Product Debates at Wells Fargo’s E-Cig Forum

NEW YORK -- Last Thursday, Bonnie Herzog brought together leaders from the electronic cigarette industry, as well as experts from the fields of public health and regulatory issues, for Wells Fargo’s inaugural E-Cig Forum. The forum took place on the Great American Smokeout Day, an appropriate coincidence as many of the conversations centered around the potential of electronic cigarettes to offer adult smokers a healthy alternative to combustible cigarettes.

In addition to panels on health and legislative issues, Herzog sat down for “fireside chats” with the heads of 10 different electronic cigarette companies: NJOY, Fin, V2 Cigs, Johnson Creek, Ballantyne Brands, Logic ECig, E-Lites, blu Ecigs, Vapor Corp. and Victory Electronic Cigarettes. While these chats covered a wide variety of topics, a common theme was what kind of e-cig or vaping products will succeed in the long run. Different companies had different opinions on product debates. A digest:

Rechargeable or Disposable

While some companies—such as NJOY—have committed exclusively to disposable products, believing the friendly price-point will drive sales, others see rechargeables as the future due to the fact that they offer a better value for consumers and better margins and the promise of repeat business for retailers (also known as the razor blade model).

E-Lites, the U.K.’s leading e-cig brand, made the conscious choice to not offer disposable products. Instead, they offer an “instant use” electronic cigarette that gives consumers the option of throwing it away after one use or purchasing refills.

“We want our product to be a part of (our consumers’) daily lives, not something they throw away,” said E-Lites’ group CEO Adrian Everett, noting that 62% of the company’s sales come from refill cartridges.

J. Andries Verleur, the co-founder and CEO of V2 Cigs, suggested that as consumers begin to try and accept electronic cigarettes, disposable models will become obsolete.

“I don’t see disposables as being a major factor five years from now,” he said. “There’s not much value in it for the consumers.”

Still, others believe there’s room for both. Fin Branding Group offers both rechargeable and disposable models and reports sales are good across the board.

“We’ve even seen consumers use both products for different occasions,” said the company’s chairman and CEO Elliot Maisel, explaining that disposable products tend to be more popular for long social occasions when consumers don’t want to worry about running out of power with a rechargeable product. “Our vision is that we’ll continue to sell both types.”

Tanks and Liquids or “Cigalike”

Although most of the electronic cigarette companies in attendance were not currently in the e-liquid or large-scale vaping hardware (also known as “tank”) business, many expressed interest in the growing sub-segment. As a leading manufacturer of U.S. e-liquids, Christian Berkey, CEO of Johnson Creek Enterprises, is quite familiar with this market and is confident that liquids already play a big role in the success of the e-cig movement.

“Hardware is why a smoker makes the first e-cig purchase, but the flavor is why they’ll make the second, third or fourth purchase,” he said.

Although Johnson Creek primarily focuses on liquids (or smoke juices), it has also recently introduced a tank product with which to consume its juices. While tanks tend to be significantly larger and heavier than traditional e-cig (or “cigalike”) products, Berkey said there is a demand for larger products that allow vapers to mix their own flavors--and that technology will help grow that demand.

“As hardware evolves, tank technology is going to develop,” Berkey said. “There will be room for tanks.”

Verleur also sees potential there and announced that V2 will be introducing a new brand in 2014 to address the tank market.

“In the U.S., 26% of the base is open system/mod large-scale devices,” said Verleur. “That market is larger in Europe. I think there’s a place for it.”

Familiar-looking or Nothing-Like-a-Cigarette

Perhaps the biggest debate of the day was whether consumers prefer electronic cigarettes that look similar to tobacco cigarettes or products that would never be mistaken for their combustible predecessor. The argument for the cigarette-like model is that the similarity will make dedicated smokers more comfortable with trying a new product.

“We’ve made conscious choice to look like a tobacco cigarette,” said NJOY’s CEO Craig Weiss. “Our view was the more familiar you make the product, the more likely people are to make the switch.”

Jim Raporte, president of the clear industry leader blu Ecigs, argued that the numbers suggest otherwise.

“Our market growth has been largely at the expense of the No. 2 brand,” he said. “A big key is that we do not look like a traditional cigarette.”

Logic’s president Miguel Martin agreed with this assessment, noting that the two e-cig companies experiencing the most growth in the Nielsen numbers—Logic and blu—in no way look like traditional cigarettes.

“We believe that when adult smokers move to this category, they want that bartender or friend across from them to know that they’re not smoking a cigarette,” he concluded.

With the segment in its infancy, only time will tell which types of products will emerge successful in the long run--or if the consumer base will be large enough for multiple varieties to thrive.