Big Tobacco Has Officially Lost Its Hold on the E-Cigarette Market

September 25, 2014 // 04:30 PM EST

For all the talk of big tobacco's e-cigarettes tasting like crap and not representing what consumers want, cigalikes have still made up the majority of the American electronic cigarette market. Until now. 

Refillable mods and nic-juice sales have officially overtaken cigalike sales, according to a new analysis by Wells Fargo Securities shared with me by VMR Products, a company that makes vape accessories and V2 e-cigarettes.

In its new Tobacco "equity research" report, Wells Fargo analysts note that market growth of big tobacco-owned brands of e-cigarettes has drastically declined year-over-year (the report is available to people who have investing relationships with Wells Fargo but was emailed to me), and that the vaping market is booming.

Though it's difficult to get firm numbers for vaping sales by small companies, Wells Fargo believes that people who use electronic cigarettes aren't quitting altogether, they're moving to refillable mods sold by small companies.

"We believe the sales decline is more reflexive of volume moving to vapors-tanks-mods, which tend to be sold in non-tracked channels (especially vape shops)," the firm wrote.

Image: Wells Fargo

At this point, the firm believes the US vapor market overall (including cigalikes) is roughly $2.5 billion, with $1.5 billion of that coming from customizable mods and nic juice, compared to roughly $1 billion for e-cigarettes.

That number, by the way, comes despite the fact that, overall, vapers spend less money than people who smoke e-cigarettes.

“In addition to the experience provided through them, open system vaporizers are also a lower-cost vaping option over the long-term," Bonnie Herzog, an analyst who worked on the paper, said in an emailed statement. "We have found, for instance, that the weekly spend for an open system user is about 30 percent less than that of an e-cigarette user.”

In other words, big tobacco has reason to be scared. People are switching, en masse, from combustible cigarettes to vapor options, and they're most often choosing the open platforms that small businesses offer and that big tobacco has utterly failed to perfect (or even manufacture, really).

"Bottom line—we continue to believe vapor consumption could surpass combustible cigs in the next decade," the firm wrote.

It's no wonder that big tobacco is trying, desperately, to make sure e-cigarettes are regulated in a way where cigalikes will be protected and vaping will be destroyed.