Battle of the Brands?

Most Retail Consumers Have No Idea What Brand of E-cig They Are Buying and Using

Recently, I sat in a restaurant across a table from an excited acquaintance.  He was showing me his e-cigarette- a small device, no bigger than a “real” cigarette and clearly intended to resemble a traditional tobacco product.

“It’s great,” he said.  “I can use it anywhere where I can’t smoke.”

And, then to prove it, he inhaled deeply, held the vapor briefly in his mouth and then opened his mouth to show me that a minimal amount of vapor escaped.

“See,” he said, “I can be really discrete with this.  It’s great!”

Because I know quite a bit about this product, the technology and the ways in which it can be used, I acknowledged the demonstration and the practicality of it.

“Yes,” I affirmed, “It’s a pretty cool product and it’s a potential game-changer when it comes to tobacco.”

But then I conducted an experiment.  I reached across the table and took the e-cigarette from him, completely enclosing my hand over it.

“Can you tell me the brand of this particular e-cigarette?” I asked.

“Brand?” he asked.

“Yes.  Is this an NJOY, a Blu Cig, a Metro, a Mistic, or a LOGIC?  What brand did you buy?”

He couldn’t answer the question.  He couldn’t tell me the brand, the density of the nicotine or how many “puffs” he was promised he would get.  He was able to tell me that it was menthol flavored and he was able to tell me where he got it and what he paid for it.

“It was on the counter of the C-store where I usually buy gas and cigarettes.  I’ve bought them there before,” he informed me.

To further illustrate my point, a recent survey, conducted by a Minneapolis-based e-cigarette consultant, revealed that 68% of e-cigarette buyers could not name the brand of the last two disposable e-cigarettes they bought at a traditional retail store.

And, there in a nutshell, is one of the great challenges of the nascent e-cigarette industry.  With literally hundreds of brands and hundreds of companies fighting for space in traditional tobacco outlets and C-stores, the retail consumer of this product has demonstrated little, if any brand loyalty.  (On the other hand, internet consumers of this product have a great deal of brand loyalty- but, eventually, that’s destined to be a smaller piece of a larger pie and that business model is in serious jeopardy as the FDA, FTC and various states gear up to regulate this product.)

Retailers have been quick to realize this lack of brand loyalty.  A store manager of a well-known Midwestern chain recently told me, “I have had six different brands on my counter in the last nine months as the companies and the distributors have come and gone and our terms and pricing have gotten progressively better.  Every time we make a switch we require that these new guys provide us one or two rounds of free fill and ‘kick-ass’ POS.”

“Consumers don’t ask for e-cigarettes by brand,” he continued. “They ask if we have e-cigs and they ask what flavors we have.”

So, let me state the obvious.  The claims of a number of large e-cigarette companies about the market share that they have achieved have come at considerable cost and with limited return on investment.  Most consumers don’t know what they are buying and they don’t care.

So, why don’t they care?  They don’t care because there’s not a whole lot of differentiation between any of these brands:  they look alike, they work alike, they taste alike and they all fail in similar ways: bad batteries, messy leaks and inconsistent flavoring.  Consumers buy them and use them for two reasons- as an alternative where and when they can’t smoke and as a method to try to quit smoking altogether.

And, I can’t blame them.  Because, despite all of the activity and excitement in the market- projected sales of $1 billion in 2013, according to the January 21, 2103 issue of TIME magazine- there really is very little to distinguish one brand of e-cigarette from another.

So, until the FDA decides how and when they want to regulate this product and product category- or even if they can, for that matter- there will be significant barriers to establishing brand acceptance and brand loyalty.  While the acceptance of the product is likely to grow from the roughly 6% of the smoking population who now claim to use them on a regular basis, brand building will take a lot longer and that will take a major commitment from manufacturers, distributors and retailers- a commitment few free compelled to make at this juncture.

Time will tell.

31 comments ↓

#1 sdf@sdf on 02.07.13 at 9:08 PM

Lou this is very insightful.

