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Vapor Corp: Consumers Tire of Generic Esmoking Products, Turn to Brand Names, Willing to Pay for Quality

April 16, 2015 | About:

Vapor Corp (VPCO) is the only dedicated esmoking company listed on the NASDAQ or NYSE. Vapor Corp sells electronic cigarettes, vaporizers, eliquids and related products. Esmoking devices enable users to inhale nicotine without smoke, tar, ash or carbon monoxide. Vapor Corp owns 16 retail locations, including brick-and-mortar "The Vape Store" locations and "Emagine Vapor" kiosks. It also distributes its products in hundreds of third-party locations.

Vapor Corp as a public company is just over one year old, excluding its predecessors' discontinued lines of businesses. Vapor Corp began making vaporizers its primary focus as of its December 31, 2013 Delaware reincorporation. It decided to take advantage of the rapid growth of the e-smoking industry, which is experiencing "a level of prosperity not seen by the tobacco industry since the halcyon days of the 1950s and 1960s." Indeed, growth rates suggest the industry will quadruple within three years.

  • The esmoking industry generated $2.5 billion in 2014.[1]
  • The esmoking industry is projected to generate $10 billion by 2017.[1]
  • Over 42 million Americans smoke traditional cigarettes, or 18% of adults.[2]
  • Over 3.5 million Americans currently use electronic cigarettes, or 1.5% of adults.[3]

[1] UBS, Wells Fargo report
[2] U.S. Centers for Disease Control and Prevention
[3] Tobacco Vapor Electronic Cigarette Association

During 2014, Vapor Corp uplisted to the NASDAQ, opened eight new retail kiosks and introduced several new evapor products. It also altered its product mix to meet favorable demand trends, as demand has been shifting from smaller ecigarette to larger evapor handhelds.

In 2015, Vapor Corp acquired Vaporin, a major distributor and marketer of esmoking products. As a result of the merger, Vapor Corp received $2.9 million net proceeds from a private placement and additional financing for up to $25 million, pending financial and performance-based covenants.

Vapor Corp's net sales are projected to be significantly higher in 2015 due to the Vaporin merger. Its net sales were $15.3 million in 2014. Vapor Corp also opened several new retail locations during 2015, and plans to open several more The Vape Shops by the holiday season.

To maintain competitive margins, Vapor Corp does not manufacture its own products; third party manufacturers manufacture Vapor Corp's products according to design and quality specifications. It sells both imported and premium, Made In The USA products.

Vapor Corp competes with other esmoking companies, most notably the esmoking subsidiaries of "Big Tobacco" comprising Lorillard (LO), Altria Group (NYSE:MO), Philip Morris (NYSE:PM) and Reynolds American (NYSE:RAI). The nature of the competition is varied as the market is highly fragmented and empowered by offshore manufacturing. Vapor Corp's direct competitors sell products that are substantially similar to Vapor Corp's products and through the same channels through which it sells esmoking products, such as convenience stores.

Fortunately, Vapor Corp's branded The Vape Shop stores do not promote third-party products, and customers are increasingly relying on branded locations like The Vape Shop to avoid the rapidly deteriorating quality of Chinese and "knockoff" merchandise. Indeed, approximately one-third of esmoking purchases in the U.S. last year were through dedicated esmoking retailers. Jeffrey Holman, CEO of Vapor Corp, estimates that the market share of dedicated retailers will overtake conventional retailers within a matter a months. He notes that brand name merchandise commands significantly higher prices than generic products, yet customers are increasingly willing to pay this premium to ensure the quality of their experience.

Vapor Corp's distribution division competes with other distributors, wholesalers and retailers for product placement within national chain stores, tobacco shops, gas stations, travel stores and shopping mall kiosks. For this reason, Vapor Corp is focusing its efforts on selling brand name products through its The Vape Shop brick-and-mortar locations. It plans to open up to 30 additional physical locations within the next 12 months.


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Comments

theartofvaping1
Theartofvaping1 - 2 years ago    Report SPAM

Never before has there been a weapon as powerful in the fight against tobacco and smoking as electronic cigarettes. Electronic cigarettes, or e-cigarettes, and even ecigs, are battery driven devices that vaporize harmless propylene glycol and vegetable glycerin, with delicious food grade flavorings, to create huge clouds of vapor and satisfying flavors that makes quitting cigarettes easier than ever. Spinfuel eMagazine examines hundreds of electronic cigarette products every year and publishes in-depth reviews so that individuals looking to rid themselves of nasty cigarettes and the diseases they cause, can find the right device for them. Electronic cigarettes are called box mods, mods, cig-alikes, and more, but they all serve one purpose… keeping people off deadly tobacco with this infinitely safer alternative. Don’t buy an electronic cigarette until you read all you can in Spinfuel.

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