Jun 13, 2013 Insight: No smoke, plenty of fire fuels e-cigarettes
LONDON (Reuters) - Puffing on slim metal tubes loaded with pale yellow liquid, two London businessmen say they have between their lips a cure for what the U.N. calls "one of the biggest public health threats the world has ever faced".
Electronic cigarettes are the future, they argue. Cheaper, cleaner and cooler than smoking, "vaping" - using a vaporizer to inhale nicotine infused with exotic flavors ranging from pina colada to bubblegum - will spell the end of tobacco.
"After I first tried this, I left half a cigarette in the ashtray and never went back," says Zoltan Kore, who co-runs the newly opened London e-cigarette shop "Smoke No Smoke".
"I'm not a smoker now, I'm a vaper," says business partner Gabor Kovacs. "The awful morning coughing fits have gone, and the waking up in the night struggling to breathe has gone, too."
Such stories - and hopes of persuading the rest of the world's billion smokers to stub out their tar and toxin-loaded cigarettes, cutting a catalogue of chronic disease risks as they do - are tantalizing for public health experts.
And since "vaping" doesn't entail kicking the addiction - either to the stimulant nicotine or to the behavioral habits of smoking - some say it can help smokers quit much more effectively than nicotine gum or patches.
COOL ALTERNATIVE, OR DANGEROUS GATEWAY?
All the top tobacco companies are now placing bets on e-smokes, which some analysts predict may outsell conventional cigarettes in 10 years, raising the counter-intuitive prospect that Big Tobacco could actually help people quit smoking.
Celebrities like Bruno Mars and Courtney Love are also endorsing them, a further inducement to makers of iconic cigarette brands like Marlboro and Camel to invest.
Yet e-cigarettes are far from universally accepted as a public health tool; regulators are agonizing over whether to restrict them as "gateway" products to nicotine addiction and tobacco smoking, or embrace them as treatments for would-be quitters.
A big issue is the lack of long-term scientific evidence to support the safety and effectiveness of e-cigarettes, prompting critics like the British Medical Association (BMA) to warn of the dangers of their unregulated use.
"These devices may also undermine efforts to prevent or stop smoking by making cigarette use seem normal in public and at work," argues the BMA, which has called for vaping to be banned in public places in Britain, just as smoking is.
The World Health Organization (WHO) is equally wary, saying that until e-cigarettes have been endorsed as safe and effective by national regulators, "consumers should be strongly advised not to use any of these products".
Supporters of e-cigarettes scoff at suggestions they are a hazard or could be a slippery slope for previously addiction-free young people to get hooked on nicotine.
There is, they argue, no evidence of any harm from nicotine consumption and it would be crazy to impose tougher restrictions on e-smokes than on toxic "death sticks" that are freely available to buy on almost every street corner worldwide.
As Adrian Everett, chief executive of Britain's leading e-cigarette company E-Lites put it in a comment to Reuters: "Comparing electronic cigarettes to tobacco is like comparing playing football to juggling live hand grenades."
BIG KILLER
While the debate rumbles, smoking is killing half of all those who do it. Tobacco has an annual death toll of 6 million people, and that could exceed 8 million by 2030 unless something urgent is done to stop people smoking, according to the WHO.
As well as causing lung cancer and other chronic respiratory diseases, smoking is also a major contributor to cardiovascular diseases, the world's number one killer.
"This could be the most effective method of smoking reduction that we have ever had," says Konstantinos Farsalinos of the Onassis Cardiac Surgery Center in Greece, who has conducted several studies exploring the risks of vaping.
His work, some of which has had some funding from makers of e-cigarettes, has found no adverse effects on heart function, nor any notable cancer risks to cells in the lungs.
Other research, however, suggests "vaping" may reduce lung capacity, and the German Cancer Research Center said last month it was concerned e-cigarette liquids contained ingredients that can irritate the airways, while poor quality products could contain carcinogens.
Against this background, a growing number of regulators see a need to control standards in a largely unregulated sector.
