Tobacco’s younger, shinier cousin – the electronic cigarette – is gearing up for a battle with federal regulators, just as the fledgling industry is getting a foothold in a state built on smoking.
Electronic cigarettes, machines that turn liquid nicotine and flavoring into a vapor, have been sold in the U.S. for two years, and their popularity is surging. But the Food and Drug Administration signaled Wednesday that it might seek to stamp out e-cigarettes in their infancy.
The FDA said it plans to address safety issues, and that could include product recalls or criminal sanctions.
The industry is made up of small firms around the country that mainly sell online. Only one is based in North Carolina, still the country’s No. 1 tobacco producer.
The Charlotte company, Blu Cigs, is already branding itself as “E-Cigarettes 2.0” – and sees its product as a symbol for North Carolina’s changing economy.
Jason Healy, a native Australian with no prior background in the cigarette industry, launched Blu Cigs in May after seeing an electronic cigarette in a Charlotte bar.
Because no burning is involved and no tobacco is used, e-cigarettes are allowed in places their old-school brethren aren’t. In light of North Carolina’s impending smoking ban, Healy said this is the main draw.
The main differences between Blu and its competitors include a carrying case that will recharge the battery and a tip that lights blue instead of red – which Healy says keeps customers out of trouble.
“Before it was ‘Hey! He’s smoking,’” he said. “With the blue light, it’s more, ‘What the hell is that?’”
The FDA, however, found that e-cigarettes contain several toxic chemicals, including an ingredient in antifreeze. Scientists said they tested 19 varieties of electronic cigarettes, many of which contained fruit and candy flavors.
The FDA has blocked importation of electronic cigarettes in some cases, but this hasn’t affected Blu. Currently, the FDA is asking the courts to give it regulatory authority over e-cigarettes.
Health advocates say e-cigarettes are potentially unsafe and can lead kids toward traditional tobacco smoking. Because e-cigarettes are not covered by federal tobacco laws, they are often easier for young people to buy.
Blu Cigs doesn’t market its product as a healthier version of tobacco. Healy mainly promotes Blu as a cheaper alternative to cigarettes. Each nicotine and flavor cartridge costs about $1.
In general, one e-cigarette provides as many puffs as six or seven traditional cigarettes.
With the costs of the battery and other expenses, Healy estimates Blu Cigs costing about $1.25 to $1.50 per the equivalent of a pack of traditional cigarettes, which runs about $4 or $5.
The “starter kit” costs about $60, and has the equivalent of about 350 cigarettes. Target audience: ages 25-35, upwardly mobile and tired of going outside to smoke.
“You’re not a leper anymore,” said Healy, who looks younger than his 34 years. “Who wants to go outside, especially in the winter?”
From tobacco to technology
For 300 years, tobacco was the primary economic driver of North Carolina, and the state is still the top producer of tobacco in the U.S. The second- and third-largest U.S. cigarette companies, R.J. Reynolds and Lorillard Tobacco, are based in North Carolina.
But in 1959, the Research Triangle Park near Durham opened, and technology began to rise as the state’s prominent industry. Soon after, tobacco began a long, steady decline in popularity and importance.
Blu Cigs embodies the change from tobacco to technology, spokesman Steve Goldberg said.
The company says it has been successful in its two months of operation. The main product is the starter kit, which contains a carrying case, batteries, chargers and flavor cartridges. Healy said the company has sold more than 50,000 starter kits and had to stop taking orders for two weeks this month to keep the backlog from piling up.
Blu Cigs employs eight people in Charlotte and more than 200 in the Chinese factory where the product is manufactured. Healy said he expects the Charlotte office – on Archdale Drive – to have more than 20 workers by the end of the year.
The Electronic Cigarette Association, a new trade group, estimates electronic cigarette sales will reach $100 million this year. The group was created three months ago, so it doesn’t have figures for last year. Spokeswoman Amy Linert said the ECA expects sales to continue to grow quickly, as long as the FDA doesn’t shut them down.
Despite the growth, the industry is still small potatoes compared to the tobacco companies.
Altria, which owns Philip Morris USA, brought in nearly $3.9 billion in cigarette sales over the first three months of this year.
But the big three tobacco companies also are losing their customer base. Between 1996 and 2006, annual consumption fell 24 percent, to 371 billion cigarettes.
While tobacco firms aren’t looking to e-cigarettes as their future, they are counting on technology to face the expected consistent decreases in domestic cigarette consumption and declining public approval of smoking.
Philip Morris USA, the largest tobacco company in the country, built a 300,000-square-foot research and development facility in 2007, which sits in the center of a biomedical research park in Richmond, Va.
Winston-Salem-based R.J. Reynolds created a product that heats tobacco instead of burns it, but the company has focused its attention on making products that don’t produce secondhand smoke, don’t require spitting and don’t create a lot of trash. The result has been finely milled tobacco that’s made to be discreet – similar to mints or chewing gum, spokesman David Howard said.
The company also got a patent last year for a machine that inserts a smoker-controlled menthol capsule into regular cigarettes.
Lorillard, based in Greensboro, uses “advanced scientific equipment” to analyze tobacco properties and develop cigarettes with less smoke, according to its annual report.
While the big companies are trying to hold on to profits, Blu Cigs plans to expand. The next step is to distribute abroad, primarily in Europe and the Middle East. Blu Cigs might begin selling in retail stores, but Healy said he wants to see what action the FDA takes before starting that.
Hazardous or healthier?
Federal guidelines prevent the company from marketing the product as a safer alternative to cigarettes, though Healy points out that Blu Cigs don’t have the tar or carcinogens that traditional cigarettes have.
Still, the health effects of e-cigarettes are unknown. Some politicians, like Sen. Frank Lautenberg of New Jersey, have called for the product to be taken off the market until the FDA has approved it.
Dr. Adam Goldstein, director of UNC Chapel Hill’s Tobacco Prevention and Evaluation Program, said he’s “cautiously worried” about e-cigarettes.
While it’s possible that they’re healthier than regular cigarettes, they’re still a source of addiction and could appeal to younger people. And a new study implied that nicotine could itself be carcinogenic.
“You don’t encourage anyone to develop use of one nicotine product,” Goldstein said. “If a smoker tells me they’re using this instead of smoking, I’ll say, ‘Great, now let’s talk about quitting.’”