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    Are C-stores Ready for E-cigs?

    The tobacco industry is abuzz with the electronic cigarette phenomenon -- but will it make it to the mainstream and convenience channel?

    An electronic cigarette manufacturer couldn’t ask for a better celebrity endorsement. Grey’s Anatomy “doctor” star Katherine Heigl appeared on the David Letterman show in late September donning a sexy purple dress -- and blowing smoke out of her electronic cigarette device. 

    “Bet I’m freaking you all out right now,” she said to the audience as she explained that she was actually smoking liquid nicotine and blowing out water vapor. “I’m essentially humidifying the space,” she said. 

    It so intrigued Dave that he took some “hits” off of it, too -- coolly blowing out a variety of smoke rings. “You’re awfully good with that,” Heigl observed, as the audience laughed at the off-the-cuff entertainment.
     
    And it didn’t stop there. For more than three minutes, the two celebrities discussed the benefits of the e-cig. Heigl told Letterman that before the e-cig she had tried everything to quit smoking cigarettes -- to no avail. She said she started using an electronic cigarette four months prior and expected that “this ought to get it done.” She also said it “saved my day.” She relayed that it was her understanding that liquid nicotine was akin to a stimulant and in this form, about as bad for a person as a cup of coffee. When Letterman asked her if she was getting addicted to the electronic cigarette, she replied, “Oh yeah, I’m totally addicted to the device. But it’s not bad for you, so it’s a fun addiction.”
     
    While some public health advocates disagree with Heigl’s assessment of the health risk, the tobacco industry has been abuzz with the electronic cigarette phenomenon for many months now. Various industry sources report that between 500,000 and 800,000 smokers in the U.S. have switched to or supplemented their smoking with electronic cigarettes since they launched in this country in 2007 (the first e-cig was developed in China in 2003; electronic cigarettes were introduced in Europe in 2006). It has also been reported that 92 percent of e-cigarette customers (or “vapers” as they are known, because they “vape” or inhale vapor with or without nicotine) like the product so much they recommend it to other adult smokers. An informal poll this year conducted by the University of Michigan revealed that 37 percent of American adults have heard of e-cigarettes and that 3 percent have used one. 
     
    In the tobacco retail channel, Smoker Friendly -- with more than 700 authorized dealers -- has its own brand of e-cigarettes and replacement cartridges.
     
    In the industry overall, there are an estimated 300 firms that make or distribute electronic cigarettes, according to a recent article in the Wall Street Journal.
     
    The Heigl endorsement -- seemingly offered freely by her and with no specific company mentioned -- has the potential to contribute to the e-cigarette becoming more of a household name. The Letterman segment was immediately put forth on YouTube and received tens of thousands of hits in the first two days. 
     
    So where does that leave c-stores?
     
    At the Tobacco Best Practices Roundtable conducted by Convenience Store News in conjunction with the Tobacco Plus Expo (TPE) earlier this year, electronic cigarettes were identified as a “surprising” growth segment for chains such as 7-Eleven, which was reportedly conducting a 104-store test on a $29 starter kit and a $14.99 refill package, according to Terry Kailey, category manager. “It’s way too early to tell who exactly is buying these, but it looks like they are smokers looking for an alternative,” he said in March. 
     
    The category has since been handed off to another category manager at 7-Eleven, and while the company is still monitoring the category, it declined commenting further at press time.
     
    In August, ElectronicCigaretteSale.net reported that 7-Eleven convenience stores in California and other c-stores throughout the country have offered “limited, regional e-cig products for sale.” Specifically, it mentioned that some California 7-Elevens were carrying Xhale O2 starter kits on sale for $19.99 -- considerably cheaper than the $35 it said the starter kits cost on the Xhale website.
     
    In a press release this summer, Nu1s 1000 Puff Disposable E-cigs said to be selling in convenience stores in a “space-saving countertop point-of-sale display which has shown to drive sales to record levels.”
     
    Meanwhile, Smoker Friendly retailers report to be selling the company’s private label starter kit for $60-$70 and $20 for refills.
     
    Michael Zielinski, president and CEO of Royal Buying Group Inc., is intrigued with the idea of selling electronic cigarettes in the convenience channel but does see price as a potential barrier.
     
    “In smoke shops, the price point works, but it probably doesn’t work in the c-store environment,” he said. 
     
    Nevertheless, he is “looking at two or three” electronic cigarette brands currently and is “going to carry them to some degree.”  He said discussions are currently in the works to combine efforts with a tobacco retail chain that is “already using them” and has “good success with the brand; we may help leverage them.”
     
    Zielinski added while it’s “still too early to tell” how successful the e-cig category could be mainstream-wise, “I would be a lot more positive if the states and federal government would let us sell them.”
     
    Indeed, there is much legal confusion and controversy surrounding electronic cigarettes lately. 
     
    The Associated Press reported last month on the ongoing debate between the FDA and certain health groups claiming that electronic cigarettes contain “dangerous chemicals” and should be regulated as drug delivery devices -- vs. users, manufacturers and some surprising public health community supporters responding that they be regulated as tobacco products. Some states have made efforts to ban the product completely, so far, to no avail.
     
    In the AP report, Jason Healy, president of e-cigarette maker Blu Cigs, estimated that there are now 20,000 to 30,000 new e-smokers every week, in spite of, or maybe because of, the ongoing controversy. 
     
    And as more e-cig consumers jump on the scene, they may come to find that their biggest problem is “that when your supply runs out, you can’t just replenish it at any convenience store,” as one smoker named Joe blogged on bloggersbase.com recently. That’s why forward-thinking c-stores are already weighing the potential opportunity.
     

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