Britain became the latest to take the plunge this week by opting to regulate e-cigarettes as non-prescription medicines, after finding widely varying nicotine levels and contaminants in some existing products. This means manufacturers will need a license from 2016, though they will still be sold in general stores.
A few countries have banned them outright - such as Brazil, Norway and Singapore - while others are opting for varying degrees of regulation, in some cases including limits on advertising and curbs on their use in public places.
France said last month it would impose the same restrictions on e-cigarettes as on conventional ones.
The European Union is proposing to limit the amount of nicotine they can hold before regulation kicks in, while the U.S. Food and Drug Administration has so far adopted a light touch, saying it plans to regulate e-cigarettes as it does tobacco.
Greater regulation, in one form or another, may sink smaller players that cannot afford to navigate through various licensing systems. But the rest will benefit from a halo of legitimacy.
In particular, that could play into the deep pockets of Big Tobacco - a prospect that makes some campaigners uneasy.
"Tobacco companies seem to be playing both sides of the game by selling cigarettes that cause thousands of deaths a year but also selling products designed to reduce the harm," says Martin Dockrell of British campaign group Action on Smoking and Health.
"There are some real risks here that need to be managed."
NO-BRAINER FOR TOBACCO FIRMS
For tobacco companies seeking to offset the decline in traditional smoking, judicious investment in e-cigarettes has become a no-brainer.
Altria, owner of Philip Morris, maker of the world's top-selling cigarette brand Marlboro, became the last of the major tobacco companies to jump on the bandwagon this week.
It is following in the steps of U.S. rivals Reynolds American, maker of Camel, and Lorillard, which paid $135 million to acquire Blu Ecigs in 2012. British American Tobacco and Imperial Tobacco are investing too.
Market consultant Euromonitor estimates the world market for e-cigarettes was more than $2 billion last year, with the United States accounting for a quarter of that. And the market is growing at breakneck speed.
Bonnie Herzog, an analyst at Wells Fargo bank in New York, believes the U.S. market alone will top $1 billion this year. By 2023, she predicts, there could be more vapers than smokers.
That poses a challenge to makers of nicotine-replacement products such as gum and patches, sold by drugmakers including Pfizer and GlaxoSmithKline, but it is a huge opportunity for the newcomers.
They include hundreds of small firms selling vaping devices made in China, where e-cigarettes were first invented, as well as a few larger pure-play e-smoke groups like U.S.-based NJOY.
NJOY this month raised $75 million from entrepreneurs including Sean Parker, co-founder of the music-sharing site Napster - another feather in its cap after recently luring former U.S. Surgeon General Richard Carmona onto its board.
At Kore and Kovacs' green, sharped-lined shop in Camden in trendy North London, the watermelon and cherry flavored vaping liquids and shiny offers of Swarovski-crystal-encrusted e-cigarettes are a far cry from the smoky reds and dusty browns one would expect in an old-style tobacconist's.
The pair say they are pursuing a deliberately clean image, designed to show how vaping can detoxify nicotine addiction.
These are exciting but uncertain times for e-smoke pioneers facing a wave of new rules in a hitherto unregulated market.
For now, Kore welcomes plans by Britain to regulate e-cigarettes as medicines. It will ensure safe standards and keep what he calls the "dodgy companies who mix nicotine liquids in the basement" out of the market.
But he's clear that excessively stringent rules would be dangerously counterproductive, banishing e-cigarettes to an inaccessible niche market and crushing an opportunity to improve health and save lives.
"To make people go back to smoking poisonous, stinking cigarettes is something that just must not happen," he said.
Electronic cigarettes are the future, they argue. Cheaper, cleaner and cooler than smoking, "vaping" - using a vaporizer to inhale nicotine infused with exotic flavors ranging from pina colada to bubblegum - will spell the end of tobacco.
"After I first tried this, I left half a cigarette in the ashtray and never went back," says Zoltan Kore, who co-runs the newly opened London e-cigarette shop "Smoke No Smoke".
"I'm not a smoker now, I'm a vaper," says business partner Gabor Kovacs. "The awful morning coughing fits have gone, and the waking up in the night struggling to breathe has gone, too."
