E-CIG: Lobbying for a hundred billion market

Traditional cigarette sales are down, but vaping has become a practice of tens of millions of people around the world. In the United States, e-cigarette sales increased from 500 million in 2012 to 2 billion in 2014. In France, they represent more than 300 million euros. So while there was only one point of sale in 2010 in France, there are now more than 2500. This exponential growth has several consequences. In particular, it provoked a debate on the regulation of these new modes of administration of nicotine.

Any regulatory choice would favor certain market players over others. As a result, a ranking of the e-cigarette as a medicine (with marketing authorization) gives an advantage to the tobacco industry but is also a benefit for the pharmaceutical industry. Lust is growing among the players in the sector to obtain regulations that, while appearing to promote consumer protection, would provide them with a decisive protection against new entrants. As in any industry that matures, the e-cigarette and tobacco sector has gradually developed a lobbying dynamic.

Take an example in the United States. Reynolds American (Vuse) and Altria (MarkTen) is lobbying the Food and Drug Administration for more regulation, including a marketing authorization. Each application would cost millions of dollars, which would limit the ability of small businesses to innovate to enter the market. It should be known that the VTM system ("vapors, tank, mods" in English) is open and can use several different brands of e-liquids. E-cigarettes using the VTM account for almost 40% of the market. Reynolds and Altria e-cigarettes, on the other hand, rely on closed systems that can only use cartridges specifically made for them. Reynolds and Altria say the VTM should be removed because it is potentially dangerous for its users, who could use lethal substances like cannabis. The truth is that the VTM is a rapidly evolving system that could eventually hinder these two companies. An authorization would protect their market.

Competition is also fierce for distributors. In France, some retailers are already expressing their desire for regulation to make their profession less difficult. According to Anton Malaj, manager of a Point Smoke store, “It's harder. There is no concrete legislation, anyone can open an electronic cigarette store, that is the problem. Tobacco is getting started and in a lot of stores you will find electronic cigarettes ”. Tobacco shops, for their part, see part of the market escaping them. The deputy Thierry Lazaro announced in 2013 a bill to give tobacconists the monopoly of the distribution of e-cigarettes in France. So far this has not resulted in new laws. Finally, some, like the Geneva professor Jean-François Etter, are surprised at the opposition to the e-cigarette because it amounts to playing into the hands of the tobacco industry. Could it be for tax reasons? This is quite likely if we consider that the French state collected a little over 12 billion euros in taxes on tobacco consumption in 2013 - a significant figure when we consider that over the duration of The health costs of a smoker are lower for the community than that of a non-smoker because of the premature death of the first.

The global e-cigarette market could eventually weigh more than one hundred billion euros. Any regulation that would increase the cost of entry into the market would allow existing players to strengthen their position. So do not be fooled. Although not necessarily necessary, consumer protection laws that regulate the quality and safety of products would be beneficial to market development. On the other hand, any regulation that would make entry on the market more difficult (by seeking to ensure more "fair" competition through, for example, the regulation of the number of stores) would lead to the creation or reinforcement of the rents of the historic players ( tobacco manufacturers) and to the detriment of consumers.

* Molinari Economic Institute

Source : agefi