Cigarette sales have long been in decline, and the pace accelerated in first quarter of 2013, with Wells Fargo today predicting sales volume was down 4.5% over the same period last year.
That is above the historic average of 3-4% falls, and may have been helped along by economic factors like higher gas prices and the payroll tax increase, which took enough cash out of low-to-middle income pockets to impact spending on semi-discretionary purchases like cigarettes.
But another factor at play, the bank said, was the growing popularity of electronic cigarettes, which are winning both converts and trial users thanks to more advertising and better distribution.
For the uninitiated, an electronic cigarette is essentially a cigarette-shaped tube that delivers users a vaporized hit of nicotine when they puff on it — there’s no tobacco, or smoke, or fire involved in the whole process. Aside from the health benefits of quitting smoking, electronic cigarettes can also theoretically be used in places where smoking is banned, like offices and restaurants, although health regulations surrounding this are still taking shape.
A full 100% of the tobacco resalers and wholesalers surveyed by the bank — representing more than 45,000 U.S. convenience stores — said they are now selling the so-called e-cigarettes, and 98% said sales were growing in the first quarter, by an average of 30%.
It’s still a small market, so those kind of numbers can be attributed in part to the small base they are growing from. But Wells Fargo thinks the e-cigarette sales could hit $1 billion in 2013, and “could surpass traditional cigs in the next decade.”
(Some context on that $1 billion figure: tobacco is a $100 billion market in America)
Here’s how survey respondents described the state of the market for e-cigarettes:
One tipping point is that repeat purchases are now outnumbering trial purchases, suggesting the e-cigarettes are winning dedicated users away from regular tobacco. And another could come when some of the tobacco industry’s biggest players step decisively into the market, which is currently being led by players like privately-held NJOY and blu, a brand that was bought by tobacco company Lorillard last year.
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