A Quitter's Market

Electronic-cigarette sales are up, and Big Tobacco wants in

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As the new year begins, many of the estimated 45 million smokers in America are trying to kick the habit. It's a perennial New Year's resolution, according to an annual Marist poll, and the growing electronic-cigarette industry is poised to capitalize on it. Njoy, an independent company that controls about a third of the domestic e-cigarette market, targets smokers trying to quit and is courting them with television commercials touting the King, the first e-cigarette to (nearly) replicate the look and taste of the real thing at a fraction of the cost. (Each King sells for about $8 and lasts as long as two traditional cigarette packs.)

Sales of e-cigarettes, which vaporize nicotine without burning tobacco, are projected to reach $1 billion this year. While that's only a sliver of the estimated $80 billion cigarette market, analysts are bullish on smokeless cigs. Wells Fargo's Bonnie Herzog compares the category's potential to the past decade's energy-drink boom, which many big beverage companies were slow to acknowledge. "Consumption of e-cigs could surpass traditional cigs over the next decade," she says.

Big Tobacco is taking notice. In April, Lorillard Tobacco Co. bought e-cigarette maker Blu, while Reynolds American is testing its own e-cigarette, called Vuse. Altria (a.k.a. Philip Morris), the only major manufacturer yet to make a play, is rumored to be interested in acquiring Njoy. "E-cigs will only improve as time goes forward," says Herzog. "This is just Version 1."