The Vaping Industry: What’s In Store?
In 2018, the UK saw the total number of vapers break 3 million.
The vaping and e-cigarette industry grew massively last year and this trend shows no signs of slowing down. There are now numerous public health bodies voicing their support and with this vaping is is perceived as a more accessible and viable option for transitioning smokers. A looming Brexit deal may also change how vaping is regulated in the UK, so the UK e-cigarette market is in for another eventful year.
CAGR, market value and the disruption of the tobacco industry:
Globally, the e-cigarette market has a predicted 20.8% CAGR over the next decade. Already valued at a £17.1bn market value, it’s a profitable industry to be in. In 2018, the tobacco industry also took a £100bn hit to its market value with the likes of British American Tobacco losing half their stock value and Altria and Philip Morris losing around a third. This is largely attributable to the uptake in e-cigarettes by existing smokers. As such, the big players in the tobacco industry are switching their focus to smoke free alternatives.
British American Tobacco already have their own e-cigarette brand, Vype. In December 2018 Altria signed a deal with Juul, purchasing a 35% stake for the price of $12.8bn. Juul started selling its pod kits in the UK in summer last year and currently have a 74% market share in the US. It’s likely more e-cigarette brands from Big Tobacco will hit the market in 2019 to compensate for their losses. It’s also likely even more money will be funnelled into research and development to make better products to meet changing consumer behaviour and demand.
Consumer habits are changing:
The UK has seen vaping flourish in the last few years. In 2012, there were 700,000 regular e-cigarette users, now there’s over 3 million. Many institutions support vaping, including the NHS and Public Health England. PHE have released a major study finding that e-cigarettes are at least 95% less harmful than cigarettes. The Royal College of Physicians are also advocates for e-cigarettes. They’ve helped alleviate concerns that vaping is a gateway to smoking and also promote them as a viable means to quit smoking. As such, more consumers are paying attention to the medical research and are changing their behaviour. Many vapers started using e-cigarettes due to friends and family, so it would follow that the more vapers there are in the UK, the more the total number will continue to increase.
Another more tangible way that consumer preferences and habits are changing can be seen on the high street. Many major department stores are having mass closures including the likes of Marks & Spencers, Debenhams and House of Fraser. Vape shops on the other hand have had a 30 fold surge of openings to meet demand. With consumers wanting custom and personal advice when purchasing their first vape kit, while many buy vapes online, there’s no shortage of clientele to sustain the bricks and mortar stores too.
Currently, e-cigarettes and e-liquids are classified as tobacco products due to the fact that they contain nicotine which is often derived from the tobacco plant. This means they’re regulated and restricted in the same way as combustible cigarettes. However, there may a change in the way they’re regulated this year which could make a significant difference for the vaping industry.
Brexit is drawing closer and with it questions have been raised about whether TPD will still be valid once the UK leave the EU. In May 2016, the Tobacco Products Directive regulations came into full effect. Created by the EU, TPD regulates the size of vape tanks, the bottle size of e-liquids that contain nicotine and have a maximum nicotine strength of 20mg. Presently, vape retailers can sell nicotine containing liquids in bottles of a maximum 10ml capacity. Without these regulations the smaller details of vaping like how frequently tanks need to be refilled due to size and how vapers purchase their e-liquid may be liable to change.
In August last year, MPs made a proposal that legislation regarding restrictions surrounding vaping should change. Many people using e-cigarettes are doing so to help themselves either quit smoking or stay away from cigarettes. If legislation changes they may soon be allowed to vape indoors where they previously weren’t allowed to. The logic behind the proposal was that when forced outside into designated smoking areas, vapers were still being exposed to the cigarettes they were trying to quit. Currently, vaping is typically banned in pubs and restaurants and isn’t allowed on public transport and offices. While the report was met with a lot of varying opinions, if it were to go through it may make vaping a more legitimate and convenient option for those wanting to quit smoking with vaping.
With a changing market, new research and potential legislative changes in the works, the e-cigarette market in the UK is a somewhat volatile sector but with plenty of potential for growth. There are presently over 9 million smokers in the UK and one of them makes a quit attempt every 80 seconds. With that in mind, the potential market for the vaping industry is huge.