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E-Cigarettes Are Smoking the Competition: Update

The growth in the market is expected to continue. Wells Fargo and Bloomberg estimate that e-cigarette sales will surpass traditional cigarettes within the next decade. The U.S. tobacco industry is a $90 billion industry. The most optimistic scenario puts the U.S. e-cigarette market at over $80 billion in 10 years, representing a 47% compound annual growth rate and a global opportunity for $300 billion in 10 years.

Even more conservative estimates are rosy. Assuming no-growth in the overall tobacco market size and 50% cannibalization of tobacco cigarettes sales, e-cigarette sales could reach $45 billion in 10 years, representing almost 40% growth per year. Using a more conservative estimate that e-cigs would take 25% of total traditional cigarette sales, the e-cigarette industry could reach $20 billion over the next decade, or a compound annual growth rate of over 30% per year for the next decade.

Key Trends

The Centers for Disease Control and Prevention found that in 2011, nearly one in five adult cigarette smokers tried e-cigarettes. That number is up 10% from 2010. Currently, about 6% of all adults have tried vapor smoking, nearly double the estimate in 2010. The growing adoption of e-cigarettes is driven by a number of trends including legality, social acceptability, health reasons, cost effectiveness, increased awareness and increased variety.

While tobacco cigarettes are banned in public places across the nation, e-cigarettes are not as strictly regulated. Smoking is banned indoors through much of the country now. And some cities, such as New York, Chicago and Long Beach, prohibit e-cigarettes in the same ways they do traditional cigarettes. But overall e-cigarettes can still be used indoors in the vast majority of cities. This creates significant demand for e-cigarettes, particularly in cold-weather locations. Smokers can get their nicotine fix indoors without having to deal with the harsh weather conditions.

E-cigarettes seem to be more socially acceptable than traditional cigarettes, too. For many, the unacceptable part of traditional cigarettes is the smoke and the smell. Unlike traditional cigarettes, e-cigarettes do not produce smoke. This leads to a lower level of intrusion and a higher level of social acceptance. This is confirmed by the 2014 American E-Cigarette Etiquette Survey conducted by Harris Interactive: nearly 63% of Americans say they would not be bothered by someone using an e-cig in close proximity.

At first glance, e-cigarettes seem to be less of a health risk than traditional cigarettes. With traditional cigarettes, smokers are inhaling a number of additives that cause cancer, including tar, benzenes, formaldehyde, arsenic, ammonia and carbon monoxide.

Nicotine itself does not cause cancer. It is a stimulant similar to caffeine. Stimulants increase your heart rate, speeds up other bodily functions and constrict blood vessels. Both are highly addictive and can cause severe withdrawal symptoms, making it difficult to quit.

E-cigarettes may be more effective then patches or gum at helping smokers stop quitting, as they replicate the process of smoking. The act of smoking becomes almost as addictive as nicotine, with some estimating 60 to 70% of the addiction is the process of placing a cigarette to your lips. The patch carries other disadvantages, like potential visibility, side effects and inability of the user to control the dosage.

A study conducted by the National Institute for Health Innovation at the University of Auckland showed the percentage of people who quit smoking was higher with e-cigarettes than nicotine patches and placebo, at 7.3%, 5.8% and 4.1%, respectively. The study also showed relapsed e-cigarette users smoked less. Of the volunteers in the e-cigarette group, 57% halved their daily cigarette use by the end of the six months, compared with 41% in the nicotine patch group and 45% in the placebo group. According to a 2011 report from the Centers for Disease Control, 68.9% of adult smokers wanted to quit smoking and 42.7% made an attempt to quit. The total market for smoking cessation products such as nicotine patches and gum was estimated at $835 million.

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