E-Cigarettes: A $1.5 billion industry braces for FDA regulation

ecigThe first time J. Andries Verleur tried an e-cigarette in 2008, he burned his lip and accidentally inhaled the nicotine fluid. “It was one of the worst products I ever tried,” he recalls, “but the idea was amazing.”

Verleur, a heavy smoker, was living in Prague and happened to spot the strange new product in a Vietnamese grocery store. The crude early version obviously didn’t work very well, but Verleur, a serial entrepreneur, immediately realized that if it did work, it could upend the tobacco industry. That was worth looking into: Cigarettes are a global business that generates more than half a trillion dollars every year, according to data from Euromonitor International.

In its simplest form, an e-cigarette is a cartridge filled with a nicotine solution and a battery powering a coil that heats the solution into vapor, which one sucks in and exhales like smoke. Typically, it looks like a regular cigarette, except the tip, embedded with an LED, often glows blue instead of red. The active ingredient in e-cigarettes is the same nicotine found in cigarettes and nicotine patches.

The effects of inhaling nicotine vapor are not totally understood, but there is no evidence to date that it causes cancer. Experts and logic seem to agree that it’s a lot better than setting chopped-up tobacco leaves on fire and inhaling the nicotine along with thousands of combustion byproducts, some of which are definitely carcinogenic. Because cancer is the main drawback of smoking for a lot of people, the delivery of nicotine without lighting a cigarette is very attractive. And because it produces a wispy vapor instead of acrid smoke, an e-cigarette lets you bring your smoking back indoors, where lighting up in an enclosed space is no longer socially, or legally, acceptable.

Verleur saw right away that if e-cigarettes could be made as convenient and satisfying as a pack of smokes, he’d make a killing. He enlisted the help of his brother, an engineer working for an Agilent Technologies (A) spinoff; booked a trip to China; and began meeting with manufacturers. In 2009 he formed his company, V2Cigs, with four employees working out of an apartment.

Five years later, V2Cigs has six manufacturing facilities in Shenzhen, China, a Miami headquarters, 250 employees, and 5 million customers worldwide. Verleur says more than a million of those are in the U.S., where Bloomberg Industries projects total e-cigarette sales could reach $1.5 billion this year. Other competitors now include NJoy, Vapor (VPCO), and Victory Electronic Cigarettes (ECIG), as well as the major tobacco manufacturers and hundreds of others.

It all still represents a tiny fraction of what Americans spend on tobacco, but it’s pretty solid for an industry that barely existed five years ago. A projection by Bloomberg Industries shows e-cigarette sales could surpass that of the traditional tobacco product by as early as 2023. Who will dominate the market is a different question, and one that may be answered not by the markets, but by the government.

A primitive, battery-operated “smokeless non-tobacco cigarette” was patented as early as 1963 and described in Popular Mechanics in 1965. Thomas Schelling, a Nobel prize-winning economist who helped start the Institute for the Study of Smoking Behavior and Policy at Harvard University’s Kennedy School in the 1980s, recalls that people in the 1960s were talking about a charcoal-based vaporizer that would heat some sort of nicotine solution. While those early versions might have been safer than a regular cigarette, they were too expensive and cumbersome to become a substitute for a pack of Camels in a country where, as Schelling notes, “you’re never more than 5 or 10 minutes away from a smoke.”

In a way, electronic cigarettes were made possible by cell phones. The drive to make phones smaller and lengthen their battery life led to the development of batteries and equipment small enough to fit in a container the size and shape of a cigarette. There’s some dispute over who invented the modern e-cigarette, but the first commercially marketed device was created by a Chinese pharmacist, Hon Lik, and introduced to the Chinese market as a smoking cessation device in 2004. From there, e-cigarettes made their way to small shops such as that of the Vietnamese grocer who sold Verleur his first one four years later.

Posted by on Feb 6th, 2014 and filed under Health, Other News. You can follow any responses to this entry through the RSS 2.0. You can leave a response by filling following comment form or trackback to this entry from your site

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