Wednesday, June 19, 2013

Will E-Cigarettes Save Big Tobacco?

Jun 19, 2013 by 
e-cigarettesBack in April, I asked if E-Cigarettes would relight Big Tobacco’s prospects.  I had my doubts.
E-cigs seemed to be a more pleasurable version of a nicotine patch: something that an existing smoker might switch to for health reasons but not exactly an attractive or glamorous product for someone who doesn’t already smoke.  (Humphrey Bogart would not have been as cool in Casablancawith an e-cig dangling between his lips.  This is an indisputable fact, not an opinion.) It certainly made sense for Altria, Reynolds American RAI -3.45% and the rest of Big Tobacco to get in on the action; it’s better to extract a little more revenue from defecting cigarette smokers than to lose them altogether.
But investors should be realistic about the potential for e-cigs to make Big Tobacco a growth industry again.  It’s not going to happen. Though there are hundreds of millions of tobacco users worldwide (the World Health Organization puts the number of tobacco users at over 1 billion), public health campaigns, legal restrictions, and changing consumer tastes have put cigarette smoking in terminal decline in the developed world.  As a sobering (no pun intended) case in point, American teenagers are more likely to use illegal drugs than to light up a cigarette.