Cigarette makers recently facing dwindling volumes have been dealt yet another blow with the ruling of a court in France. As per media reports, the decree has stated that e-cigarettes can be sold only by tobacconists (expert tobacco dealers). The ruling also states that these cigarettes belong to the same category as tobacco products, and, therefore, the advertising bans on cigarettes will be applicable for them as well.
E-cigarettes are becoming increasingly popular especially among youngsters. These battery-powered devices turn a nicotine-based liquid into vapor. They were considered less harmful than tobacco products and therefore the major tobacco players capitalized on them.
Altria Company's (MO) subsidiary, Nu Mark LLC, introduced its first e-cigarette brand — MarkTen e-cigarettes — in Indiana in August. Reynolds American Inc.'s (RAI) subsidiary, R.J. Reynolds Vapor Company, is expanding the distribution network of its tailor-made e-cigarette — Vuse. Lorillard Inc. (LO) captured a leading position in the electronic cigarette industry in the U.S. after it acquired e-cigarette brand blu e-Cigs in Apr 2012. Also, in November, Philip Morris International (PM) announced its plans to foray into the e-cigarette business.
The verdict could have great influence on other government bodies that are still undecided on whether to levy the same regulations on the e-cigarette category as the tobacco products. The U.S. Food and Drug Administration plans to set marketing and product regulations for e-cigarettes in the near future as there is not much scientific evidence to back their ability to help smokers quit or smoke less. European legislators are expected to frame regulations for e-cigarettes, based on the risks or benefits on smokers’ health which is a burning topic in the subcontinent.
Moreover, the cigarette makers are facing tough industrial conditions amid strong anti-smoking campaigns worldwide, where governments are imposing restrictions on tobacco companies which, in turn, are leading to a decline in cigarette consumption. In such a condition, the ruling against e-cigarettes will be detrimental to the margins of the tobacco biggies in the coming quarter.