E-Cigarette Sales Rebound Ahead of Stricter FDA Rules

Leading industry analysts stated on Wednesday that e-cigarette sales have rebounded over the past three months, as a portion of future smokers purchase more products ahead of stricter federal regulations starting on August 8.

Bonnie Herzog of Wells Fargo Securities reported that e-cig sales increased by 16.6% year-over-year for the 12-week period ending September 10.

Herzog's monthly report is based on Nielsen data, which tracks e-cig sales in mass channels and convenience stores. Vaporizers, which are typically lower-priced, are mostly sold in tobacco and vape shops, where Nielsen tracks limited sales.

Since their introduction to the market on February 15, 2007, e-cig products—including nearly all e-cigs and vaporizers—must undergo additional FDA requirements to prove they do not pose public harm. This includes providing more details on liquid nicotine ingredients and manufacturing specifics.

Herzog noted that the sales fluctuations coincided with VUSE, the best-selling e-cig brand from R.J. Reynolds, raising product prices, as well as increased promotions and offerings from Altria Group's subsidiary, NuMark, with its MarkTen XL.

“We also believe that the industry's push for innovative advancements has contributed to this, emphasizing greater competition,” Herzog said, referring to nJoy's announcement of filing for bankruptcy on September 16.

nJoy is the only major e-cig manufacturer selling both disposable and rechargeable e-cigs and vaporizers. It holds a 5.1% market share.

Herzog stated that VUSE's market share remains steady at 38.2%, “reflecting solid consumer response to recent format enhancements and ongoing innovation.”

blu eCigs, sold by ITG Brands LLC, holds the second position with a 16.9% share. MarkTen XL's market share slightly increased to 15.3%.

Herzog continued to project $4.1 billion in overall e-cig sales for 2016: $2.5 billion from vaporizers, tanks, MODs, and personal vaporizers, and $1.6 billion from e-cigarettes.

Regarding traditional cigarette sales, they rose by 1% over the 12-week period, up to 2% year-over-year.

“As we expected, cigarette sales are also beginning to slow, trending down towards a historical decline of 3% to 4%, especially as the industry has seen an unusually strong volume trend over the past year,” Herzog said.

R.J. Reynolds Tobacco Company continues to lead the industry in sales, primarily driven by Newport sales growth, which increased by 3.5% over the 12-week period and up to 4.9% over the past year. Newport is the best-selling menthol cigarette and the second overall brand.

Herzog noted that sales of premium cigarettes, such as Natural American Spirit, also benefited from price increases, while Camel, the third brand, saw a slight decline in sales.

Herzog stated that ITG Brands' “traditional cigarette sales have stabilized in recent months but fell by 1.1% over the 12-week period.

ITG's market share is 7.4%, down from 10% in June 2015, when it acquired three Reynolds brands (Kool, Salem, Winston) and a Lorillard brand (Newport) for $7.1 billion as part of the Reynolds acquisition.

Herzog again warned that ITG continues to struggle with gaining traction for its four cigarette brands.

ITG officials have disputed Herzog's market share estimates, claiming it is closer to 9.3%.