Blu ecigs, a maker of electronic cigarettes acquired by tobacco titan Lorillard this year, is one of several e-cigarette makers ramping up marketing to win over the rising number of smokeless tobacco users. Lorillard’s $135 million acquisition of blu ecigs was discussed in a previous Bizmology post by Hoover’s colleague Catherine Colbert. Subsequent advertising efforts to “take back your freedom to smoke” are part of the US tobacco industry’s response to the wave of smoking bans, taxes, and publicized negative health effects. Such concerns have driven volume sales of traditional cigarettes down by 3% to 4% a year, according to this Bloomberg article.
Ironically, the US Food and Drug Administration (FDA) may be helping to spur the movement toward more smoke-free tobacco consumption, as it has yet to impose regulations on these cigarette alternatives. This has implicitly given makers the green light to develop and market new smokeless tobacco alternatives without much government intervention.
In addition to Lorillard’s battery-powered e-cigarettes, rival US tobacco companies Altria and Reynolds American have introduced with considerable fanfare finely milled tobacco-concentrated dissolvable lozenges and sticks to spark demand for smokeless tobacco. Reynolds American rolled out Camel Orbs. Altria introduced Marlboro and Skoal brand sticks, and in 2012 Verve, a nicotine disc.
Meeting with mixed consumer reviews, snus, a pouch snuff that isn’t spit, is sold by Altria (through subsidiary UST) and RJR Tobacco (part of Reynolds American). Reynolds American reported more than a 25% jump in earnings in 2011 over the prior year, fueled in part by Camel snus sales. Although Altria’s sales and earnings slipped in 2011, UST posted a shipment volume increase of more than 1% over 2010.
The switch is slow but steadily growing; smokeless alternatives today generate a thin 1% of the overall $90 billion US tobacco market, but sales grew roughly 7.5% in 2011 over 2010, according to Euromonitor International. Prior to that, the CDC reported that about 122.6 million pounds of smokeless tobacco were purchased in the US in 2010, up from 121.4 million pounds in 2009. Lorillard reports that blu ecigs generates $300 million in sales, but that number is expected to increase to $1 billion annually.