Small Business

Small vape shops scramble for survival as government, Big Tobacco put up ‘one hurdle after another’

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Chris McGrath doesn’t plan to give up his dream of helping people quit cigarettes by vaping.

But the Harrison vape shop owner is worried the mounting challenges confronting his industry, particularly its smallest players, that could push his and hundreds of other small shops and manufacturers out of business.

“Small businesses like mine, we’re going to be a dying breed,” said McGrath, who opened Octopus Ink Vaping on Freeport Road four years ago. Last year, McGrath added a second store in Plum and expanded to eight employees.

Starting this summer, stringent and costly Food and Drug Administration regulations are set to go into effect that could put nearly all but deep-pocketed vaping “juice” manufacturers out of business, and rid store shelves of nearly anything but nationally distributed products.

“Local places that make their own juices, there’s no way on God’s green earth they could ever possibly meet the standards that the FDA is imposing,” McGrath said.

The looming federal changes follow several years of disruption to a recently burgeoning industry as thousands of small business owners nationwide grapple with the impact of anti-vaping policies, emergency bans and public health alerts.

Chris Hare, co-owner of Nomad Vapors on Route 130 in Jeannette, said he encourages members of the public as well as policymakers with questions or concerns about vaping to visit his shop and ask questions. His hope is to avoid knee-jerk reactions and potentially misleading information.

‘One hurdle after another’

At a time when Pennsylvania has no cigar tax and state government controls wholesale and retail liquor sales, small vape shop owners and employees are wondering why their jobs seem to matter less to politicians and policymakers.

“It’s just one hurdle after another,” McGrath said, “but I’m planning on riding this out until they force me to stop.”

In 2016, Pennsylvania implemented a 40% “floor tax” on vape shop inventories along with a 40% sales tax on vaporizing devices. That also includes the propylene glycol- or vegetable glycerin-based “juices” that fill them and the batteries used to operate them.

McGrath borrowed money from his parents to keep his doors open and make payroll.

“I got hit with that one, and that was a nightmare and a half,” he said. “I only survived that because I opened at the beginning of that year, which means I didn’t have a big business yet. I didn’t have employees, I didn’t have a big stock. If a place had $200,000 in stock, they wanted $80,000 in three months, so the better you were doing, the worse off you were.”

In 2017, Allegheny County became the second county in the state to ban vaping everywhere that cigarette smoking is banned, joining more than 500 jurisdictions across the United States with similar local bans. The next year, the FDA declared the spike in vaping among teens to be an “epidemic.”

Then, this past fall, came perhaps the most crushing blow, when thousands of vape shops nationwide watched sales plummet after government reports in August that vaping had sickened nearly 1,300 people and killed 26. Federal officials initially provided few answers about why and which types of vaping were involved.

Sales plummet after public health scares

The Centers for Disease Control and Prevention officials since have tied the vast majority of cases to a contaminating filler, namely, vitamin E acetate. It is added to illicit vaping liquids containing THC, the psychoactive ingredient in marijuana that makes users feel high.

Those products were sold illegally on the black market — not in neighborhood stores.

Despite those findings, McGrath said he had customers showing up at his store lamenting their decision to return to smoking cigarettes because their spouses were pressuring them to stop vaping.

“My sales tanked,” said McGrath, whose stores experienced a 40% drop in sales compared to the same time the previous year. “Everyone has been hoping it would bounce back, but they just kept slamming us.”

Like legal marijuana dispensaries, makers of legal nicotine-based vaping products have tried to distance themselves from the problem. Emergency bans issued by the governors of Michigan, New York, Massachusetts and Utah “kept up the scare for everybody,” said McGrath, who knows several owners who shut down in recent months. “Everybody hung in as long as they could.”

Greg Conley, a spokesman for the American Vaping Association, estimates that at least 200 stores closed nationwide between August and October 2019.

It’s difficult to peg the precise number of small vape shops still operating in Pennsylvania, with competition also including convenience stores and gas stations that sell versions of disposable and battery-operated e-cigarettes.

More than 70 of an estimated then-300 vape shops closed in the months following the 2016 tax increases, according to business owner surveys and research by The Commonwealth Foundation, a free-market think tank based in Harrisburg. Fifth Avenue Vapor in New Kensington was among them.

Tyler Younkins, 34, a financial analyst-turned owner of Vapor IQ just off Route 356 across from a Sheetz in Buffalo Township, scoffed at the notion that the CDC, FDA and local health officials deny that vaping can be a smoking cessation method for adults. He and other vape shop owners say they’re disappointed by policymakers ambiguously lumping even zero and low-nicotine vaping products into the category of “tobacco products.”

