Herzog projects $5.1 Billion in US vapor sales in 2018, up from $4.4 Billion in 2017

[Bill Godshall]

Well's Fargo's Bonnie Herzog is now estimating that $5.1 Billion of vapor products will be sold in the US in 2018, an increase from $4.4 Billion in 2017.

Perhaps most importantly, Herzog estimates that $3.5 Billion of Premium/Open Vaporizers and e-liquid will be sold in 2017, up from $3 Billion in 2018.

Herzog also estimates that $1.6 Billion of cigalike e-cigs (a category that includes juul) will be sold in 2018, up from $1.4 Billion in 2017. Herzog cited Nielsen data finding $322 Million of Juul were sold in 2017, and Juul has skyrocketed to 40% of the cigalike e-cig market segment during the past month. Sales and market shares of BAT/Reynolds' Vuse, Altria's Mark Ten, Fontem's Blu, JTI's Logic and njoy have all declined.

 

[papergoblin]

I'm not surprised at seeing a decline in the offerings from BT companies. People are becoming more and more aware of options (aside from the ones in the gas station). The only downside is with the increase in "profits", comes the government to "help" by taxing it to death and of course "safety regulations" (have to justify the taxes some how).

I wonder how much longer BT will deal with less profits, while paying out at the same time. I think we may be edging into the calm before the storm. Prices have been declining, making things even more affordable, which increases popularity. I hope I'm wrong but have a nagging feeling the shoe is about to drop.

 

[Bill Godshall]

The problem is that FDA's Deeming Rule bans the sale of all Premium/Open Vaporizers and E-Liquid, and the only vapor manufacturers that can afford to conduct the research and submit PMTAs and MRTPs for vapor products are PMI, Altria, BAT/Reynolds, Imperial and JTI (for their cigalike e-cigs).

Back in 2011 and 2012, Big Tobacco realized that FDA's Deeming Rule would protect not only their cigarettes (from market competition by premium vapor products), but that it would also give them a potential FDA approved monopoly or cartel to market their inferior cigalike e-cig products (because only they have the necessary money, researchers and expertise to attain FDA approval).

 

[Kent C]

I found this interesting:

"In November, California voters approved raising the excise tax to $2.87. It took effect April 1.

Overall cigarette sales volume fell 0.3 percent during the four-week period, but was up 0.8 percent over the past 12 weeks."

"Sin Taxes" don't always work they way the politicians expect. The definition of "unintended consequences" that politicians are blind to, or simply don't think past one level of concepts - tax = more revenue, without regard to how people will react. (recall the "luxury tax" on boats, etc. in the 80's - jobs lost along all coastal areas and rather than the $9 Billion projected, they got losses of $3 billion. Of course Prohibition is the standard for mistakes on how people will react.)

They get less of what they want by attempting to steer their favored social outcomes, plus less intended revenue that they probably have already spent.

 

[Bill Godshall]

I wonder how much longer BT will deal with less profits, while paying out at the same time.

None of the large tobacco companies have made a profit from marketing vapor products. Reynolds and Altria still haven't recouped the several hundred million dollars they've been investing in vaping since 2012, while PMI hs invested several Billion dollars developing its IQOS (and only began selling the product in Japan and several other locations last year).

The tobacco companies won't start making a profit from their vapor products unless/until FDA begins to enforce the Deeming Rule (by removing competitive vapor products that don't comply with the Deeming Rule from the market), and unless/until FDA approves PMTA and MRTP applications for tobacco industry vapor products (or PMI's IQOS).

 

[Bill Godshall]

For comparison to older Herzog vapor sales estimates that I posted last year at
Wells Fargo's Bonnie Herzog estimates $4.4 Billion in vapor sales in 2017

2018 $5.1 Billion total, $3.5B PVs & e-liquid, $1.6B e-cigs
2017 $4.4 Billion total, $3B PVs & e-liquid, $1.4B e-cigs
2016 $4.1 Billion total, $2.5B PVs & e-liquid, $1.6B e-cigs
2015 $3.5 Billion total, $2B PVs & e-liquid, $1.5B e-cigs
2014 $2.5 Billion total, $1.1B PVs & e-liquid, $1.4B e-cigs

If Juul maintains its current 40% share of the cigalike e-cig market segment, and if Herzog's 2018 sales estimates prove correct, only $960 million of cigalike e-cigs will be sold in 2018 (excluding the $640 million of Juul sales). FDA's Deeming Rule is the only thing that can keep the cigalike e-cig industry viable in the future, as sales of PVs and e-liquid continue to grow rapidly at the expense of cigalikes in the current almost free market.

 

[papergoblin]

None of the large tobacco companies have made a profit from marketing vapor products. Reynolds and Altria still haven't recouped the several hundred million dollars they've been investing in vaping since 2012, while PMI hs invested several Billion dollars developing its IQOS (and only began selling the product in Japan and several other locations last year).

The tobacco companies won't start making a profit from their vapor products unless/until FDA begins to enforce the Deeming Rule (by removing competitive vapor products that don't comply with the Deeming Rule from the market), and unless/until FDA approves PMTA and MRTP applications for tobacco industry vapor products (or PMI's IQOS).

That's why they want the regulation as fast as possible, they don't want a company to come in (and conglomerate) and be able to compete with them. They want electronics killed so they can sell the more profitable item "tobacco". They want all electronics to be as their snus products, useless in the aspect of replacement. They are too invested in smoke to justify the costs of changing products.

 

[Bill Godshall]

I found this interesting:

"In November, California voters approved raising the excise tax to $2.87. It took effect April 1.

Overall cigarette sales volume fell 0.3 percent during the four-week period, but was up 0.8 percent over the past 12 weeks."

Don't know where Kent found those quotes, but it wasn't from the report I cited from Bonnie Herzog.

In fact, Herzog reported a 3.7% decline in total US cigarette sales volume during the past 4 weeks,
a 4.2% decline during the past 12 weeks, and a 3.6% decline for the past 52 weeks.

Please note these are y/y numbers (e.g. the 3.7% past 4 week decline was 3.7% lower than the same 4 week period a year ago).

 

[Kent C]

Don't know where Kent found those quotes, but it wasn't from the report I cited from Bonnie Herzog.

In fact, Herzog reported a 3.7% decline in total US cigarette sales volume during the past 4 weeks,
a 4.2% decline during the past 12 weeks, and a 3.6% decline for the past 52 weeks.

Please note these are y/y numbers (e.g. the 3.7% past 4 week decline was 3.7% lower than the same 4 week period a year ago).

You didn't give a link to your info so I googled and found the similar quotes you listed plus more here:

Vuse falls further behind Juul on e-cig sales

You may have more recent data... but as you see, the article above says what I posted.

 

[Bill Godshall]

I was citing data from Herzog's January 9 report, which I cannot post here.

The December Winston Salem Journal article Kent cited (that contained a quote from Herzog about expected
4 and 12 week sales data following the industry wide price hike) also contained the following sentence, which is consistent with her more recent data I cited above.

"Herzog maintained her projected overall industry-volume decline for 2017. It is now 3.5 percent, down from 3.8 percent and below the 4 percent average decrease of recent years."

Note that Herzog issues new tobacco sale data reports every 4 weeks.