Ballantyne Brands Eyes C-stores as Biggest Growth Opportunity


NEW YORK -- With a strong presence in other retail channels such as mass-merchandise, grocery and drug, Ballantyne Brands is now ready to ramp up convenience store distribution of its Mistic electronic cigarette brand.

CEO John Wiesehan Jr. revealed the company’s plans today during Wells Fargo Securities LLC's "Tobacco Talk" conference call series with Bonnie Herzog. Herzog is managing director of tobacco, beverage and consumer research at Wells Fargo Securities.

"Ballantyne's biggest opportunity for growth will certainly be the c-store channel. We are rolling out to Circle K nationally this month. We have rolled out to the entire chain of Kangaroo Express," Wiesehan said. He also reported that the Charlotte, N.C.-based electronic cigarette company is working with convenience channel distributors including Pine State Trading Co., Core-Mark Holding Co. and H.T. Hackney Co.

"You are going to see our c-store distribution increase quite dramatically in the next three to six months," he said.

With Big Tobacco companies The Altria Group and Reynolds American Inc. (RAI) throwing their hats into the electronic cigarette ring, the retail space is getting more crowded.

"I welcome Big Tobacco. I think they bring credibility to the market and to the category," Wiesehan said. "I also welcome them because I am not going to be a Big Tobacco company. I am going to act like a [consumer product goods (CPG)] company. We have been told by large, national retailers [that] the cigarette companies, at times, are kind of inflexible. They feel pigeon-holed at times because of their trade contracts. We are going to run this business as a CPG business. We are going to try to maintain their margins, and we are going to continue to be nimble and flexible as it relates to how we do our in-store merchandising."

The big three tobacco companies -- Altria, RAI and Lorillard Inc. -- have the war chests, the marketing and the distribution model. With that, Altria and RAI have the ability to drop their e-cigarette products at retail like Lorillard has done with blu, he said.

"We do think there is going to be room for two or three non-tobacco companies to hold their own within the retail distribution," Wiesehan added.

In addition to making significant moves further into the c-store channel, Ballantyne Brands will introduce a new product in the fourth quarter. The chief executive said details will be revealed in the next 30 days.

On the manufacturing side, Ballantyne Brands this year began working with a Baltimore-based company to manufacture its e-cigarette liquid, bringing that part of the operation from China to United States.

"Today, the product is manufactured in China with the e-liquid made in Baltimore. But for the past six to eight months, our board has taken a very hard look at doing final assembly and production here in the U.S," he said. "We have gone so far down the path that we have identified our engineering group that will build the machines for us and we have already identified [a site] in North Carolina close to our headquarters in Charlotte."

The plans are not yet final, as the company still has to conduct its final due diligence on the final analysis, "but it is something we are taking a very hard look at," said Wiesehan.

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