Regulatory Update: November 9, 2018

November 09, 2018

   FDA Commissioner Scott Gottlieb is expected to finally do the big reveal next week.  Early reports suggest that he is going to ban flavored e-liquid sales in convenience stores and gas stations (with the exception of tobacco, mint and menthol) as well as legislate increased age verification for online sales.  Readers of our blog will know that this move comes as the result of large scale sting operations over the summer that found major chain convenience stores were frequently selling e-liquid products to underage persons.  


    Many people are already panning the FDA’s move.  Liz Mair, the spokeswoman for the nonprofit Vapers United said, "This is an ill-conceived and exceptionally dangerous move by the FDA.”  We’re not so sure.


    The actual effect of this legislation will be to drive electronic cigarette and e-liquid sales back to vape shops rather than convenience stores.  The FDA has said that vape shops have shown themselves to do a far better job at responsibly carding potentially underage buyers.  This move by the FDA will potentially greatly reward them for that history of responsibility.  


    The obvious downside will be that, as Greg Conley, president of the advocacy group the American Vaping Association said, vapers in more rural areas will have a much harder time finding and purchasing e-liquids.  Vape shops are not readily available in all neighborhoods and the lack of availability will, heartbreakingly, likely drive some back to cigarettes.  There's no doubt that this is bad news for vapers living in these under served areas.  Of course, e-liquid will still be available online so a bit more advanced planning can at least reduce the harm caused by this.


    Beyond that issue, however, early reactions seem to be missing the larger effect this move by the FDA will likely have on the e-liquid industry as a whole.  Currently, five behemoths—Juul, Vuse, Mark Ten, Blu and Japan Tobacco’s brand Logic—represent 97% of the electronic cigarette market.  They have attained that dominance largely through availability—that is, because they are in gas stations and convenience stores.  Convenience store shelf space is a highly competitive game and one that only the big boys can afford to play.  Few, if any, boutique e-liquids are available at these locations.


    If the FDA suddenly takes away this competitive edge, driving vapers to make their purchase in vape shops rather than convenience stores, it could radically shift the power dynamic in the industry.  Vape shop owners are connoisseurs, enthusiasts, who will likely direct customers to great tasting e-liquids and innovative hardware set ups.  No longer will 97% of purchasing decisions be made by what’s available at the gas station.  Instead, potential vapers will be exposed to much greater choice when they make their purchasing decisions and that will be a benefit to them (because life is too short to vape crappy e-liquid!).  This will almost certainly lead to a renaissance for smaller craft e-liquid manufacturers (such as ourselves) and a greater, more thoughtfully curated variety being used by vapers.  It will also likely lead to a large jump in sales for brick and mortar vape shops as well as online vape retailers, most of which are small business, thus redistributing the 97% share of the industry currently held by the Big 5.  


    So while our hearts go out to consumers in remote locations who may suddenly struggle to find a place to purchase, we rejoice at the thought that the stranglehold the Big 5 e-cigarette brands have held on the market may soon be lifted.  We knew the FDA was going to take some bold and potentially draconian measures.  In our opinion, it could have been much, much worse.

P.S. Could FDA's sudden back tracking on banning online sales be due, in part, to an assist from Kai's Virgin Vapor?  Readers of our blog know what we're talking about...



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