E-cigarette industry flourishing in Poland

Image : shutterstock

They are hip, cool and trendy! Electronic cigarettes are gaining in popularity, but health experts worry about the dangers they may pose. Nevertheless, the market for e-cigarettes is growing and they are becoming the talk of the town in Warsaw

by Sergiusz Prokurat

ccording to data from the eSmoking Institute, a Polish advocacy group for e-cigarettes, traditional cigarette sales are in decline – dropping from 75 to 55 billion units in the last decade. Meanwhile, the consumption of e-cigarettes is rising. In Poland, one out of ten smokers already have them, which in total amounts to about 1.2 million users. Most smoke them because they are cheaper than traditional cigarettes – price is a key factor in switching to the electric replacement for over half of smokers. Other commonly mentioned pros include the absence of the smell which accompanies traditional cigarettes, and health reasons. The cost of buying a quality e-cigarette is about PLN 150. The utensil’s liquid, the flavored substance used to fill it, is a further cost of PLN 10-20. Assuming moderate use, this can last a week or even more. An e-cigarette is also cheap to maintain, as the spare parts cost no more than PLN 10. Thus, the economic calculations clearly favor the electronic version of this vice.

A vein of gold
Around 5 percent of e-cigarettes bought by Poles comes from local factories, the rest is imported; 90 percent comes from China. The golden years for e-cigarette distributors began in 2010, when the ban on smoking in public spaces was introduced. The following years saw dynamic growth of the distribution network: CHIC, Trendy and SH Prince kiosks and stands appeared all over the country. The market leader, CHIC, has already reached the threshold of a thousand stores and a successful online shop. According to data provided by the Association for e-smoking (STEP), the industry in Poland currently employs approximately 10,000 people, generating revenue of around PLN 1.5 billion annually. Meanwhile, exports amount to PLN 37 million, with an estimated value of the Polish e-cigarette market placed at the PLN 500 million mark.

€10 billion
is the projected value of the e-cigarette segment in 2017. Currently it’s valued at €2 billion

The urgency to enter this market has also caught on to the major tobacco corporations. Phillip Morris has already announced its own device for 2014, while British American Tobacco is currently analyzing the market and its entry strategy. For the tobacco giants, investing in e-cigarettes isn’t just about reclaiming countless clients. These products can also provide them with a loophole against the ban on advertising tobacco products and improve their sales figures. More pertinently, current Polish law doesn’t regulate the ways in which this e-vice can be sold and used – thus an e-cigarette can be bought and smoked by a minor, and the decision on whether to sell the device and its spare parts is solely up to the vendor.

Poland, e-smoking leader
The Polish domestic market has great potential for further growth. According to a report by Market Research, a company which specializes in industry outlook investigation, Poland’s potential is boosted by lax or non-existing regulation, little negative publicity about e-cigarettes, and multiple retailers vying for market share. Furthermore, two recent academic publications looked at consumer behavior on the Polish e-cigarette market and found that a fifth of all Polish youth, have at some point tried smoking such a device, pointing to a sustained rise in demand for e-cigarettes as these teenagers move into the group of adult consumers.

Poland’s rise as a prime e-cigarette market has been coupled with the emergence of Polish companies which have successfully branded their products to consumers both at home and abroad. No other firm is a better example of this trend than CHIC, and its retail arm eSmoking World, which already has half a million returning domestic customers in this relatively new market. The company has also expanded aggressively throughout Europe, seeing rocketing sales in the large markets of the Netherlands, Ukraine and Russia. The company also has further plans of launching a chain of specialized retail stores in the Netherlands by the second half of 2014. Finally, eSmoking World is also a trailblazer in terms of distribution channels, as it effectively combines traditional retail and online sales with a threefold increase in purchases through mobile devices. All in all, the company, whose brands such as Volish, Mild or Provog are market leaders in their respective categories, is poised to become one of the major players in the European market, with a growth potential which is still very much untapped.

Health-preserving law

Image : shutterstock

Image : shutterstock

A strong argument for e-cigarettes is the health aspect. Many smokers swear that their transition to the e-replacement is beneficial to their health and reduces the risk of suffering from disease induced by tobacco smoke. However, the truth is that this product is relatively new; therefore it is impossible to say how this habit will influence their health status in 20-30 years’ time. According to experts from the eSmoking Institute, smoking e-cigarettes is healthier than inhaling the toxic smoke of traditional cigarettes. While they do contain harmful substances, they have much less and at much lower concentrations than their traditional counterparts. And while nicotine remains toxic and addictive, in the case of an e-cigarette a smoker breathes in 30-40 percent less of this substance.
Yet the effects of the rest of the ingredients in the e-cigarette liquids remain unknown. Some scientists fear that this can harm e-smokers’ health in the future and, paradoxically, induce diseases as serious as those caused by traditional cigarettes. With no legal regulations in place, the sale of substances of an unknown provenance and quality is clearly possible. At present anyone can produce the liquids, in unfit conditions and from low quality ingredients. Here, again, the issue of control has been completely left up to the distributors.

Buying a cigarette…  at the chemist’s?
Even though Polish laws don’t regulate this sector, the European Union has decided to look into the matter. Taking advantage of a recent vote on the tobacco directive, European politicians have studied the issue of e-cigarettes. The European Commission wanted a top-down classification of these goods as medical products, which would shift the distribution of e-cigarettes to pharmacies. Recently, the European Parliament decided to reject this measure by arguing that this would considerably limit product availability, and this in turn is a product which improves the health of countless smokers.

The question of electronic cigarettes remains ill-defined in many aspects. The issues of product quality remain unclear; the legal age of buying them and their accessories is yet to be set. Additionally, the limitations to be imposed on their use have been put on the shoulders of third parties. The public transport authority in Warsaw has implemented a ban on smoking e-cigarettes in their vehicles. Restaurant owners and employers are also busy creating their own bans and limits for e-smokers.

E-ciggies – boom or bust?
Expert estimates place the current global value of the e-cigarette market at around €2 billion, with a projected rise to €10 billion by 2017. Countries such as Poland also demonstrate that a relatively positive image of the electronic devices as compared to their traditional counterparts can lead to further conversions. If e-cigarettes and their traditional counterparts can be considered as rivals, the former currently have as little as 10 percent of Polish smokers convinced, but they also have great prospects of wooing the remaining 90 percent. Furthermore, on a brand new global market in these products, Polish companies have a unique opportunity to establish themselves as international leaders, without having to battle entrenched incumbents.
Yet this rosy outlook comes with several serious risks for the whole industry. One of the main factors propelling its impressive growth has been the move to ban smoking in public spaces, which currently does not include e-cigarettes. This could change. Also relevant is the health factor, considered an advantage of the electronic devices over traditional cigarettes. But in time and with further medical studies, this unregulated product may even be found to cause more health hazards than its rival goods, completely reversing the trend.
Finally, legal regulations, while slow to address new and fast-growing markets, will finally impose more or less restrictive rules on the products, their distribution and public consumption. The newly-adopted EU tobacco directive is a prime example of how such legislation can limit the appeal of e-cigarettes. Considering all the above, while they may become a very popular consumer product, the market for these devices is still at a vulnerable stage and can just as easily ultimately become a niche offering.


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