Such stories - and hopes of persuading the rest of the world's billion smokers to stub out their tar and toxin-loaded cigarettes, cutting a catalogue of chronic disease risks as they do - are tantalizing for public health experts.
And since "vaping" doesn't entail kicking the addiction - either to the stimulant nicotine or to the behavioral habits of smoking - some say it can help smokers quit much more effectively than nicotine gum or patches.
COOL ALTERNATIVE, OR DANGEROUS GATEWAY?
All the top tobacco companies are now placing bets on e-smokes, which some analysts predict may outsell conventional cigarettes in 10 years, raising the counter-intuitive prospect that Big Tobacco could actually help people quit smoking.
Celebrities like Bruno Mars and Courtney Love are also endorsing them, a further inducement to makers of iconic cigarette brands like Marlboro and Camel to invest.
Yet e-cigarettes are far from universally accepted as a public health tool; regulators are agonizing over whether to restrict them as "gateway" products to nicotine addiction and tobacco smoking, or embrace them as treatments for would-be quitters.
A big issue is the lack of long-term scientific evidence to support the safety and effectiveness of e-cigarettes, prompting critics like the British Medical Association (BMA) to warn of the dangers of their unregulated use.
"These devices may also undermine efforts to prevent or stop smoking by making cigarette use seem normal in public and at work," argues the BMA, which has called for vaping to be banned in public places in Britain, just as smoking is.
The World Health Organization (WHO) is equally wary, saying that until e-cigarettes have been endorsed as safe and effective by national regulators, "consumers should be strongly advised not to use any of these products".
Supporters of e-cigarettes scoff at suggestions they are a hazard or could be a slippery slope for previously addiction-free young people to get hooked on nicotine.
There is, they argue, no evidence of any harm from nicotine consumption and it would be crazy to impose tougher restrictions on e-smokes than on toxic "death sticks" that are freely available to buy on almost every street corner worldwide.
As Adrian Everett, chief executive of Britain's leading e-cigarette company E-Lites put it in a comment to Reuters: "Comparing electronic cigarettes to tobacco is like comparing playing football to juggling live hand grenades."
BIG KILLER
While the debate rumbles, smoking is killing half of all those who do it. Tobacco has an annual death toll of 6 million people, and that could exceed 8 million by 2030 unless something urgent is done to stop people smoking, according to the WHO.
As well as causing lung cancer and other chronic respiratory diseases, smoking is also a major contributor to cardiovascular diseases, the world's number one killer.
"This could be the most effective method of smoking reduction that we have ever had," says Konstantinos Farsalinos of the Onassis Cardiac Surgery Center in Greece, who has conducted several studies exploring the risks of vaping.
His work, some of which has had some funding from makers of e-cigarettes, has found no adverse effects on heart function, nor any notable cancer risks to cells in the lungs.
Other research, however, suggests "vaping" may reduce lung capacity, and the German Cancer Research Center said last month it was concerned e-cigarette liquids contained ingredients that can irritate the airways, while poor quality products could contain carcinogens.
Against this background, a growing number of regulators see a need to control standards in a largely unregulated sector.
Britain became the latest to take the plunge this week by opting to regulate e-cigarettes as non-prescription medicines, after finding widely varying nicotine levels and contaminants in some existing products. This means manufacturers will need a license from 2016, though they will still be sold in general stores.
A few countries have banned them outright - such as Brazil, Norway and Singapore - while others are opting for varying degrees of regulation, in some cases including limits on advertising and curbs on their use in public places.
France said last month it would impose the same restrictions on e-cigarettes as on conventional ones.
The European Union is proposing to limit the amount of nicotine they can hold before regulation kicks in, while the U.S. Food and Drug Administration has so far adopted a light touch, saying it plans to regulate e-cigarettes as it does tobacco.
Greater regulation, in one form or another, may sink smaller players that cannot afford to navigate through various licensing systems. But the rest will benefit from a halo of legitimacy.
In particular, that could play into the deep pockets of Big Tobacco - a prospect that makes some campaigners uneasy.
