As you’ve undoubtedly noticed, the e-liquid market has dramatically shifted toward larger bottle sizes and reduced pricing across the board. Wholesale and distribution pricing for 30ml bottles has reached unbelievably low bottom lines concurrent with pricing on 60ml bottles equal to–and sometimes less than–the former price point of 30ml bottles. This reality has caused panic among many manufacturers and wholesalers because reduced margins typically translate into trouble for your business, right? Not exactly. The solution–so often being the case–is to diversify.
First and foremost, as a manufacturer, you must consider whether your e-liquid line will even be on the market in 2019 relevant to the PMTA process through the Food and Drug Administration (FDA). Indeed, many variables are involved in navigating through FDA-mandated applications. However, one thing is certain. If no traction is gained in the legislative sphere through Cole-Bishop or HR 2058 or with respect to the pending lawsuits, then you will essentially have two options for preserving the availability of your e-liquid line on the market. One, is the aforementioned PMTA, and the other route is through Substantial Equivalence (SE). Both are pricy and equally vague concerning the likelihood of being approved. Should you decide to pursue FDA approval, then it is a matter of simply lowering your wholesale pricing on 30ml bottles with a 60ml option–assuming the application is approved–to remain solvent and competitive in this ever-changing industry.
The other more practical approach is to diversify your products. In other words, streamline your wholesale and distribution channel with a variety of nationally-branded lines for name recognition and value. Certainly, sales of your own manufactured lines may incur a loss or noticeable decrease. However, the pathway around this is to distribute e-liquid lines with established branding at rock bottom pricing, which will allow that brand to do most of the heavy lifting for you. The obvious benefit of taking such an approach is that you will be wholesaling and distributing at least some of the products that will be available following the 2019 approval deadline. Nathan Coccimiglio and Shilo Platts of Cash Vape Distribution have implemented this model into their game plan for being one of the businesses that will remain profitable over the long-haul of regulatory uncertainty and market change. When asked for further comment, Shilo Platts told us, “One of the advantages I have of working with Nathan is his uncanny ability as a business owner to predict how change will impact our sales before it even occurs. In that way, he’s tremendously proactive, and it is exactly why we continue to experience positive growth.”
Invariably, there will be those who stubbornly cling to the path of least resistance by blitz selling their own manufactured line with no intention of ever obtaining FDA approval while knowing they will be forced out of business in roughly two years. This is a similar pattern to the one we cautioned against many months ago regarding retail stores who were unwilling to diversify by carrying products other than their house lines. As we have seen, many of these stores are now permanently closed. Unfortunately, this is a scenario that could have been easily avoided by the willingness to adapt business models more conducive to regulatory change. Well, here we are again back at the drawing board as business leaders with critical decisions to be made. Experience tells us that Darwinian theory will take over once more in a survival of the fittest among us. Those with winning mindsets will prevail, and those with a status quo mentality will almost certainly fail. SVBS
Shilo Platts is Vice President of Sales/SFATA Co-President of Utah Chapter. Shilo grew up in New York City and the Salt Lake City area, has lived in Naples, Florida, and moved back to Utah to finish his education at the University of Utah where he earned a Bachelor of Science degree in psychology with a certificate in criminology. Family is of great importance to Shilo, and he takes pride in his Sicilian heritage. Shilo’s professional background in sales and marketing translate well into his role at Cash Vape where he is the Vice President of Sales and says, “I love my job! It’s refreshing to work with a team I genuinely enjoy being around, and for a company owner I truly respect and admire.”