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E-Cigarette Makers’ Ads Echo Tobacco’s Heyday

August 29, 2013

E-Cigarette Makers’ Ads Echo Tobacco’s Heyday

By STUART ELLIOTT

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Electronic cigarettes may be a creation of the early 21st century, but critics of the devices say manufacturers are increasingly borrowing marketing tactics that are more reminiscent of the heady days of tobacco in the mid-1900s. With American smokers buying e-cigarettes at a record pace — annual sales are expected to reach $1.7 billion by year’s end — e-cigarette makers are opening their wallets wide, spending growing sums on television commercials with celebrities, catchy slogans and sports sponsorships. Those tactics can no longer be used to sell tobacco cigarettes, but are readily available to the industry because it is not covered by the laws or regulations that affect the tobacco cigarette industry. The e-cigarette industry is also spending lavishly on marketing methods that are also still available to their tobacco brethren, including promotions, events, sample giveaways and print ads.The Blu eCigs brand — which recently added the actress Jenny McCarthy to its roster of star endorsers, joining the actor Stephen Dorff — spent $12.4 million on ads in major media for the first quarter of this year compared with $992,000 in the same period a year ago, according to the Kantar Media unit of WPP. And ad spending in a category that Kantar Media calls smoking materials and accessories, which includes products like pipes and lighters in addition to e-cigarettes, has skyrocketed: from $2.7 million in 2010 to $7.2 million in 2011 to $20.8 million last year.

In the first quarter of 2013, Kantar Media reported, category ad spending soared again, reaching $15.7 million, compared with $2 million in the same period a year ago. In fact, that $15.7 million total exceeded the spending for ads in major media for tobacco cigarettes, at $13.9 million, according to Kantar Media.

“It is beyond troubling that e-cigarettes are using the exact same marketing tactics we saw the tobacco industry use in the ’50s, ’60s and ’70s, which made it so effective for tobacco products to reach youth,” said Matthew L. Myers, president of an organization in Washington, the Campaign for Tobacco-Free Kids, that has fought for decades against aiming cigarette ads at minors.

“The real threat,” he added, “is whether, with this marketing, e-cigarette makers will undo 40 years of efforts to deglamorize smoking.”

Makers of e-cigarettes counter that their marketing efforts are legal and intended to reach adults — particularly, they say, adults who smoke tobacco cigarettes.

“Our company is being built on branding,” said Elliot B. Maisel, chairman and chief executive at the Fin Branding Group in Atlanta, which last month began running television commercials for its Fin e-cigarette to accompany other initiatives like print and online ads. The company plans to spend more than $8 million this year to take advantage of “the opportunity to build a great American iconic brand,” he added.

Joana Martins, vice president for marketing at Fin Branding, described the Fin ads as aimed at “adult smokers, 25 to 44, who are tired of being ostracized” and would be receptive to a pitch that “it’s O.K. to smoke again.” That is reflected in the campaign theme, “Rewrite the rules.”

There is another reason that e-cigarette makers are appropriating the marketing playbook of tobacco cigarettes beyond the proven effectiveness of tactics like advertising on television and sponsoring racecars: giant tobacco companies like Lorillard and Reynolds American, which sell traditional smokes like Newport and Camel, are entering the e-cigarette category alongside smaller, entrepreneurial outfits like Fin Branding. Big Tobacco’s arrival is coming through acquisitions (e.g., Lorillard bought Blu eCigs last year) and start-ups (e.g., Reynolds American is introducing an e-cigarette named Vuse).

A selling point in a campaign for Vuse that began this week in Colorado is that it is “designed by tobacco experts” to deliver “a perfect puff every time,” said Stephanie Cordisco, president of the R. J. Reynolds Vapor Company division of Reynolds American in Winston-Salem, N.C.

(In “A perfect puff every time,” you might hear an alliterative echo of classic tobacco cigarette slogans like “Not a cough in a carload,” “A treat instead of a treatment” or “Light up a Lucky”).

“I spent a lot of my career working with Camel,” Ms. Cordisco said, “under the marketing restrictions” that affect how tobacco cigarettes are sold.

“Obviously, I’m very excited,” she added, to be able to use media like television and radio to promote Vuse. “It’s a major consumer win, because consumers have access to information.”

Matt Coapman, vice president for marketing at Blu eCigs in Charlotte, N.C., said: “Our target audience is adult smokers. Where we can reach those adult smokers, we’re going to try our best to get in front of them.”

“As the category increases in sales, so will the marketing dollars follow,” he added.

Lorillard intends to spend $30 million on marketing this year for Blu eCigs, Mr. Coapman said, including a renewal of the endorsement agreement with Mr. Dorff for “another year, at least.” Celebrities who endorsed tobacco cigarettes back in the day included, in addition to film and television stars, athletes, singers, doctors and even cartoon characters like the Flintstones.

A point made by the e-cigarette industry and its supporters is that electronic smokes offer an alternative to tobacco cigarettes that may be less harmful.

“Whether e-cigarette products, responsibly marketed and properly regulated, could help people quit smoking and reduce tobacco use is a fair question,” Mr. Myers said.

“But what we see in the marketplace is something entirely different,” he added. “The people who are making them are behaving more like the tobacco industry than like people who care about public health.”

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About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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