"Tobacco companies seem to be playing both sides of the game by selling cigarettes that cause thousands of deaths a year but also selling products designed to reduce the harm," says Martin Dockrell of British campaign group Action on Smoking and Health.
"There are some real risks here that need to be managed."
NO-BRAINER FOR TOBACCO FIRMS
For tobacco companies seeking to offset the decline in traditional smoking, judicious investment in e-cigarettes has become a no-brainer.
Altria, owner of Philip Morris, maker of the world's top-selling cigarette brand Marlboro, became the last of the major tobacco companies to jump on the bandwagon this week.
It is following in the steps of U.S. rivals Reynolds American, maker of Camel, and Lorillard, which paid $135 million to acquire Blu Ecigs in 2012. British American Tobacco and Imperial Tobacco are investing too.
Market consultant Euromonitor estimates the world market for e-cigarettes was more than $2 billion last year, with the United States accounting for a quarter of that. And the market is growing at breakneck speed.
Bonnie Herzog, an analyst at Wells Fargo bank in New York, believes the U.S. market alone will top $1 billion this year. By 2023, she predicts, there could be more vapers than smokers.
That poses a challenge to makers of nicotine-replacement products such as gum and patches, sold by drugmakers including Pfizer and GlaxoSmithKline, but it is a huge opportunity for the newcomers.
They include hundreds of small firms selling vaping devices made in China, where e-cigarettes were first invented, as well as a few larger pure-play e-smoke groups like U.S.-based NJOY.
NJOY this month raised $75 million from entrepreneurs including Sean Parker, co-founder of the music-sharing site Napster - another feather in its cap after recently luring former U.S. Surgeon General Richard Carmona onto its board.
At Kore and Kovacs' green, sharped-lined shop in Camden in trendy North London, the watermelon and cherry flavored vaping liquids and shiny offers of Swarovski-crystal-encrusted e-cigarettes are a far cry from the smoky reds and dusty browns one would expect in an old-style tobacconist's.
The pair say they are pursuing a deliberately clean image, designed to show how vaping can detoxify nicotine addiction.
These are exciting but uncertain times for e-smoke pioneers facing a wave of new rules in a hitherto unregulated market.
For now, Kore welcomes plans by Britain to regulate e-cigarettes as medicines. It will ensure safe standards and keep what he calls the "dodgy companies who mix nicotine liquids in the basement" out of the market.
But he's clear that excessively stringent rules would be dangerously counterproductive, banishing e-cigarettes to an inaccessible niche market and crushing an opportunity to improve health and save lives.
"To make people go back to smoking poisonous, stinking cigarettes is something that just must not happen," he said.
June 9. 2013 E-Cigarettes Fire Up Investors, Regulators
By MIKE ESTERL
A group including Silicon Valley entrepreneur Sean Parker is investing $75 million in a leading maker of electronic cigarettes, part of a wave of money firing up a market that is under increasing regulatory scrutiny.
E-cigarettes are hot right now, but the nascent industry still faces the same health and regulatory questions of its leafy predecessor. Mike Esterl joins MoneyBeat to discuss.
The market for e-cigarettes—battery-powered devices that turn heated, nicotine-laced liquid into vapor—is small but growing rapidly, in part because they are increasingly seen as less harmful than conventional cigarettes.
Mr. Parker, who co-founded the music-sharing site Napster and was the first president of Facebook Inc., is part of an investment group acquiring a minority stake in Scottsdale, Ariz.-based NJOY Inc., one of dozens of e-cigarette companies that have surfaced since 2006.
"There's a huge opportunity to transition the entire world away from dangerous, carcinogenic, combusting cigarettes," said Mr. Parker, who has been a big donor to cancer research, in an interview.
Big tobacco companies also are piling in. Altria Group Inc., MO -0.19% which makes Marlboro cigarettes and controls roughly half the U.S. tobacco market, is expected to detail its e-cigarette plans Tuesday. Reynolds American Inc.,RAI -0.98% maker of Camel cigarettes and the industry's No. 2, said last week it will sell e-cigarettes in Colorado ahead of a national rollout. No. 3 Lorillard Inc.LO -0.88% acquired Blu Ecigs, NJOY's biggest rival, for $135 million last year.
