It's a significant news item that has largely gone under the radar, save for those vested in the tobacco and e-cigarette business. The Food and Drug Administration on Friday announced that onerous regulations that were set to be imposed upon e-cigarette manufacturers in August 2018 have now been postponed out to four years later.
Obviously, the recent FDA announcement is a significant boost to vaporizers and the broader industry. According to leading e-cigarette retailer Vapor Authority, "vaporizer manufacturers were required to submit a costly approval application for any vaping product that hit retail markets after February 15, 2007." Such proposals stoked fear among industry participants because only the most profitable products would receive application dollars, thus killing innovation.
The creative synergies that has been part and parcel of vaporizers and the e-cigarette market is exactly what worried Big Tobacco companies. For decades, vaping engineers developed increasingly popular and effective alternatives to nicotine-based smoking products. Today's vaporizers are more computer than they are cigarettes, and they are able to deliver experiences and sensations that Big Tobacco companies can only dream of.
But what the old guard had that e-cigarette firms couldn't match was resources and networks. Essentially, Big Tobacco companies could lobby the hell out of government agencies and promote agendas friendly towards their interests. Previously, the tobacco conglomerates were able to wage a PR campaign against vaporizers, and such actions were mostly unmitigated.
However, the FDA announcement put a big kibosh on traditional tobacco. The government agency was already deeply committed in working towards a smoke-free society. With cigarette smoking hitting record lows, especially among youth, that lofty goal seemed attainable.
The appeal of vaporizers is that they deliver both nicotine and non-nicotine flavors. Within the vaping subculture, non-nicotine flavors are more desired due to their smooth texture and the ability to smoke for hours without harsh side effects. Thus, the e-cigarette platform has both health and consumer convenience advantages.
With the FDA announcement, the last line of defense for Big Tobacco companies was breached. Rather than denigrate and stymie e-cigarette firms, the old guard is now forced to innovate and come up with their own (profitable) nicotine alternatives. That's why multiple tobacco stocks experienced enormous volatility on Friday's trading session.
Unfortunately, Big Tobacco companies will have to get creative, and quickly. The Trump administration cannot back out of the FDA announcement — doing so would make the President look antagonistic towards small businesses.
On the other hand, hurting the tobacco industry shouldn't be considered a total victory. Plenty of jobs are created by this massive industry. Eliminating the industry means eliminating domestic production and career-level opportunities.
No matter what, the FDA has to tread carefully or it risks creating a bigger problem than with what it originally started off.