#2 http://tinyurl.com/openbarup56750 on 02.08.13 at 4:54 AM

This post, “Battle of the Brands? – TobaccoToday” was in fact very good.
I am making out a replica to clearly show my personal colleagues.
Thanks for your effort,Patsy

#3 Chris on 02.08.13 at 11:57 AM

I’ll give you the fact that there are hundreds of thousands of first time users, and those people may not know the differences right away (unless they take the time to do a little research). Saying that all brands work and taste the same, or that they are all basically the same tells me that you are not very knowledgeable about the industry in general. That is like saying all cigarettes taste the same, and there is no brand loyalty because they are all basically the same thing. You just stop by your local store, say “hey gimme a pack of smokes”, open the pack with no promise of puffs per stick, light it up and hope for the best… Right? Come on! Basing brand loyalty or acceptance on FDA regulation is also absurd. Disappointing read…

#4 Lou on 02.09.13 at 1:04 AM

@sdf
Not my post
but has a lot of merit
actually talked with a retailer about this today and he supported the fact that brand loyalty was an issue

#5 Sambo Eciger on 02.09.13 at 12:16 PM

Absolutely agree with Chris. Every day, ecigs are being bought by first time users who have no idea what brand to buy, and will go with the retailers recommendation. The retailer, the Midwestern retailer for instance, automatically pushes the most profitable brand regardless of its quality. Some of these 1st time users turn into regulars and have a brand preference in due course. Retailers selling ecigs for 2 or more years and carrying 3 or more brands have 4 to 5 regulars who ask for their brand of ecigs every time they purchase. As the number of ecig converts grow, so does brand loyalty. The brands mentioned in the article have a major following (and substantial market share, like 80% of brick and mortar sales). I guess E-cig Observer has to interview a number of retailers to get the true picture. Remember these brands have been in existence only for 3 to 4 years, have grown exponentially, and have only recently started marketing/advertising campaigns. Brand loyalty is a work in progress for ecig manufacturers but dismissing it as non-existent is factually incorrect.

#6 Vapor Vixen on 02.10.13 at 1:19 AM

Actually think those who think the so called leaders are doing well are really mistaken other than BLU. Don’t believe everything you hear. By the way if you know anything about this business you will realize that the consumer is going to decide. So many of the leaders in the past are no longer to be found. 80% you really are mistaken. You must be listening to the hyped up marketing programs that are far from the truth. The E-Cig observer is not that far off in his or her evaluation. 80%? you seriously need to rethink that as there are a few brands that would mess with that thought.

#7 Terry on 02.11.13 at 12:01 AM

too early yet for the loyalty bit at this point
when retailers offer more than the early entry offerings and broaden their offer, leaders will emerge – some have indicated that its always possible that the leader might not yet be at retail but still in development

#8 OTP Kid on 02.11.13 at 6:17 PM

ecigs are all the same since they are virtually all produced in the same factories in China without regulation – no wonder there’s no loyalty from consumers

#9 Terry on 02.12.13 at 1:09 AM

you are so right OTP Kid
the importers that make their comments really don’t get that because they have “re-engineered” (yeah right) the product as a part of their ad propaganda. just really is crazy to see the false advertising and propaganda that misleads the industry

#10 sdf@sdf.com on 02.12.13 at 10:40 AM

OTP kid is correct. but cigarettes are pretty standardized too — EXCEPT cigarettes are easier to actually flavor. it’s very hard to flavor the e-cig in a meaningful way and that is going to be a real impediment to lasting brand relationships for consumers.

