Big Tobacco seems confident they’ll come out of the FDA regulatory mess of e-cigarettes as the big winners. Why? Because unlike the majority of “mom and pop” vaping industry, Big Tobacco has the infrastructure, and deep pockets, to deal with all the FDA regulation expenses now, and the expectation that their smaller competitors will be wiped out soon, courtesy of the Food and Drug Administration.
In an April 2019 email to tobacco and e-cigarette industry insiders, Bonnie Herztog, the Managing Director of Equity Research at Wells Fargo Securities summarized the TMA’s (Tobacco Merchants Association) 104th annual meeting and conference held in Falls Church, VA, stating that Wells Fargo continues to be “bullish” on the U.S. tobacco and nicotine profit pool opportunity. Herzog further wrote that while Wells Fargo “fully” expected FDA’s broad policies and further restriction to continue especially with regard to flavor restrictions to curb youth e-cigarette use, she also emphasized that tobacco manufacturers were “well positioned” in the current regulatory and political environment due to their strong management teams, “funds to drive innovation”, and specifically, “industry consolidation”, which she believed would “increasingly favor scale in the global “arms” race in RRPs” (Reduced Risk Products).
In simplest terms “industry consolidation” means a lot of smaller players go away, leaving just the big players, and “increasingly favor scale” means that the big players (ahem, Big Tobacco) will have a bigger and bigger advantage over smaller vapor companies. In fact, Wells Fargo stock analysts think that it’s a great idea to buy tobacco stocks like Altria (who, let’s not forget, owns a 35% stake of JUUL) and Philip Morris right now, although in all fairness, she pretty much always says that — (here, here, and here…)
The Big Tobacco war on vaping is already seeing some early battles. TD Bowen, a small vape shop owner who owns Moon Mountain, and is the former President of the Florida Smoke Free Association, talked to Soupwire about what many small and mid-sized vape shops and e-cigarette companies believe was a move by JUUL to wipe out vape shops earlier this year. Altria, the parent company of cigarette manufacturer Phillip Morris (Marlboro, Virginia Slims, Benson & Hedges) is a major owner of JUUL.
Many vaping industry insiders believe the industry is too big and expansive for the FDA to regulate – that it would be easier to manage a handful of vaping companies, rather than thousands of small businesses across the U.S.
And late last year, the FDA asked five of the major e-cigarette and cigarette companies to help draft regulation to regulate e-cigarettes.
Bowen said the FDA’s position seems to be, “We’re going to lump vapor in with tobacco – a small business that was built by a number of American small businesses — wipe out those businesses, and then turn it back over to the companies that have been killing people for over a hundred years.”
That’s just what Big Tobacco is counting on. The big Tobacco war on vaping looks to looming on the horizon.
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