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Chats at Bonnie’s Fireside

Wells Fargo Securities, the leading investment analyst for the tobacco products industry, held its second annual E-Cig Conference in New York City on November 20, and the centerpiece of the festivities was a series of “fireside chats” with industry leaders. Representatives from nine companies chatted by the fireplace, seven of them from firms that do not sell poison, two from Big Tobacco.

Although WF tobacco guru Bonnie Herzog, the author of the feast, sings the praises of e-cigs, of late particularly of vapor-tank products that are moving ever further from any attempt to mimic a coffin nail (and running away with the industry), her stock analysis assumes a professional blindness to the ethical divide between these two kinds of companies. Wells Fargo Securities is for investors, not moral philosophers, and the point is to keep clients informed about how best to make money on nicotine delivery systems. While vapers may equate Big Tobacco leaders roughly with Satan, at Herzog's party they play in the same sandbox with the good guys.

When the CEOs outline company objectives, the diametrical difference appears, however. Joe Murillo, who heads Altria's Mark Ten subsidiary NuMark, names his objective as “To be there for the 50% of adult tobacco consumers who are seeking non-combustible alternatives; to attain market leadership over time.” NJOY's Craig Weiss states his company's diametrically opposite objective: “To obsolete smoking and combustible cigs.” So the maker of Marlboros and Mark Tens wants to dominate sales of the antidote to the poison it continues to sell. As noted recently in the New England Journal of Medicine, Big Tobacco wants to use e-cigarettes as a means to keep people smoking; independents want to "obsolete smoking". Most vapers see the Big Tobacco attitude as hypocritical, but Herzog withholds comment, except about potential profits.

Reynolds showed up too, its objective also “to attain market leadership . . . non-combustible alternatives.” No mention of erstwhile market leader Blu or its parent Lorillard, presumably since it contemplates sliding down the gullet of neighbor and one-time competitor Reynolds, as Blu takes flight across the Atlantic. Only Vuse and forthcoming “heat-not-burn” tobacco product Revo are mentioned in the Reynolds stable. European Big Tobacco firms stayed away.

Independent firms were well represented, and they appear ready to do valiant battle with Big Tobacco. Ballantyne Brands stresses that its leadership is outside the tobacco industry, and claims to bridge the divide between cigalikes and vapor-tanks, although NJOY also touts its offerings of all three types of ENDS “form factors”: disposables, rechargeables, and open systems with their liquids. Logic says it wants to be the “premium” company, and sticks to disposables and rechargeables, claiming to offer the best battery life. Johnson Creek by contrast sticks to liquids and touts premium quality, vying for the label “the Cadillac of Smoke Juice Made in the Heart of America.” International Vapor notes its network of VapeFi Vape Shops, and aims to leverage a “unique distribution model” appropriate to future developments. Two European independents crossed the Atlantic to chat at Bonnie's fireside: XEO touts its German technology, while Gallic VMR aims to use its vertical integration to stay ahead of the innovation curve.

Herzog herself states the general theme most succinctly: “We reiterate our Overweight rating on the tobacco sector given our continued optimism on the vapor category.”

 

Hear! Hear!

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