No cowboys or camels here
Retailers stocking an assortment of tobacco products today would be remiss to ignore electronic cigarettes (e-cigarettes). E-cigarettes – which, in a nutshell, are cigarette-shaped devices containing a nicotine-based liquid that is vaporized and inhaled to simulate the experience of smoking tobacco – have seen dramatic sales in recent years.
Looking specifically at the 52 weeks ending Sept. 8, dollar sales of overall electronic smoking devices spiked 130.7 percent to $161 million, according to data from Information Resources Inc., Chicago. During the same timeframe, unit sales jumped 134.7 percent to 12.9 million.
And retailers have a prime opportunity to compete in this category with e-cigarettes of their own. Tony Vecchie, senior vice president of sales and distribution with Eco-Cigs, a Northbrook, Ill.-based manufacturer of e-cigarettes under the Sapphyre brand and for retailers store brands, notes that given its newness, the e-cigarette space doesnt yet have the overwhelming national brand dominance found in the traditional cigarette category.
"Only a handful of e-cigarette brands have any real consumer traction out there," he says. "And because the retailer is the one that owns and controls the shelf space, by all means, retailers are able to effectively give their own brands that space."
A few years ago, the tobacco store channel was the only channel in which it made sense to offer private label e-cigarettes, says Mary Szarmach, vice president of trade marketing and government relations with Smoker Friendly, a Boulder, Colo.-headquartered chain of tobacco stores that wholesales its Smoker Friendly e-cigarettes and e-cigarette kits (manufactured by San Clemente, Calif.-based Freedom Smokeless) to noncompeting retailers in all channels. Today, that reality has changed.
Do
make sure to carry more than just one or two e-cigarette SKUs – national and private brand – if you already offer a wide selection of traditional cigarette SKUs.
Dont
make outlandish claims on packaging.
"As c-store buyers, drugstore buyers and consumers have become more educated, e-cigarettes have now expanded into c-stores, drugs[tores] and mass merchants," she states. "I feel these four channels would be successful for a private label e-cigarette, especially since [so many retailers in] all channels sell private label products, and they have a loyal consumer base."
Vecchie agrees, adding that dollar stores, which now are "stepping off into tobacco" also have an opportunity to dive into the private label e-cigarette business.
Disposable, rechargeable or both?
In the e-cigarette category, two product types exist: disposable and rechargeable, Vecchie says. Disposable e-cigarettes, which usually claim to last the equivalent of two packs of traditional cigarettes (approximately 400 puffs), generally sell individually and can be thrown away after the battery dies. Rechargeable e-cigarettes, on the other hand, often sell in kits containing multiple rechargeable batteries, multiple varieties of cartomizers (the e-cigarette tips that both contain and vaporize the e-liquid) and a battery recharger.
Do
consider offering products with exotic e-liquid flavors.
Dont
do business with a supplier that isnt staying abreast of news on potential FDA regulations.
And although both product types are contributing to the growth of the e-cigarette category, Vecchie believes the future of e-cigarettes lies in rechargeable products. For the most part, the disposable side of the business today is still the "trial side," he points out.
"Once a consumer recognizes that, Hey, I like electronic cigarettes, they do migrate, in many cases, to a rechargeable product, where its a better value," he says.
Vecchie recommends that retailers have both disposable e-cigarettes and kits on hand to cater to new and current "vapers" (people who inhale e-liquid vapor). And its important to have a good selection of both store brand and national brand e-cigarette SKUs, especially if the particular retailer already boasts a wide selection of traditional cigarette SKUs.
"One or two SKUs of a disposable product lost on the counter or the back bar of a drugstore or in a dollar store – thats not even visible," he states.
Favored flavors
Whether a vaper is into disposables or kits, what attracts them to a particular e-cigarette? E-liquid flavors, Vecchie points out, with current favorites being berry-mint, strawberry and peach.