#11 Patrick on 02.12.13 at 10:47 AM

Thanks for the great post, Lou. I’ve been wondering how most ecig companies hope to build a brand when they have no IP or proprietary aspects other than packaging.. They could at least go the “blu route” and hired a US eliquid shop to make them some proprietary flavors. It’d be slightly more expensive, though, (if only due to shipping) and I guess they’d rather spend their cash shoving their products onto shelves…

#12 Candy Girl on 02.12.13 at 11:30 AM

Disposable E-cigs are hard to flavor for many reasons. None of the e-cig manufacturers encapsulate the liquid in an airtight cartridge, this is not a part of the current technology, and oxidation causes the flavors to degrade. Despite claims to the contrary, shelf life of disposable products is limited with the design that is manufactured and sold today.
Also, understand the battery issues. Do a quick experiment- take a flavored, disposable e-cig and drain the battery to half-power- use it at that point and you will find that the flavor, while still somewhat discernible, is unrecognizable- fruit, candy, menthol- they all taste about the same by the time a disposable hits its half-life. The latter issue can be remedied by using as fully a charged battery as possible in those units that are rechargeable, but it’s difficult, if not impossible, to manage this issue with a disposable unit, unless the power can be properly managed throughout the useful life of the product. And, that can’t be done with a $5.99- $8.99 MSRP disposable unit. On a side note- I have yet to find a disposable whose battery outlasts its liquid. They all lose power before they lose juice!!

#13 Patrick on 02.12.13 at 12:29 PM

Hey Candy Girl, I wanted to provide a little “manufacturer’s feedback” on a few of your points. All of this is based on my personal experience, so don’t take it as the Bible of ecigs, but it might be useful:

1) Disposable ecig batteries expire before the eliquid is empty by design. Overfilling on eliquid is cheap v. adding more battery life, and the the user experience with excess liquid on a low battery is much more pleasurable than excess battery power on low liquid. Basically, they’re designed to maximize enjoyment at the end of the lifecycle, not to vaporize every last drop of eliquid. And the unused eliquid might be a couple pennies’ worth at manufacturers’ costs, a tiny fraction of the device’s total cost, so it’s not like that unused fraction is jacking up your price at all.
2) Packaging makes a huge difference in shelf life. I’d avoid disposables that don’t have a tight plastic cover over the mouthpiece. (one of the flaws of the love/hate nJoy King) A “fully sealed package” isn’t nearly as effective at maintaining flavor integrity as a tight cap in my experience, unless the package is extremely tight. (tight blister packs aren’t bad, but all the others I’ve seen aren’t going to preserve your flavors well at all)
3) Flavor degradation as the product is used is, as far as I can tell, mostly a function of the way the product is used. (at least on our flavors, I haven’t vaped too many competitors’ carts to dryness) In my experience, nothing changes flavors quicker than exposure to high temperatures, and high temperatures are most common when a user draws lightly on an ecigs. This is because the power to the filament is controlled by a simple “on/off” mechanism, rather than a sliding scale that decreases with lighter draw, so the filament gets full power whether you’re drawing lightly or heavily on the device. This is a problem because the filament is designed to be cooled by air flow as you inhale, so a light draw will basically overheat it and “burn” the temperature shield and eventually polyfill within the cartridge. Judging by RJR’s recent press releases, I think they’re working on this flaw in the design (i.e. power delivery to the filament will be dependent on how hard you’re drawing), so it’s possible or even likely that the Vuse (and maybe other future designs) won’t have this problem. I should also note that, subjectively, some flavors actually taste better if you “burn” them, but others become really gross. I think one of our flavors is amazing when burned, and wish I could figure out what the delicious chemical we’re forming is, but there’s another that I find unusable if it gets even lightly singed. If I smoke it carefully (not that customers should be expected to do this) then the flavor remains consistent through the end of the cartridge though.

#14 OTP Kid on 02.12.13 at 2:52 PM

Patrick,

There are discussions going on at the FDA since the ecig is regulated as a tobacco product. In these conversations, there’s an increased likelihood that characterizing flavors will be banned by the FDA, the same as they are for cigarettes. No one knows of course when this will occur; however, when it does, and it is likely it will, the flavoring discussion will be moot.

#15 Patrick on 02.12.13 at 3:41 PM

Tobacco flavors are no less prone to degradation than non-tobacco flavors, so flavor stability will continue to be a concern as long as ecigs remain a product.

