E-cig shops taking hold in the Twin Cities suburbs

Anthony Haugen kicked his smoking habit five years ago. But a business opportunity lured him back, and he's now selling and puffing on the new smoking alternative: electronic cigarettes.

Haugen opened a shop two months ago in a Coon Rapids strip mall. It's one of a spate of e-cigarette sample rooms opening in Twin Cities suburbs.

"We've had very successful days," Haugen said. "There hasn't been a day where we haven't covered our expenses. On a busy day, we've seen 100 customers."

E-cigarettes are a rapidly growing industry nationally. Sales have doubled every year since 2008 and are projected to reach $1.7 billion this year.

In the Twin Cities, new shops are particularly prevalent in Anoka County, which has the highest concentration of smokers in the metro area. Five stores have opened in Blaine in the past six months; there are also three in Coon Rapids, two in Anoka, one in Ramsey and one in Fridley.

Elsewhere, Woodbury in the east metro, Hopkins in the west and Shakopee in the south all issued licenses for their first e-cig stores in September. Minneapolis city staffers estimate four or five shops in the city exclusively sell e-cigarettes. St. Paul city staffers say they know of three new e-cig stores.

Right now, the industry is largely unregulated at the state and federal levels, making it easy to get into the business. In most Minnesota cities, all you need is a license and storefront. With this year's steep increase in the state cigarette tax, the market for cheaper smoking alternatives is red hot, new shop owners say.

Also, the devices, which don't contain tobacco, don't fall under the state's clean-air act, meaning individual bars, restaurants and retailers set their own rules about people lighting up e-cigs. A handful of cities, including Duluth, have banned smoking them in public.

Another factor buoying the industry: E-cigarettes can be advertised on television, something conventional cigarette brands have been forbidden from doing for more than four decades.

The lack of regulation has prompted action by some government officials. Hopkins passed a yearlong moratorium on additional e-cigarette sample rooms after its first one opened on Main Street this fall. On Oct. 23, 40 state attorneys general, including Minnesota's Lori Swanson, sent a letter to the U.S. Food and Drug Administration (FDA) urging the agency to quickly issue proposed regulations addressing the advertising, ingredients, and sale to minors of electronic cigarettes.

How they work

E-cigarettes are battery-operated products that heat liquid nicotine, along with flavors and other chemicals, into a vapor that the user inhales. E-cigarettes don't smell or create smoke like conventional cigarettes, and users can control the amount of nicotine involved. In some cases, they contain no nicotine; Haugen says he uses none in the e-cigarettes he "vapes." Proponents of vaping say it's cleaner, safer and less intrusive than conventional smoking. Others say much more needs to be learned about their health effects.

Some shops mix their own juice so users can customize the vaping experience including flavor combinations and the amount of nicotine. Others, including Haugen, buy it from suppliers and add the nicotine.

Customers can buy a starter smoking device for less than $30. Juice refills, which start at less than $10, are equivalent to five packs of conventional cigarettes.

As with conventional cigarettes, buyers must be at least 18 years old in Minnesota. This fall, two e-cigarette shops in Blaine along with 11 other conventional tobacco retailers failed annual compliance checks, selling to a minor.

Getting into the business

It isn't just start-ups getting into the e-cig businesses.

Steve Johnson, owner of Little Havana Tobacco in Anoka, stopped selling conventional cigarettes in May in anticipation of the cigarette tax hike. His store, primarily a high-end cigar shop, added a small case of e-cigarettes in July. Johnson said it now accounts for 15 percent of his business. The profit margins on e-cigs are around 100 percent.

Johnson said he initially saw strong growth in his e-cig sales. It's slowed recently as so many other stores have opened in the area.

"Everyone with a dream and $5,000 is opening a shop," he said.

Unlike some of the newer e-cig start-ups, Johnson said he doesn't mess around the juice. He buys it prepackaged from a supplier in North Carolina.

Johnson, who said he generally frowns on overregulation, said he does see the value in the government overseeing what chemicals go into e-cigs and how they're mixed.

"Do you really want the genius behind the counter mixing this?" he asked.

Health questions

E-cigarettes haven't been extensively studied for health effects.

"There is still a lot we don't know about these products, including whether they will decrease or increase use of traditional cigarettes," Dr. Tom Frieden, head of the federal Centers for Disease Control and Prevention, said in a written statement.

Although e-cigarettes appear to have far fewer of the toxins found in smoke than traditional cigarettes do, their effect on long-term health must be studied, the CDC says.

One thing the agency can track is a steep uptick in use. About 6 percent of all adults have tried e-cigs. That's doubled since 2010.

The percentage of high school students who reported ever using an e-cigarette rose from 4.7 percent in 2011 to 10 percent in 2012. Use also doubled among middle school students. According to the CDC, 1.78 million middle and high school students nationwide sampled e-cigarettes in 2012.

The American Lung Association has lined up against electronic cigarettes, saying they are not proven smoking-cessation devices.

"We are advocating the FDA to step up. Right now, it's in limbo. It's the Wild West in terms of retail shops opening up, the type of information going out and the claims being made," said Robert Moffitt, spokesman for the American Lung Association in Minnesota.

Currently, the FDA regulates electronic cigarettes only if they make a therapeutic claim; most not do not.

The FDA is moving to release for public comment a proposed rule to regulate additional categories of tobacco products.

"Further research is needed to assess the potential public health benefits and risks of electronic cigarettes and other novel tobacco products," said an FDA spokeswoman.

Shannon Prather • 612-673-4804