Key Findings Part 2: Vapour Products

October 2018

Driven by the rapid expansion of heated tobacco in Japan and the emerging use of non cig-a-like closed systems, growth in vapour products re-accelerated in 2017. Regulation and innovation will determine the near-term shape of the global category while in the longer term vapour continues to be an agent of transformation for tobacco businesses.

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Headlines for 2017

Vapour products value

The total global vapour products market reached a value of USD18 billion in 2017. Continued rapid uptake of iQOS (and newer entrants) ensured that Japan overtook the US as the largest vapour market (though US remains leader in e-vapour). Vapour products is rapidly eclipsing more well-established tobacco categories, and by 2020 will be the single largest category, outside cigarettes.

Vapour products value growth 2017

Growth of 51% globally in 2017 meant that growth in vapour accelerated again compared to the moderate 37% experienced in 2016. This increase in the pace of growth was driven by the speedy expansion of heated tobacco as a category (though closed vaping systems also saw faster growth in 2017 vs 2016).

Non-cig-a-like closed system value

Once again, the highest single rate of growth within vapour products in 2017 was recorded not by heated tobacco products, but by non-cig-a-like closed systems. Driven primarily by the success of JUUL and other pod mods brands in the US, growth is expected to expand internationally in the coming years.

Vaping population

An estimated 35 million people were regular dual or sole users of e-cigarettes and vapour products globally in 2017. It is likely that a small majority of consumers remain dual users (especially in emerging markets), although over time sole users will account for a greater proportion of the consumer base.

Heated tobacco value growth

Driven by iQOS, but buttressed by increasing numbers of new launches, the heated tobacco category virtually matched 2016’s 200% rate of growth (albeit from a larger base) and is almost certain to become the single largest vapour category in 2018. 

Introduction

Scope

Background and Key Findings

Research methodology
Tobacco and nicotine delivery timeline
Vapour products timeline
Headlines for 2017
Category size and growth comparisons 2012-2017
Vapour size and growth category outlook 2017-2022
Vapour growth enters a more mature phase
Vapour products poised to overtake other tobacco product categories
Moderate in pace of vaping population increase

Geographic and Category Focus

Taxonomy of next-generation products
Geographic spread of e-cigarettes
Market-level growth in vapour products in 2017
Balance of vapour consumption globally by 2022
Evolution of balance of consumption by region
Cig-a-like is yesterday’s technology… for the moment
The JUUL effect: a double-edged sword for pod mods
Closed pod systems address wider consumer desires
Open vaping systems remain important but not dominant
Consumption set to shift back to closed vaping systems?
Estimated heated tobacco volume by region
Growth in heated tobacco thus far led by iQOS
Heated tobacco forecasts
US: regulatory uncertainty and cannabis legalisation looms
UK: official attitude begins to turn strongly positive
China: vapour products beginning to appeal close to home
Italy: market continues to grow as heated tobacco ticks up
Germany: vapour products growing quickly
South Korea: becoming a dynamic t-vapour environment

Channel Focus

Global distribution beginning to revert to the mean
The online channel: central but at risk
10 EU member states ban online sales
Vape stores: specialists that shaped the category
iQOS stores: play a dual role in the early days of heated tobacco
Digitalisation influencing vapour distribution and engagement

Legislation

Global overview of e-cigarette regulation 2018
The quantum superposition of tobacco control
Differential regulation requires detaching nicotine from the mode of delivery
The shape of the end for combustion dictates future of vapour
Outcome of COP8 will be influential particularly in emerging markets
Modified risk not recognised in communication - yet
Vapour legislation: major developments in the EU and the US

Companies and Innovation

E-cigarettes landscape still dominated by non-tobacco players
Tobacco players and their vapour brands
The changing face of innovation in next-generation nicotine
New paradigms for innovation and development
Innovation top trends: tobacco heating products
Innovation top trends: nicotine salts
Innovation top trends: pods on the horizon
Innovation top trends: CBD oil
Innovation top trends: flavour evolution
Innovation top trends: hybrids and category blending
JUUL-a-likes: imitation is the sincerest form of flattery
What Japan can tell us about the growth of heated tobacco elsewhere

The Future: Platform vs Substance Agnosticism

Vapour products are playing a key role in the industry’s transition
New modes of consumption accelerating outswitching
Category blurring and platform blending prime consumers
Platform agnosticism versus substance agnosticism
Vapour devices will increasingly be used for cannabis consumption
Why tobacco and nicotine should be interested in legal cannabis
Cross-pollination between vapour and cannabis points the way
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