“I tried the patch and the gum and all of it and none of it worked,” said Younkins, of South Buffalo. “I’ve helped myself and many, many people quit smoking, and wean down to zero nicotine or stop vaping altogether.”

Big Tobacco evolves into Big Vaping

McGrath said he doesn’t want teens vaping, and he definitely doesn’t want them getting hooked on cigarettes.

Nor do he and other entrepreneurial vape shop owners want to be associated with Big Tobacco — though they’re well aware that cigarette-selling behemoths such as Altria Group, parent company to Marlboro, now dominate the vaping market. In late 2018, Altria bought a major stake in the fast-growing Juul vaping company, which then had a $38 billion valuation. It has since dropped to $12 billion.

The U.S. Small Business Administration estimates that as many as 90% or more of vaping and tobacco manufacturers and retailers are run by small-business owners. Yet products such as Altria’s Juul pods control more than half the market share of vaping.

“Because we are all tiny shops under a big umbrella, we don’t have the power that Altria or Marlboro has,” McGrath said. “I still keep emailing the representatives and calling the White House and doing what I have to to keep this alive.”

Altria Group spent more than $2 million in the past six years on firms employing close to three dozen lobbyists and pumping $1 million into political campaigns in Pennsylvania, state records show. Nationally, Altria spends closer to $10 million a year on lobbying the federal government.

Vaping proponents argue that shrinking their industry — or relegating it to Big Tobacco-type companies with an incentive to sell higher-nicotine products — will lead to more former smokers returning to tar-filled cigarettes. Relatively scant research is available about potential dangers and long-term effects of vaping, which gained ground in U.S. markets around 2007.

Teen vaping doubles in 2 years

Vaping use among teens more than doubled in the past two years, up to as many as one-quarter of high school seniors reporting trying it, a New England Journal of Medicine study published in September found.

The same survey also found that the fewest number of students ever are smoking cigarettes, or about 5.7% of seniors in 2019, compared to 7.6% the year before. Debate rages on over whether vaping devices could be a “gateway” product, or there’s merely been a shift to vaping among would-be smoker teens who viewed vaping as less harmful.

“Smoking trashed my life,” McGrath said. “Vaping is ‘harm reduction.’ It’s not 100% safe, but let me tell you something: I’ve tried quitting cold turkey several times and it doesn’t work. We know cigarettes kill you.”

The FDA is scheduled to begin reviewing all e-cigarettes in May.

Only manufacturers with enough money to perform and submit the required research on each type of product and variation will be able to continue making them.

Industry observers say that complying will be nearly impossible for small regional manufacturers. Some are based in and around Pittsburgh, producing hundreds to thousands of flavored juices with varying nicotine levels.

Ban of flavored vaping could be next

Bill Godshall, executive director and founder of SmokeFree Pennsylvania, a Swissvale-based nonprofit that supports vaping as a way to quit smoking, argues that stringent regulations won’t curb people from vaping altogether. Instead, he’s worried that overly onerous rules will “wipe out brick-and-mortar vape stores” to the benefit of a more dangerous black market and unregulated online retailers overseas.

In contrast, the American Lung Association gave a failing grade to Pennsylvania in its “State of Tobacco Control” annual report last month, with low marks driven by the state’s “failure to adequately address the youth e-cigarette epidemic.”

The association cited the rapid climb of Juul’s popularity as “one consequence of inaction by federal and state governments.”

A four-month ban on sales took effect in Massachusetts. In New York, Gov. Andrew Cuomo has pushed to ban sales of flavored vaping liquids. The Trump administration has signaled interest in a ban on all but tobacco- and menthol-flavored vaping products.

Products with creative flavors are being targeted because of their perceived appeal to young vapers, but they account for the majority of sales to all users, including adults. FDA officials said last month they will continue targeting vaping products that appeal to underage users in other ways, such as packaging that mimics juice boxes, cereal or other kid-friendly snacks.

Like many fellow vaping enthusiasts, local vape shop owners balk at the premise that fun flavors could only appeal to kids, with flavors popular among elderly customers weaning off nicotine such as “Fruity Pebbles.”

Natasha Lindstrom is a Tribune-Review staff writer. You can contact Natasha at 412-380-8514, [email protected] or via Twitter .

Source

neallesh@yahoo.co.uk

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