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Could the US ecig market be headed for $4 billion a year turnover?
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Mark Benson Offline
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Could the US ecig market be headed for $4 billion a year turnover?
A report last week cast a very encouraging light on the US ecig market with a suggestion that the current turnover of around $1.5 billion per annum could increase to in excess of $4 billion by the end of 2018. The report contained a forecast 24.2% growth per annum in the short-term with a calculation that electronic cigarette sales in the US could outstrip their tobacco counterparts within 10 years. While these are obviously very encouraging and very ambitious targets could be really see the US ecig market headed for $4 billion a year turnover in just five years?

Growth helped by reduced tobacco cigarette sales

There is no doubt that ongoing growth in electronic cigarette sales in the US has been assisted by a near 30% reduction in tobacco sales since 2004. When you bear in mind this is a multibillion-dollar market we can only imagine what a 30% reduction in sales is doing to not only the tobacco cigarette companies but also the tax authorities. This is before we even begin to examine the perceived health benefits and cost benefits associated with vaping and electronic cigarettes!

In many ways the US authorities, and other governments around the world, have played into the hands of the electronic cigarette market by banning tobacco cigarettes in public places. The recent introduction of various regulations by the FDA (still in a consultation period) was perhaps an attempt to regain control of the market although unfortunately for the authorities, user numbers are growing and the vaping community is becoming more vocal in its support for the industry.

Is growth of 24.2% per annum achievable?

As we touched on above, there are many different factors playing into the hands of electronic cigarette companies in the US. We have seen growth well in excess of 24.2% over the last decade and in reality this is certainly an achievable target and one which the industry could exceed in the right regulatory and economic environment. This is perhaps one more reason why the tobacco cigarette companies are now looking towards the electronic cigarette industry with mergers and takeovers rumours a constant source of intrigue.

We will also likely have the authorities looking towards the electronic cigarette industry with tobacco sales tax falling significantly. Many people believe this is the main reason why the authorities have taken such an interest in the sector.

Where is tobacco tax income spent?

Many state authorities and governments around the world are keen to give the impression that tobacco tax income is all redirected to the health care system as a means of compensating the cost of treating tobacco smoking related illnesses. The reality is that there is no legal agreement to ensure that all tobacco tax income is spent in this area and indeed much of it has historically been directed to areas of high investment requirements such as education. So, does this not undermine the claim that tobacco tax income is used to cover additional health care costs?

This is something that the industry will be investigating in more detailed because some states in the US are trying to tax electronic cigarettes despite the fact that there is no medical evidence so far that they are detrimental to health. Trying to tax a product on the grounds of "safety" before you have any evidence is most certainly legally challenging to say the least and does leave open the potential for legal redress.

Conclusion

Growth in the US electronic cigarette market is expected to hit 24.2% per annum between now and 2018. This should see growth in annual electronic sales from the current $1.5 billion level to in excess of $4 billion within five years. It is therefore no surprise to learn that the authorities are very eager to grab their slice of the action with an array of states attempting to push through electronic cigarette taxes.

However, the vaping community is more vocal than ever before, willing to fight the fight and it will be interesting to see how this particular story plays out.

For more information on OK Electronic Cigarettes and the various products available please visit the OKCigs website.
16-06-2014 01:15 PM
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