3 Things You Must Know About E-Cigarettes

Between the 1930s and 1950s, doctors proclaimed that cigarettes were safe and even had possible health benefits. Fortunately, times have changed, and the public is now well aware of the dangers of tobacco, the leading cause of death in the United States.

However, this year's Surgeon General's Report on Smoking and Health, which started in 1964, revealed even more troubling statistics. While lung cancer and respiratory disorders are commonly associated with smoking, other major health problems, such as liver cancer, colorectal cancer, diabetes, and rheumatoid arthritis are now linked to tobacco use. Secondhand smoke has also been implicated in causing strokes.

The Surgeon General's Report has made a positive impact on smoking trends -- between 1965 and 2012, the percentage of American smokers dropped from 42% to 18%. However, 42 million American still smoke, and the three largest American tobacco companies -- Altria (NYSE: MO  ) , Reynolds American (NYSE: RAI  ) , and Lorillard (NYSE: LO  ) -- generated combined revenues of $39.5 billion in fiscal 2012, a 2% increase from the previous year.

For decades, the tobacco industry and the U.S. government have been at odds with each other -- in 1984, tobacco companies were required to add health warning labels, and in 1998, they were forced to pay for anti-smoking ads. Excise taxes have also steadily risen -- a pack of cigarettes in the U.S. can now cost as much as $14.50 in New York State (a 16% jump from the previous year).

In response to a shrinking U.S. market and rising government pressure, Altria, Reynolds American, and Lorillard have recently shifted gears by promoting e-cigarettes (electronic cigarettes), which are touted as a new way to satisfy smokers while reducing health risks.

Blu eCigs. (Source: Company website.)

However, is the public being misled by this new promise of safer cigarettes? Let's take a look at 3 main things that consumers need to know about the e-cigarette market.

1. How do e-cigarettes work?
A traditional cigarette is made of dried tobacco leaves. Tobacco smoke eventually becomes tar, the particulate matter that gathers in the lungs and causes respiratory problems and cancer. Nicotine, the stimulant found in tobacco leaves, is what makes cigarettes so addictive.

Nicotine gum and patches, the two most common methods to stop smoking, deliver nicotine into the blood without the cancerous effects of tobacco smoke.

E-cigarettes were designed with a similar idea in mind. The user puts a nicotine cartridge into the device, which is subsequently vaporized by a heated electric charge. The nicotine is inhaled in a liquid vapor form, eliminating the problems of secondhand smoke.

An illustration showing how e-cigarettes work. Source: Winningjaguar.com

Supporters believe that the e-cigarette can help smokers eventually quit smoking, since the physical stimuli are more similar to those of actual smoking than nicotine gum and patches. Many models even include LED tips which light up as the user inhales.

2. Are e-cigarettes safe?
Although e-cigarettes do not contain tobacco, regulatory bodies aren't convinced that they are any safer. In July 2013, the WHO issued a statement advising against the use of e-cigarettes until further studies could be conducted.

A major problem is the fragmented state of the e-cigarettes market and the widely varying nicotine content in products, which can range from 6 mg to more than 100 mg. A normal cigarette contains approximately 12 to 17 mg of nicotine. Just 0.5 mg to 1.0 mg of nicotine per kilogram of a person's body weight can be lethal.

By itself, nicotine does not cause cancer. However, it is highly addictive and can cause high blood pressure and an elevated heart rate, which can lead to other cardiovascular problems.

When we take a look at the new e-cigarettes from Altria, Reynolds, and Lorillard, we can see that these products generally contain between 6 mg to 24 mg of nicotine per cartridge.

Company

E-cigarette brand(s)

Nicotine content

Market share

Altria

MarkTen

15 mg

Less than 1%

Reynolds American

VUSE

12-17 mg

2%

Lorillard

Blu Ecigs, SKYCIG

6-24 mg

49%

Sources: Industry websites.

Therefore, e-cigarettes might be less hazardous to your health than traditional cigarettes, but they are hardly a perfectly safe alternative.

3. Why is Big Tobacco getting involved?
There are a few main reasons that Big Tobacco is suddenly so interested in selling e-cigarettes in the United States:

  • Health findings on e-cigarettes are still inconclusive, so they haven't been regulated yet. This means that e-cigarettes aren't subject to excise taxes (in most states), graphic warning labels, or other rules.

  • The U.S. market for traditional cigarettes continues to shrink. To preserve their bottom lines and hefty dividends, cigarette companies have had to dramatically cut costs, slim down operations, and reduce their workforces.

  • Big Tobacco needs to diversify its product offerings beyond smoking and chewing tobacco. Altria, for example, also owns cigar maker John Middleton Cigars and large stakes in brewer SABMiller and winemaker Ste. Michelle Estates.

Most importantly, if e-cigarettes can gain traction in the United States, one of the toughest tobacco markets in the world, they will likely flourish in overseas markets. Philip Morris International (NYSE: PM  ) , which was spun off of Altria in 2008 to handle its overseas operations, could use e-cigarettes to offset declining rates of smoking in the European Union (28%) and developed nations in Asia (28%).

In other words, Philip Morris, Altria, and Reynolds aren't introducing e-cigarettes due to the realization that tobacco is deadly and addictive. They are doing so because revenue growth at Lorillard -- the market leader in e-cigarettes -- has been quite impressive:

 

Revenue growth YOY

Earnings growth YOY

Philip Morris International

0.1%

5.1%

Altria

6.6%

112.5%

Reynolds American

0.9%

8.8%

Lorillard

12.6%

(8.8%)

Source: Yahoo Finance, Jan. 20.

