E-cigarettes have been heralded as a potential savior for a tobacco industry desperate for new products and customers in the face of a shrinking number of smokers and punitive damages such as the $23.6 billion awarded by a Florida jury last week.
But it turns out that regular smokers prefer the real thing.
“There is consumer dissatisfaction with the product, which leads to high levels of rejection” said Vivian Azer, tobacco and beverages analyst at Cowen & Co. in New York. “Consumers are willing to try the product, but they are not satisfied.”
Indeed, U.S. sales of e-cigs, which look similar to a traditional cigarette, but use a battery to vaporize rather than burn the nicotine, have been declining for the past several months.
According to Nielsen convenience-store data, e-cig sales declined 17% in the period ending June 7. What’s more, prices have been negative for six sequential monthly periods, driven by unit declines of 2.8% and lower year-over-year net pricing of 14.2%.
Bonnie Herzog, a senior analyst at Wells Fargo & Co., said the drop in sales tells only part of the story.
“We believe the negative pricing trends could be due to increased penetration of kits which offer a lower price/cartomizer.” The average price per unit was $5.64.
Cartomizers are disposable cartridges with atomizers built into them. The idea is that there is a brand new atomizer in each cartomizer offering maximum vapor production, according to a description on the website of My Vapor Store, an online electronic cigarette superstore.
“Further, we believe the sales decline is more reflective of volume moving to vapors-tanks-mods, which tend to be sold in non-tracked channels, especially vape shops,” said Herzog. Vape shops are storefront locations that cater to the vaping community.
There are still many questions about the health implications of e-cigs In April The Food and Drug Administration announced a proposal to deem e-cigarettes a “Tobacco Product” which means it can treat the e-electronic product the same as traditional cigarettes.
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