E-cigarettes, unlike traditional smokes, currently aren't federally regulated. The Food and Drug Administration warned consumers in 2009 the new technology could pose its own health risks and required further study. The agency has said it is planning regulations that would treat them as tobacco products, but has provided no details.
In an interview last week, FDA tobacco czar Mitch Zeller described the e-cigarette market as "the wild, wild West" in terms of regulation.
More than a dozen states, including Arkansas, Colorado and Maryland, have banned e-cigarette sales to minors. New Jersey, North Dakota and Utah have outlawed their use in enclosed public spaces. A bill approved by California's state senate in May would bring e-cigarettes under smoke-free laws covering public buildings, workplaces and restaurants.
Boston, Seattle and Indianapolis have extended their smoking bans to the devices. Airlines don't allow e-cigarettes, nor do Amtrak or Starbucks Corp. SBUX -1.04%
For current smokers, e-cigarettes are believed to be less harmful than traditional smokes, which release most of their toxins through combustion. But some studies indicate nicotine, the addictive agent in cigarettes and in the new devices, may harm fetuses.
The long-term impact of inhaling e-cigarette vapor, which contains other substances such as propylene glycol, has yet to be determined.
Among the questions faced by federal regulators: Could e-cigarettes, which currently offer flavors such as chocolate, strawberry and piña colada, serve as a gateway to traditional cigarettes for young people? Will longtime smokers use them only to get a nicotine fix where regular smoking is banned? What kind of age restrictions and warnings should they carry? And what about advertising?
The FDA's Mr. Zeller declined to comment on what future regulations might look like or when they will be proposed. E-cigarette sellers aren't currently allowed to make health or smoking cessation claims.
The European Union also is considering limits on e-cigarette sales, and France's health minister said last month the government would impose the same curbs on them as on conventional cigarettes. E-cigarettes are already restricted in Mexico, Brazil and several Asian countries.
The potential market for e-cigarettes is huge. Despite new regulation of cigarettes and stepped-up public health campaigns urging Americans to quit, nearly one in five American adults still smoke. E-cigarettes more closely mimic smoking than do other smokeless products such as moist snuff or nicotine patches.
Industry experts say U.S. retail sales of e-cigarettes could reach $1 billion this year, just 1% of the country's cigarette market but twice that of 2012, as they spread from the Internet to store shelves and generate buzz through television advertisements and celebrity endorsements.
Sales of traditional cigarettes have been falling as public-health officials mount graphic advertising campaigns and push to expand bans on smoking in public places, and as federal and state tax increases have raised cigarette prices.
NJOY, the company in which Mr. Parker is investing, is a top-selling brand. Although industrywide sales numbers are scarce, NJOY captured 35.6% of the $36.4 million in U.S. convenience-store sales in the four weeks ended May 11, according to Wells Fargo Securities, citing Nielsen scanner data.
Lorillard's blu had a 33.9% share, followed by the privately held LOGIC and 21st Century brands, with 13.8% and 7.4%, respectively.
Mr. Parker is investing nearly $10 million. Homewood Capital, a New York investment fund headed by Douglas Teitelbaum, is investing nearly $40 million. Boston-based Fidelity Investments is contributing about $25 million. And Founders Fund, a San Francisco venture-capital fund started by PayPal co-founder Peter Thiel, is kicking in roughly $5 million.
Mr. Thiel helped finance the 2005 film "Thank You for Smoking," a satire about the cigarette industry.
Mr. Teitelbaum, former head of hedge fund Bay Harbour Management, says he began exploring an investment in e-cigarettes after deciding the category could be a game-changer and that NJOY's product was impressive. "It's clear they have the flavor right, the look and feel of the cigarette right, the branding and packaging right," said Mr. Teitelbaum, who says he smoked traditional cigarettes for more than 30 years before switching to NJOY Kings a few months ago.