#16 Candy Girl on 02.12.13 at 3:41 PM

Here’s the problem, according to the court, the e-cig is to be regulated tobacco product, but the main ingredient and that which makes it a tobacco product- nicotine- does not in any way possess the flavor characteristics of tobacco. Nicotine, processed from tobacco, has an unpleasant bitter, “peppery” taste- consistent with other alkaloids. Caffeine, another alkaloid, has a similar flavor when processed from coffee. E-cigs require a flavoring- albeit tobacco flavoring- just to be palatable. On a side note- many importers and flavor specialists report that their best performing e-cig flavor at retail is a simple menthol which outsells mentholated tobacco-flavored e-cigs by a wide margin.

#17 Terry on 02.12.13 at 11:23 PM

Interesting comment made today during RAI earnings report -“while rates of trial are high in the e-cigarette space, conversion remains quite low”

#18 sdf@sdf.com on 02.13.13 at 7:48 AM

Yes well it’s good the tobacco business has finally figured out what the drug business knew a long time ago: nicotine tastes terrible!!

Look at the inversion in NRT (cessation drugs). Everyone likes the oral products that are loaded with sweeteners to taste mask. The nicotine inhalers have barely got a pulse in terms of sales (I know they don’t have the vapor and lights that consumers like so much w e- cigs but the flavors are also really problematic).

Some of these new nicotine gummies from big tobacco taste sweet (double entendre) — they are loaded with sugar and the nicotine does not bother you.

Most e-cigs are flavored with chocolate to try to hide the nicotine — BLU is like a cocoa puff for goodness sake.

If the FDA looks under the hood of the flavor systems (by way of a characterizing flavor analysis), then you’re going to be able to buy some heavily discounted lamborghini’s from former e-cig guys.

#19 Amuse me on 02.13.13 at 1:54 PM

According to a tobacco research analyst at a major bank, the Electronic Cigarette industry ended 2012 with $528 million in Sales. A total of 278 brands by 251 manufacturers, with the top 10 brands garnering 77% of the total while the other 241 brands combined for 23% in Sales. The top US brands by sales were Mistic, NJOY, Blu, LOGIC, Metro, 21st Century, V2, FIN, Krave & CIG20. The same analyst predicted Sales for 2013 at
$1 Billion plus with about 25 brands remaining after FDA regulations are implemented. Two of these brands are in serious talks with Big Tobacco. As per the analyst, expect press releases after the FDA makes its move. Cheers!

#20 OTP Kid on 02.13.13 at 2:33 PM

E-cig flavoring will be banned, excise taxes will be imposed at the federal and state level, and the FDA will assert it’s authority and regulate production. All this means that the ecig people will have to find the next phone card, pet rock, ecig item to sell because if there’s any business left then Big Tobacco will have it all. Cheers

#21 Terry on 02.13.13 at 10:57 PM

who is the analyst where can we find the report

#22 OTP Kid on 02.14.13 at 5:03 PM

It is most interesting to note that a great many of these ecig companies have been shopping around wanting to sell or to raise capital or find legitimate distribution through manufacturers. What does that tell you?

#23 OTP Kid on 02.14.13 at 6:53 PM

The Tobacco Team of the law firm Troutman Sanders noted that at a meeting of e-cigarette companies before the Tobacco Plus Expo in Las Vegas on January 30-31, much talk was about the proliferation of exhibiting e-cigarette companies, and the FDA’s expected regulation of the device. Troutman Sanders said the FDA has indicated that it intends to issue proposed regulations by April 2013, but “many in the industry appear to be ill-prepared for potential regulation.” The law firm said businesses should consider how FDA regulation would impact them and make preparations, adding that Troutman Sanders has been advising companies about the prospect of future FDA regulation of e-cigarettes (Troutman Sanders 2/9).

