Despite pressure from state and local regulations and competition from other segments, vape sales chart an upward course.
E-cigarettes and vaping products are facing headwinds from all sides — from regulatory challenges to competition from nicotine replacement products to disruption amid COVID-19, which has nudged some vapers back to combustible tobacco products.
Still, demand for e-cigs and vape products continues to grow. C-store dollar sales of electronic cigarettes have risen a hefty 6.8% for the 52 weeks ending Aug. 9, according to IRI, and unit sales are surging, seeing a 15.6% rise for the same period. And that’s with an average price drop of $1.13 per unit.
But the regulatory heat is rising. Most recently, California’s Gov. Gavin Newsom, D-Calif., signed into law Senate Bill 793, a flavored vaping ban, on Aug. 28. Chicago passed a flavored vape ban on Sept. 9, and backers of an Illinois state initiative that stalled last year said they plan to try again in 2021.
Municipal and state bans are nothing new to vape manufacturers and retailers. And until federal guidelines, in the form of policy and/or legislation, set a standard for all jurisdictions those local restrictions will continue to trouble more convenience operators.
Mark Lapierre, director of category management for Sylvania, Ohio-based S&G Stores’ 55 Stop & Go and In & Out Mart locations in Northwest Ohio, is already hampered by citywide regulation. Like other municipalities, e-cigarettes and vape products could be next.
“We have menthol ban in Toledo city limits, which is difficult for us,” said Lapierre. “I think it’s going to follow the normal gambit, but I certainly hope there’re enough lawsuits that crush it.”
More bans are on the horizon, according to Greg Conley, president of the nonprofit American Vape Association.
“There are tax hikes on the Colorado and Oregon ballots that are likely to pass,” Conley warned. “We’re going to see tobacco tax increases in many states at least tried this year because of COVID. State coffers, states that started off without a great amount of money in reserve, they are going to be hurting.”
That revenue shortfall may hold off state attempts at flavor bans, Conley added, because state legislators will be heavily focused on filling government coffers. That sentiment could play out through 2021, as well.
The pandemic also brought fears that vape product consumers would return to traditional tobacco products, and there has been evidence of that scenario playing out in convenience stores.
“What we’re seeing out in the rest of the country, in the news, is that a lot of people switched back to combustibles,” Lapierre said. “I don’t think vape sales have necessarily dropped.”
Lapierre noted that e-cigarettes and vape are already seeing competition in his set from non-tobacco nicotine products. As for the future of the set, Lapierre expects to continue carrying vape, which he believes will continue as a key segment. “But the rest of it is for nicotine replacement products. And that could be anything from ZYN and Rogue,” he said of the remainder of his tobacco set.
And as far as the California ban taking place on Jan 1, 2021, Conley said retailers shouldn’t hold their breath. The California Coalition for Fairness filed papers Aug. 31 to begin the process to place the ban on the ballot, according to a Sept. 1 report from the “Los Angeles Times.” Should the group collect the nearly 625,000 valid signatures needed, the tobacco ban would be on hold until voters weigh in. That could be as late as 2022.
While that may be good news for c-store operators and others retailing vaping products, the specter of municipal regulation is a constant presence.
“So that’s two more years of Californians being able to access flavors,” said Conley. “But the bad news is that California local governments — you probably already have 30%, if not more of the state, living under flavor bans right now.”