Electronic cigarettes — or e-cigs — are puffing along in the United States and one Miami company, V2 Cigs, has taken advantage of this fast-growing market to become the third-largest e-cig vendor in the country in less than five years.
Two friends, Jan Andries Verleur, a smoker, and Dan Recio, who does not smoke, saw there was great potential for e-cigs and decided to develop their own product in Miami. They put together the little money they had in 2009 to start designing electronic cigarettes and lining up manufacturers in China. Once they had a product, they set up a Website and began selling V2 Cigs in 2010.
“We became profitable almost immediately, and put our profits back into the company,” said Recio, a co-founder of V2 and the president of product development.
The partners built their internet sales platform and expended overseas.
Like other e-cig companies, V2 originally focused on Web sales. But in April 2013, the company made a strategic move, reaching an agreement with National Tobacco Company to sell V2 products at 10,000 retail outlets (such as Hess gas stations) that NTC supplies with tobacco products.
As a result, V2 today is a major online vendor of e-cigs and has a growing presence in retail outlets. Its goal is to place its products in around 35,000 retail stores by the end of this year.
E-cigs are devices that allow consumers to inhale nicotine vapor without the smoke, tar, carbon monoxide and other chemicals contained in tobacco. They often look like normal cigarettes and use a tiny battery to activate a heating element that vaporizes liquid nicotine stored in the e-cig tube when air is pulled through the device. E-cigs have a small LED which lights up when the device is being used.
E-cigs use a mixture of nicotine, propylene glycol and flavorings. Since people inhale the vapor, e-cig users say they are “vaping,” not smoking.
E-cigs appeal to many cigarette smokers as an alternative to tobacco and to other consumers as a novelty item. Retail and online sales in 2013 are expected to increase by 240 percent or more, according to a Wells Fargo Securities report.
In South Florida, a range of e-cig brands compete against the much-larger tobacco market in gas stations, retails outlets and online sales sites.
They are cheaper than traditional tobacco cigarettes, have large markups and come in a wide variety of designs and flavor options, as well as different colors and distinctive styles for women.
The e-cigarette market is highly fragmented. There are about 4,000 companies in the U.S. alone, and about 10 control 75 percent of the market.
“E-cigs currently represent only a very small slice of the tobacco market, but their appeal is growing very rapidly,” said Recio, who studied motion pictures and psychology at the University of Miami. But traditional tobacco companies are worried that e-cigs could take away some of their customers.
Lorillard, the third-largest U.S. cigarette producer, is already diversifying into electronic cigarettes. It paid $135 million last year to acquire blu Ecigs, the largest American e-cigarette company, and earlier this year bought a U.K. based e-cig firm, SKYCIG.
V2, a unit of privately held VMR Corp., now is the third-largest e-cig company in the U.S., following Lorillard’s blu Ecigs, the largest, and NJOY, based in Arizona. The name V2 means “Your life, Version 2.0,” Recio said.
To get underway, Verleur and Recio, who had worked together on other projects, combined their savings, credit cards and a loan and started designing their first products in a two-bedroom apartment in North Bay Village. They had three employees.
“Like Apple, we designed and developed our product here and turned to China and Hong Kong for manufacturing our components and assembling our product,” Recio said. The two partners invested about $30,000 to get started.
The entrepreneurs set up a Website and began selling online in April 2010. The response was overwhelming. Verleur and Recio were able to use their cash flow to expand their product line and add Web sales personnel. They now have no debt.
Today, V2 has 1 million retail and Web customers and 150 employees. It operates out of office space and a warehouse in Miami and has a fulfillment center in Kentucky. The company is launching its own branded stores at malls. It also is expanding into Europe and Latin America.
It added more than 25 employees in recent months to keep up with demand.
The company did not release sales figures but said its sales projections for 2013 are 50 percent higher than 2012. V2 receives about 7,000 orders a day on the Internet, Recio added. Currently, about 75 percent of V2’s sales come from the Web, while 25 percent come from retail.
V2 Cigs sells a wide range of e-cigs in different flavors (American tobacco, Turkish, menthol, vanilla, coffee, chocolate, etc.) and offers five nicotine levels ranging from 0 percent to 2.4 percent. To attract holiday sales, V2 offers flavors like pumpkin spice and cinnamon eggnog.
The company sells about 350 SKUs: V2 cigarettes, which mimic regular cigarettes, Vapor Couture, a fashionable e-cig created for women, and Vantage Vapor, a more economical e-cig line.
E-cigs can be sold online and marketed on TV, which gives them a strong advantage over traditional cigarettes. E-cigs can be bought individually (for single use — about 400 puffs) or in kits that allow consumers to recharge e-cig batteries and refill the flavor reservoir.
Prices vary. For example, a V2 single-use red tobacco flavor or menthol flavor e-cig retails for $5.99. After about 400 puffs (equivalent to 1.5 or 2 packs) the e-cig is discarded. V2 has rechargeable e-cigs for $12 and supplies a range of kits, with a charger for the lithium ion battery and refills of vapor liquid. The high-end kits can sell for as much as $179.99.
V2 maintains strict quality control here and at manufacturing sites to ensure uniform flavor quality and nicotine delivery, and to guarantee that the electronic elements work properly.
While some people believe e-cigs represent a “safe” alternative to tobacco smoking, Recio stressed that the company cannot make any assertions like that because not enough research has been done. Many commercial establishments allow “vaping” even though tobacco smokers are banned or must smoke outside the building.
Some critics are concerned about the long-term effects of vapor, while others warn that children are attracted to e-cigs.
In Florida, for example, people younger than 18 cannot legally purchase e-cigs, and V2 will not sell its products to underage consumers.
On Tuesday, European lawmakers endorsed a permissive approach to the sale and use of e-cigarettes, although the products could not be sold legally to anyone younger than 18. Meanwhile, V2 and other e-cig companies are bracing for stricter regulation by the U.S. Food and Drug Administration.
The Attorneys General in 40 U.S. states last month asked the FDA to more strictly regulate e-cigarettes in an effort to avoid underage “vaping.”
One South Florida cardiologist, Joshua M. Larned of the Holy Cross Medical Group’s Cardiology Associates of Fort Lauderdale, said, “Any opportunity to move a patient off cigarettes is an opportunity, but there needs to be FDA regulation.
“The problem is that this is an unstudied treatment, a weaning strategy that needs to be researched carefully by the FDA.”
V2 is actively penetrating international markets. For example, José Antonio Valencia distributes V2 products to malls and stores in Ecuador.
“We started shipping in 2011 and now reach 15 sales points nationwide,” said Valencia, one of the founders and owners of E-Cigs Ecuador.
“There is very strong demand for e-cigs,” said Valencia, who lost close family members to smoking-related diseases. “This is also very personal, so that people don’t have to go through what my family did.”
And some consumers use e-cigs to be stylish.
Connie Martinez, a 21-year-old student who works at an Italian restaurant in Pompano Beach, says that she doesn’t smoke cigarettes but thinks “vaping” e-cigs on the weekend is fun.
“I buy e-cigs at the gas station when I go out on weekends,” Martinez said. “I get the strawberry flavor, without nicotine. Regular cigarettes leave a bad taste in your mouth. The e-cigs don’t leave a bad smell and you don’t have to buy gum.”