By: Kiran Moodley | Assistant Producer, CNBC.com
Traditional tobacco companies need to adapt to the rise of electronic cigarettes – or e-cigarettes – ahead of the product becoming regulated in the U.K., according to an analyst at Berenberg Bank.
Britain’s Medicines and Healthcare Products Regulatory Agency is set to regulate the sale of e-cigarettes in 2016. However, Erik Bloomquist, senior analyst of consumer staples at Berenberg, told CNBC that the agency will endorse an e-cigarette produced by British American Tobacco (BAT) next year, which will be a turning point in the product’s popularity.
“We think [this] will be really critical because then they’ll be able to tell people: ‘this is a product that is lower risk than a traditional cigarette’,” he said.
An e-cigarette is an electronic inhaler, usually containing nicotine and emitting a harmless vapor, that is meant to simulate – and be a substitute for – tobacco smoking,
Bloomquist said that Imperial Tobacco, a company whose second-quarter earnings on Thursday missed Berenberg’s expectations, is making the right move in planning to release e-cigarette products in 2014.
He added that tobacco companies have a number of advantages in the e-cigarette space.
“We think they will adapt and we think they have some competitive advantages that really are sustainable,” he said. “Critically among those are the knowledge they have of the consumer and also the distribution systems they have.”
He said that some companies were putting a lot of effort into developing e-cigarette products, albeit “belatedly.”
Currently, BAT and Philip Morris were ahead internationally when it came toe-cigarette production, Bloomquist said, while in the U.S., Lorillard was leading the way, with their blu e-cigs dominating innovation and enjoying around 40 percent of the share of the market.
by Barbara Diamond
The Laguna Beach City Council on Tuesday rejected a proposed ban on electronic cigarettes.
City Manager John Pietig recommended adding e-cigarettes to the city’s ordinance restricting the use in public of tobacco and other plants or weeds that are smoked. The proposed amendment is consistent with the council’s long-standing desire to protect the public from secondhand smoke and to discourage the unhealthy habit of smoking, according to Pietig’s summary.
“The secondhand vapor from an e-cig is no more harmful than the water vapor rising out of a cup of coffee,” said Laguna Beach resident Peter French, regional vice president of Life LLC. “We sell health and wellness products. One of those products happens to be the electronic cigarette.”
E-cigarettes are battery-operated devices that generally contain cartridges filled with nicotine, flavors and other chemicals, according to a July 22, 2009, news release from the U.S. Food and Drug Administration provided by Tom Kiklas, president and co-founder of the Tobacco Vapor Electronic Cigarette Assn.
FDA tests have detected dipropylene glycol in the cigarettes, but an Environmental Protection Agency release, also provided by Kiklas, states that studies conducted up to the testing limit established by the agency have shown dipropylene glycol not to be carcinogenic.
“I am not convinced that e-cigarettes are dangerous,” said Councilman Steven Dicterow, who voted to reject a ban.
Councilwoman Toni Iseman, the council’s most avid advocate of smoking bans as a person who is made ill by secondhand smoke, said she once sat next to a smoker puffing on an e-cigarette and could not smell anything.
“A secondary [e-cig] benefit is not dropping cigarette butts on the ground, and we could possibly be helping someone quit smoking,” Iseman said.
Mayor Kelly Boyd, who quit smoking after being diagnosed with cancer but still sneaks the occasional puff, said a golfing buddy of his smokes electronic cigarettes and has cut back on tobacco products.
French compared the addictive quality of nicotine to that of caffeine.
“Nicotine has gotten a bad reputation over the years based on the company it keeps,” French said. “Wrapped up in a traditional cigarette, nicotine is surrounded by thousands of chemicals, more than 60 of which are absolutely carcinogenic and many of which are more addictive than nicotine itself.”
French said that since 2008, his sales have shown that thousands of people have moved away from traditional cigarettes.
“This is because it is an easy, effective and safe nicotine delivery system without other harmful chemicals, including tar and carbon monoxide,” French said. “This technology should be embraced and celebrated, not vilified and feared out of ignorance. ”