This note was originally published August 23, 2013 at 10:40 in Consumer Staples
Yesterday the Wall Street Journal reported that the FDA is considering a ban on online sales of e-cigs as part of broader regulatory restrictions that are expected to be announced in October.
What’s Our Take?
- It wouldn’t be a huge surprise to see online sales of e-cigs banned. The FDA is well aware how easy it is for consumers to purchase e-cigs online– one simply has to put in a birth date of at least 18 years of age
- The FDA is also concerned with the appeal of flavored e-cig offerings (like bubble gum or coffee) that may attract a younger demographic
- Estimates suggest the online e-cig market to be worth ~$500MM of the total $1-1.5B category
- We expect any restrictions on online sales to favor Lorillard’s Blu e-cig and NJOY (private), the two companies with the greatest retail market share and nationwide presence. [Blu is estimated to have under 20% of its total sale online]
- Additionally, as RAI (Vuse) and MO (Mark-Ten) expand distribution (they’ve rolled out brands in the last two months across test markets in one state each), we’d expect an online ban to benefit big tobacco due to their retail leverage over smaller e-cig players
- We expect future FDA regulatory restrictions to include at least advertising (same or more similar standards to traditional tobacco) and nicotine levels (at most equivalence with traditional tobacco)