Vaping Emerges from a Cloud

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Sep 16, 2020, 08:30 ET

NEW YORK, Sept. 16, 2020 /PRNewswire/ -- With the global e-cigarette and vape market expected to exceed $59 billion by 2027, the vaping industry appears to have weathered a cloud of scrutiny and is emerging better regulated and even stronger. Much of that growth stems from an increasing awareness of the advantages of consuming smokeless and ashless nicotine, backed up with growing studies. Although larger tobacco companies control a large share of the global e-cigarette and vape market, smaller elite players such as Kaival Brands Innovations Group Inc. (OTCQB: KAVL) (KAVL Profile) are making their presence felt in a space where innovation and compliance are essential factors for success. Kaival Brands is the sole distributor of Bidi(TM) Stick, an innovative nicotine vaping device designed to provide adult smokers with a premium vaping experience. Philip Morris International Inc (NYSE: PM) has launched a next-generation, e-vapor product platform called IQOS MESH. Imperial Brands (OTC: IMBBY) is focusing on providing a portfolio of high-quality, next-generation products that are potentially less harmful than combustible cigarettes, including its pioneering vapor brand, blu. British American Tobacco Industries (NYSE: BTI) has welcomed the FDA guidance as a further step toward a sustainable regulatory environment for the U.S. vapor market. And Turning Point Brands (NYSE: TPB) has focused on operating its vaping business at smaller but still profitable levels.

Global market projected to more than triple in size, reaching $59.3 billion by 2027.
The exclusive distributor of the Bidi Stick, Kaival Brands has developed national distribution channels with future growth in mind.
Kaival's impressive financial performance appears to solidly position the elite newcomer as a dominant player offering premium products.

Click here to view the custom infographic of the Kaival Brands Innovations Group Inc. (OTCQB: KAVL) editorial.

Marketing Gaining Traction

A recent report noted that the global market for e-cigarettes, estimated to reach $16.9 billion in 2020, is projected to more than triple in size, reaching $59.3 billion by 2027. Those numbers, indicating a CAGR of 19.6% during the next seven years, include double-digit growth in all the main e-cigarette markets, including the United States, China, Japan, Canada, and Germany.

A Grandview Research report overview also anticipated substantial growth in the market, actually forecasting CAGR growth of 23.8% over the same period. "The market is expected to gain traction over the forecast period, owing to increasing product demand from millennials," the report notes. "The availability of a variety of e-cigarette options is anticipated to further fuel product adoption."

The report goes on to note that "large tobacco companies have flourished by introducing these devices through various brands that cater to different requirements, thereby enhancing the product quality and level of customization. Moreover, emerging e-cigarette technologies, such as pod systems and squonk mods have increased its popularity in recent years."

Companies, both large and small, offering innovation in this expanding market could make huge strides in distinguishing themselves from the competition.

Future Growth in Mind

Kaival Brands Innovations Group Inc. (OTCQB: KAVL) is focused on growing and incubating innovative and profitable products into mature, dominant brands — exactly what's needed to capture significant market share in the burgeoning vaping sector. The exclusive distributor of the Bidi Stick, Kaival Brands has developed solid national distribution channels with future growth in mind. Consequently, the company's products are currently available in thousands of retail and convenience store locations nationwide.

"We are proud to announce that Bidi Sticks can now be found nationally in over 850 retail stores, like Fas Mart and SprintMart, owned by GPM Investments LLC in addition to over 2,200 current Circle K convenience stores, and we expect in the coming months for our distribution to expand potentially into thousands more retailers and convenience chains," said Kaival president and CEO Niraj Patel. "Bidi Sticks can also be purchased online for in-person delivery from any goPuff.com facility that has the ability to sell Bidi Sticks legally with proper age-verification gates within that state or municipality."

The company isn't letting international borders stop them either. "Internationally, we also recently shipped an initial order valued at approximately $166,000 to Ambros Inc., a company located in Guam that is the exclusive distributor of Johnson & Johnson and Budweiser products to all retailers located in Guam," Patel continued. "The Bidi Stick will be the only vaping device offered by Ambros Inc. to their customers and retailers."

