From good to great

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From good to great

December 1, 2015

Calumet Advisors offers a unique combination of knowledge and expertise to help vapor companies leap to the next level.

TR Staff Report

Navigating the ever-evolving vapor business can be tricky. Rapid changes in legislation, technology and competitive dynamics force players to constantly re-evaluate the overall market. How, for example, has JT’s acquisition of Logic impacted the valuation of still-independent brands? How will new regulatory demands on e-liquid containers impact access to shelf space? In addition, the industry’s global nature requires companies to understand the nuances of different cultures, which can have real business consequences.

Gathering such intelligence is time-consuming and expensive, which means the best information tends to be available only to the companies with the deepest pockets—Big Tobacco. Yet the vapor business comprises many small- and medium-sized players that also need access to world-class expertise. To serve this group, three businessmen recently established Calumet Advisors. By combining their knowledge, skills and networks, they are able to offer an unprecedentedly wide spectrum of consulting services.

Calumet’s creators—Givi Topchishvili, Ron Tully and Dmitri Churakov—boast years of experience in the tobacco, pharmaceutical and financial services industries, and each has a strong interest in the vapor business. Topchishvili is the founder and president of 9.8 Group, a holding with a portfolio of consulting companies in various verticals. He has more than 25 years of experience in international business, covering marketing, communications and advisory services for various industries. Tully brings a quarter-century of tobacco industry experience to Calumet Advisors. Among other things, he is the founder of TNV Ventures, a specialty consultancy for the tobacco, nicotine and vapor fields. Churakov is the founder and CEO of the Wingle Group, a China-based consulting service and authority on e-cigarette technologies, accessories and e-liquids.

Vapor Voice caught up with Topchishvili to discuss the group’s ambitions.

Vapor Voice: Please describe the circumstances under which the members of Calumet met; what does the name stand for?
Topchishvili:
The idea of launching a full-fledged consulting service devoted specifically to the vaping industry had been on our minds for some time. The marketplace was craving professional services that could help mid-size enterprises “leap” to the next level. Also, the natural consolidation taking place in the industry revealed a huge gap in industry-specific advisory.

The idea to start Calumet Advisors arose on a plane from Europe to the U.S., when three visionaries, each with unique capabilities and extensive networks, started talking. As entrepreneurs with a global mindset, we realized that, when combined, our knowledge of industry innovation, market-entry strategies and regulatory issues would perfectly fill that advisory gap. We understood the opportunity and the fact that we were going to be on the market just in time. Although each of us already had several well-established businesses, we realized that joining forces would open up considerable new opportunities. That reminds me one of my favorite quotes, from John D. Rockefeller: “Don’t be afraid to give up the good to go for the great.”

As for the name, we were thinking of something authentic and meaningful that would tie to our mission to provide wise and balanced solutions. The calumet is a ceremonial pipe used in some Native American cultures during sacred ceremonies. We found it symbolic and reflective of the message our company wanted to convey to the market.

What will Calumet be able to offer to the vapor industry that the partners’ companies could not offer individually?
Calumet Advisors offers consulting services rooted in industry-specific practical knowledge and methodologies, combined with access to international markets and capital. That’s not something partners could have offered individually. You will find companies providing fragments of the services we offer, but Calumet Advisors’ ability to provide the full range on a global scale is unprecedented in this industry.

What type of knowledge is most in demand within the vapor industry?
The new tobacco industry currently faces challenges typical for the period of transition from early adopter-oriented startups to institutional mode, namely a period of market consolidation.

Just a year ago many thought that the low barriers to entry were a major industry threat. Today the discussion is if there will be any small players left in the coming years. Big Tobacco, as well as major PE and family funds are coming in with cash, strategic marketing and global distribution networks. And these are the very areas where everyone else must keep their eyes on.

Companies that are looking to sell either strategically or feel forced to do so by new realities must do everything to increase their valuation, and increasing sales will not necessarily be the best way to get there—in some instances it’s even detrimental!

On the other side of the spectrum, you have many successful international brands that are now considering entering the United States, and U.S. brands eyeing the lucrative Asian markets. Those companies need the tools to replicate their business success while facing new realities, and this is where market-entry knowledge is crucial. And just about everyone is vying to increase their distribution, which is difficult to do in an oversaturated market. Just look at the recent retail partnership between PAX and Tenet Southampton—that was a very elegant and creative way to make retail inroads.

We give our clients the knowledge and resources to stay competitive, increase valuation and gain market share, without competing with Big Tobacco dollar to dollar—because that’s not a war one can win.

What do you see as the three greatest challenges to the vapor industry in the near future? Why those?

The accelerated pace of consolidation in the vapor industry today implies more mergers and acquisitions. That’s a challenge for many companies because it requires them to have a management team with expertise in M&A and investments. Unfortunately, entrepreneurs in this industry often lack both. Accordingly, this knowledge gap will put such companies under a lot of pressure when they start searching for investors and negotiating company valuation.

It’s surprising to see how many companies today are being valuated using outdated criteria—that includes companies with significant market share and real opportunities to attract investors. But without the necessary financial skill set they lose the momentum and risk failing in the new environment. On the other hand, this atmosphere provides investors and shareholders with a unique opportunity to quickly grow the business and get a lucrative exit, should they chose to do so.

Another challenge is the constant demand for R&D and innovative technologies. There is so much happening right now in search of “that perfect device.” We mentioned PAX earlier. PAX2 is a great vaporizer, but Juul really seems to take things in a new direction with its slick pocket-size design and swappable juice cartridges. It is very common for companies to become complacent and chose stability over innovation. Fortunately, the vapor industry does not allow companies much leisure—you either swim or sink.

The third challenge is developing know-how for using vaping devices outside of the vapor industry. There are numerous opportunities for secondary vaping applications in Big Pharma, healthcare and wellness industries. For example, learning to adopt vaping devices for medicine intake, or as a tool to manage hunger, facilitating weight loss. We expect that some of the secondary applications of vaping devices might become dominant in the future.

In general, how would you recommend vapor companies prepare for those challenges?
To quote Guy Kawasaki, “You have to start with the basic premise that you need to know what your competition is doing.” If you carefully analyze the successes and failures of other players, it could give you any number of successful strategies. They key is having the knowledge to truly understand the market nuances and the ability to turn it into an opportunity for your company.

How will you define success? In other words, what will you accept as evidence that the consulting services provided are making a positive difference for your customers?
Quick-paced business does not allow for intangible results. To us success and positive difference means creating innovative business opportunities for our clients: bringing them to new markets, helping them expand market share, enabling higher valuations.

What general advice would you have for any person or company considering an entry into the vapor business?
The gold rush is definitely over. Now it’s more of a Spartan race for shelf space and innovative products as the key targets. So we would recommend to only go into it if you have the money, patience and determination to win.

Where do you see the industry five years from now?
Predicting the future for such a volatile industry is a vain exercise. What we expect it to accomplish in the next five years is to become a far deeper integrated lifestyle gadget, adopt industry-wide quality and safety standards, and learn how to take the vaping technology to other industries. And, of course, to make leaky cartomizers a concern of the past.

 

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