Monday, 16 June 2014

Could the US ecig market be worth $4 billion a year?

Over the last few months has been intense speculation about the future of the US electronic cigarette market which is now estimated to be worth around $1.5 billion. While there are a number of regulatory changes on the horizon, with the FDA finally announcing its plans just a few weeks ago, there is a growing belief that significant short to medium-term growth could see electronic cigarette sales overtake their tobacco cigarette counterparts. So, how much could the US ecig market be worth in the short-term?

A research note published recently suggested that growth of 24.2% per annum is achievable between 2014 and 2018. When you bear in mind that the market is currently worth around $1.5 billion, this equates to market sales in excess of $4 billion per annum by the end of 2018.

People Power v Regulations

While there is no doubt that the FDA is looking to introduce fairly rigid and potentially expensive regulations in the short to medium term, there is a growing feeling that people power will also be a force to be reckoned with. Since the introduction of regulatory guidelines, in both the US and Europe, there has been a significant uprising amongst the vaping community who are accusing governments and politicians of manipulating the facts. Historically it has been very difficult for so-called people power to win the day but the strength of feeling amongst the electronic cigarette community is making politicians sit up and listen.

That is not to say that regulations will not be introduced in the short to medium term, or that some of these changes will be restrictive to the industry but perhaps people power will prevent the authorities from taking a stranglehold on this relatively new industry. There is also the issue of potential court action by affected parties which will at worst will drag out the situation for many years to come, delaying the introduction of regulations, and at best force the authorities to think again. This has happened in the US where the FDA previously attempted to ban electronic cigarettes only to be forced into an embarrassing U-turn after a High Court ruling.

Electronic cigarette taxes

The issue of a further tax on electronic cigarette sales in the future has never been too far from the headlines. The problem has been exacerbated by the reduction in tobacco cigarette taxes which is impacting state and government income streams across the world. Again, the argument for introducing electronic cigarette taxes seems to be on somewhat shaky ground when you bear in mind the potential health benefits many people have been talking about. The main idea of the tobacco tax was to fund additional health services which cigarette smokers may require in the future, something of a grey area with regards to electronic cigarettes.

We will see an array of medical trials announced in the short, medium and longer term as both the industry and government regulators seek to clarify rumours, untruths and speculation about the sector – in particular health implications. However, at this moment in time growth in electronic cigarette sales is set to continue as the number of former tobacco cigarette smokers switching to their electronic counterparts continues to rise.

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