Who Will Keep Big Tobacco Honest?

I have at times been accused as a bit of a downer.  I tend to make dire conclusions from news like the FDA’s eventual regulation of electronic cigarettes.  Sure, the genie’s out of the bottle when it comes to e-cigarettes.  The word is out on e-cigarettes, and no matter how the staunchest prohibitionists pout, e-cigarettes aren’t going to go anywhere.

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That’s the good news.  The bad news is that in the spectrum of possible regulations, there’s a whole lot of room to kill the hobbyist and small business aspect of vaping.  For a minute, let’s have a little thought exercise here.

FDA Logo

The FDA has stated that their primary goal with e-cigarettes beyond ensuring basic safety is to keep them away from our poor misguided and corruptible youth. Therefore, it’s not unreasonable to assume the restrictions would at least include prohibition of most advertising, flavor bans and the death of online sales. It’s also possible that really ugly things like premarket approvals and user fees come into play.

In a best case scenario, most small businesses that rely on internet sales for its business will fold.  Or as industry wonks say, there will be heavy consolidation within the industry.

So, what would that look like?

Fortunately, many great vape shops have sprung up across the country.  Where I live we went from virtually no shops to over a dozen within a year or two span.  Some of those shops are even quite excellent.

weldingLocal specialty shops will be around sort of in the same capacity as you see standalone tobacco shops today.  It’s where the connoisseurs will go to stock up on their high-end gear (and likely “nicotine free” flavored e-liquid).

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Even then, the huge range of products and rapid innovation we see now might end up slowing down considerably.  With just a fraction of speciality vendors that exist today, manufacturers, particularly the large overseas factories, will likely slow down the pace of innovation due to fewer wholesale customers and decreased demand.

Of course, people who have no good shops around them are in a lurch.  Many more people who might have graduated to second generations and beyond might end up sticking with whatever is available in their local gas station.

That’s where things get interesting.  There’s only so much space in the crowded shelves of gas stations.  This is doubly true if any sort of behind the shelf requirement comes into play for retail e-cigarette sales.  Only the brands that sell well and know how to compete for limited shelf space will stay there.

There will probably be a couple independents like NJoy, and maybe Vapor Corp or Fin.  They will be sitting next to offerings from the major tabacco players.

Essentially, at this point, the odds are pretty good that most consumers will be buying an e-cigarette from our friends at Big Tobacco.

Now, let’s take things a step further.  Let’s assume the FDA really puts the screws to the industry and requires pre-market authorization and any other of a number of things it does for analog cigarettes.

out of businessI think that will likely knock the local specialty shops out of the running.  Local stores essentially sell commodity goods. They aren’t related to the manufacturer, so that begs the question, who would submit these products for approval and pay the fees?

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I’m not sure the factories really care enough to bother.  They could easily switch gears and start producing automotive parts or something.  Small businesses are in no real position to deal with federal bureaucracy designed for tobacco companies.  Local shops lack both the experience and the funds to navigate such treacherous waters.

That leaves the latter category, the stuff you find in gas stations today.  The smaller players that are sort of hanging on now will likely be consolidated. NJoy is a billion dollar company now, so it likely can survive.  And tobacco companies naturally thrive in this sort of environment, they know every trick in the book.

If you were wondering about gen 2 devices, you can pretty much forget about that.  The current big players seem just content in products that mimic traditional cigarettes.

Big Tobacco is only in the game to make up for lost cigarette sales, so one way or the other, they get what they want.

Fast forward a year or two after my dark dystopian future sets hold and NJoy or some other token indy company along with Big Tobacco are the only survivors and the children have finally been saved.

While whatever independant company remains will likely worth several billion dollars by then, that’s still small stakes for a major tobacco player.  Eventually, there will be a buyout leaving nothing but cigarette companies on store shelves.

smokesThat’s the point where the question proffered in the title makes sense.  With no other competitors out there, what’s to stop Big Tobacco from making some changes.  Now I know it’s kind of a prohibitionist tactic to keep pointing out Big T is up to no good, but seriously, screw those guys.

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If they can get away with it, they will probably do something to e-cigarettes to make them as… appealing as traditional smokes.  The only thing standing between them and some sort of evil plan is… the government. And that’s worked so well in the past.

After all, who else would there be to raise a stink?  The Prohibitionists?  It’s likely people will stop taking them seriously at some point, and even if they were successful, they’d just manage to get rid of e-cigarettes while regular cigarettes march right along.  Maybe Pharma can finally end tobacco addiction by then.  Ok, nevermind.  That leaves the government.  They’re the ones that started us down this road of no return by gift wrapping the e-cigarette industry for the tobacco players, aren’t they.

That just leaves us.  But we’re all busy enjoying our black market vaporizers and DIY e-liquid.

Ok, so I admit this is a bit of an extreme case and a sort of dark future.  But, I think at the extremes if stuff goes down the right way, it’s just as likely as any other future.  What are your thoughts?  Will things be brighter?  Am I an idiot? Or do you think I’m being too optimistic?  I’d love to hear your comments.

 

Steve K

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