Feb 12 2014
Big Tobacco Shakes up Electronic Cigarette Market
Published by Clarence M. Jaramillo at 10:03 am under SBN News
Is Big Tobacco poised to take over the electronic cigarette industry?
Back in 2012, Lorillard acquired Blu Cigs for $135 million. Last year, the maker of Newport, Old Gold and Kent spent £30 million to add SKYCIG to its portfolio. Blu currently holds a 40% share of convenience store e-cigarette sales in the US while SKYCIG is one of the biggest ecig brands in the UK.
Imperial Tobacco, the world’s fourth largest cigarette company, purchased the e-cigarette business of Dragonite for $75 million last September. Dragonite is the Chinese company that invented the electronic cigarette.
Last week the Altria Group, makers of Marlboro, announced that it was buying Green Smoke for $110 million – which is almost three times the annual revenue of the Israel-based ecig company.
Although Reynolds is sticking with its own Vuse ecig and British American Tobacco has thrown its resources behind its Vype brand, it seems that acquiring major e-cigarette players are the way to go for tobacco companies looking to position themselves in the booming electronic cigarette market. After Lorillard, Imperial and Altria, other tobacco giants are likely follow suit this year according to analysts.
Wells Fargo projects that in the next decade, e-cigarette consumption will overtake that of traditional cigarettes.
“What was years ago a cult fad is now more than doubling in sales annually the last three years,” said Sam Hamadeh, CEO of research company PrivCo.
The centuries-old tobacco trade has largely depended on continuity while electronic cigarettes are creating an atmosphere of innovation and cutting-edge product development. “God forbid you would ever change the recipe to the Marlboros, so there’s no innovation whatsoever,” Hamadeh explains.
Andries Verleur, co-founder of leading ecig brand V2 Cigs, agrees: “Innovation has driven so many industries. We’ve taken a product and continue to innovate and make it better and better from a risk-profile perspective.” V2 cigs has also made their brand the most affordable by giving customers the option to use a v2 ecigs coupon.
NJOY, the biggest competitor of Blu in the retail sector, ran its “Friends Don’t Let Friends Smoke” commercial during the Super Bowl last week. Featuring electronic cigarettes on the most watched sports spectacle in the US shows how far ecigs have come. Clearly they are a niche product no more.
“When the [NJOY] e-cigarette TV ad ran on the Super Bowl last Sunday, that was the day e-cigarettes officially went mainstream,” observed Hamadeh.
CVS, the second-biggest drugstore chain in the US, announcement last week that it will stop selling tobacco products – a move that NJOY CEO Craig Weiss expects to have a domino effect for the e-cigarette market.
Walgreens and Walmart, number one and number three pharmacy chain in the country, are already carrying Blu and Mistic products as well as ecigs from other startups. Weiss believes that these companies are likely to continue selling e-cigarettes even if they decide to remove cigarettes and cigars from their shelves.
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