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Bonnie Speaks!

Investment guru for the nicotine products industry Bonnie Herzog of Wells Fargo Securities just got back from Vegas. It is unclear whether she won anything on the slot machines, but she came back with some clear ideas about the direction of the vaping products industry, and what it all means for the industry's financial backers. Let's hear what Bonnie has to say.

Wall Street's tobacco expert continues to "remain excited about the vast potential of the vapor category," but is unwilling to "call" what will happen from a "product format perspective". This could be a discreet way of avoiding a judgment on whether the FDA will cave in to Big Tobacco and heed the R.J. Reynolds request to outlaw their competition in the form of the vapor-tank market. Herzog does not venture a prediction on "which device or nicotine delivery format(s) will reign supreme."

Herzog notes that "disruptive technologies" vary in their speed of uptake. She is talking about things like cell phones and electronic cars, which offer consumers life-changing new products based on novel technologies. Cell phones went viral quickly, she observes, while electronic cars are taking longer to catch on (no doubt because they represent a more substantial investment). "Vapor/reduced risk alternatives" will be adopted more quickly, Herzog avers. Like duh! When the product you're addicted to is certifiably lethal, you have a strong incentive to try an alternative, no matter what vote-hungry mayor is trying to block your path.

Big Tobacco will play a key role, opines Herzog, in the shape of the industry to come. That may come as a disappointment to many vapers, who feel anger toward the companies that showed callous disregard for their customers' lives for so long. Investors tend to ignore ethical values when their bank books are at stake, and investors are Herzog's primary clients. But the vaping community may continue to root for the independents, regardless of what the wealthy death-merchants are doing.

The consensus is that the deeming regulations were a step in the right direction, and Herzog agrees. The panel Bonnie attended expects final regulations in a year or two. She expects the regs will increase credibility and drive innovation in the vapor category, and applauds the agency's acceptance of a "continuum of risk". Elements that remain unclear are the clearance pathway for new products, flavors, the acceptability of "open systems", online sales, and regulation of hardware components.

Herzog's company, Wells Fargo Securities, will be offering a conference for investors in New York City on November 20. Investors are to "hear directly from and network with industry leaders and visionaries in the burgeoning, game-changing vapor and e-cig category."

No doubt Bonnie Herzog's take on the future of the industry will provide a valuable yardstick for future developments.