Leonardo DiCaprio digs them. Johnny Depp draws on them. Jenny McCarthy goes out with them.
They’re e-cigarettes, and they’re the latest symbol of Hollywood hip glam.
But this is no mere Hollywood fad to the big tobacco companies, which are betting that e-cigs can give them a much-needed boost.
The devices release nicotine-infused vapor for inhalation, and though they’re not exactly risk-free, the battery-operated devices are being marketed to both traditional and new smokers.
“If you’re Big Tobacco and competing against another Big Tobacco, the fact that they’re betting on e-cigarettes and [seeing] better profits — that makes a big difference,” explains Adriana S. de Lozada of PrivCo.
The gross profit margin on e-cigs, which range in price from an $11.99 Blu to a $26.97 NJOY three-pack — is 30 percent higher than for traditional cigarettes, according to a recent Wells Fargo Tobacco Retailer Survey report.
Not only that, the annual growth rate for e-cigs is expected to reach 30 percent, according to Wells Fargo Senior Analyst Bonnie Herzog’s report. She predicts e-cigarette consumption will “eclipse” traditional cigarettes “over the next decade.”
Big Tobacco company Lorillard, owner of Blu (which it acquired for $135 million in 2012), captures nearly half of the US e-cigarette market, at 49 percent. Third-quarter Blu sales saw a fourfold increase in revenue over the same quarter one year ago.
Additionally, Reynolds American and Altria Group, the largest cigarette producer in the country, are test-marketing their own e-cig brands.
Will this “steamy” affair last? E-cigarettes are largely unregulated, unlike their ugly stepsisters. But FDA regs may come down as soon as next week, and they could stunt the market’s growth.
“It’s all about timing right now for these companies. Once the regulation starts to come in, there’s going to be … more focus on marketing and marketing costs,” says analyst Lozada.