E-cigarette sales will suffer if regulated like tobacco, analyst says
Designed to simulate smoking, electronic cigarettes continue to grow in popularity but uncertainty over possible Health Canada regulations and restrictions by other regulators are raising concerns for the industry in Canada.
Phillip Gorham, a tobacco analyst for the U.S. investment research and management firm Morningstar, says further growth of the e-cigarette industry will be dampened if regulatory bodies decide to impose controls similar to those on tobacco products. Among them, he cites increases in prices and taxes and legislation restricting advertising, store displays and rules on who can sell them.
READ MORE: Two sides to the e-cigarette debate
The growth in the e-cigarette category has been driven by novelty, Gorham said, adding that if the devices are kept out of view and under lock and key it will difficult to capture new sales.
“E-cigarettes depend on marketing for growth and cigarette companies can’t generate consumer interest without that,” says Gorham. “It’s very much on trial.”
The UN health agency this week called for member countries to prohibit e-cigarette sales to minors and ban their use indoors until more evidence can be gathered about the risks, adding that the product’s expanding popularity presents a public health dilemma.
“E-cigarettes are a story of both risks and promises. In a sense they are a double-edged sword,” Dr. Douglas Bettcher, director of the WHO’s Department for Prevention of Non-communicable Diseases, told reporters. “The tobacco industry is taking greater share – as public health partners, pretending to be part of the solution to the health disaster they have created.”
Tommaso Di Giovanni, head of reduced-risk product communications at Philip Morris, criticized the WHO for calling for a “de facto exclusion of tobacco companies in the democratic process.”
READ MORE: WHO urges tighter regulation of e-cigarettes
“This view ignores the fact that product innovation to develop and assess truly reduced risk alternatives to combustible cigarettes can play an important role for public health,” he said in an email to The Associated Press. “Companies like ours are not only driving this innovation, but have the necessary knowledge and resources to contribute to achieving that goal.”
According to the Electronic Cigarette Trade Association of Canada (ECTA), member retailers report between $10,000 and $20,000 a month in sales.
The battery-operated devices do not contain tobacco but can be used to heat a liquid nicotine solution, creating a vapour that users inhale. Smokers like them because the vapour looks like smoke but doesn’t contain the thousands of chemicals, tar or odour of regular cigarettes.
E-cigarettes that are sold without nicotine, or which don’t make health claims, can be sold legally in Canada, according to Health Canada.
However, if they are sold with nicotine and or in packaging that makes a health claim, they fall under the jurisdiction of the Food and Drugs Act. Under that act, a manufacturer must apply to Health Canada for authorization to bring a new product to market.
To date, Health Canada has not approved any e-cigarettes under the Food and Drug Act.
Some proponents of e-cigarettes dispute Health Canada’s position and suggest e-cigarette juice containing nicotine is governed by the Consumer Chemicals and Containers Regulations of 2001.
Addiction experts and public health officials are divided over e-cigarettes as a smoking cessation aid. Some say if e-cigarettes are safer than regular cigarettes then the e-cigarettes could help save lives. But that opinion is challenged by those who argue that e-cigarettes may lead to smokers cutting back on regular smoking but remaining addicted.
Chief medical officers in Toronto and Edmonton have called on local governments to ban the use of e-cigarettes anywhere smoking is prohibited, while Nova Scotia’s health minister has pledged to introduce legislation in 2014.
The municipality of York in Ontario and the city of Red Deer in Alberta have imposed outright bans in public places.
Kate Ackerman, owner of Alberta-based Electro Vapors, is concerned that small businesses like hers will pushed out of the market – or worse, forced underground if regulations become too onerous.
It’s already happening in Europe, the biggest market for e-cigarettes apart from North America. Sales are banned in 13 of the 59 countries that regulate the devices, according to the WHO, but most of those 13 countries say they are still available because of illicit trade and cross-border Internet sales.
“The demand is not going away. This horse is not going back into the gate,” said Ackerman, who also sits on the ECTA board.
“There are people who have been smoking for 50 years . . . and they’ve picked up an electronic cigarette and were finally able to permanently put away tobacco. These people are not going back to tobacco. The worst thing I can see is for this market to go underground, to become even a black market and it’s totally unnecessary.”
Rechargable kits imported from China retail for between $80 and $100. E-liquid cartridges containing nicotine are purchased separately.
A month’s worth of e-liquid can be bought online for about $20 while a pack of twenty cigarettes varies from $10 to $15 if bought separately.
© The Canadian Press, 2014