Dominant Player, Premium Product

In addition to reporting notable distribution reach, Kaival's impressive financial performance appears to solidly position the elite newcomer as a dominant player offering premium products in the vaping sector. The company just released its financial results Q3 2020. Reported highlights include the following eye-popping numbers:

Revenues for quarter ending July 31, 2020, totaled approximately $32.4 million, compared to $0 in the same period of the prior fiscal year.
Gross profit for the third quarter of fiscal 2020 was approximately $4.4 million, compared to $0 for Q3 2019..
Total operating expenses were approximately $1.5 million in the third quarter of fiscal 2020, compared to approximately $27,000 in the same period of the prior fiscal year.
Net income reached an estimated $2.6 million, compared to net loss of approximately $27,000 for the prior year period.
Cash balance at July 31, 2020, was approximately $2.7 million, compared to $0 at Oct. 31, 2019.

The company credits much of its financial growth to the popular Bidi Stick. "We had an extremely busy and fruitful third fiscal quarter," said Patel. "We experienced a rising demand for our exclusively distributed premium product, the Bidi Stick. We have seen an increase in sales of almost 44% from the previous quarter, with our sales growth occurring mostly organically through smaller distribution channels and wholesalers. Now in the fourth fiscal quarter, we are focused on expanding our distribution into large national retailers and convenience chains."

A Nicotine Experience for Today

Explosive sales of the Bidi Stick are a testament to the ideal system designed for vaping in today's world. The high-quality product is a one-time use, closed-system, disposable vaping device that is tamper proof and recyclable. Available in 11 flavors, the innovative product is made from high-quality components, including a long-lasting battery and class A nicotine. Product engineering also includes a sensitivity control system, along with a proven mechanism designed to help identify and eliminate counterfeit products.

At a time when vaping is under close scrutiny, the Bidi Stick is only marketed to adult smokers and is intended as an alternative to cigarette smoking. Specifically, the product is designed to provide adult smokers an option that offers nicotine satisfaction while reducing daily urges for nicotine.

From packaging design to marketing strategies to distribution policies, Bidi Vapor(TM), the manufacturer of the Bidi Stick, is committed to strict compliance to government regulations. As part of that compliance process, Bidi Vapor products are sold primarily through national convenience stores as well as online exclusively on Bidi Vapor's website and the digital convenience store, GoPuff.

Bidi Vapor requires its retail partners to sign a retailer pledge that confirms their commitment in making sure that their customers provide a valid government-issued identification to prove age eligibility. For online customers, Bidi Vapor follows a strict age-verification process to ensure that only customers 21 years of age and older can purchase the product. The customers' age and identity is verified by a third-party AgeChecker.om, which uses multiple databases to confirm people's IDs. As another layer of confirmation, Bidi Vapor calls customers within 24 hours upon the purchase transaction to verify their age and the eligibility of the transaction. And finally, upon delivery of product, Bidi Vapor requires a valid identification with the customers' signature.

The vaping industry has undergone much needed reform. New regulations have limited access to minors, pushed out bad actors, and returned focus to delivering vaping products as an alternative to smoking tobacco. The industry has not only stabilized, it is growing. Investors can now look to rapidly growing companies in the sector for potential outsized market returns.

Industry Heating Up

With an industry set to heat up significantly, Kaival Brands isn't the only company leveraging for position in the promising space.

Philip Morris International Inc. (NYSE: PM) is working to replace cigarettes with smoke-free products designed to create a nicotine-containing tobacco vapor, without burning and smoke. The company is focusing its efforts on its next-generation, e-vapor product platform — IQOS MESH — which features a heating technology that is completely new to e-vapor generation. The IQOS MESH uses a metallic mesh punctured with tiny holes to heat a prefilled, presealed e-liquid cap (called VEEV) that contains nicotine and flavors. Each VEEV cap contains a new MESH heater, which eliminates the need to manually replace it. The consumer activates the heating process by pressing on a button, heating up the e-liquid to generate a nicotine-containing vapor.

