Lorillard expects success with Blu Cigs, but will others follow?

It appears that tobacco manufacturer Lorillard and electronic cigarette brand Blu are still just getting to know each other. With its latest earnings report, Lorillard indicated general satisfaction with its acquisition of Blu earlier this year.

Lorillard said that Blu contributed $8 million to the company’s total net sales for the quarter, but didn’t have an impact on profitability. In addition, Lorillard earnings per share were $2.19 when adjusted for costs related to the Blu acquisition.

Murray S. Kessler, Lorillard CEO & President, expressed a strategic view of Blu and the electronic cigarette market after the first quarter earnings report. “I’m even more convinced about this opportunity now that we have gotten to better know the business and its management team,” Kessler said in recent earnings report coverage. “The business is rapidly growing, there is a clear patch to improving the technology over time, and consumer research supports that there is strong trial and repeat. Keep thinking of Blu as a long-term R&D project that we’re very excited about.”

As for electronic cigarette government regulation, Kessler seems to see things heading mostly in the right direction. “We are taking a leadership position in the industry regarding responsibility and quality control and we look forward to working with the FDA so that it allows this segment to responsibly grow. We also look forward to working with the FDA to assess the role c-cigs can play within a comprehensive hard reduction strategy. We are convinced e-cigs can, and should, play a major role.”

Besides Lorillard’s direction with Blu, it will be interesting to see where other major tobacco companies go with electroniccigarettes as they seek additional markets.

When asked about the Lorillard acquisition and electronic cigarettes during a conference call earlier this year, Altria Chairman & CEO Michael E. Szymanczyk remained rather cautious. “We pay attention to all of these emerging segments and watch what’s going on and do some research and so we’ve been monitoring this one for some time,” Szymanczyk said. “There is pretty high awareness, but it represents still pretty small business proposition and so we are mindful of it.”

While Szymanczyk indicated that Atria has done consumer research on e-cig technology, he also admitted the marketplace is wide open. “It’s not the kind of things that you would market test because it would be pretty hard to read among all the noise that exists in the market, but you really rely on consumer research relative to communication around the segments and the particular audiences.”

Phillip Morris also seemed to send mixed messages in electronic cigarette and alternative tobacco product discussions earlier this year when CEO Louis Camilleri said the industry could be heading for a “paradigm shift” with new products around the world. However, any details on where Phillip Morris is going with c-cigs or other products remains open to speculation.

The major tobacco manufacturers may also been cautious when it comes to electronic cigarettes since some companies experimented with them with little progress years ago. Only now that e-cig technology has improved in the last decade have they gained more significant popularity, acceptance and apparent success.

So, while Lorillard has taken that initial electronic cigarette plunge with the Blu acquisition, the other major tobacco companies are still sitting on the edge of the pool while countless smaller brands enjoy the water, or vapor, in this case. 

Metro keeps its eye on the electronic cigarette prize

As the electronic cigarette market grows rapidly, the METRO brand is looking to continue cutting its way through an often hazy and cloudy marketplace with a solid line of products and a straightforward marketing approach.  

The Colorado-based Metro brand was launched by Nicotek, LLC in January 2011 and is available both online and in retail outlets. Like many electronic cigarettes, METRO  uses a simple two-part system with a rechargeable battery, flavor cartridge and battery charger.  

Marketed in premium and standard starter kits with separate accessories, and now, disposables, Nicotek has closely monitored and watched the electronic cigarette market for about three years to help develop the METRO brand and products.

 That research into both the benefits and drawbacks of electronic cigarettes led Nicotek to specifically focus on quality and consistency with the METRO brand. In addition, METRO closely follows suggested FDA e-cig regulations, including selling only regular and menthol flavors at standard nicotine volume strengths between 0 and 1.8 percent with water, propylene glycol and flavor. 

 “We continue to react quickly to market conditions, provide top of the line display and merchandising options, and of course, offer a quality product at a fair price,” said Mark Williams, business development representative for Nicotek. “These are all the things that retailers, distributors and consumers are looking for.” 

METRO starter kits with a rechargeable lithium battery, two hybrid cartridges and a USB battery charger retails for a reasonable $19.99. They also come in premium kits with two batteries, 10 cartridges, three charges and a case for $49.99.  

In April 2012, METRO launched a disposable one-piece electronic cigarette called SEVEN that retails for $7.99 delivering about 300 puffs or the equivalent of two packs of traditional cigarettes. 

“This new item from METRO allows us to offer a more natural smoking experience through an e-cig that is about the same size as a traditional cigarette,” said Chris Colon, category development manager for The Pantry convenience story chain. “Consumers are shopping with their wallets in today’s economy and I feel the METRO SEVEN provides consumers with an option they have been looking for.” 

While I find the various electronic cigarette comparisons to be somewhat subjective, my experience with the METRO 1.8 percent standard e-cig had it lasting quite a long time without needing a charge or cartridge change. Also, the battery and cartridge proved to be dependable with the flavor - one of the most realistic I’ve experienced when compared to traditional cigarettes. Finally, a functional and eye-catching tin carrying case gives METRO some added style, and they are now selling t-shirts online.

METRO seems to be striking a good balance between online and retail sales availability. Their website at www.metroecigs.com gives customers easy access and basic product information. With a presence in more than 10,000 U.S. retail stores, METRO should grow that area further with products like the disposable SEVEN. 

“Our team is constantly researching and brainstorming new ideas to help grow the electronic cigarette market,” said Arthur Marquez, creative director for Nicotek. “2012 brings a tone of new and exciting concepts to the table.” 

Competing in an ever growing, crowded and complicated electronic cigarette market, METRO is likely to succeed based on a combination of simplicity and creativity. “We definitely plan on longevity,” said METRO's internet marketing specialist Jessica Miltier. “Even as a company in its infancy, we have been able to stand up against some of the biggest competitors by following the market and growing with it. We know it’s not going to get any easier and controversy will continue, but that helps us stay on our toes.” 

With starter kits and disposable products online and in retail stores, METRO hopes that strategy helps continue successful growth.