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June 1, 2012

Wells Fargo - Electronic Cigarettes The Next Big Thing?

Electronic Cigarettes - The Next Big Thing?

According to a survey done by the Wells Fargo Securities Tobacco Talk, electronic cigarettes certainly stand a fighting chance in the tobacco industry. Retailers have been thoroughly impressed with the electronic cigarette products they've been selling. And they've been even more impressed by the revenues they're bringing in.

In fact, electronic cigarette sales have skyrocketed to $350 million, even as the ecig industry waits for ground rules (from the FDA) for manufacturing electronic cigarettes. Murray Kessler, the CEO of Lorillard, Inc., which recently acquired blu Cigs, says the industry is expected to earn over $1 billion in the next few years.

This is no surprise to me since ecigs don't contain the 4,000+ chemicals that regular tobacco cigarettes do. Couple that with the fact that ecigs are also cheaper, and you have a product that people truly want and enjoy.

More Ecig Acquisitions To Come?

It was only recently that Lorillard, Inc. became the first of the three major tobacco companies to acquire an electronic cigarette brand with their purchase of blu Cigs for $135 million.

Said Bonnie Herzog, Managing Director at Wells Fargo Securities, "We continue to believe [Lorillard's] ecig acquisition is very positive and expect [Reynolds America] to be the next mover into this growing category, most likely organically, but we wouldn't rule out a potential acquisition,

E-cigarettes - The Next Big Boom

Herzog believes the massive growth that the electronic cigarette industry has experienced thus far is very similar to the huge boom of energy drinks in the recent years.

"We think ecigs are to tobacco what energy drinks are to beverages. In other words, similar to energy drinks, ecigs are profitable, growing quickly, gaining shelf space and consumer acceptance; therefore, e-cigarettes are an important new niche category for retailers."

I'd have to agree. Electronic cigarettes fill a huge consumer demand for the countless many who are looking for a better, cheaper alternative to analog cigarettes.

Ecigs = Texting. Tobacco Cigarettes = Snail Mail

Ecigs have been a huge hit so far, and I fully expect them to eventually replace tobacco cigarettes almost completely. It's a simple a case of how technology works in the marketplace. And in this case, e-cigarettes are like email and texting, whereas, tobacco cigarettes are like snail mail. And as history has proven time and time again, technology always wins.

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