Published on August 26th, 2013 | by Trick0
E-Cigs: Big Tobacco’s Antidote to Black Market Losses?
Kyle Stock of Bloomberg Businessweek believes he’s figured out why Big Tobacco loves electronic cigarettes: the lack of regulation and the associated taxes, he says, means less incentive for a black market.
“…as long as the government doesn’t burn them with a bunch of new taxes, they will probably be happy to keep e-cigarettes off billboards or Web stores or whatever requirements regulators throw their way.”
According to Stock, in states like New York, more than half of all cigarettes are “smuggled,” meaning they are brought in from other states or countries, or are counterfeits. Stock seems to believe that if taxes are kept low, there will be less reason to buy and sell electronic cigarettes on the black market, and more profits for Big Tobacco.
Frankly, we find Stock’s view that this is the “real reason” Big Tobacco is getting into electronic cigarettes to be overly simplistic. At a time when the tobacco market have been shrinking for years, it’s clear that the tobacco companies need to enter new markets to remain relevant and stay profitable. While electronic cigarettes represent only a small chunk of their business today, all estimates are that the market is growing exponentially, and even Stock’s own company believes that eventually e-cigarette sales will outpace those of traditional smokes. Forget the black market: electronic cigarettes, taxed or not, could turn out to be a real gold mine, and a savior, for tobacco companies.