August 19th, 2015:
British study: e-cigs 95% less harmful than cigarettes
Brits worry too many smokers don’t recognize e-cigs’ benefits
https://www.consumeraffairs.com/news/british-study-e-cigs-95-less-harmful-than-cigarettes-081915.html
Great Britain and the United States haven’t always seen eye-to-eye. The latest example: e-cigarettes. Politicians and public health authorities in the U.S. continue to view e-cigs with caution while England has taken a more positive view — most notably a new report from Public Health England (PHE) that finds e-cigs about 95% less harmful than smoking.
“My reading of the evidence is that smokers who switch to vaping remove almost all the risks smoking poses to their health,” said Professor Peter Hajek of Queen Mary University. Hajek co-authored the report with Professor Ann McNeill of King’s College London.
The expert independent evidence review also finds “no evidence so far that e-cigarettes are acting as a route into smoking for children or non-smokers.” That contradicts a study by the University of California last year that found that adolescents who used the devices were more likely to smoke cigarettes and less likely to quit smoking.
Falling smoking rates
The review, commissioned by Public Health England (PHE) — an arm of the British Department of Health — goes further and suggests that e-cigarettes may be contributing to falling smoking rates among adults and young people.
The review found that almost all of the 2.6 million adults using e-cigarettes in Great Britain are current or ex-smokers, most of whom are using the devices to help them quit smoking or to prevent them going back to cigarettes.
It also provides reassurance that very few adults and young people who have never smoked are becoming regular e-cigarette users (less than 1% in each group).
Emerging evidence suggests some of the highest successful quit rates are now seen among smokers who use an e-cigarette and also receive additional support from their local stop smoking services.
Time to reconsider?
The report drew the expected response from the American Vaping Association, which represents manufacturers of the electronic nicotine delivery devices. It called for U.S. organizations and government agencies like the American Cancer Society, American Lung Association, Campaign for Tobacco-Free Kids, and Centers for Disease Control & Prevention (CDC) to reassess their views on vaping.
“This report represents a major win for public health. Smokers need to know that vapor products are far less hazardous than smoking and effective for quitting,” said Gregory Conley, AVA president. “With over 42 million Americans still smoking cigarettes, there is no excuse for major public health organizations to continue to propagandize against these lifesaving products.”
Attitude gap
Nothing better illustrates the attitude gap between the U.S. and Britain than the concern expressed by U.K. health officials that too many people think e-cigs are just as harmful as traditional cigarettes.
“The problem is people increasingly think they are at least as harmful and this may be keeping millions of smokers from quitting. Local stop smoking services should look to support e-cigarette users in their journey to quitting completely,” said Professor Kevin Fenton, Director of Health and Wellbeing at Public Health England. “E-cigarettes are not completely risk free but when compared to smoking, evidence shows they carry just a fraction of the harm.”
Ann McNeill, co-author of the review, agreed:
There is no evidence that e-cigarettes are undermining England’s falling smoking rates. Instead the evidence consistently finds that e-cigarettes are another tool for stopping smoking and in my view smokers should try vaping and vapers should stop smoking entirely.
E-cigarettes could be a game changer in public health in particular by reducing the enormous health inequalities caused by smoking.
Altria In The U.S. Tobacco Industry — A Porter’s Five Forces Analysis
The U.S. tobacco industry is rather interesting. At a time when the industry on the whole is grappling with declining volumes, two big tobacco players, Reynolds (No.2) and Lorillard (No.3) have joined forces to increase the level of consolidation in the industry, which could significantly alter the competitive landscape going forward. In this article, we use Porter’s model of industry rivalry to assess the U.S. tobacco industry on the basis of the threat of potential new entrants, the bargaining power of suppliers, the bargaining power of buyers, and the threat of substitutes. We use this analysis to assess prospects for the leader, Altria, in this industry.
— Threat of New Entrants: The threat of new entrants is an important factor for judging the level of competition in an industry, since a proliferation of new entrants could result in share losses for incumbent firms. In this case, pricing power could be severely hampered as firms may have to slash prices in order to maintain their market shares.
Now, do we foresee any new players in the U.S. tobacco industry in the short to medium run? Probably not. Although barriers to entry in the tobacco industry are low, in the sense that it is easy for smaller players to enter the market, it may not be very viable for them to compete against conglomerates such as Altria at a national level. This is because these companies enjoy economies of scale in manufacturing, packaging, branding, distribution, and marketing, the costs associated with which, could be extremely high for a smaller company to undertake. Furthermore, a ban on tobacco advertisements could make it difficult for smaller names to drive brand recognition among the masses, making it hard for them to broaden their customer base. Having said this however, Altria could face stiff competition in the future from other big tobacco names that have established themselves in markets outside of the U.S. For one, with the Reynolds-Lorillard merger, the industry will see the British tobacco company, Imperial, competing at the No.3 spot with some of its own brands, and some divested brands from Reynolds. In this case, Altria continues to face a threat from new entrants, who have already built the necessary capital needed to compete at a national level from operations in other markets.
— Bargaining Power of Suppliers: Supplier bargaining power is an important parameter to assess competition since it could translate into higher costs for tobacco producers to reduce overall industry profitability. The degree of supplier bargaining power depends on factors such as the number of suppliers in the market, the value of the firm demanding the product to the supplier, the scarcity of the resource, and the substitutability of the resource.
