As Feds Meddle, Kure Bets on Future of Vaping
After years of explosive growth, cigarette replacements like e-cigs and vaping have entered unchartered waters amid reduced sales growth, increased government scrutiny and, perhaps most significantly, new government studies underscoring how much better they are for users compared with traditional cigarette smoking.
I’ve seen the booths for e-cig and vape shops at franchise shows for years, but never had much interest, assuming the category was bound to be taken down by regulations or, worse yet, studies showing them to be as dangerous as some have predicted. With more data, and even more uncertainty, I’ve changed my mind and am digging into this industry for an upcoming feature in Franchise Times.
After combing through countless news stories and health studies, I began my active reporting with an interview with Martin Sumichrast, a large-scale investor and chairman of Charlotte-based Kure Corp., a franchised vaping outlet with 34 locations and dramatic expansion plans that, he says, will proceed regardless of government intervention.
First, some vocabulary: e-cigs and vaping are quite similar, although e-cigs are smaller, typically resemble cigarettes and heat the nicotine-laced liquid to create the cloud of smoke-like gas. Vaping/vape pens/etc., are similar, but often larger, hold more liquid and create the vapor by atomizing the so-called e-liquid, rather than heating it. Same effect, basically, but vaping seems to have the momentum over smaller, more primitive e-cigs.
A watershed moment for the industry came last year when Public Health England released the results of its comprehensive study concluding that e-cigarettes are approximately 95% less harmful than smoking, and have massive potential to help smokers ditch the old-school, notoriously deadly habit.
“E-cigarettes are not completely risk free but when compared to smoking, evidence shows they carry just a fraction of the harm,” said Professor Kevin Fenton, director of health and wellbeing at Public Health England. “The problem is people increasingly think they are at least as harmful and this may be keeping millions of smokers from quitting.”
Adding another turn to the screw, this year the FDA announced plans to regulate the e-cig/vape industry by treating the products like tobacco, which would add exceptionally expensive requirements that would likely take out many of the small, mom-and-pop vape and e-cig shops.
Kure’s Sumichrast feels this benefits his franchised company, which has plans to grow to 500 units in the coming years.
“A lot of these vape shops are guys buying jugs, mixing it in back,” he said. “We set out to institutionalize it and become the Starbucks of vaping.”
There’s clearly a lot of uncertainty in this $2 billion industry, but given the rapid reduction of U.S. smoking rates and growing interest in vaping, this is an industry worth looking into—both for investors that can take a little risk, and anyone that sees anything beyond tobacco as a good thing.