Unlike many rival e-cigarettes that are made of metal and weigh and look more like fountain pens, NJOY Kings more closely resemble regular cigarettes. The disposable cigarette retails for $7.99 and promises to last roughly as long as two packs of traditional cigarettes. The company has been advertising on TV and has attracted celebrity endorsers such as musicians Courtney Love and Bruno Mars.
In March, former U.S. Surgeon General Richard Carmona joined NJOY's board.
As the government's top physician, Mr. Carmona had highlighted the dangers of secondhand smoke and supported an outright ban of tobacco products.
After joining NJOY, Mr. Carmona said it is important to explore alternatives to traditional cigarettes because the adult smoking rate has remained stuck at around 20%.
More study is needed on the health effect of e-cigarettes, he said, but "initial information certainly suggests there is significant potential for harm reduction."
He added that e-cigarettes could be another tool to get more people to quit.
A group including Silicon Valley entrepreneur Sean Parker is investing $75 million in a leading maker of electronic cigarettes, part of a wave of money firing up a market that is under increasing regulatory scrutiny.
E-cigarettes are hot right now, but the nascent industry still faces the same health and regulatory questions of its leafy predecessor. Mike Esterl joins MoneyBeat to discuss.
The market for e-cigarettes—battery-powered devices that turn heated, nicotine-laced liquid into vapor—is small but growing rapidly, in part because they are increasingly seen as less harmful than conventional cigarettes.
Mr. Parker, who co-founded the music-sharing site Napster and was the first president of Facebook Inc., is part of an investment group acquiring a minority stake in Scottsdale, Ariz.-based NJOY Inc., one of dozens of e-cigarette companies that have surfaced since 2006.
"There's a huge opportunity to transition the entire world away from dangerous, carcinogenic, combusting cigarettes," said Mr. Parker, who has been a big donor to cancer research, in an interview.
Big tobacco companies also are piling in. Altria Group Inc., MO -0.19% which makes Marlboro cigarettes and controls roughly half the U.S. tobacco market, is expected to detail its e-cigarette plans Tuesday. Reynolds American Inc.,RAI -0.98% maker of Camel cigarettes and the industry's No. 2, said last week it will sell e-cigarettes in Colorado ahead of a national rollout. No. 3 Lorillard Inc.LO -0.88% acquired Blu Ecigs, NJOY's biggest rival, for $135 million last year.
E-cigarettes, unlike traditional smokes, currently aren't federally regulated. The Food and Drug Administration warned consumers in 2009 the new technology could pose its own health risks and required further study. The agency has said it is planning regulations that would treat them as tobacco products, but has provided no details.
In an interview last week, FDA tobacco czar Mitch Zeller described the e-cigarette market as "the wild, wild West" in terms of regulation.
More than a dozen states, including Arkansas, Colorado and Maryland, have banned e-cigarette sales to minors. New Jersey, North Dakota and Utah have outlawed their use in enclosed public spaces. A bill approved by California's state senate in May would bring e-cigarettes under smoke-free laws covering public buildings, workplaces and restaurants.
Boston, Seattle and Indianapolis have extended their smoking bans to the devices. Airlines don't allow e-cigarettes, nor do Amtrak or Starbucks Corp. SBUX -1.04%
For current smokers, e-cigarettes are believed to be less harmful than traditional smokes, which release most of their toxins through combustion. But some studies indicate nicotine, the addictive agent in cigarettes and in the new devices, may harm fetuses.
The long-term impact of inhaling e-cigarette vapor, which contains other substances such as propylene glycol, has yet to be determined.
Among the questions faced by federal regulators: Could e-cigarettes, which currently offer flavors such as chocolate, strawberry and piña colada, serve as a gateway to traditional cigarettes for young people? Will longtime smokers use them only to get a nicotine fix where regular smoking is banned? What kind of age restrictions and warnings should they carry? And what about advertising?
The FDA's Mr. Zeller declined to comment on what future regulations might look like or when they will be proposed. E-cigarette sellers aren't currently allowed to make health or smoking cessation claims.
