Hartford Business Journal

www.HartfordBusiness.com February 15, 2016 • Hartford Business Journal 3 As vaping industry grows so does gov't oversight By Keith Griffin kgriffin@HartfordBusiness.com I f you build it, the state will regulate it. And that's exactly what's happening with Con- necticut's nascent vaping industry, which comes under increased scrutiny March 1, when retailers and manufacturers of electronic ciga- rettes must begin registering with the Depart- ment of Consumer Protection, coughing up a one-time $75 fee and annual fee of $400. Normally, the heightened oversight would draw the ire of businesses, but vaping indus- try representatives say they aren't opposed to increased scrutiny of e-cigarettes as they seek legitimacy, hoping to branch out with new stores and state and federal validation of the products they sell. E-cigarettes and the practice of smoking them (referred to as vaping) have gained popular- ity in recent years as an alternative to cigarettes. Vaping uses an electronic nicotine delivery system to simulate smoking. Products include electronic cigarettes, cigars, cigarillos, pipes or hookahs that are sold by vaping retailers. "We want to get rid of misconceived notions [of e-cigarettes and the vaping industry]," said Nicholas Ricciardi, the founder of Smooth Vaporz, who owns four e-cigarette stores in western Connecticut. Along with his brother George Ricciardi, he is hoping to franchise Mist Essentials and open stores starting first in Connecticut and then beyond. Ricciardi said he is actively involved in the Smoke Free Alternative Trade Associa- tion (SFATA), which has 15 to 18 active store members in Connecticut, whose mission is to educate the public about vaping. The indus- try has argued vaping is safer than smoking cigarettes and a useful aid in helping smok- ers kick the habit. The American Lung Asso- ciation, among other groups and individuals, has raised concerns about the health con- sequences of e-cigarettes, particularly their inclusion of nicotine and use among minors. Responsible store owners, Ricciardi said, are in favor of regulations like childproof caps and a minimum age of 18 for the pur- chase of e-cigarettes. They favor other restrictions as well like the product only being sold from retail locations and banning e-cigarette use in public places, which went into effect in Connecticut last October. But he doesn't want it restricted to the point where vaping is only allowed on the street. "It should be up to the individual owner of res- taurants," and other private businesses as to whether vaping should be permitted, he said. On the federal level vaping laws are also being enacted. Recently, President Obama signed into law the Child Nicotine Poisoning Prevention Act, which requires child safety packaging on liquid nicotine containers. It was co-sponsored by Connecticut's U.S. Rep. Eliza- beth Esty and U.S. Sen. Richard Blumenthal. Esty said in a statement, "Even a small bottle of liquid nicotine may contain enough nicotine to kill four small children. With the rise in popu- larity of e-cigarettes, thousands of children are exposed to liquid nicotine." CT's new regulations Connecticut's latest industry regulation kicks in March 1, when vaping retailers and manufacturers will have to register with the Department of Consumer Protection License Services Division. Division Director Michael Elliott said an applicant has to have a loca- tion and be in compliance with local zoning and public safety ordinances and codes. "This can't be done out of the back of your van," Elliott said. Also, you can't be a convicted felon or be guilty of tax or cigarette violations. The 18 staffers in his division aren't going to be conducting background checks, Elliott said. It's an honor system. Consumer Protec- tion will review all the supporting paper- work submitted with the application before approving a retailer for a permit. The potential is there for hundreds of per- mits, Elliott said, based on the number of lottery retailers in Connecticut. There is a presump- tion, he said, of a crossover. So far, though, as of Feb. 9, only 24 retailers have applied. It's a process that is fairly quick, provided all the rel- evant local approvals are submitted with the state application. Elliott said it can be done in a day or two. Just don't expect a quick turnaround at the end of February. Just as the vaping industry likes to clearly distinguish itself from tobacco products, so does state law differ between e-cigarettes and their tobacco equivalents. Two distinct per- mits are required with tobacco under the over- sight of the Department of Revenue Services. Lora Rae Anderson, director of communications at Consumer Protection, said her agency got the nod to oversee the vaping industry because liquid nicotine, the key ingre- dient of e-cigarettes, is considered a drug. "We have a diverse array of responsibilities," she said. Another state agency with its hand in the vaping business is the Department of Bank- ing, which is responsible for granting permis- sion to franchise a business in Connecticut. Market opportunities Among Ricciardi's four stores, which are open seven days a week, he has 12 full-time employees and some part-timers. He wouldn't disclose annual revenue num- bers, but said it's not a low-risk, high-return industry. A national report released in December said U.S. brick-and-mortar vape shops generate annual non-online sales of more than $300,000 per store, according to the 2015 Vape Shop Index, released by ECigIntelligence, Roebling Research, E-Cigarette Forum, and the SFAT. The index also found that more than two- thirds of respondents (69 percent) were single- store owners, while 16 percent owned two shops, and 15 percent had three or more stores. Ricciardi said the number of people Continued Vaping Demographics An online study by Vaping.com, which garnered 10,000 responses, determined more than a third of respondents had their first e-cigarette at a specialty retailer followed by online vendors and locations like gas stations, pharmacies and general stores. It also determined the e-cigarette buyer typically is a male between the ages of 22 to 54 with an average age of 39. Nick Ricciardi, owner of Smooth Vaporz, stands in front of a liquid nicotine display at his store in Waterbury. P H O T O | P A B L O R O B L E S Subscribe online: HartfordBusiness.com/subscribe Delivering Business. When you need information to grow your business, we deliver! 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