Death and taxes aren't the only sure bets in life. You can
always count on:
- Kids looking for the newest, coolest fad to explore.
- Adults who want to be healthy but would rather take a
shortcut for their clean bill.
- Companies looking to exploit both.
Add a component of addiction to this scenario, and you get a
multi-billion-dollar bonanza of a market in e-cigarettes.
The decade-old industry began gaining traction in 2008,
drawing $20 million that year, $500 million in 2012, and it's
expected to reach $1.7 billion in 2013. Only a fifth of the more
than 45 million smokers in the United States has tried them, so
the effect of e-cigs on the $80 billion tobacco industry is only
beginning to be realized.
Of course, the difference between the two is that you "vape"
e-cigarettes, not smoke or inhale them. The battery-powered
tubelike devices release water vapor laced with nicotine housed
in a cartridge. Users then inhale the vapor as they would the
smoke from a combustible cigarette.
E-cigs are marketed as healthier or not as bad for users, but
everyone from federal agencies and anti-smoking advocates to
doctors, hospitals and educators are putting up their dukes
against e-cig companies.
Here are a few pros and cons:
The Food and Drug Administration (FDA) says one of the
ingredients in e-cigarette vapor is polyethylene glycol, the
chemical used for theatrical smoke. It is also an FDA-approved
food additive commonly found in deodorants, moisturizers and
According to e-cigarette merchant EverSmoke.com, heavy smokers
can save more than $1,000 a year by switching to e-cigs.
Many e-cigs also deliver nicotine, so some people may stay
They are non-flammable.
Studies showed that at least two brands of e-cigs revealed
detectible levels of known carcinogens, such as diethylene
glycol, an ingredient in antifreeze, as well as small amounts of
E-cigs come in many flavors and are easily found in retail
outlets and on the Internet.
Only a fifth of the more than 45 million smokers
in the United States has tried them, so the effect of
e-cigs on the $80 billion tobacco industry is only
beginning to be realized.
So, with the backing of celebrities and stores wanting to sell
them -- half the states even do to minors -- a handful of
companies stand to profit from the e-cig generation. Let's start
with tobacco row.
Altria Group (
, the world's biggest tobacco company and parent company of
Philip Morris USA, was the last one of the big three to jump in,
seeking future sales growth because of the expected decline in
cigarette smokers. It generates a healthy 5.4% dividend and is up
68% over the past five years.
Wells Fargo estimates that No. 2
Reynolds American (
will have $4 billion in revenue from e-cigs in 2021, compared
with $3.9 billion from conventional cigarettes. RAI offers a 5%
dividend and is up 16% this year.
, maker of Newport cigarettes, is the third-biggest and oldest
U.S. tobacco company. It acquired electronic-cigarette maker Blu
eCigs for $135 million in 2012 and racked up first-quarter sales
of $57 million in 2013. The brand is already in 80,000 stores. LO
offers a 5.1% dividend.
Vapor Corp. (
is the only pure e-cig play among the group. Although it reported
record net sales of $21.4 million in 2012, an increase of 33.6%
year over year, it's the riskiest of the bunch. It has nearly
quadrupled from $0.25 in early January to nearly $1.
Risks to consider:
With Vapor, you need to be aware that it could get squeezed
out by Big Tobacco, plus it trades on the pink sheets, so
volatility is to be expected. Think small in terms of
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You can't go wrong putting money to work in the top three U.S.
tobacco companies. They have all fared well over time, and e-cigs
will just add revenue or at least any lost from people quitting
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