Big Three Moving Quickly in Growing E-Cigarette Presence

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Big Three Moving Quickly in Growing E-Cigarette Presence

By Melissa Kress, Convenience Store News - 10/28/2013

JERSEY CITY, N.J. -- The big three tobacco companies may be relative newcomers to the electronic cigarette market, but all three are poised to make moves quickly. Reynolds American Inc. (RAI), Lorillard Inc. and the Altria Group Inc. discussed their e-cigarette offerings during their respective earnings calls last week.

Colorado Success
RAI's R.J. Reynolds Vapor Co. unveiled its Vuse digital vapor cigarette at a launch party in June. One month later, Vuse made its first appearance in stores in Colorado.

"We are still in the early days, but the results are significantly exceeding our expectations," reported Daniel Delen, president and CEO of RAI. In its three months in retail, he said Vuse has become the market leader in Colorado, with replacement cartridges being the highest performer of the line's SKUs -- pointing to repeat purchases and adoption of the brand.

"We are pleased, but not surprised," Delen added. "Innovation has always been one of our advantages."

Vuse has been experiencing out-of-stock issues, especially in the early days, potentially putting constraints on further expansion, according to Delen. However, he said the success in Colorado "bodes well" for a national rollout of the product. He declined to release more details until the Winston-Salem. N.C.-based company's Investor Day in November.

Global Eye
Greensboro, N.C.-based Lorillard is also seeing success with its blu eCigs brand. The company acquired the electronic cigarette in April 2012, and it continues to grow in volume and market share, said Murray Kessler, Lorillard’s chairman, president and CEO.

Pointing to "a four-fold increase" in blu sales, Kessler explained that net sales for blu were $63 million and $177 million, respectively, for the three months and nine months ended Sept. 30. These numbers compare to $14 million and $22 million, respectively, for the three months and nine months ended Sept. 30, 2012.

According to EXCEL data, blu has attained an approximate 49-percent share of the domestic retail market for the third quarter, and approximately 44-percent share for the first nine months of this year, Kessler stated. The e-cigarette brand is now in more than 127,000 retail outlets.

Based on the success of blu thus far and the future potential of the electronic cigarette category, Kessler reported that Lorillard acquired SKYCIG, an e-cigarette company based in the United Kingdom.

"The immediate goal is to grow the awareness and brand of SKYCIG, and to expand blu and SKYCIG across [Europe]," he said. "This is not the beginning of a series of acquisitions, but rather we are looking at organic growth."

David H. Taylor, executive vice president of finance and planning and chief financial officer at Lorillard, noted that blu has the potential to become an international brand, with the acquisition of SKYCIG serving as the platform. "SKYCIG is a good start that will give us an 18- to 24-month headstart on what we could have done organically," he explained.

Kessler added that although Lorillard intends for blu to become a global brand, there are no plans to "shut down" SKYCIG.

Indiana, Arizona Mark the Spot
Not to be left out of the electronic cigarette buzz, Richmond, Va.-based Altria's subsidiary Nu Mark is prepping plans to bring its new e-cigarette brand MarkTen to Arizona in December. Marty Barrington, chairman and CEO of Altria, said more details will come as the expansion date nears.

As for now, MarkTen is experiencing a great reception in its first lead market. The electronic cigarette made its first appearance in Indiana in mid-August and can now be found in more than 3,000 stores in the state.

Barrington said it’s still too early to talk numbers from Indiana, but MarkTen has been well received by consumers and the trade, as CSNews Online previously reported.