CVS move won’t slow e-cigarette sales

As retailer gives up cigarettes, e-cigarette industry grows

By Jonnelle Marte, MarketWatch 

The news Wednesday that CVS Caremark CVS +0.17%   would stop selling tobacco products drew praise from the White House and anti-smoking groups. But while the ban is the latest anti-smoking initiative introduced by a major retailer, it may not do much to slow the fast-growing e-cigarette industry.

E-cigarettes, battery-powered devices that convert nicotine-containing liquid into vapor, aren’t sold at CVS. But they are widely available and have become easier to buy over the years, even as traditional cigarettes have gotten more expensive and retailers have cut back on selling them. The electronic products are being carried by more brick-and-mortar stores and are sometimes displayed more prominently than old-fashioned cigarettes, says Bryan Haynes, partner at law firm Troutman Sanders and counsel for the Electronic Cigarette Industry Group, a trade association representing e-cig makers. “It used to be only a select few locations would carry e-cigarettes, and they would generally be more specialized shops,” says Haynes. “Now it would be more surprising if you didn’t find e-cigs anywhere that traditional cigarettes are sold.”

They are also gaining in popularity, at a time when sales of traditional cigarettes are declining. About one in five adult smokers in the U.S. tried electronic cigarettes in 2011, up from 10% in 2010, according to the Centers for Disease Control and Prevention. And Bonnie Herzog, a senior analyst with Wells Fargo, says that the roughly $2 billion e-cig industry is on track to quintuple to $10 billion in sales by 2017. Although e-cigs currently represent only a fraction of the overall tobacco industry — estimated at $100 billion — Herzog says they could become more popular than traditional smokes over the next decade.

The move from CVS comes weeks after a report from the U.S. Surgeon General showing that smoking is deadlier than initially expected and linked to diseases such as diabetes, rheumatoid arthritis and colorectal cancer, on top of previously well-known conditions such as lung disease, heart attack and stroke. But since there isn’t as much evidence linking the much younger e-cigarette industry to health risks, e-cigarettes have less of a stigma, says Haynes.

Some smokers are having an easier time smoking e-cigarettes than traditional cigarettes, as the latter are increasingly being banned in parks, restaurants and the workplace, says Haynes. The devices can be more discreet than regular cigarettes.

Indeed, while employers have ramped up their anti-smoking efforts in recent years, banning smoking at the workplace and charging workers who smoke higher insurance rates, many companies say they are waiting for more research regarding the health risks of using e-cigarettes. “We’re waiting for more evidence, more clarity to be able to set meaningful policy,” says LuAnn Heinen, a vice president at the National Business Group on Health, a non-profit in Washington, D.C., that encourages employers to ban traditional cigarettes at work and to offer smoking-cessation programs for workers looking to quit.

To be sure, anti-smoking groups say the lack of research regarding e-cigarettes is more reason for consumers to avoid the products. “Nobody knows what’s in them,” says Paul G. Billings, senior vice president of advocacy and education for the association, adding that some studies have found e-cigarettes contain carcinogens. There is also a concern that e-cigarettes may be introducing teens — and other nonsmokers — to nicotine, with the share of high-school students who say they’ve used them doubling to 10% from 2011 to 2012, according to the CDC. And some groups are treating e-cigs and other tobacco products similarly. Johnson & Johnson JNJ +0.33%  , for example, bans workers from using e-cigarettes along with all tobacco products on their campuses, says Fikry Isaac, head of global health for Johnson & Johnson.

CVS move won’t slow e-cigarette sales