Vaping sales haven’t completely vaporized in the aftermath of deeming regulations passed last fall by U.S. Food and Drug Administration (FDA). For the time being, vaping and e-liquid c-store sales have maintained an upward trajectory in the convenience channel.
Information Resources Inc. (IRI), a Chicago-based market research firm, reported electronic smoking devices earned more than $277 million for U.S. convenience stores during the 52 weeks ending Dec. 25, 2016. That indicated an 8.44% increase in a year-to-year comparison. Unit sales fared even better with a 12.78% increase.
Euromonitor International projected growth of approximately 158% for vapor products in the U.S. between 2015-2020. That would deliver a 20.9% compound annual growth rate.
“RaceTrac had a very profitable year as it relates to vapor in 2016,” said Rich Jacobs, director of packaged beverages and tobacco. “In 2015, we had minimal growth due to having multiple product lines and not promoting the category throughout the year. Our goal in 2016 was to right-size the category and drive trial by reducing inventory, selecting premium products and creating impactful promotions. We saw an increase in units, which drove big margin increases for our stores.”
Based in Atlanta, RaceTrac operates more than 435 stores in four southern states.
GOVERNMENT INFLUENCE
Still, there is an air of uncertainty as stakeholders cast eyes upon Capitol Hill.
“The markets were frozen on Aug. 8, 2016. One development that happened shortly before Aug. 8 was the development of more innovative, smaller devices that are refillable pod-type systems. Those all have their own issues,” said Gregory Conley, president of the American Vaping Association. “If they didn’t have to be rushed to market before Aug. 8, these would be much better products.”
The FDA’s deeming regulations targeted vaping products, including e-liquids, as tobacco products—thereby committing them to the same regulatory standards as cigarettes.
Afterward, companies rushed to get products to market before having to secure FDA approval on new products. However, manufacturers still face the decision of whether to incur the cost of trying to qualify existing designs and formulas for FDA approval and keep their products on store shelves after the grace period expires.
Conley believes the industry could gain a firmer foothold if the new White House administration and the Republican-controlled Congress act on calls to change the official predicate date of Feb. 15, 2007. Moreover, President Donald Trump told pharmaceutical company CEOs Jan. 31 that between 75% and 80% of all FDA regulations will be eliminated, according to a report by the Regulatory Affairs Professionals Society.
“If you have new leadership at FDA, I think we’ll see positive things happen,” he said. “There is a small possibility that as the Trump administration gets going and key personnel at the FDA are shuffled into positions, you could see harm-reduction products recognized at the federal level.”
In that regard, Conley is keeping an eye on Philip Morris International’s iQOS, a heat-not-burn device the company hopes will be categorized as a reduced-risk product (RRP). The manufacturer last December submitted a modified risk tobacco product (MRTP) for iQOS, the new heat-not-burn tobacco system. The manufacturer anticipates releasing the product to market before the end of 2017.
“iQOS is the first [RRP] opportunity. The first day it gets approval from the FDA will generate massive publicity,” Conley said.