June 2016

NATO Conference Ends 15-Year Run

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By Norm Bour

“All things must pass” is a popular cliché as well as a song title, and after 15 years the annual trade conference known as NATO is calling it quits.

The National Association of Tobacco Outlets was founded in 2001 and initially included tobacco companies of all shapes and sizes. Over the years they added hookah and most recently, vape. Don Bores, the original founder of NATO said in a 2014 interview on VAPE radio, “They thought I was crazy when I took an e-cigarette out of my shirt pocket, took a puff and put in back in my pocket.” This was in 2008 and as recently as 2015 vape companies represented as much as one third of their vendors.

Frank Armstrong is the current NATO president, and has been a board member since 2003. He is the owner of Blue Ridge Tobacco, a chain of eight tobacco stores in North Carolina and Virginia. They have been ahead of their fellow smoke shop competitors and have been carrying cigalikes and vaping supplies for several years.

The association has 51,000 members, a powerful force, and consists of tobacco outlets, convenience stores, wholesalers and manufacturers.

This recent show was significantly smaller than in years’ past with just over one hundred vendors and several hundred attendees. As the speed of communication has increased, many business owners feel less need to learn from live events since they get information much quicker from other sources.

There is no question about it: the competition for attendees at tobacco shows is just as challenging as for vape shows. Since 2013 when I started VapeMentors, I have attended dozens of shows and each year the numbers increase, which results in smaller attendance for everyone.

When asked why they are ending the 15 year run of live events, Armstrong stated, “When we look towards the future, which could be just a handful or years to many times that, we have to acknowledge that one of our primary missions is to protect our members- and not orchestrate conventions. Threats come from many places including new deeming regulations, but more from state and local issues which have increased over the years.”

He confessing that NATO reached a major decision and determined that their time and resources were best spent on those state and local regulatory issues. “That will help us do best for our industry,” he concluded.

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The Vaping Presence at NATO

Of the 105 vendors, just a handful were vaping companies, mostly liquid sellers, as is common. There were a few familiar names, but the biggest was Lost Art, here for their first-and last show.

In just two years they have become a significant presence and when we asked cofounder Ryan Thomas why they exhibited he responded: “We decided to attend NATO because it was something different, and a possibly untapped market.” Overall they were pleased with the level of interest though most that visited their booth were not familiar with their company.

They also took advantage of one of the most unique sponsorship offerings I have ever seen: a phone charging station with Lost Art logos plastered on every side.

Judah Arama was on the floor representing Helium brand e-liquids. The Florida-based company has been in liquids since 2008 and their parent company, VPR Brands, is one of the few publicly traded vape industries.

They initially manufactured for others but launched the Helium brand with a new twist. In an effort to keep consistent texture and flavor they decided to offer coolers to their retail sites which keeps their bottles at 20 degrees below room temperature.

“The intent is to keep the liquid between 70 and 75 degrees,” said Arama, “and we found this kept the flavors more consistent.” He specifically said that the end purchaser is not required to chill their liquids since that time lapse would be insignificant.

This does bring to light an issue for many manufacturers since it can take many months to consume a finished product that was made up to one year earlier.

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The Importance of Education

NATO will be missed since they held a unique educational place in the world of conventions. This event covered just 15 hours over two days, but six of those hours were dedicated to educational programs and the balance for exhibitor hours.

This year they brought in Bonnie Herzog, Managing Director Beverage, Tobacco & Convenience Store Research, Wells Fargo Securities, LLC, as well as Don Burke, Senior Vice President, Management Science Associates, Inc. (MSA), one of the market leaders in tracking c-stores and product sale.

Some data they shared included:
• Last year, 2015, was a banner year for the sale of analog cigarettes. WTF??
• Vapors, tanks and mods (VTM), plus e-cigs, are in 27 percent of all convenience stores.
• The potential market and upside for vape products is huge, as estimates show that the worldwide tobacco market is a $900 billion business, yet vape is just one percent. But in the US, vape is estimated to impact 52 percent of the tobacco market. Yes, that is why overseas manufacturers are seeking our US dollars.
• The top liquid flavor category is fruits with a 96 percent approval rate, followed by deserts at 86 percent. Tobacco and menthol continue to drop in popularity at 36 and 34 percent respectively.
• The ages of vape consumers was higher than they expected with ages 31 to 40 being the “sweet spot” followed by Gen Y’s close behind.
• Most vapers start because they want to get rid of tobacco addiction and less than 10 percent vape just for fun.

The closing speaker was the man everyone loves to hear, but few believe: Mitch Zeller, Director of FDA Center for Tobacco Products. He told the audience that the final deeming regulations “would be released soon,” and assured everyone that they listened to the feedback and concerns from “tens of thousands that offered their thoughts and opinions.” By the time you read this his words of solace may be real or possibly not.

NATO will be missed.

– Norm Bour

Norm Bour is the founder of VapeMentors and creator of the VAPE U online programs. They offer services & resources for anyone in the vape space, including vape shops, online stores and e-liquid brands. He’s also the host of Vape Radio, the largest vaping radio show in the world with more than 1.2 M downloads. Norm interviews the masters of vape and thought leaders in the vape space. Contact him at norm@VapeMentors.com.