With the incredible success of electronic cigarettes, traditional tobacco companies are beginning to worry. While a dip in cigarette sales was expected, the significance of this change was recently discussed by Jim Cramer, who presents “Mad Money” on CNBC. Based on the figures presented by Adam Spielman, analyst with Citigroup, Cramer came to a dramatic conclusion. At least, dramatic for cigarette manufacturers.
The big tobacco brands have in the last few years recorded historic reductions in sales. Philip Morris even took things further than the forecast, with a total drop in sales of 2,3%. Malboro, their flagship brand, saw a 7% reduction in sales.
The decline of the tobacco market is an international phenomenon. Global figures are plumetting across the board, from a 1,5% drop in sales in Canada, for example, to 10,4% in Eastern Europe. The stock prices for big tobacco are not bucking this trend, but rather confirming it. And while, until now, cigarette brands could compensate these losses in sales with raised prices, this will no longer be possible.
Vaping: an economic threat that might represent a solution
To boose sales figures, cigarette companies have considered branching out, turning to the very devices that represent their strongest competition. While e-cigarettes represent a threat to the tobacco industry, they also represent a lucrative market in their own right.
Juul Labs is the perfect example, with a record growth in sales reaching a whopping 800% in 2017. Enough to seduce the competition, who will most likely be following in their footsteps to attempt to bring their investors some good news! This product has known incredible success for smokers trying to quit, but also, more worryingly, in the adolescent market.
A number of cigarette companies have as a result launched their own devices, but still only barely scratching the surface of the market cornered by Juul Labs, which offer very high nicotine levels. These next-generation, USB stick-shaped e-cigs have taken the lead, and it’s going to be difficult for any other brand to catch up.