there are around 250 independent electronic cigarette providers. Since 2012, big tobacco companies have been on the hunt to acquire these firms, in order to secure them a solid position in the ever-growing industry.
‘ECigs are eating into big tobacco’s sales so they desperately want to get into this industry,’ declared Fuller, who expects Blu to hit UK sales of £100m by the end of next year. ‘They are buying up brands because it gives them distribution and knowledge of the industry, which right now a lot of them don’t have.’
Back in July the world’s fourth-largest tobacco company ‘Imperial Tobacco’ said that it would acquire Blu, along with a portfolios of of other tobacco brands, for $7.1bn due to Reynolds American’s $27.4bn takeover of the mother group Lorillard. The decision to sell Blu to Imperial was a move by the two merging giants to appease regulators, but Imperial made from the ecig company a condition of the deal, as it hopes to gain further traction in the UK electronic cigarette market.
‘This will take months and months,’ says Fuller on Blu’s second change of ownership in just nine months. ‘The overall deal is one of the biggest acquisitions in the history of the US. It’s a long process. So for us for now it’s business as usual.’
‘Some of our competitors have made ads which hurt the industry due to their bad taste. E-cigarettes are a product for over-18s and the advertising rules should reflect that, similar to the rules of alcohol and gambling,’ according to Fuller. ‘If you start regulating us like tobacco and stop allowing e-cigarettes to be advertised, then smokers won’t be educated, and the alternative for them is to continue to smoke.’