The European Union also is considering limits on e-cigarette sales, and France's health minister said last month the government would impose the same curbs on them as on conventional cigarettes. E-cigarettes are already restricted in Mexico, Brazil and several Asian countries.
The potential market for e-cigarettes is huge. Despite new regulation of cigarettes and stepped-up public health campaigns urging Americans to quit, nearly one in five American adults still smoke. E-cigarettes more closely mimic smoking than do other smokeless products such as moist snuff or nicotine patches.
Industry experts say U.S. retail sales of e-cigarettes could reach $1 billion this year, just 1% of the country's cigarette market but twice that of 2012, as they spread from the Internet to store shelves and generate buzz through television advertisements and celebrity endorsements.
Sales of traditional cigarettes have been falling as public-health officials mount graphic advertising campaigns and push to expand bans on smoking in public places, and as federal and state tax increases have raised cigarette prices.
NJOY, the company in which Mr. Parker is investing, is a top-selling brand. Although industrywide sales numbers are scarce, NJOY captured 35.6% of the $36.4 million in U.S. convenience-store sales in the four weeks ended May 11, according to Wells Fargo Securities, citing Nielsen scanner data.
Lorillard's blu had a 33.9% share, followed by the privately held LOGIC and 21st Century brands, with 13.8% and 7.4%, respectively.
Mr. Parker is investing nearly $10 million. Homewood Capital, a New York investment fund headed by Douglas Teitelbaum, is investing nearly $40 million. Boston-based Fidelity Investments is contributing about $25 million. And Founders Fund, a San Francisco venture-capital fund started by PayPal co-founder Peter Thiel, is kicking in roughly $5 million.
Mr. Thiel helped finance the 2005 film "Thank You for Smoking," a satire about the cigarette industry.
Mr. Teitelbaum, former head of hedge fund Bay Harbour Management, says he began exploring an investment in e-cigarettes after deciding the category could be a game-changer and that NJOY's product was impressive. "It's clear they have the flavor right, the look and feel of the cigarette right, the branding and packaging right," said Mr. Teitelbaum, who says he smoked traditional cigarettes for more than 30 years before switching to NJOY Kings a few months ago.
Unlike many rival e-cigarettes that are made of metal and weigh and look more like fountain pens, NJOY Kings more closely resemble regular cigarettes. The disposable cigarette retails for $7.99 and promises to last roughly as long as two packs of traditional cigarettes. The company has been advertising on TV and has attracted celebrity endorsers such as musicians Courtney Love and Bruno Mars.
In March, former U.S. Surgeon General Richard Carmona joined NJOY's board.
As the government's top physician, Mr. Carmona had highlighted the dangers of secondhand smoke and supported an outright ban of tobacco products.
After joining NJOY, Mr. Carmona said it is important to explore alternatives to traditional cigarettes because the adult smoking rate has remained stuck at around 20%.
More study is needed on the health effect of e-cigarettes, he said, but "initial information certainly suggests there is significant potential for harm reduction."
He added that e-cigarettes could be another tool to get more people to quit.
April 2012 |
Lorillard Buys Blu Ecigs for $135 million |
The nation’s oldest continuously operating tobacco business has officially moved into the smokeless, electronic variety. Based in Greensboro, North Carolina, top cigarette maker Lorillard announced today that it has acquired blu ecigs, an electronic cigarette company located in nearby Charlotte.
Lorillard, Inc., through its Lorillard Tobacco Company subsidiary, is the third largest manufacturer of cigarettes in the United States. Founded in 1760, Lorillard is the oldest continuously operating tobacco company in the U.S. Newport, Lorillard’s flagship premium cigarette brand, is the top selling menthol and second largest selling cigarette in the U.S. In addition to Newport, the Lorillard product line has four additional cigarette brand families marketed under the Kent, True, Maverick and Old Gold brand names. These five brands include 43 different product offerings which vary in price, taste, flavor, length and packaging. In April 2012, Lorillard acquired blu ecigs, the leading electronic cigarette company in the U.S. Lorillard maintains its headquarters and manufactures all of its cigarette products in Greensboro, North Carolina.
