Market Shifting to Pod Systems, Disposables Predicted to Shrink

Following the tightening of regulations, outright bans in countries around the world, and the potential of shrinking profit margins, there is growing evidence that the vaping industry is preparing to make a major shift from disposables to pod systems over the next few years. 

The popularity of disposable vape products has seen huge growth in recent years, with an estimated 50% of vape sales in the U.S. attributed to single-use devices at the end of 2022. 

Even with changing laws and added restrictions, sales of disposables have remained strong, and the market had previously been predicted to grow considerably between now and 2030. 

But after years of boom, could we be about to see the death of disposable vapes? Sources within the industry certainly think so, and a demise that is not just imminent but already well underway in many countries. 

In the U.S. the FDA continues to try to make the sale of flavored vapes, particularly disposables, impossible. In September, it issued CMPs (Civil Money Penalties) to 22 retailers for selling flavored vape products illegally. The penalties could be as high as $19,192 for each violation of the tobacco laws.

To date, the FDA has authorized just 23 tobacco-flavored e-cigarette products and devices, without a single sweet, fruit, or candy-inspired disposable among them.

The UK, France, Germany, Australia, and New Zealand are all implementing or considering a ban on the sale of single-use vapes in some form. Just like in the U.S., concern about who uses disposable vapes and who they are marketed to is prompting governments to act. But aside from the fears about youth vaping, disposable vapes are also increasingly seen as a growing environmental problem. 

In the United Kingdom, research by Material Focus estimated that as many as 5 million disposable vapes are thrown away each week, up from 1.3 million a week in 2022, with only around 17% of users attempting to send them for recycling. That equates to tonnes of lithium wasted annually, enough to build the batteries for 5,000 electric cars.

Any store that sells vapes in the U.K. should provide a system for customers to recycle used devices. That rarely happens, either on the part of the store or the customer, but even if it did, the cost of recycling those vapes could be as much as two hundred million pounds a year.

This environmental waste not only risks provoking regulatory action from governments, but also risks turning public opinion against disposable vapes, the sort of turn seen over the last few years against single-use plastics and other environmentally damaging products. 

In a bid to reduce battery pollution and waste, the European Union adopted a new regulation in July of this year that requires batteries in small electronic devices to be replaceable and recoverable by 2027. That includes smartphones, cameras, and other small electronics, but will also impact vapes.

This new law will add a layer of cost and complexity to European disposables, where the maximum sale price is effectively capped by the relatively low 2ml e-liquid limit, which would likely be untenable for vape brands even if they weren’t facing an outright ban. 

The profit margin on disposable, single-use vapes is rarely more than 25 or 30%, but often in single digits. That is why brands regularly launch new, incrementally different variations of their products: to create fresh interest and keep sales high. Increasing production costs without the ability to pass that onto the consumer makes for a product that, as remarked upon by Daniel Terveen of British American Tobacco, cannot sustain long-term growth. 

Many of the biggest names in disposable vaping are already making moves to switch to pod systems in several regions. Elfbar, VUSE, and several others have launched refillable pod vapes in recent months, which is a trend set to continue and accelerate. We can expect to see many more well-known brands follow suit in 2024. 

At the InterTabac trade show in Dortmund, Germany in September, more than half of the vape exhibitors displayed refillable products, with many others planning to launch similar devices. Pod vapes generally have a higher profit margin than disposables, and don’t face many of the regulatory hurdles that single-use vapes will encounter in the next 12 months. 

That is a potential win-win situation for vape brands as they get set to see their biggest markets for disposables shrink or vanish in the coming years. At the very least, it could be a lifeline, the alternative to which will probably be sinking without a trace.