Is This the Next Looming Threat to E-Cigs?

The people behind Zeo are at it again. This time, instead of using a headband to track sleep, they're using a lighter to track cigarettes.

Two of Zeo's former employees are among the founders of Quitbit, a crowdfunding supported company developing a smart lighter in a bid to tap into the smoking cessation market, a growing and important market already served by nicotine patches made by Pfizer (NYSE: PFE  ) , and e-cigarettes made by Lorillard (NYSE: LO  ) , Reynolds (NYSE: RAI  ) , and Altria (NYSE: MO  ) .

Those major cigarette manufacturers are benefiting from rising popularity for e-cigarettes even as traditional cigarette sales falter. Initially marketed as a way to stop smoking, e-cigarettes are also being used as a cigarette alternative, with users advocating that e-cigarette vapor is less toxic than chemical-laden packs of Pall Mall and Marlboro.

Source: Quitbit

Can lighters displace batteries?
It's unclear how much of the smoking cessation market Quitbit's lighter could capture, and whether Quitbit's lighter could erode battery-powered e-cigarette sales among users hoping to kick the habit. The lighter is a unique idea, but its appeal may be somewhat limited. The lighter will track the number of lights, and is programmed to ignore smokers who like to fiddle with their lighter, or who tend to light cigarettes for friends. To eliminate those from the lighter's running count, the lighter won't register lights lasting less than 1.5 seconds, or lights that happen within three minutes of a counted light.

Quitbit's goal is to establish the lighter as a friendly reminder, similar to a weight scale, that can be used to help users reduce how much they smoke. Will users be willing to pay for a lighter that essentially nags them about their habit? It's a fair question; but Quitbit's lighter could find a niche audience of users who would like to limit their smoking, without quitting cold turkey.

E-Cigarettes remain a powerful product
Lorillard was the first of the big three to embrace e-cigarettes, purchasing the e-cigarette brand Blu in 2009. Blu has since become the industry leader, with market share near 50%, and annualized sales north of $200 million.

Source: Lorillard Blu

Reynolds and Altria, the nation's largest makers of cigarettes, have approached e-cigarettes more cautiously, but are more recently bolstering their own e-cigarette offerings. Altria announced it would spend $110 million in February to add e-cigarette maker Green Smoke to its existing MarkTen brand, and Reynolds launched Vuse, its own e-cigarette brand, last summer.

That has smaller e-cigarette manufacturers and consumer watchdogs nervous. Smaller e-cigarette companies are already finding it tough to compete given that big tobacco's deep pockets provide firepower for marketing and innovation. As Reynolds and Altria gain a foothold, consolidation among the smaller players is likely.

Regulator worries aren't tied to market share, but, instead, to rising popularity, and studies showing that e-cigarette vapor may not be as safe as some early proponents have suggested. There's also a growing concern that the main users of e-cigarettes aren't users trying to quit, but young consumers new to nicotine. If that's true, some anti-smoking advocates think e-cigarettes may pose more harm than good, serving as a gateway to more powerful nicotine products, including traditional cigarettes.

E-cigarettes, as a category, are also facing another threat from vaporizers that deliver a more potent dose of nicotine than traditional e-cigarettes. As vaporizers gain more attention and slow e-cigarette growth, companies like Lorillard are investing more in boosting the potency of e-cigarettes to compete.

MODE Vape. Source: facebook.com/ModeVape

During Lorillard's first-quarter earnings conference call, the company reported that vaporizers were one reason behind its quarter-over-quarter e-cigarette sales growth slowing to about 10%. That's got Lorillard ramping R&D to make its e-cigarettes more powerful.

"Blu will be making a series of technical advances in the next 6 months that improve battery strength, vapor production, consumer value and satisfaction. We believe these types of changes will accelerate the acceptance and/or minimize the defection from traditional e-cigs, but we will be watching the vaporizer category carefully," said Lorillard CEO Murray Kessler.

Fool-worthy final thoughts
There are, of course, traditional (and well-tested) methods of quitting smoking, such as Pfizer's Chantix, a smoking cessation drug that posted sales of nearly $650 million last year. In studies, 23% of Chantix patients quit smoking at one year versus just 10% of patients receiving placebo.

E-cigarettes may offer some users an opportunity to quit, too, but more studies will need to be conducted to prove that their risk to new smokers is lower than their benefit to those looking to stop. While Quitbit has a unique device that may help users at least reduce their smoking, there's also the chance of users relegating the lighter to the back of the junk drawer, similar to stashing the weight scale in the back of the closet. After all, what we don't know can't hurt us -- or so the saying goes.

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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 June 15, 2014, at 10:24 PM, mintcream wrote:

    Absolutely not. The only thing these products really have in common is the fact there are electronics involved. The consumers for the lighters are different than those who would be interested in electronic cigarettes. While some people may report using e-cigs to stop smoking, many users keep using them as a less harmful alternative to a habit they enjoyed but had a lot of difficulty stopping.

    This timed lighter is for people who think they'll be able to quit smoking. Not the kind of people who will go, run, and buy a normal lighter when the "Quitbit" drives them crazy.

    Chantix isn't so fabulous either with a reputation of over 1,000 victims of suicide related to use of the medication.

    If Blu wants to get better, they better start thinking and fast outside the "cigarette shaped look-alike" battery bubble. Smokers find out fast, those batts don't last and subsequently Blu hits the trash.

  • Report this Comment On June 16, 2014, at 4:01 PM, hallucinoJEN wrote:

    Not every smoker wants to quit the habit of smoking. Part of the appeal of e-cigarettes is the fact that it mimics the action of smoking. How does this lighter counter mimic the act of smoking? It doesn't. It is just playing the part of the "quit or die" mentality of the public health community.

    Many smokers successfully switch to e-cigs, because they have tried all the traditional methods of quitting (patches, gums, lozenges, Chantix, etc), and failed while using them. If the public health community really want to save the lives of smokers, they need to embrace tobacco harm reduction which provides a safer (about 99.99% safer) way to get the nicotine people crave.

    Studies have shown that e-cig vapor is safer than smoking, both to the user and the bystander. Go to http://www.casaa.org/Clinical_Research.html for a list of the published research on e-cigs.

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