In Depth

TV Ban Looms For E-Cigarette Marketers -- FDA Poised to Regulate Billion-Dollar Industry

By Michael Sebastian
Advertising Age

Big Tobacco has made a historic return to the airwaves and pages of consumer magazines with ads for e-cigarettes, but the days of regulation-free marketing may soon be over -- and with them, a potentially lucrative new pipeline of ad dollars to networks and publishers.

The Food and Drug Administration, which is expected to weigh in on e-cigarettes in October, will likely propose a ban on TV advertising for e-cigs, according to a report out Monday from the financial services group CLSA Americas. A ban would curb an emerging source of revenue for TV networks, where spending on e-cigarette commercials climbed 17.9% to 2012 from 2011, according to a Citibank report earlier this year.

The booming e-cigarette market is currently unregulated, allowing Big Tobacco's historic return to TV after more than 40 years as well as renewed print ad spending for tobacco, which has declined since the Master Settlement Agreement in 1998. The same Citibank report said print ad spending among e-cigarette marketers increased 71.9% to 2012 from 2011.

E-cigarette makers have said they plan to continue marketing their product across a range of media unless and until a ban is introduced. "In lieu of regulations, we will look at all mediums -- including TV, print, radio, point of sale and direct mail -- to communicate with adult smokers," David Howard, a spokesman for Reynolds American, told Ad Age last week as the company prepared to roll out a TV campaign in Colorado for its new e-cigarette Vuse (below).

Meanwhile, Lorillard's Blu e-cigarette, which claims nearly 40% of the market share, introduced a TV and web campaign this summer with Jenny McCarthy. That followed an earlier TV and print campaign featuring actor Stephen Dorff.

Other players in the e-cigarette industry, including NJoy and Fin, have also been running TV commercials. NJoy is second to Blu in the e-cig market, with about one-third of market share.

The FDA is expected to issue a proposed rule in October that will allow it to regulate e-cigarettes. At that time, the proposal will be open for public comments, a process that will likely last for months.

Jenny Haliski, a spokeswoman for the FDA, said the organization cannot comment on the contents of the proposed rule.

"The FDA intends to propose a regulation that would extend the agency's 'tobacco product' authorities -- which currently only apply to cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco -- to other categories of tobacco products that meet the statutory definition of 'tobacco product,'" Ms. Haliski said in an email. "Further research is needed to assess the potential public health benefits and risks of electronic cigarettes and other novel tobacco products."

The CLSA report, meanwhile, predicted other likely proposals from the FDA on e-cigarettes are a ban on sales to minors and potentially the requirement of a warning label. The FDA may also restrict online sales, the report said. Online sales of e-cigarettes are projected to reach between $500 to $625 million this year, said Bonnie Herzog, managing director and senior beverage and tobacco analyst at Wells Fargo Securities, in a press release issued last week by e-cigarette maker V2.

Restrictions to online sales would likely help the nation's three biggest tobacco makers -- Altria, Reynolds American and Lorillard -- because of their large distribution networks, the CLSA report said.

E-cigarette sales are projected to reach $1.7 billion by the end of 2013, Ms. Herzog said.