And many other flavors can be found in the e-liquid marketplace. For example, Johnson Creek Enterprises, an online retailer of Johnson Creek brand e-liquids and e-cigarettes, offers 22 flavors of e-liquid in bottles on its website, including Swiss Dark (dark chocolate), Espresso, Valencia (orange spice) and tobacco varieties such as Tennessee Cured, Silverthorn (Turkish and Virginia tobacco), JC Original (everyday blend with caramel and vanilla undertones) and more.
The flavor business is so big, Vecchie says, that his company developed a line of electronic smoking devices intended not for the traditional vaper, but for the person who loves the kinds of flavors often found in hookah tobacco. Sapphire Hookah, a new line of disposable electronic smoking devices available for private labeling, contains no nicotine but comprises a wide variety of exotic flavors – including Blueberry Mint, Mango Tango, Green Apple, Watermelon Heaven, Chocolate Mint and more.
However, similar to what it did for traditional cigarettes, FDA could issue regulations that require manufacturers to stop making e-liquids that dont taste like traditional tobacco, Vecchie says.
Szarmach says retailers need to make sure they – as well as their private label e-cigarette suppliers – always are aware of whats going on in regard to FDA regulation.
"Retailers must partner with a manufacturer that will be able to stay up with the ever-changing technology and FDA-approved manufacturing practices and regulations," she explains. "As a retailer, you do not want to roll out with a private label brand and then have your manufacturing partner not be able to keep up with increasing sales or, worst case, be shut down because they cannot comply with any regulations imposed by the FDA."
In addition to flavors, consumers are becoming increasingly interested in knowing the source of the e-liquids they consume. Nick Molina, CEO of Miami Lakes, Fla.-headquartered International Vapor Group – which manufactures e-cigarettes under retailers brands and the Eversmoke, South Beach Smoke and Nutricigs brands – notes that many manufacturers today use e-liquids sourced from China, while his company uses only 100 percent American-made e-liquids in its disposable e-cigarettes and its cartomizers. The "made in the USA" approach pleases many of his companys customers.
"We take an extra step of getting our juice above food grade, where it is designed to be inhaled," he explains. "Other important factors are ... battery performance and vapor production."
The battery is the most expensive part of the device, Vecchie notes. So if a retailer settles for a less-expensive disposable e-cigarette, it runs the risk of disappointing consumers with a battery that doesnt last very long – or is defective altogether.
Package to please
Looking at own-brand e-cigarette packaging, Szarmach notes that retailers need to make sure they keep the look similar to that of other private brand products on shelves.
"Consider similar colors and logos associated with [your] current private label brand," she states. "As long as [you] have a loyal customer base that purchases [your] private label brands, this could translate into another successful launch."
Packaging also needs to convey sound manufacturing processes to make consumers feel safe, Molina offers.
"You do not want consumers wondering if corners were cut in developing this private label brand," he says. "It should also be very clear what each package contains and what features are included.
And those product features should be communicated honestly via packaging. Vecchie notes that several disposable e-cigarettes he has tested claim on the packaging to be equivalent to two packs of traditional cigarettes (400 puffs), but end up falling far short in terms of puff count. This realization could turn off consumers.
"Its best to be honest with your claims because you cant fool the regular smoker," he says.
As for merchandising private brand e-cigarettes, Szarmach notes that retailers need to make sure their own-brand e-cigarettes always are at the front of mind, promoted through loyalty programs and other vehicles. And pricing always should be kept below that of the products national brand counterparts.
Molina agrees, pointing out that any in-store merchandising strategy for store brand e-cigarettes should be focused around price.
And in the end, the old-fashioned method of telling customers about a product at the counter or register remains an excellent way to get them to try your own-brand e-cigarette over a national brand product, Vecchie states.
"Many purchases are still being influenced at the point of purchase," he says, "and the retailer has the distinct advantage there just speaking to their customers."
| FDA and e-cigarette regulation For more information, visit http://1.usa.gov/TJXspM. |