Imperial Brands (OTC: IMBBY) subsidiary Fontem US LLC (Fontem US) announced that it hassubmitted Premarket Tobacco Product Applications (PMTAs) to the U.S. Food and Drug Administration (FDA) seeking authorization for the continued marketing of a wide range of its myblu electronic vaping products. Fontem US's blu products play a fundamental role in the company's goal of providing adult smokers with options that are potentially less harmful than combustible tobacco products.

British American Tobacco Industries (NYSE: BTI) publicly welcomed FDA regulation and guidance in the vaping industry as a further step toward building a sustainable regulatory environment, noting the company stands ready to comply with new guidelines. "Yesterday's announcement takes us a step closer to a predictable regulatory environment in a key marketplace, but focus must now shift to enforcement to ensure vapour market regulations are effective," stated British American Tobacco CEO Jack Bowles. "We have long said it is not the marketing of these products per se that is the concern, it is the irresponsible marketing of them that should be robustly addressed. For us, smart regulatory frameworks partnered with responsible marketing and appropriate enforcement will ensure the sustainability of adult consumer choice across all categories."

Turning Point Brands (NYSE: TPB) reacted quickly to concerns about the vaping industry, consolidating its vaping business and cutting companywide headcount by more than 10%. "Fourth quarter 2019 was a solid quarter for our core tobacco segment and an important transition period for our NewGen segment," said Turning Point Brands president and CEO Larry Wexler. "Our ambition continues to focus on creating value for our shareholders by delivering quality products to satisfy the evolving preferences of consumers in the actives market."

As innovative companies look to bring new nicotine options to adult smokers, those consumers appear ready to reward efforts made to offer safer, smokeless products. With predicted double-digit growth on the horizon, investors may also benefit from innovation in the e-cigarette and vaping space.

For more information about Kaival Brands, please visit Kaival Brands Innovations Group Inc. (OTCQB: KAVL).

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Sept. 16, 2020, 10:02 AM UTC

By David Ingram

Politics are hard to miss on YouTube this year.

Last month, Joe Biden made a splash when his campaign bought out YouTube's homepage with an ad about sports stadiums that had been left empty by the coronavirus pandemic. The ad got more than 10 million impressions, his most ever on the site.

President Donald Trump's campaign has purchased YouTube homepage ads, too, and he reserved the space again for early November as voting ends, Bloomberg News has reported. The ads are autoplay, making them all but unavoidable.

Beyond those ads, politics are popping up in all sorts of videos. A legion of well-practiced right-wing YouTube personalities, some with large followings, have been posting daily videos boosting Trump and launching attacks against Biden. And digital strategists for various political campaigns are exploring ways to seep political discussion deeper into YouTube's niche audiences, placing ads alongside cooking shows, for example. Others are working on campaigns that ask for donations, which used to be less common on the site.

YouTube, founded in 2005, has often been overshadowed by the likes of Facebook and Twitter as a place where political campaigning happens online, but this year is shaping up differently, and the fall promises to test YouTube's capacity to serve as a political referee.

"YouTube has come into its own. It has blossomed. It is incredibly effective," said Rebecca Donatelli, president of Campaign Solutions, a political consulting firm that works with Republican candidates. In the realm of politics, she said, "this is the year of YouTube."

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Trump himself has more than tripled his YouTube following in five months, growing from 320,00 subscribers in April to more than 1 million now. Politico reported this month that the Trump campaign was trying to flood YouTube with content and leverage the site as a secret weapon, much as the Trump campaign did with Facebook in 2016.

But the Biden campaign says it has doubts. Megan Clasen, a Biden campaign adviser, tweeted that it had outspent Trump on YouTube at the start of September.

In a sense, it's about time YouTube got so much attention. It often ranks first or second on lists of most-visited websites, and it's the most widely used online platform among U.S. adults, a Pew Research Center survey found last year.

It may be that 2020 is an especially good year to match with YouTube as a medium. News about police shootings, Black Lives Matter protests and the coronavirus pandemic is often highly visual.

"That's where the electorate is this cycle, and if it doesn't have a video attached to it, it's not as real," Donatelli said.

But YouTube's emergence as a central political battleground is causing alarm among advocates for voting rights, as well as people who research disinformation online, who fear that the Google-owned service is underprepared for election season.