Companies such as Altria rely on farmers for tobacco supply. Since the 1930s, the U.S. government regulated the tobacco market under a quota system, where a farmer could grow only a fixed amount of the crop. This restriction in supply, along with government initiatives such as the provision of low interest loans, guaranteed minimum price and grower cooperatives (bought unsold tobacco), and made the crop a rather profitable one for farmers to grow. However, in 2004, this system ended with the introduction of a $9.6 billion buyout program, which paid farmers a fixed sum annually to help them transition to free markets. This, coupled with dwindling tobacco volumes, have led to plummeting profits, against which, farmers have lost their bargaining power. The loss in the degree of bargaining power for suppliers in the U.S. is evident from the statement below made by Marvin Eaton, a farmer who currently supplies tobacco to Altria and Reynolds — “The companies, they’re in control, and if they don’t want Marvin Eaton raising tobacco and I can’t make a living on what they say they’re going to pay me for, then I, Marvin Eaton needs to get him something else he enjoys doing.”
— Bargaining Power of Buyers: In some cases, powerful buyers could exert a downward pressure on prices to reduce industry profitability. Bargaining power here depends on factors such as the number of buyers in the market, availability of substitutes, and the number of firms producing the product.
In the tobacco industry, at large, bargaining power of buyers may be lower. Part of this is solely based on the addictive nature of the product involved. In general, tobacco companies tend to have a greater command on pricing since there will always be a proportion of the population that will buy cigarettes irrespective of its price. Furthermore, cigarette demand in general is price inelastic, i.e. demand is less responsive to changes in price. Now, with the Reynolds-Lorillard merger, and further consolidation in the industry, buyers could lose out further on bargaining power since they would have fewer substitutes to turn to in the situation that any one firm resorts to price hikes.
— Threat of Substitutes: A substitute product can be anything that is produced in a different industry but manages to meet the same needs. In the case of tobacco, this would entail over-the-counter products such as nicotine patches, gum, nasal sprays, lozenges, and other products. With growing awareness about the ill-effects of smoking and regulatory crackdown on the industry making the product expensive, many Americans have been opting for tobacco substitutes. Furthermore, there are hardly any costs associated with switching to an alternate in this case. For instance, if a smoker smoking a pack of cigarettes costing $5.50 chooses to quit, he can save up to $1,980 in a year. Even the cost of nicotine replacements is far lower than that of cigarettes, in that the smoker could save anything between $11-$47 a week depending on his choice of therapy. (See: Choice of Over-the-Counter Nicotine Replacement Therapy – Factsheet) Such savings could be a huge incentive for smokers to kick the habit going forward. However, new on the block are e-cigarettes, which have been seeing unprecedented growth over the past few years. Big tobacco companies such as Altria have been capitalizing on the opportunity in this realm, which could go on to benefit them. However, while e-cigarettes could be an effective tool for “damage control,” it is highly unlikely that they will actually go on to offset the losses coming in from a declining market.
— Competitive Rivalry: The U.S. tobacco industry was already highly consolidated and this level of consolidation is expected to further intensify this year on, with the Reynolds-Lorillard merger. The post-merger Reynolds is expected to have a stronger presence with 34% of the market, as opposed to 28%, to form a stronger competitive force against Altria. Apart from this, the entity is expected to have a clear win in the Menthol market, with America’s top brand, Newport (37% market share), in its portfolio. Clearly, these two powerhouses joining forces is bound to bring in synergies in production, distribution, and promotions. In order to compete effectively, Altria may have to incur costs going forward to drive its brand presence among the masses. This is particularly true for Menthol, where Altria’s Marlboro Menthol could lose share to the likes of Newport and Camel, which have, in general, been seeing rising shares and could only benefit further from the merger.
In conclusion, while Altria could have little to worry about when it comes to factors such as new players entering the market, they could be threatened as an increasing number of smokers opt for substitutes in an attempt to quit smoking. This development, along with an intensifying competitive landscape, could threaten prospects for the company. However, further consolidation in the industry could bring with it certain advantages, particularly in the form of higher pricing power, which could ensure steady profits for Altria going forward.
Will UK e-cigarette ruling boost sales?
http://www.reuters.com/video/2015/08/19/will-uk-e-cigarette-ruling-boost-sales?videoId=365337233
Health officials in Britain have for the first time endorsed e-cigarettes, saying they are 95 percent safer than tobacco equivalents and even suggesting doctors should be able to prescribe them. As Ciara Lee reports it could fuel the race to invest in the electronic devices.
Transcript
On offer soon from your doctor? Maybe. A UK government agency is calling for e-cigarettes to be made available on prescription. Public Health England says the devices are about 95 percent less harmful than regular smoking. And it says they could be a gamer-changer in helping people to give up tobacco. (SOUNDBITE) (English) PROFESSOR KEVIN FENTON, PUBLIC HEALTH ENGLAND, SAYING: “As time progresses we’re going to accumulate more evidence and more data both on the use of e-cigarettes and their impacts. So we’ll be able to update our estimates in terms of the long term use. But for the short and medium term as an aid to help people to quit, we certainly want to see more people embarking on that journey.” Not everyone is convinced. Last year the World Health Organisation came out against e-cigarettes saying that governments should be regulating their use more strictly. The global tobacco industry sells about 5.7 trillion regular cigarettes a year. But the number is shrinking due to increased health awareness, weak consumer spending and higher taxes. Companies like Philip Morris and Imperial Tobacco both reported falling revenue on Wednesday from traditional cigarettes. They’re offsetting that with specialist brands and e-cigarettes are increasingly playing a part. Some firms in the industry have already bought makers of the metal devices Studies like this could fuel further investment – in a product already used by 2.6 million people in the UK.