The Effect of E-Cigarettes on Tobacco Industries

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As the public increasingly become aware of the health risks and costs involved in smoking cigarettes, many smokers are switching over to e-cigarettes. The health risks of cigarette smoking have been well publicized by governments for decades, with the U.S Surgeon General having issued a report on the risks back in 1964. Nowadays, all cigarette packages must carry warnings about the risks that smoking poses.

E—cigarettes are now undoubtedly the biggest threat that the tobacco industry has ever faced. It was only a matter of time for technology decided to innovate cigarettes, and big tobacco companies were not prepared.

E- cigarettes have been in circulation since 2006; with only several thousand users. Since 2006 the market has exploded. There are now several million users worldwide and hundreds of brands to choose from. By next year, e- cigarette sales are projected to top $10 Billion; rising 25% a year since 2014.

The number of traditional cigarettes sold has also fallen since 2004.That is partly the result of social initiatives including education campaigns and bans on smoking in public places in towns and cities nationwide- something that e-cigarettes don’t experience.

Many converted e-cigarette smokers report they now prefer them due to them being able to indulge in different vaporized flavours and aromas without any of the negative social stigma attached with tobacco smoking. Now, in stores all over, there Is 31% more shelf space being devoted to e- cigarettes and liquids.  According to the Wells Fargo research, 100% of the surveyed tobacco resellers and wholesalers, representing over 45,000 U.S. convenience stores, are now selling electronic cigarettes, and 98% of them reported growing sales in the first quarter of this year by an average of 30%. The Wells Fargo survey interestingly found that repeat sales are now outnumbering trial purchases which shows how e-cigarette companies are gathering more and more uses from Big Tobacco, affecting their profits.

Bonnie Herzog, the senior analyst for Wells Fargo Securities anticipates margins from vapor products will approach 39% by 2018—substantially closing the gap with combustible cigarettes.


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