Disposables - Big Tobacco Killer Or The Next Juul Moment?
Disposable e-cigarettes are flooding the German market. Following the impressive successes in the United States and the United Kingdom, more and more companies in Germany want to participate in this trend. In addition to the established companies in the industry, rogue traders are increasingly popping up to make a quick buck with illegal products.
Why now?
The disposable hype has broken out in Germany. After the Vape Show in Dubai, the product category is coming back into focus in Europe. Disposables are not a new phenomenon, however. There have already been many disposables since 2013, but they remained only a marginal phenomenon. The reasons for this included the technology, the prices, and the lack of nicotine kick. Through the further development of the vaporizers and coils and especially through nicotine salt, even smaller devices can now deliver better taste and a better nicotine kick. In addition, the prices for disposables and open-pod systems have dropped significantly.
Disposables and the restrictions on the European market
Due to the TPD, the fill quantity of disposables and pods is limited to 2ml. For this purpose, the products must guarantee a constant nicotine delivery. Furthermore, the well-known limit of 20mg nicotine per ml also applies here. These legal restrictions made it difficult in the past to bring out good and useful products to the market. Meanwhile, European manufacturers advertise disposables that offer up to 800 puffs and deliver a noticeable nicotine kick - without exceeding the limits of the TPD. Puffs represent the amount inhaled breaths and they are usually mentioned on the packaging of these devices. For comparison, a tobacco cigarette provides between 6-10 puffs. Accordingly, a pack of 20 cigarettes offers up to 200 puffs. In theory, a good disposable can represent the "puffs" of up to four packs of cigarettes (20) - with the restriction that the puff on a tobacco cigarette is still perceived as significantly stronger than on a disposable.
Accordingly, the product category offers great opportunities but also risks:
Disposables are the opposite of clunky e-cigarettes associated with the vaping scene. They are significantly more attractive to milieus outside the vaping bubble. In addition to the aesthetic considerations the ease of use is very important. The well-tuned automatic draw makes it easier for many smokers to use them unlike DTL(direct-to-lung) devices. This also resolves the vexed issue of returns and advice for retailers away from e-cigarette specialty stores. In addition, it is much easier for disposables manufacturers to create a good and reliable vapor experience, as the mixing ratio of the liquids can be more specifically matched to the hardware. Beside these advantages, the barrier to entry is significantly lower than with classic entry-level devices.
Even compared to the popular pod systems and open-pod systems, disposables are significantly less expensive, as the following figure shows. The price of some disposables are thus below the average price of a pack of cigarettes in Germany. This makes it possible for the first time for the e-cigarette industry to offer a profitable and functioning product that can meet the margins in the convenience sector AND at the same time undercut the price of a box of cigarettes.
Some very simplified calculations can be made for this purpose. In comparism the costs for 10 puffs (sales price / average value of the estimated puffs of the sales unit), one can see how great the potential of the disposable is. For this purpose, the cost of 160 puffs (estimated number of total puffs in a cigarette box) can also be compared between the products. When looking at this, it is noticeable that the disposables close the large cost difference between open-pod and closed-pod systems. This creates new opportunities for the industry to attract massive numbers of smokers to e-cigarettes in the coming years.
Risks
Of course, disposables are particularly critical from an environmental perspective, as they are disposable electronic items. In addition, the electronics and the battery, are also used only once and not reused. The current political and social mood is reluctant to use disposable devices, which is certainly not conducive to disposables. It seems a matter of time before the environmental disadvantage of these products leads to tighter regulation or possibly a ban.
The market for disposables is huge and sourcing platforms, such as All-in-china or Alibaba, make it easy for free-riders to import their own products. However, this is where the big danger lies for the industry and for consumers. Some Chinese factories are offering disposables with 2ml content and 400 puffs starting at $1.30 ex-works. Without further costs for necessary registration, this seems to be a profitable business. However, these offers should be taken with great caution, as the documentation, the quality of the hardware and especially the liquid used do not meet European standards.
For example, the purity of ingredients such as nicotine, flavors and PG and VG is an important quality feature. In Germany, many manufacturers have oriented themselves to pharmaceutical purity and dispense with flavors that contain essential oils, for example, or are prohibited by the TPD. Since the non-European market has the greatest relevance for disposable manufacturers, some products are accordingly not adapted for the European market. This often becomes apparent when checking the safety data sheets, which do not exactly meet European standards. Random samples in England have shown that the nicotine content was occasionally 50mg/ml and not the labeled 20mg/ml. Moreover, there were also some devices that contained more than 2ml of liquid.
In addition to these deficiencies, the labeling according to the CLP Regulation, the Tobacco Products Act and other regulations is often insufficient. Missing or wrong pictograms, missing package inserts or the designation of social media emblems are typical labeling errors of novices. As well, the import of electronic items and especially lithium-ion batteries is also associated with further legal obligations. Non-compliance can lead to warnings and hefty fines. How naively some companies proceed in this regard can be seen, for example, in the lack of registrations with the EAR Foundation in Germany. These can be easily checked via a public portal.
As in the past, illegal products are particularly dangerous for the industry. Disposables could be considered as ideal target in the media. The EVALI crisis as well as the Juul crisis have shown that reporting is unfortunately undifferentiated. Unfortunately these products are particularly popular with young users and are deliberately marketed as lifestyle products outside Europe. It seems only a matter of time until this topic is exploited by the media.
Conclusion:
Disposables can become a real game-changer and further accelerate the disruption of the tobacco industry. The advantages of the product category could eliminate the last concerns of buyers and category managers in the convenience segment and thus make the products available in a much larger market. A look at the United Kingdom impressively shows the potential of this development. Investments in this product category could provide companies in Germany with attractive profits and a significantly larger customer base. For this to happen, however, the marketability of the products must be guaranteed, and E-Cig-Consulting is happy to support you in this.
However, the risks should not be disregarded and especially a partly green federal government could consider a ban of such products in a fast-track procedure. Finally, the competition in this segment should not be underestimated. Many companies have already submitted their registrations and will therefore be able to start selling in the next few months. So there are many signs of a price war in the spring in this category.
Nevertheless, a wise investment in this area is worthwhile, as the product class offers enormous advantages and could also be the gateway to a sustainable switch to e-cigarettes. In addition, the product offers liquid manufacturers the opportunity to bind new customers to their own brand and to achieve a significantly higher customer lifetime value.
M.P.