Mad Men was one of the most iconic shows of the past decade, depicting the advertising industry in the 1960s. It focusses on Don Draper and looks at some fairly hard-hitting subjects, from women's roles in the workplace, race, fidelity, and the ethics of working within specific industries. However, central to the entire show is smoking, with cigarettes being smoked in almost every scene throughout the show's 7 seasons. AMC have said that a total of 942 cigarettes are smoked on screen throughout its 92 episodes. So central is it that Don Draper's first line of dialogue even references the pastime, as he asks 'Yeah, you got a light?'.
This isn't some kind of fictionalization either. According to studies, over 40% of Americans smoked during the 1960s. The tobacco industry held a tremendous power on the world as a result, which continues even today. According to the World Health Organization in 2002 there were 15 billion cigarettes being sold every day and today tobacco companies spend over $1 million every single hour in promotion across the world.
However, while the global tobacco market may still be worth $770 billion, they are being disrupted and outmanoeuvred by a smaller, but fast-growing industry - vaping.
The vaping industry is expected to have a CAGR of 16.6% through 2022 and a market value of $27 billion according to Research and Markets' report Global E-Cigarette Market Size, Share, Development, Growth and Demand Forecast to 2022. Bloomberg industries has predicted that by 2047 there will be more sales within vaping than the traditional tobacco industry. Given that the tobacco industry has been around for hundreds of years, to lose dominance within 30 years is a seismic shift. In an interview with Healthline, Jeff Drope, PhD, vice president of economic and health policy research for the American Cancer Society (ACS) said 'It’s the most disruptive change in the tobacco market...There is no parallel.'
However, this is not something that the incumbents within the industry have taken lying down, as you might expect from something that is already hitting their customer base. According to studies in the US, 2015-2016 saw the biggest decrease in smoker numbers in over 25 years, which could be attributed to the rise in e-cigarette use. For instance, in the UK there has been a huge decrease in the number of smokers between 2010-2017, experiencing a 5% drop within 7 years, whilst a survey from the Office for National Statistics found that this decline in smoking correlated with an increase in vaping, with approximately 4% of the UK population now vaping compared to 15% smoking.
This is why some of the biggest companies in big tobacco have begun to invest in or acquire vaping companies, with some even funding studies that show the positives of the very industry that's threatening their core market. For instance, a study, funded by British American Tobacco compared the inflammation in the lungs from e-cigarettes and regular cigarettes and found a dramatic drop with e-cigarette use. Some of the most popular vaping brands are now owned by big tobacco companies, for instance, VUSE is owned by a subsidiary of Reynolds America, British American Tobacco launched Vype, and Blu is owned by Imperial Tobacco.
Tobacco companies have rightly been seen as a negative influence on society, to the extent that they are banned from advertising in most western countries and are heavily regulated in almost every country across the world. The $1 million per hour promotional budget mentioned before actually predominantly goes on subsidies to reduce the price of their cigarettes rather than traditional advertising, simply because they aren't allowed to do anything else. Vaping, on the other hand, is generally seen as a positive as the evidence that it is helping people to quit smoking has increased as more and more people have started to use it.
However, unlike other industries who have been disrupted, like retailers with Amazon and taxis with Uber, the industry that's been targeted has not tried to fight against this new incumbent, they have instead fully embraced it and invested heavily in the early stages, ironically helping to cannibalise the market they created. It is why you don't often see tobacco companies complaining about vaping - they have as much vested interest in growing the market as anybody else.
Unlike Amazon and Uber though, they have another reason for supporting the new industry, which is quite simply that it keeps their customers healthier and alive for longer - according to the CDC there is a 10 year difference in life expectancy between smokers and non-smokers. Through supporting this new industry they aren't just stopping themselves losing money, they are also giving themselves an additional 10 years of selling time for their customers.
There are very few innovations of the past few years that have so thoroughly influenced the incumbents they are challenging to the extent that within less than a decade those same incumbents have felt the need to invest billions and shift their business plan to fit the new model rather than trying to challenge it. Vaping is an innovation that is often overlooked and not seen as being on the same level as Uber, AirBnB, or Amazon, but in terms of how it's impacted the industry it went up against, few can argue that it isn't in the same league in terms of the difference it's made. The only real difference has been that the companies that have been disrupted have reacted accordingly and are now benefitting from these huge market shifts.