E-Cigarette Sales Slumping Since Regulatory Action

For the last 10 months, convenience store e-cigarette sales have been slumping. According to Nielsen data, e-cigarettes sales are down 3.5 percent for the four-week period ending Dec. 25. The sector, mostly consisting of convenience stores since Nielsen doesn’t track vape shop sales, has been failing since the U.S. Food and Drug Administration (FDA) implemented its latest round of heightened regulations on the products on Feb. 6.

vape shop 2
Credit: Timothy S. Donahue

Overall e-cigarette sales-volume growth has declined steadily since Nielsen’s Aug. 10, 2019, report, when it was up 60.2 percent year over year, according to a story in the Winston-Salem Journal. The latest FDA restrictions on the sector debuted Feb. 6. Those restrictions foremost required manufacturers of cartridge-based e-cigarettes to stop making, distributing and selling “unauthorized flavorings” by Feb. 6, or risk enforcement actions.

Top-selling Juul’s four-week dollar sales have dropped from a 50.2 percent increase in the Aug. 10, 2019, report to a 15.6 percent decline for the latest report. By comparison, Reynolds’ Vuse was up 87.3 percent in the latest report and NJoy down 31.5 percent.

Juul’s market share dropped from 54.3% in the previous report to 53.8 percent. It was at 55.1 percent a year ago. Vuse’s market share slipped from 28.5 percent to 28.1 percent, while No. 3 NJoy was unchanged at 5 percent, and Fontem Ventures’ blu eCigs was unchanged at 3.6 percent.

Goldman Sachs analyst Bonnie Herzog has cautioned in her monthly reports in recent months that there has been increasing consumer demand for lower-priced traditional cigarettes during the pandemic.

Herzog referred to the trend as “downtrading” from many top brands. That trend could be offset somewhat by the scheduled $600 federal stimulus payment to most Americans, which could be released as early as this week,

Cowen & Co. analyst Vivian Azer also says consumer downtrading in traditional cigarettes “remains a central theme in the U.S.

FiscalNote Markets managing director Stefanie Miller said that the Food and Drug Administration under a Biden administration “is likely to begin working anew on nicotine cap regulations for cigarettes.”

“Because of likely inaction in Congress, we now expect the Biden administration to reopen stalled menthol/flavor regulations as well.”

The $908 billion federal stimulus package contains an element that affects the distribution of electronic-cigarette products, according to tobacco analysts. The Preventing Online Sales of E-Cigarettes to Children Act prohibits the U.S. Postal Service from delivering packages containing e-cigarettes. The bill also subjects e-cigarettes to other rules that currently govern online cigarette sales. The prohibition could go into effect as soon as 120 days.

“We see this policy as mainly advancing the trend we’re already seeing in the market — which is that the large, well-capitalized manufacturers will be poised to pay the costs to be in compliance with the new more burdensome policies,” Miller wrote. “Meanwhile, smaller manufacturers and retailers likely fall short and will be forced to exit the market.”