Latest E-Cigarette Push Gets a Reality Check

Sales shifting from c-stores to vape shops.

August 28, 2014

NEW YORK – There’s been a big push in the electronic cigarette market, as Altria Group Inc. and Reynolds American Inc. together have captured about a quarter of convenience-store sales just weeks into national rollouts of the battery-powered devices, according to a report in the Wall Street Journal. In a surprising development, though, e-cigarette sales are falling at these traditional retail outlets, reversing three years of rapid-fire growth.

About seven in 10 regular cigarettes are sold in convenience stores. That's where Altria (via its NuMark brand) is distributing its MarkTen e-cigarette, and Reynolds is launching its electronic Vuse. That is also where No. 3 tobacco player Lorillard Inc. is already positioned with the top-selling e-cigarette, Blu. They're all hoping to capture the small but growing number of smokers who are switching to the devices, which heat nicotine-laced liquid into vapor and are believed less toxic than cigarettes.

But e-cigarette sales are increasingly shifting to thousands of recently opened "vape shops," where consumers can buy refillable vaporizers that can pack more than five times the liquid and battery power of the smaller, sealed "cigalike" versions that Altria and Reynolds are just now rolling out. They also allow consumers to buy hundreds of flavored liquids in bulk and to mix and match hardware from dozens of manufacturers offering their products at lower prices.

According to the Wall Street Journal, Altria and Reynolds's e-cigarette dollar shares at convenience stores reached 14% and 11%, respectively, for the four weeks ended Aug. 2 after beginning their national rollouts in June, according to Wells Fargo, citing Nielsen store-scanner data. But overall e-cigarette sales at convenience stores shrank 7.5% in the same period, to $41.4 million. There are no reliable sales estimates for vape shops, but the Smoke-Free Alternatives Trade Association, an industry group, estimates the number of vape shops has more than tripled to 35,000 in the past year.

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