TOBACCO Continued from FP4
In April, PMI stock fell more than 15 per cent in a single day after the company’s chief executive announced Japanese IQOS sales had significantly declined quarter-over-quarter. Other tobacco stocks fell in sympathy, suggesting the market is particularly jittery about poor results in the next-generation category.
The commercial prospects for e-cigarettes may be a different story. In Canada, at least, the question is less about whether there’s a market for a new product than whether tobacco companies can capture market share from incumbent vape companies.
“I don’t think that the tobacco companies are necessarily guaranteed success in this market,” said Amelia Howard, a sociology PhD candidate at the University of Waterloo, whose research focuses on vaping trends.
A lot depends on how well convenience stores take to selling products developed by tobacco companies. Even then, “vaping companies now are developing these (pre-filled, closed) systems that could go into convenience stores,” Howard said. “That, to me, would put the tobacco companies at risk unless they’re able to keep up with the innovation in the space.”
That thought is echoed by Boris Giller, communications director at The Canadian Vaping Association and president of 180 Smoke Vape Store, which has 15 locations, mostly in the Greater Toronto Area.
“A lot of the manufacturers are releasing a new version every couple of months, while big tobacco companies have a development cycle of two or three years, and $3 billion, so they can’t respond to the market as fast as the rest of the industry,” he said. “We’re going to see a lot of investment (by tobacco companies in Canadian vaping companies) once they hit their head against a wall in terms of entering the market.”
Whatever happens in Canada — it will depend to a significant extent on how the regulations shape up in the coming year — Big Tobacco appears to have entered a strange phase of its long history.
Companies are trying to sell products that take people away from their core offering, and executives are saying — with a straight face — they’re “part of the solution.”
But as Peter Luongo, managing director for PMI’s Canadian division puts it, “Whether it’s us doing it or whether it’s our current competitors, or whether it’s new competitors that emerge in the future, long-term people are going to switch from cigarettes to these new products because they’re just better. We’d rather be at the forefront of that change than lagging behind.”