NCtrend: Blowing smoke

 In 2015-12

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by Clayton Hanson
Once marketed as a way to quit smoking, e-cigarettes and “vaping” have turned into an underground novelty now    making a push into the mainstream. Their growing popularity has captured the attention of Hollywood, teenagers, entrepreneurs, Big Tobacco, lawmakers and regulators. Vape shops filled with young people (mostly men, many fond of tattoos and black clothing) are sprouting across North Carolina, popular for their comfortable lounges, free Wi-Fi and “cloud competitions.”
Common KURE
Demonstrating the rapid growth is KURE Corp., a “vaporium” franchise headquartered in Charlotte that plans to open 22 new stores in the Carolinas over the next few years and franchise dozens more. Among its backers are Charlotte private-equity group Siskey Capital LLC. In an effort to stand out from the 15 or so other vape-shop companies with a presence in North Carolina — including Mooresville-based MadVapes — KURE portrays itself as more than a store. Along with selling supplies, the stores encourage lounging, with overstuffed chairs and heavy-metal music. It’s free to hang out for those 18 and older.
“We serve the same demographics as the local coffee house, only our guests can vape, snack and shop with other people in the vaping community,” says Jonathan Benjamin, CEO of Kure’s franchise division. He was previously chief development officer at Atlanta-based Huddle House, a diner-style restaurant with franchises in 21 states.
Vaping conventions draw hundreds to test the latest flavors. Vape Mania, sponsored by MadVapes and other retailers, booked the Benton Convention Center in Winston-Salem in September. More are expected at VaperSlam in March in Charlotte. MadVapes was started by former computer programmer Mark Hoogendoorn, with 70 locations in eight states, stretching from Texas to Massachusetts.

Tobacco road
Traditional cigarettes still reign at the large tobacco companies, but they, too, are trying to capitalize on the vaping trend. R.J. Reynolds Vapor Co., a subsidiary of Winston-Salem-based Reynolds American and maker of VUSE,  the nation’s top-selling electronic cigarette, recently announced it would move all manufacturing to its 2 million-square-foot plant in Tobaccoville. The shift will help expand VUSE production in response to higher demand, says Reynolds spokesman Jacob McConnico. Reynolds has also tripled its e-cigarette flavorings from two to six. Lorillard Co., acquired earlier this year by Reynolds in a $25 billion transaction, had to sell off its blu e-cigarette brand because of antitrust concerns. If Reynolds had kept blu, the company would have controlled more than 58% of U.S. e-cigarette sales. Not to be left out, Philip Morris last year unveiled its own e-cig, HeatSticks, in Italy and Japan. HeatSticks contain tobacco, not the liquid form of nicotine that is found in other products, in an effort to appeal to traditional smokers. Philip Morris expects the device to account for 15% of total revenue within a decade, according to The Wall Street Journal.

 

Test takers
E-cigarettes are unregulated, but that is likely to change. The Food and Drug Administration sent proposed rules to the White House in October. That could mean more business for Durham-based Enthalpy Analytical Inc., which was acquired by Irvine, Calif.-based Montrose Environmental Group Inc.  in January.  Enthalpy has been testing e-liquids for about three years, making it one of the oldest labs in the industry.  Gene Gillman, technical director at Enthalpy, says e-cigarettes account for about half of the company’s business and is a growing segment. Not surprising considering  that there are about 7,764 unique e-liquid flavors, by one count. Even though e-cigarette manufacturers aren’t required to test, many do, Gillman says.  “They really care about the health of their users, many of whom moved away from combustibles. They perceived (e-cigarettes) as healthier, and manufacturers realize they have an obligation to hold up to that expectation.”

 

What’s next

E-cigarettes (or “vape pens”) have the same appearance as traditional cigarettes except they come with self-contained batteries and retail for about $10, compared with $5 to $15 for a pack of traditional smokes. Vaporizers are larger and allow for a greater variety of liquid flavors than the slim pens found in gas stations or convenience stores. “Mods” range from about $40 into the hundreds.  When a user draws on either device, the battery heats the nicotine-laced liquid, creating an inhalable water vapor.  The resulting clouds have prompted some local governments to extend “no-smoking zones” to “no-vaping zones.”  Other states are looking at taxing e-cigs , following North Carolina’s lead.  Critics accuse the industry of targeting children with flavors like cotton candy and waffles.

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