Posted by ECigaVapeUSA on 9/17/2014 to E-Cigarette News
Reynolds American (NYSE: RAI ) is lobbying the U.S. Food and Drug Administration for tighter restrictions on the e-vapor market. It may seem counterintuitive, but Reynolds American's lobbying efforts could end up helping it and Altria Group (NYSE: MO ) boost the profitability of their e-cigarette
and combustible cigarette operations, as what they suggest would hurt competitors offering different types of vapor devices.
If the Food and Drug Administration implements Reynolds American's policy suggestions, Reynolds American and Altria could dominate the market.
Setting the stage for domination
The FDA outlined a first round of e-cigarette regulations earlier this year. The proposed rules appear to benefit larger e-cigarette companies by requiring special approval for devices that are not "substantially equivalent" to products that were on the market prior to Feb. 15, 2007. The FDA estimates that each application for a new device could cost several million dollars, the Winston-Salem Journal reported at the time. This would make it prohibitively expensive for small e-vapor companies to invent new products, thereby limiting innovation to a handful of well-capitalized players.
Reynolds American and Altria also have an advantage in distribution. Reynolds American's Vuse e-cigarette captured 61% of the Colorado market within months of being released, the company said. Altria's MarkTen e-cigarettes achieved 48% market share in Arizona within seven weeks of its introduction, that company said. Moreover, MarkTen is already distributed in over 60,000 stores just months after its nationwide launch. These quick market share grabs demonstrate big tobacco companies' distribution advantage.