This Year Marks The Rise of E-Cigarettes

Source from:  Richmond (VA) Times-Dispatch 12/30/2013

2013 might be remembered as the year when electronic cigarettes took off in the heart of tobacco country.

At least eight retail stores specializing in selling electronic cigarettes, battery-powered devices or e-cigarettes, opened this year in the Richmond area.

As retailers attempt to capitalize on the shift in smokers' buying habits — a small, but growing part of the overall tobacco market — big cigarette companies such as Henrico County-based Altria Group Inc. have jumped in as well.

"It is definitely a disruptive innovation," said James Xu, majority owner of Avail Vapor LLC, a Richmond company that opened six e-cigarette retail stores in Virginia in 2013, including two in the Richmond area, with more stores planned for next year.

"It is going to change the landscape of the traditional cigarette market," Xu said. "And we are such a big tobacco town that it is going to change the landscape of this town, too."

Unlike conventional cigarettes, e-cigarettes do not burn tobacco or contain tobacco leaf. The battery-powered devices heat a liquid solution of water, nicotine and flavorings, creating a vapor that is inhaled by the smoker, or "vaper."

E-cigarette stores in the Richmond area have opened under names such as Richmond Vapes, Vapors Lounge, Voltage Vapin', River City Vapes and RVA Vapes. Store owners say practically all of their customers are current tobacco users.

"Quitting smoking is really hard for people to do, and we have found a way that is easy, or seems to be," said Chris Dooley, a co-owner of Richmond Vapes, an e-cigarette store that opened about eight weeks ago on West Broad Street in Henrico County.

Like most other e-cig stores, Richmond Vapes has a lounge area where customers can puff on e-cigs, or "vape," while socializing or watching television.

Dooley and co-owner Josh Moore are experienced in sales, particularly selling electronics and cellular phones, but saw an opportunity for their own venture with the rise of e-cigarettes. "This is really picking up steam," said Moore.

Stores are opening, even though the U.S. Food and Drug Administration has not yet determined safety and marketing regulations. E-cigarettes currently are unregulated.

E-cigs have stirred a heated public health debate. Proponents say the devices produce far fewer harmful chemicals than conventional cigarettes. Public health groups worry that e-cigarettes will keep smokers hooked and that long-term health consequences are unknown.

In Virginia, state lawmakers will tackle some issues surrounding e-cigarettes in the upcoming General Assembly session starting in January. At least two bills would explicitly prohibit sales of e-cigarettes to minors. Lawmakers also may consider whether e-cigarettes should be taxed the same as conventional cigarettes in Virginia.

While sales of e-cigarettes to minors are not explicitly prohibited now under Virginia law, local sellers say they abide by laws that prohibit tobacco sales to minors.

"We are not going to play around with that," said Moore of Richmond Vapes, which has posted a sign at the register saying it does not sell to minors. "We don't think minors should have anything to do with this, just like cigarettes. We fully respect that."

While e-cigarette advocates contend that the devices should be considered safer than conventional cigarettes and should not be stymied by regulation, they concede that some regulatory framework is needed.

Of particular concern is the manufacturing and sourcing of the wide variety of liquid solutions that go into e-cigarettes, some of which may be produced in unsanitary conditions.

The FDA, "has to put some order into this market, which we welcome," said Xu of Avail Vapor.

"They have to put regulations in place like an age limit and good manufacturing practices and advertising," he said. "We want to have this kind of regulation. But on the other side, I think they [the FDA] understand that if they are too heavy-handed, they are going to kill innovation."

Xu said he started exploring the idea of opening e-cigarette stores when his wife successfully switched to e-cigarettes from conventional cigarettes.

Xu is a partner with his sister and brother-in-law in Evergreen Enterprises, a Richmond-based manufacturer and distributor of home décor products that owns the Plow & Hearth retail store chain.

Avail Vapor is a separate business started by Xu and business partner Donovan Phillips. Xu said they made several trips to China, where e-cigarettes were first developed years ago, to learn about the industry there. Hundreds of factories in China are now making e-cigarette products, Xu said.

"Some of them are questionable," he said.

Avail Vapor operates its own pharmaceutical-grade laboratory in Henrico where a pharmacist, also a partner in the business, makes the company's "juice," the liquid concoctions of water, flavorings and nicotine that customers can buy in small plastic bottles to squirt into their re-useable smoking devices.

Avail has opened retail stores locally in Carytown and Short Pump, as well as in Fredericksburg, Blacksburg, Virginia Beach and Norfolk. The company plans to open more stores in Virginia, Maryland and the Washington area next year.

Stores such as Avail Vapor and Richmond Vapes sell electronic cigarettes in a variety of sizes and designs, including disposable types and rechargeable, reusable devices.

Xu wants to create a high-end experience for his e-cigarette customers. His stores are designed to cultivate an atmosphere and experience similar to an Apple electronics store or a Starbucks, he said.

Because so many cigarette smokers are still unfamiliar with how e-cigarettes work, "we hold their hands," he said.

At the Avail Vapor store in Short Pump, customers can sample more than 50 "juices" at a series of tasting stations with e-cigarette liquids in flavors such as "Butterscotch," "Virginia Pure," "Tropic Thunder" and "Pixie Dust."

The e-cigarette market remains small compared to the $90 billion U.S. market for conventional cigarettes, but enticing even to major tobacco companies.

Altria said in October that it was expanding sales of its e-cigarette brand MarkTen from an initial market in Indiana to retail stores in Arizona. The company said it has learned from its test marketing, but it did not disclose sales figures.

Some industry analysts such as Bonnie Herzog of Wells Fargo Securities predict that e-cigarette sales will continue to grow, likely pushing $1.7 billion in sales this year, and could surpass conventional cigarette sales within a decade.

Xu said e-cigarettes have reached a point where they are user-friendly enough and cheap enough to have wide appeal, and more innovations are likely on the way.

"That is why you see more and more people coming here, and when they convert they actually stick to it," he said.