The recent electronic-cigarette flavorings ban push by the Trump administration may play a role in reducing the decline in traditional cigarette demand, a leading tobacco analyst said Wednesday.
The number of cigarettes sold — cigarette volumes — dropped by 7.1% in the four-week period that ended Sept. 7, according to the latest Nielsen survey Nielsen primarily measured convenience-store data.
Wells Fargo Securities analyst Bonnie Herzog has said cigarette volumes could be down as much as 6% this year. British American Tobacco Plc and Altria Group Inc., parent company of Philip Morris USA, have said the decline could be between 4% and 5%, while Imperial has said between 4.5% and 5%.
Herzog has projected $9 billion in e-cigarette sales this year, up from $7 billion in 2018.
“We think recent negative FDA/health headlines and increasingly negative perception of e-cigarettes/Juul is adversely impacting e-cigarette volume, Juul in particular,” Herzog said.
“While too early to call, this could result in improved combustible cigarette volumes as vapers potentially return to the cigarette category, especially given menthol cigarettes will still be available — not the Food and Drug Administration’s desired outcome.”
Herzog said that depending on how quickly the FDA discloses its latest restrictions proposal, “we now believe there could be upside to our estimate based on consumer response to the FDA’s actions on e-cigarette flavors/Juul.”
That could mean the cigarette volume decline shrinks to about 5% by year’s end.
“This is a decidedly undesirable outcome for public health, as cigarette smoking falls on the most harmful end of the risk continuum,” Herzog said.
“However, it does show how far the FDA is willing to stray from its objective to avoid ‘unintended consequences’ in order to get e-cigarettes out of the hands of kids.”
Juul holds a 72.5% market share despite eliminating some flavorings earlier this year. However, it is down to 68% over the last four weeks.
By comparison, the market share is 11.6% year-over-year for No. 2 Vuse of R.J. Reynolds Vapor Co., as well as 11.3% over the past four weeks. Similar Vuse flavored e-cigs have not been pulled from retail by Reynolds Vapor.
Imperial Brands Plc’s Blu e-cig was third at 5.1%, followed by NJoy at 4.9% and Japan Tobacco’s Logic at 2.4%.
However, NJoy’s market share jumped to 13.7% for the most recent four-week period.
Herzog said NJoy’s recent gain can be attributed to the methodology changes, saying previous reports “excluded multiple NJoy product SKUs in its scan-reporting data.”
In traditional cigarettes, Nielsen reported Marlboro volume was down 2.9% for the four-week period, while Newport was down 1.9%, Camel down 7.2%, Natural American Spirit down 3.9% and Pall Mall down 11.6%.
The volume decline is partially caused by a recent 11-cent per pack price increase and by electronic cigarettes being increasingly adopted as a viable nicotine alternative.
Part of the decline also can be attributed to wholesalers and retailers stocking up on inventory ahead of the price increase in February. Those groups typically pass along list-price increases to consumers.
Philip Morris held steady in first place at 54% market share, of which 47.2% is the top-selling Marlboro.
Reynolds was unchanged at 33.7%, led by 13% from Newport, 8.8% Camel, 6.4% Pall Mall and 3.5% Natural American Spirit.
ITG was at 7.1%, including 2.1% from Winston and 1.6% each from Kool and Maverick. ITG has said its market share is closer to 10%.
E-cigarettes are just the third largest tobacco product with 5% of retail sales, compared with 82% for traditional cigarettes and 8% for chewing and smokeless tobacco.
“Public health is also in a Catch-22” scenario in how to reduce e-cigarette consumption while not encouraging resumption of traditional cigarette consumption, said David Sweanor, an adjunct law professor at the University of Ottawa and the author of several e-cigarette and health studies.
“If the public is believing the scare stories emanating from government agencies, major non-government organizations, media outlets, etc. we can expect an uptick in smoking rates and eventual rates of disease and death,” Sweanor said.
“If significant swaths of the population have opted to ignore or dismiss such messages and see those entities as non-credible, then public health in general is in grave danger as its success depends on credibility.”
Sweanor said that “among other consequences, the anti-vaxxers, promoters of snake oil and those deriding ‘fake news’ are likely feeling particularly good about all this.”