E Cigarette Companies Look To New Innovations
E cigarette companies are already looking at new innovations and products to keep the e cigarette market fresh and ahead of the technological curve. Tougher competition and stricter regulations are driving this process and it is more important than ever that the industry keeps developing.
The large tobacco firms do not face the same type of pressure as the e cigarette companies, essentially because their investments within the industry are only a tiny segment of their overall business, and also because they only act as a buffer against waning tobacco demand.
The second biggest tobacco company in the world, British American, established a division in the year 2011 to create e cigarettes, and a year later they purchased CN Creative which is based in the United Kingdom. The company sells an electronic cigarette referred to as Vype in the UK. Meanwhile, Reynolds America – a company in which it is a major shareholder, is launching an e cigarette known as Vuse across the United States.
In April, U.S. Marlboro producer Altria Group purchased Green Smoke, a Miami-based firm for one hundred and ten million dollars. In July Lorillard decided to sell off Skycig and Blu, a company it purchased for one hundred and thirty five million dollars in the year 2012, to Imperial Tobacco, makers of Gauloise.
Electronic cigarettes started as simple appliances, mainly sold and purchased over the internet before they became widely available during the previous last 4 years. Therefore, while there was need for private equity and venture capital, capital requirements were comparatively moderate.
Bigger Investors Get Onboard
Because these devices are now available in retail shops, the big players must invest in quality control, slotting fees, marketing as well as supply chain in order to boost and maintain their market share. That can reduce cash flow, which makes them less appealing to private equity companies that require short term profits to take care of their debts.
Several independent firms might still be able to go public, or sell out to larger companies but there is fear within the industry that several others might get crushed, and the owners may not be able to recover their investments.
“Some independent firms will certainly achieve a great deal of success, nevertheless I anticipate that several might ultimately not be able to find an exit strategy,” stated Mark Winkler of Fleming Family & Partner.
Help may come from the healthcare industry
According to sources knowledgeable about the matter, NJOY – a company that has had many fund injections from venture capital and private equity funds, as well as others including Silicon Valley entrepreneur Sean Parker, has attracted the interest of both pharmaceutical and tobacco companies. The source did not reveal the identities of the firms and did not state whether any discussions occurred.
Healthcare companies might ultimately find it reasonable to purchase electronic cigarette manufacturers, because they are a threat to nicotine replacement therapies provided by companies such as GlaxoSmithKline and Pfizer. British American Tobacco’s Nocoventures division, together with Kind Consumer and Consort Medical, has had Voke (a new nicotine inhaler) licensed within the United Kingdom as a medical device.
NJOY has not made any comment about any such approaches; however Weiss, the firm’s chief executive officer stated, “if the appropriate kind of investor came to us, I would have paid attention”. It will be recalled that NJOY recently rolled out new lines of vape and rechargeable products in flavours such as Butter Crunch and Blood Orange.
There is no doubt about it, the electronic cigarette industry is growing and changing at a ever increasing pace. What type of innovations would you want to see in the e cig industry? Feel free to let us know in the comments below.
Author: Kevin Ewbank
Avid vaper & co-founder of SmokShop