Altria to Enter Electronic Cigarette Business

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Altria to Enter Electronic Cigarette Business

By Melissa Kress, Convenience Store News - 04/25/2013

RICHMOND, Va. -- After months of speculation, The Altria Group Inc. announced today that is throwing its hat into the electronic cigarette ring.

The Richmond, Va.-based tobacco company revealed this morning that its subsidiary Nu Mark will introduce an electronic cigarette into “a lead market” in the second half of this year. This will make Altria the last of the big three tobacco companies to join the e-cigarette industry.

"The [electronic cigarette segment] is small relative to traditional tobacco products, but there is no doubt that adult tobacco consumers are interested in it," Altria Chairman and CEO Marty Barrington said during the company's earnings call this morning.

He explained that Altria has been following the increased awareness and trial of e-cigarettes over the past year and believes the time is right for Nu Mark to enter the vapor product arena. More details will be revealed at Altria's Investor Day in June. However, Barrington said the company intends to join the e-cigarette segment "responsibly" and a lot of that will be defined by any regulation issued by the Food and Drug Administration.

"We have a product and a plan to allow us to be competitive," he noted.

Nu Mark is an Altria subsidiary primarily focused on developing and marketing innovative tobacco products for the adult tobacco consumer. It was behind the development of Verve discs, a tobacco-less nicotine product that Altria launched in May.

"We were excited to see that MO's Nu Mark subsidiary plans to introduce an e-cig into a 'lead market' in [second-half] 2013," said Bonnie Herzog, managing director of tobacco, beverage and consumer research at Wells Fargo Securities LLC.

Altria's announcement comes after months of speculation over when -- not if – and how it would introduce an electronic cigarette. Some industry watchers believed Altria would acquire an existing e-cigarette company, while others thought it would use its existing research and development muscle to launch its own product.

Greensboro, N.C.-based Lorillard Inc. was the first major tobacco company to enter the e-cigarette playing field with its April 2012 acquisition of blu ecigs for $135 million. In its first-quarter results released yesterday, Lorillard reported that distribution of blu ecigs expanded to more than 80,000 retail outlets during the quarter, resulting in net sales of $57 million and a more than 40-percent retail market share.

Winston-Salem, N.C.-based Reynolds American Inc. (RAI) has also made waves in the e-cigarette segment. Its R.J Reynolds Vapor Co. introduced Vuse this past summer, and RAI's President and CEO Daniel M. Delen said during its earnings call this week that the company will reveal expansion plans soon.