#24 OTP Kid on 02.14.13 at 6:54 PM

Arizona: Senate Panels Endorse Bill To Ban Underage Possession And Sales Of E-Cigs
The Arizona Senate Judiciary and Commerce, Energy and Military committees unanimously endorsed and sent to the floor by way of the Rules Committee a bill sponsored by Senate Majority Whip Adam Driggs (R-Phoenix) that would make it a petty offense for minors to possess electronic cigarettes and for others to sell, provide or give the product to minors. Ben Palmer, spokesman for Tobacco Free Arizona, said e-cigarette use “looks too much like smoking and precipitates the notion that smoking is cool.” Ray Story, CEO of the Tobacco Vapor Electronic Cigarette Association, said the organization supports a ban on underage sales and possession. The association’s members are not allowed to sell e-cigarettes to minors or to package or market their products in ways that could appeal to teens, but laws would ensure that all companies refrain from selling to minors, he said. Don Isaacson, who represents Reynolds American, said electronic cigarettes are not intended to appeal to children. “The main attraction (of electronic cigarettes) appears to be allowing people who currently smoke cigarettes to get off of smoking,” he added (Arizona Capitol Times 2/11).

#25 OTP Kid on 02.14.13 at 6:56 PM

Writing in the Daily Beast, Eli Lake, senior national-security correspondent for Newsweek and the Daily Beast, reports on his experience using electronic cigarettes to quit regular cigarettes and being able to use the device anywhere including on airplanes, in meetings and at restaurants, then being told that “they are not without health risks.”Lake notes that the US Food and Drug Administration says on its website that e-cigarette users “have no way of knowing … how much nicotine or other potentially harmful chemicals are being inhaled during use,” while Miami, Florida-based e-cigarette company Krave says on its website that the device contains nicotine and propylene glycol, a substance that the FDA classifies as GRAS or “generally recognized as safe.” Lake also reports that Dr. Lowell Dale, the medical director of the Mayo Clinic’s Tobacco Quitline, said “we are just being very cautious about the long-term consequences of its use,” and described propylene glycol as a liquid is “similar to antifreeze.”

#26 OTP Kid on 02.14.13 at 6:59 PM

After Mary Lynn Tollison of the Spartanburg Alcohol and Drug Abuse Commission in South Carolina and Sgt. Danny Blackwell of the Spartanburg County Sheriff’s Office on February 11th proposed an amendment to the definition of a “tobacco product” under the State Youth Tobacco Law to include e-cigarettes, State Rep. Doug Brannon (R-Spartanburg) said he plans to introduce a bill to that effect on February 12th. In an e-mail to Tollison, Branon said he has discussed the proposed change with an attorney of the House of Representatives and that an amendment is being drafted. Brannon said an e-cigarette lobbyist has informed him that the industry has “no problem” with the proposed change. Under the law, sales of tobacco products, samples, or substitutes are prohibited to anyone aged below 18. A subsection of the law prohibits minors from possessing a tobacco product. Tollison said e-cigarettes are gaining popularity among State youth as the devices cost less than regular cigarettes and do not contain tobacco. Blackwell said there is no legal justification to confiscate e-cigarettes found in the possession of minors, given that the devices are a nicotine-delivery system. Blackwell said youth either have someone older purchase e-cigarettes for them or use a fake ID to make the purchase (Spartanburg Herald-Journal 2/11).

#27 Richie Rich on 02.15.13 at 12:38 AM

“E-cigarettes are dead, just as I told all of you they would be.”
These are OTP Kids comments on 7.24.09 on this blog on the article, Dr Joel Nitzkin’s interview by James Dunworth. He also later commented he is always right.
What an arrogant pompous know it all who knows nothing.
Stop putting your foot in your mouth. Start putting an E-ciggie in your mouth. You may live longer.

#28 sdf@adf.com on 02.15.13 at 11:23 AM

In fairness to OTP kid, the Sottera case was a shocker. The draft EU directive would kill the category in europe. The idea that the deeming regs will do successfully what the FDA has already tried once does not seem entirely far fetched.

#29 Lou on 02.20.13 at 1:20 PM

@amuse me – Can you help me with the comment you made regarding the tobacco analyst at a bank’s comments.
I need to find this for an article being written
Appreciate!

#30 Lou on 02.23.13 at 4:59 PM

@muse me still need the source of your comments, there is an editor that wants to follow up on these comments

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