It’s been a week of crazy ups and downs for the tobacco industry, but things have finally settled down enough to give us a clear view of the current situation. For months, there have been rumors that Reynolds American was interested in buying out Lorillard, but no one ever expected the events we saw unfold over the past few days!
Just two weeks ago, the tobacco brands had pretty clear rankings. Phillip Morris was the top selling brand, followed closely by Reynolds Americans in the second spot and Lorillard in third place. But now everything is up in the air! Reynolds American has acquired Lorillard for $25 billion in one of the most important tobacco mergers we have ever witnessed. As the two team up, rivals Camel and Newport are suddenly on the same team, but a few other tobacco brands are facing a completely unexpected future. Right after the merger was completed, Reynolds American turned around and sold Winston, Salem, Kool, and Blu Ecigs to UK-based Imperial Tobacco.
This was truly a surprising twist because analysts had expected the interest in a merger was closely linked to Blu’s rising status as the top selling ecig in the United States. As of June, Blu ecigs accounted for 42 percent of ecig sales in convenience stores. They were leading the vaping market in brick and mortar stores by a huge margin. This seemed like a very appealing asset that would interest Reynolds American, so everyone was surprised when the tobacco giant immediately sold the ecig brand to a UK tobacco company.
Now that Reynolds American and Lorillard have teamed up under one roof, it will definitely increase the competition with Phillip Morris. By acquiring Salem, Winston, and and Kool, Imperial Tobacco will likely slide into a new third-place ranking for US tobacco sales as well as claiming the top ecig sales spot thanks to Blu.
The fast paced buying and selling of tobacco and ecig brands has left many questioning the ultimate goal of Reynolds. Why dump the top-selling ecig brand without even giving it a shot? Reynolds CEO Susan Cameron spoke with confidence about the decision, explaining that the company was choosing to place full focus on their own ecig, Vuse. “Divesting Blu was a business decision. And it was important to Imperial as part of this divestiture package and ensuring that they were a strong #3 player. I think in context, we have such confidence in Vuse’s superior technology that it is a game-changing product. Its early market results demonstrate that. And we believe that Vuse will be very successful and is showing great signs as we have embarked on our national rollout. So we are very confident that Vuse can continue to compete with Blu. And we look forward to that continuing.”
While Reynolds is openly happy with the new acquisition of Lorillard, Imperial Tobacco is on cloud nine to have quickly taken such a high ranking position in the US market. CEO Allison Cooper refused to give details about how the company managed to secure Blu so quickly, saying only, “It’s clearly my extreme charm.”
We want to hear what our readers think of this crazy week of mergers! Do you think Reynolds did the right thing by acquiring Lorillard, but dumping Blu? Does Vuse have what it takes to outrank Blu in the coming months?