The Foolish takeaway
In closing, e-cigarettes could represent a positive step toward curbing smoking rates in America, leading to lower rates of lung cancer, respiratory problems, and other serious health issues.

However, they should not be considered a better treatment than nicotine gum or patches just yet. Moreover, consumers should only consider e-cigarettes a new smoking cessation device, and not an excuse to start smoking.

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Read/Post Comments (13) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 24, 2014, at 5:33 AM, Janette wrote:

    Hi Everyone Janette here,

    Im a 2 pack a day smoker (65) my son brought me home a vapourlites ecig and from that moment 2 months ago my life has chanegd significantly, I have more money and i am able to walk up and down the stairs without wheezing, I would recommend them to everyone !

    Thanks for reading

    God Bless

    Janette x

  • Report this Comment On January 24, 2014, at 1:06 PM, TonyMorgan7 wrote:

    Yes, <a href="www.facebook.com/EJuiceBox E cigarette</a> consist of Nicotine but it is not much harmful as compared to tobacco or other chemical composition in cigarette which leads to lung cancer or other deadly respiratory disorders. On the other hand it also eliminates the effect of second hand smoking. So we can say that its benefits overcome some of its drawbacks which are not a matter of big concern.

  • Report this Comment On January 24, 2014, at 3:38 PM, TacAirlifter wrote:

    So, health concerns aside, are these looking like growth industries if the e-cig market can get off the ground?

  • Report this Comment On January 24, 2014, at 3:39 PM, TacAirlifter wrote:

    And Leo, fine writing on the subject.. very detailed and researched. Why I consider myself a Fool indeed!

  • Report this Comment On January 24, 2014, at 6:12 PM, neelvk wrote:

    @Janette - How about giving up cigarettes (e or otherwise) and you would save even MORE money...

  • Report this Comment On January 25, 2014, at 12:52 PM, TMFTypeoh wrote:

    "the leading cause of death in the United States."

    I think you mean the leading cause of preventable death, or self inflicted death...right?

    I think heart disease and cancer are #1 and #2.

    Brian

  • Report this Comment On January 25, 2014, at 2:21 PM, TMFSunLion wrote:

    Hi Brian,

    Thanks, I should have specifically stated "leading cause of preventable death":

    http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/uc...

    Cheers,

    Leo

  • Report this Comment On January 27, 2014, at 7:17 AM, ashleyjames389 wrote:

    Electronic Cigarettes haves alot of potential for investors

    http://bit.ly/ECiggerates

  • Report this Comment On January 27, 2014, at 11:32 AM, ScarletRainbow wrote:

    One of the many reasons I started using e-cigarettes is because, everytime I've tried to quit smoking, using whatever means available, I always gained too much weight. With e-cigarettes, I've been able to cut way down in using cigarettes while still being able to smoke. I have found that, regardless, cigarettes are a PHYSICAL habit, as well as a chemical dependency. This will not change. To really feel good about quitting, we have to find an activity that prevents us from wanting a cigarette at all. When I'm working on my computer, I consciously have no need to have a smoke. E-cigarettes will continue to re-enforce the HABIT, but that's okay with me.

  • Report this Comment On January 27, 2014, at 8:38 PM, jeepshepard wrote:

    Good article.

  • Report this Comment On January 27, 2014, at 11:59 PM, ATy2 wrote:

    Hi all. Just want to alert those interested in learning more about e-cigarettes that there is a great web site maintained by CASAA (Consumer Advocates for Smoke Free Alternatives). If you poke around the site you'll see that--contrary to the frequently stated claim that "there is no research" (re: the composition of nicotine liquids, composition of the vapor emitted, etc)-- in fact, there is a growing body of scientific research, much of which has been conducted over the last several years. Discussions among ecig users have also served as the impetus for some very interesting explorations of the addictive properties in the tobacco plant (beyond just the nicotine) that may help to explain why some smokers find it so difficult to quit and why the usual pharmaceutical products (nicotine gum, patches, etc) have such a miserable overall success rate.

    I agree that big tobacco got into the ecig business because of declining revenue and also because they saw the potential for gaining a market share of a growing and thriving industry. The truth is that they're relative late-comers to this game.

    The vast majority of people I know who use a PV (Personal Vaporizer--a more generic term than ecig because most of the devices available don't even try to mimic the look/feel of a cigarette) don't use Blue or any of the products marketed by the tobacco companies. They buy their supplies from small businesses and get their information via word of mouth, online reviews, forums, etc. There is a tremendous amount of misinformation out there--much of it perpetrated by seemingly reputable sources. If you're interested in cutting through the noise, start by exploring CASAA 's website:

    http://casaa.org/Electronic_Cigarettes.html

  • Report this Comment On January 31, 2014, at 3:19 PM, trishgal wrote:

    i started on e-cigs over 4 years ago. Within 2 days, my cough was gone. The awful bronchitis I was getting at least twice a year.....never came back! Nothing else worked for me, and I'd tried almost everything over the over 40 years I smoked. These are a godsend and I can forsee healthy additives in new choices of "juice" and more in the future.

  • Report this Comment On February 03, 2014, at 2:09 PM, cattywampus wrote:

    How does an e-cig cartridge compare to a pack of cigarettes as far as price and nicotine content, which is cheaper?

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