Lorillard, Reynolds Continue E-Cigarette Rollout

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Lorillard, Reynolds Continue E-Cigarette Rollout

By Melissa Kress, Convenience Store News - 02/12/2014

GREENSBORO, N.C. -- The electronic cigarette category continues to see increased competition as existing players expand their reach. Lorillard Inc. and Reynolds American Inc. (RAI) are two such companies with a stake in the game that has broadened their distribution.

In the past few months, Greensboro-based Lorillard not only grew its U.S. presence with blu eCigs -- which is now in 136,000 retail outlets -- but also entered the European market with its acquisition of SKYCIG, an e-cigarette business based in the United Kingdom. The company's steps have led its electronic cigarette segment to record net sales of $54 million in the fourth quarter of 2013 and $230 million for the year ended Dec. 31. This compares to $39 million in the fourth quarter of 2012 and $61 million for the year ended Dec. 31, 2012, Murray Kessler, Lorillard chairman, president and CEO, said during an earnings call this morning.

Notably, SKYCIG generated $4 million in net sales during the fourth quarter after being acquired by Lorillard on Oct. 1, he added.

As for share, Kessler said blu eCigs captured approximately 48 percent of total market for the fourth quarter and approximately 47 percent for the year.

"Lorillard has established itself as the clear leader in the e-cigarette category in 2013," he said.

Looking outside the U.S. market, Kessler explained the company is rebranding SKYCIG e-cigarettes to blu and will roll out the product across Europe by mid-year.

That rebranding will include ongoing investments in marketing and advertising to establish blu in the U.K., said David Taylor, Lorillard chief financial officer. He added the company expects to stay in investment mode for e-cigarettes for "the foreseeable future."

"I believe [we] have only scratched the surface of the category," Kessler added.

Winston-Salem-based RAI's subsidiary R.J. Reynolds Vapor Corp. also increased its presence in the e-cigarette arena by expanding its VUSE digital vapor cigarette to Utah. It is the second market for VUSE, which made its debut in Colorado in July.

"VUSE continues to deliver outstanding results in Colorado and remains the market leader in the state," Daniel Delen, RAI president and CEO said during the company's earnings call Tuesday.

In addition, VUSE has helped drive growth in the e-cigarette category as a whole in the state, he said. "Since VUSE was introduced in July, the e-cig category has tripled in size," Delen added.

Notably, VUSE is seeing not only consumer trial but also repeat purchase. Refill cartridges are the brand's largest SKU at 80 percent of total sales volume, he said.

And while he said it is too early to talk numbers in Utah, "the expansion is going well" and he sees no reason why Utah won't be similar to the experience in Colorado.

VUSE is on course for a mid-year national rollout, Delen concluded.