As cigarettes sales continue to show steady decline over the past decade, the battle is on for big tobacco. According to the Federal Trade Commission, U.S. expenditures for cigarettes marketing declined from $9.94 billion in 2008 to $8.05 billion in 2010. In an effort to stimulate sales, major tobacco players like Altria, Lorillard, and Reynolds American are taking proactive steps to avoid the financial fall-out. Late to the party, these companies have finally chosen to move into electronic cigarettes and use our new market as another way to reach its declining consumer base.
With major tobacco companies now developing and marketing their own electronic cigarettes, it raises several questions. Will the new e-cigs drive innovation in electronic smoking or just use their muscle to crush the small innovators in the e-cig industry? Will people accept the new e-cigs marketed through Big Tobacco companies or will they shun them due to their former reputation?
All five big name US tobacco companies are jumping on the e-cig bandwagon. Let’s take a brief look at each of these companies and how they are introducing e-cigs into their product lines.
Altria is the largest cigarette manufacturer in the United States. Based in Richmond, Virginia, Altria produces a variety of popular cigarette brands including Marlboro, L&M, Parliament, and Virginia Slims. Altria recently announced plans to introduce their own e-cig brand later in 2013. While many are waiting with eager anticipation to see the new e-cig Altria will unveil, this company is actually playing catch-up with their competitors who are already embracing the e-cig market.
British American Tobacco
British American Tobacco is another popular cigarette manufacturer, credited with distributing Lucky Strike and Pall Mall cigarettes. In December 2012, British American announced that they had acquired CN Creative Limited, a start-up based in the United Kingdom that specializes in electronic cigarette research and development. With the acquisition, they also took over Intellicig, the e-cig brand sold in more than 26 countries through over 5000 retailers.
Imperial Tobacco is another leader in the Big Tobacco industry. With brands like Embassy, Lambert, Butler, and Davidoff, Imperial dominates the cigarette industry in many African countries. On May 1, 2013, Imperial announced their intention to expand their company to include electronic cigarettes. They are open to both development of new e-cig products or acquiring existing brands.
Lorillard is the third largest tobacco company in the United States. Based in Greensboro, North Carolina, Lorillard is responsible for making Newport, Kent, and Maverick cigarettes. In April 2012, Lorillard moved into the e-cig industry by acquiring Blu eCigs for $135 million. This decision proved to be lucrative right away. During the first year under Lorillard management, Blu eCigs expanded to sales in more than 50,000 retail stores. The result was an immediate jump in profits, with Blu eCigs contributing $61 million to Lorillard’s overall net sales for the year.
Reynolds American is the second largest cigarette maker in the United States. Based in Winston Salem, North Carolina, Reynolds American produces Pall Mall and Camel cigarettes. This company recently decided to expand and include a line of electronic cigarettes. As a first step, Reynolds has created the Vuse e-cig, which is now available in limited distribution in North Carolina and Virginia. Vuse e-cigs are expected to be available throughout the United States soon.
So these big five are obviously embracing electronic cigarettes as a way to continue generating sales in the face of declining tobacco use. While many people are choosing to give up smoking, e-cig use is increasing with each year. The future could be bright for e-cig users as more companies move to develop cutting edge technology to serve as an alternative to tobacco cigarettes, even if it comes from an old enemy.
What do you do think about Big Tobacco moving in on E-cigs? Will you avoid them out of principle? Could their financial clout actually help the industry? Leave us comment with your thoughts below.