Tobacco Companies Pursue More Vaporization Innovation

According to a report from Winston Salem Journal, the mantra of small independent e-cigarette manufacturers is to sell innovative products and reap increasing profits.

While industry insiders, politicians, and anti-smoking advocates await the FDA's guidelines on e-cigarettes, Logic and Fin are pushing the advancement of their personalized e-cigarette products.

Lorillard is preparing to launch its latest blu e-cigarette version called "blu+" on November 10.

The American Reynolds company, which is pinning its hopes on the Vuse e-cigarette brand, is seeking approval from the Federal Trade Commission for its $27.4 billion acquisition of Lorillard.

Traditional e-cigarettes are battery-powered devices that heat the liquid nicotine contained in disposable cartridges to produce inhalable vapor. Manufacturers offer very few flavor options, partly because they expect the FDA to restrict flavoring, just as they have with combustible cigarettes.

In contrast, vaporization products can be equipped with a liquid capsule that can be inserted into the cartridge, known as an open system style. E-cigarettes provide consumers with a variety of flavors, including fruit and candy flavors.

The FDA has been regulating tobacco products and marketing since June 2009, but it does not have the authority to ban nicotine or tobacco. A chaotic Western environment has emerged in the absence of FDA regulation on e-cigarettes, with e-cigarette shops popping up like mushrooms across the country.

Industry observers note that most nicotine liquids in open systems are produced by Chinese or unregulated e-cigarette shops. The World Health Organization expressed concerns in August about the ability to control liquid compounds inserted into e-cigarette products instead of nicotine solutions.

Logic, Fin, and blu e-cigarette companies are trying to address this issue by offering alternatives in the form of closed cylindrical e-cigarettes.

Wells Fargo Securities analyst Bonnie Herzog called Logic Pro "the most advanced vaporization product available." It offers pre-filled, vacuum-sealed capsules. Its refillable e-liquid is sold in packs of one or five, with two tobacco flavors and one menthol flavor.

"Consumers can switch flavors without having to finish a capsule, which is a great feature based on consumer personalization trends," Herzog said.

Herzog stated that the battery life of the blu+ is twice that of current rechargeable kits, with charging speed being twice as fast. It features a brand new cartridge system that can hold more liquid nicotine than previous cartridges.

"Overall, the launch of this new product actively considers bridging the gap between blu's cigarette-like characteristics and today's high-performance e-cigarette products," Herzog said.

Herzog mentioned that Logic Pro and blu+ products "aim to address the shortcomings of traditional e-cigarettes, including unstable performance, insufficient vapor production, and weak batteries." Reynolds claims that Vuse has solved these issues.

The stakes in the debate over e-cigarettes and vaporization products may be evident both economically and in terms of industry changes.

Herzog expressed her encouragement by the Logic and blu e-cigarette products and "hopes they can accelerate growth in the convenience store vapor product category again."

Howard stated that Reynolds' focus is on the national expansion of Vuse.

"The early feedback from consumers and retail partners has been very positive," Howard said.

Herzog noted that Altria Group's e-cigarette brands Vuse and MarkTen, which only began national rollout this summer, have already captured 29% of the national convenience store market share.

"All the innovations we are making are key drivers of our transformation strategy and will continue to move forward," Howard said. "However, considering the path of product innovation, I won't start speculating on anything we may or may not consider."

Scott Ballin, former director of the Smoking or Health Alliance, stated, "Focusing on technological advancements and safety in marketing may give these products a sustainable competitive advantage in the market."

"The changes in the entire market seem to happen every day, and it looks like every major company is striving to stay one step ahead."

Reynolds has suggested to the FDA that it ban the use of open system vapor cigarettes because they "pose unique public health risks."

Conley pointed out that Logic and blu+ products "may adopt Reynolds' sealed system since they are not refillable."

"However, savvy consumers will have no problem converting these non-refillable cartridges into refillable ones."

Ballin predicted that the FDA would impose strict restrictions on open system vapor products.

"The lack of regulation on e-liquid cartridges could support the FDA's position; otherwise, you could open a whole can of worms that could enter these cartridges," Ballin said.

"The FDA also needs to further clarify that not all e-cigarettes are good, and not all e-cigarettes should be on the market."