The electronic cigarette market is expanding and developing as more users make the switch but in some parts of the U.S. sales of models — the small e-cigarettes made to resemble the size and shape of tobacco cigarettes — are slowing down. On the other hand, the sales of larger customizable devices known as mods are increasing at about twice the rate. It seems vapers are making the switch to mods
According to Nielsen, e-cigarettes models sales have been on the decline for the past several months, dollar sales plummeting with as much as 10% back in April. The suspected causes are users’ changing preferences and the significant amount of negative publicity surrounding electronic cigarettes, with both the FDA and the CDC speaking out against the use of the products and increasing public debate on the proposed regulations.
But some people believe that the soft numbers of Nielsen’s analysis do not paint an accurate picture of what’s really going on in this segment. ‘Negative pricing trends could be due to increased penetration of kits, which offer a lower price-per-cartomizer’ said Wells Fargo analyst Bonnie Herzog. ‘Further, we believe the sales decline is more reflective of volume moving to vapors-tanks-mods (VTMs), which tend to be sold in non-tracked channels (especially vape shops) as Nielsen e-cig data is not a proxy for the vapor category as a whole’ she added.
Lorillard’s officials said that the slowdown in starter kit sales is directly related to the intense rise of vaporizer demand in vape shops. Vaporizers can be filled with a wide range of e-liquids and their sales are growing at double the rate of ordinary cig-a-likes. For the first three months of this year, compared to the same period a year ago, Lorillard’s revenue from the sales of e-cigs fell 11%, which in itself is not a huge issue. However, the company’s selling, general, and admin costs jumped 93% on a reported GAAP basis.
‘Vapors/tanks are underrepresented in Nielsen but are growing two times faster than the vapor category based on our ‘Tobacco Talk’ survey,’ Herzog said. ‘Investors have been questioning if the investments the major players are putting behind vapor justify a possible longer timeline to contribute to the bottom line.’
Lorillard was the first of the major U.S.-based tobacco companies enter into the e-cig market. It purchased Blu eCigs before many individuals in the industry had even heard of e-cigarettes and has since made an aggressive marketing push to get Blu products into every convenience store in the nation. This strategy has captured around 50% of model sales for the tobacco giant.
Overall, it looks as if the electronic cigarette’s popularity is already dying out with their steadily replacement by vaporizers. However, this could only be a short-term trend, but Lorillard’s management is well aware that e-cigarette sales have been decreasing for some time now.