They point to a growing body of research that has identified YouTube as a primary way people learn to believe conspiracy theories or consume extreme commentary, sometimes fueled by YouTube's recommendation algorithm.

"I still think they really haven't figured out with YouTube how to stop those who are profiting off misinformation and disinformation from continuing to do it," said Joan Donovan, research director of the Shorenstein Center on Media, Politics and Public Policy at Harvard University.

YouTube said it is taking the challenge seriously. Leslie Miller, YouTube's vice president for public policy, wrote in a blog post last month that the service was committed to removing content that violates its rules, such as videos that encourage others to interfere with voting.

The company has outlined other steps to ensure a credible election, such as pledging to terminate channels that misrepresent their countries of origin or conceal their associations with government actors. YouTube has banned videos promoting Nazi ideology and promised a crackdown on "borderline content."

"Over the last few years, we have developed a systematic process to effectively remove violative videos, raise up authoritative content and reduce the spread of borderline content. We apply this framework to elections around the world, including the 2020 U.S. election," YouTube spokesperson Ivy Choi said in a statement.

The primary season saw at least one example of a political dirty trick carried out on YouTube. Last month, as polls opened in Florida, some voters received fake text messages and a YouTube video falsely claiming that Republican congressional candidate Byron Donalds had dropped out. YouTube removed the video, and Donalds prevailed in the primary.

But YouTube's policies still lag behind those at Facebook, Pinterest and Twitter, according to a report card from the Election Integrity Partnership, a group of academics and nonprofits tracking misinformation online. The group says YouTube's policy on voter intimidation, for example, isn't comprehensive enough.

It's not just Nazis and voter intimidation that worry people, however. It's also how YouTube shapes the broader information ecosystem.

More so than in 2016, YouTube is a home for livestreamers and social media celebrities who have built followings of thousands or millions of people. YouTube shares revenue with them and offers other opportunities to make money that other tech platforms don't match.

Donovan of Harvard said she expects some YouTube provocateurs to wield newfound media influence over the next two months, backing one candidate or another. "And we're not going to know if those influencers are being paid by companies, charities, dark money groups or super PACs," she said, because political operatives may be able to avoid disclosure requirements from the company, the government or both.

In February, the Democratic primary campaign of former New York Mayor Michael Bloomberg helped to popularize new marketing forms, such as endorsements from social media meme accounts.

"There's a shadow market for political advertising that is potentially going to be supercharged in the lead-up to the election," Donovan said. If YouTube can't keep up, she said, "the whole of society suffers."

Voting rights lawyers worry about the spread of false information about how to register or how to vote. In a report this month, the Brennan Center for Justice at New York University Law School urged tech companies to increase the visibility of reliable sources, such as election agencies.

When people search for voting information, "some video gamer shouldn't be the No. 1 result," said Ian Vandewalker, senior counsel at the Brennan Center.

Trump's courting of YouTube influencers was on show last year when he invited many of them to a social media summit at the White House. They now make up something like a YouTube cheering section, often popping up on the most-viewed list with a search for Biden's name.

Covid-19 has only added to the value of streaming services like YouTube, said Shannon Kowalczyk, chief marketing officer for Acronym, a group that's working to elect Democrats including Biden.

"People have more time on their hands at home. We've seen streaming numbers surge," Kowalczyk said. Acronym uses YouTube to target people, especially young people, who don't normally tune in to political discussions and may be in a position to be persuaded, she said.

YouTube and Google surprised many digital ad buyers last November when they said they wouldn't allow political campaigns to target ads based on public voter records or political affiliations. They said ads would be more widely available for public discussion.

That caused some money to shift to other platforms that allow narrow targeting, such as Roku, strategists said. But they're also finding YouTube useful in unexpected ways.

"We're using it a lot for fundraising, which is way different from what it has been in the past. It was mostly a persuasion play," said Eric Frenchman, chief marketing officer for Campaign Solutions, the Republican firm. He said the return on investment rivals that of Facebook, where campaigns have typically gone in the past to raise money.

David Ingram

David Ingram covers tech for NBC News.