Shelling out some $135 million in cash to add blu’s assets to its stash, $6.5 billion Lorillard is working to capture this fast-growing and tech-savvy niche of the smokeless tobacco market. Sans the smoke, ash, or smell of a real burning cigarette, leading brand blu ecigs helps smokers looking to kick the habit maintain the social aspects of lighting up. As part of the agreement, blu ecigs will operate as a unit of Lorillard with existing management intact.
Lorillard primarily supplies premium and discount cigarettes — under the Kent, Old Gold, True, and Maverick names — to wholesale distributors that service more than 400,000 retail outlets, chain stores, and government agencies such as the US Armed Forces. These established relationships stand to give the company’s new blu brand some timely traction as competition heats up in e-cigarettes; blu will also benefit from having a big brother that can navigate the industry’s regulatory issues. For more on the nuances of this high-tech tobacco product, refer to a previous Bizmology post from colleague and First Research analyst Rebecca Mallett.
Lorillard has long relied on Newport, its best-selling flagship menthol cigarette brand that generates 85% of revenue. The cigarette manufacturer, founded in 1760 by French immigrant Pierre Lorillard, ranks #3 behind Philip Morris USA and Reynolds American.
To keep up with these tobacco titans and cater to consumers looking for newer smokeless tobacco products, Lorillard did well by strategically acquiring blu and expanding its products portfolio. As more restaurants, companies, and communities continue to bow to pressure from anti-smoking advocates, tobacco companies like Lorillard will need to look for more innovative ways to not only serve active cigarette smokers, but those who require smokeless products or who are opting to kick the habit altogether.
Lorillard, Inc., through its Lorillard Tobacco Company subsidiary, is the third largest manufacturer of cigarettes in the United States. Founded in 1760, Lorillard is the oldest continuously operating tobacco company in the U.S. Newport, Lorillard’s flagship premium cigarette brand, is the top selling menthol and second largest selling cigarette in the U.S. In addition to Newport, the Lorillard product line has four additional cigarette brand families marketed under the Kent, True, Maverick and Old Gold brand names. These five brands include 43 different product offerings which vary in price, taste, flavor, length and packaging. In April 2012, Lorillard acquired blu ecigs, the leading electronic cigarette company in the U.S. Lorillard maintains its headquarters and manufactures all of its cigarette products in Greensboro, North Carolina.
Shelling out some $135 million in cash to add blu’s assets to its stash, $6.5 billion Lorillard is working to capture this fast-growing and tech-savvy niche of the smokeless tobacco market. Sans the smoke, ash, or smell of a real burning cigarette, leading brand blu ecigs helps smokers looking to kick the habit maintain the social aspects of lighting up. As part of the agreement, blu ecigs will operate as a unit of Lorillard with existing management intact.
Lorillard primarily supplies premium and discount cigarettes — under the Kent, Old Gold, True, and Maverick names — to wholesale distributors that service more than 400,000 retail outlets, chain stores, and government agencies such as the US Armed Forces. These established relationships stand to give the company’s new blu brand some timely traction as competition heats up in e-cigarettes; blu will also benefit from having a big brother that can navigate the industry’s regulatory issues. For more on the nuances of this high-tech tobacco product, refer to a previous Bizmology post from colleague and First Research analyst Rebecca Mallett.
Lorillard has long relied on Newport, its best-selling flagship menthol cigarette brand that generates 85% of revenue. The cigarette manufacturer, founded in 1760 by French immigrant Pierre Lorillard, ranks #3 behind Philip Morris USA and Reynolds American.
To keep up with these tobacco titans and cater to consumers looking for newer smokeless tobacco products, Lorillard did well by strategically acquiring blu and expanding its products portfolio. As more restaurants, companies, and communities continue to bow to pressure from anti-smoking advocates, tobacco companies like Lorillard will need to look for more innovative ways to not only serve active cigarette smokers, but those who require smokeless products or who are opting to kick the habit altogether.