The deals keeping rolling in, with the latest being the purchase of one of the leading UK e-cigarette brands, E-Lites, by the powerful Japan Tobacco corporation. Market Watch reports that the agreement calls for Japan Tobacco to purchase all outstanding shares of Zandera Ltd., which makes the very popular E-Lites brand. Terms of the deal were not disclosed.
With UK e-cigarette brands surging in the last few years, E-Lites found a very solid place in the market for itself, allowing for revenues of almost $27 million this past fiscal year.
Apparently Japan Tobacco liked the makeup of the company enough to make its first big foray into the e-cigarette market. E-Lites was founded in 2009 as one of the first e-cigarette brands in the UK, and the Bromsgrove-based company built a brand reputation that allowed them to take advantage of the rising tide of e-cigarette sales in the UK.
Growth of e-cigarettes in the UK has been phenomenal, tripling in the past two years alone. The UK e-cigarette market now counts over 2 million in its customer base. There have been several UK e-cigarette brands purchased in the past 18 months, but the only big tobacco company that has bought in to the UK market was Lorillard when its Blu Cigs purchased SKYCIG. Japan Tobacco now adds a second big tobacco company to the e-cig market in the UK.
Japan Tobacco is an enormous international corporation with revenues in the billions of dollars. The Tokyo-based conglomerate makes many popular cigarette brands that are recognizable internationally, albeit not in the US. They do own and market the very popular Winston and Camel brands as well, but only outside the United States. All of that and more makes Japan Tobacco the third biggest tobacco company in the world, behind China National Tobacco and Phillip Morris International, respectively.
At this point all the big American tobacco companies have already gotten in the e-cig game, so it was only a matter of time before we saw Japan Tobacco get in on the emerging market. With so many e-cigarette brands in the US theoretically available, it is interesting that they chose a UK brand to purchase.
If you can’t beat them, join them
It fits in with their strategy in that the internationa arena is more their turf, so to speak. Lorrilard crossed over by picking up SKYCIG through their Blu Cigs brand, so it stands to reason that Japan Tobacco will also be keeping an eye on the lucrative US e-cigarette market, too.
For now, they stayed closer to home by starting with E-Lites, but it wouldn’t surprise anyone to see them expand their portfolio and adding an additional e-cigarette brand or two in the future.
It isn’t surprising to see big tobacco companies take a “if you can’t beat them, join them” approach, but the pace of enacting this strategy has been trending up very quickly as well. Where in the beginnings of the e-cigarette industry we saw tobacco companies ignore them as a fad, that attitude changes rapidly and soon enough there was a concerted effort on the part of the tobacco industry to snuff out the new threat they faced.
It was only after years of legal battles and lobbying did the nascent e-cig industry survive, on the backs of homegrown, private companies that stood up to multi-billion dollar corporations. Only a couple of years after accepting their defeat, tobacco companies are carving out large parts of the e-cig industry for their own.
What all of this means is that e-cigarette is here to stay, albeit somewhat taken over by big tobacco. There remain many private e-cigarette brands out there, but one has to wonder who will be bought next and what will be left.
For the consumer this should mean some clearer standards, especially with the upcoming FDA regulations. It may also mean that many e-cigarette users will be once again buying from big tobacco, which is a sobering thought for many. There will still be many options out there because of the large amount of e-cigarette brands today, but that number will dwindle as the industry experiences more consolidation.
The race to capture market share in the growing e-cigarette industry is on, with Japan Tobacco taking its first shot across the bow and signaling it won’t remain quiet on this front. There will be more; the only question is when and from where. We’ll keep tracking these developments in the industry here at ECCR, so stay tuned.