BIZMOLOGY — Electronic cigarettes are not new. As the more recent history of the story goes, the idea came in a Chinese pharmacist’s dream in 2000. Europe embraced the product in 2006, with US consumers taking their first vaporized drag a year later.
These smoke-free cigarettes have attracted even more attention from regulators. Spurred initially by the World Health Organization in late 2008, e-cigarettes have faced years of debate, legislation, and controversy, and the smoke won’t clear entirely anytime soon.
Then in early 2012 Lorillard, the nation’s oldest continuously operating tobacco business and third-largest maker of cigarettes in the US, inked one of its most forward-thinking deals. The smoking giant acquired Charlotte, North Carolina’s blu eCigs for a whopping $135 million. Needless to say, the move piqued the interest of industry followers, cigarette smokers, and nonsmoking advocates.
blu eCigs founder Jason Healy, who still heads the electronic cigarettes business as president under Lorillard’s umbrella, was reminiscing recently about last year’s April 25 purchase, reading about our impression of the deal on Bizmology.com and leaving a comment.
Healy and I have since discussed where blu eCigs is today and what the future holds for the company and this controversial niche industry.
Other than the obvious reason of wanting a progressive product in its portfolio, longtime tobacco company Lorillard was attracted to blu eCigs for its leading brand and its established infrastructure. Buying your business has allowed Lorillard to become an overnight player in the electronic cigarette market with a top brand. As we approach the anniversary of the acquisition, will you share some of your recent accolades and some hurdles you’re currently working to overcome?
The acquisition all in all has been a tremendous success for both parties. The year since the acquisition has been filled with record numbers across the board from revenue to retail locations. Aside from the “Wall Street” type successes, I’ve been so proud of my team and how yet again they have risen to the challenge. It’s not easy being a startup entrepreneurial company and overnight being part of a 250-year-old public company. The team here at blu has stayed true to its roots and continued to be a progressive, exciting, consumer-focused team despite the distractions and attention the sale brought. On the other side of the coin, I don’t think too many companies could have complemented this partnership more than Lorillard and their staff.
Lorillard banks on its Newport® menthol cigarette, the #2 top-selling cigarette name in the US, to bring in more than 85% of sales. How is blu eCigs blazing its own path under Lorillard’s umbrella?
Well, I think what Lorillard does is a little more complex than that. While they are known for the Newport brand, they are very much like blu in that they promote freedom and choice within the cigarette segment of the market, and their acquisition of blu shows the true commitment to that philosophy. Through Newport, Lorillard offers adult smokers alternatives and freedom, and blu really complements that. Lorillard showed a lot of foresight purchasing blu, and it shows their commitment to having a seat at the tobacco harm-reduction table. blu will continue to be successful because of this commitment and foresight.
Is the blu eCigs product sold through wholesale distributors along with the Newport, Kent®, Old Gold®, True®, and Maverick® brands? Has event sponsorship, such as SXSW, been a more successful vehicle for driving sales and in getting in front of existing and potential customers?
While blu is sold through the same channels as traditional cigarettes, it isn’t sold with Lorillard’s traditional cigarettes. Event sponsorship has been an important vehicle for blu, but again, getting back to the team here at blu, it’s one thing to sponsor an event, and then it’s a completely different animal to actually maximize and enhance the sponsorship. The team here works hard to think outside the box and look at all the different avenues to maximize sponsorship. I think the way they activate around our events or sponsorships has been the key. Millions of events are sponsored every year around America and even within our industry, but no one gets the success out of an event like my team! They absolutely study the event and the patrons and design a comprehensive program to ensure blu is the most visible and engaged sponsor.
Who have you found is the target audience for blu eCigs? Do your customers already smoke and they’re looking for an alternative?
The target audience is adult smokers, and the marketing team here at blu works very hard to screen and ensure our marketing is aimed at this audience. blu is made for smokers, and that’s who we have found use the product. We design and market blu so that it has no real appeal outside of adult smokers.
Are customers attracted to electronic cigarettes as a way to kick the habit while maintaining the social aspects of lighting up?
The great thing about blu is that it is truly the first viable alternative for smokers that mimics the act of traditional smoking. I always tell people that if you spoke to 10 blu customers you would find at least five different ways of using the product day to day. Some use it for freedom and others as a way of eliminating tobacco, smoke, and ash. It’s quite amazing to watch a product that at its core simply provides freedom and choice.
Smoking is banned in certain venues. How do your customers deal with the world adjusting to this type of smoking? I can see restaurant patrons, for instance, not knowing the difference and asking the person to “put out” their cigarette not knowing it’s actually vapors.
With other e-cig brands you might be right, but blu was designed to decrease the likelihood of confusing or offending non-smokers. More specifically, if you look at blu — while it acts like a cigarette — it doesn’t look like a cigarette. From the black color to the glowing blu tip, nonsmokers see immediately that this is not a cigarette, and, as a result, they are more likely to respond with curiosity as opposed to immediately being offended.
Founded in 1760, Lorillard is the nation’s oldest continuously operating tobacco business. How do you see blu eCigs fitting into the tobacco company’s long-term vision?
When I look at Lorillard, I see an older blu. I love the history of Lorillard and when you take a look, Pierre Lorillard was a pioneer much in the same way blu is today. They are cut from the same cloth, just that one side is a little older — LOL.
What is the role of the electronic cigarette alongside Lorillard’s tobacco cigarettes? Is the company growing the blu eCigs business separately? If so, where does blu eCigs leverage the expertise of Lorillard?
The purpose of blu and Lorillard is the same at its core. So in addition to returning strong growth to shareholders, we are both focused on offering choice and freedom to adult smokers. While that may sound simple and idealistic, it is very true and the reason why it has worked.
So, referencing the comments to last year’s blog post on Bizmology.com, are you amused and a bit shocked by the conspiracy theories mentioned — that Lorillard bought blu eCigs just to squash the company so that tobacco can win and live on? What do you say to these theorists today?
I was actually looking back at those comments a few weeks ago as I was reminiscing about the sale. I laughed back when they were made, and I think I laughed harder now. People who made those comments enjoyed the fact that e-cigs were somewhat “underground,” and they enjoyed the fact that they were trendsetters and they thought the acquisition would take that away. I said then and I can say again now that the result has been quite the opposite. Just like prior to the acquisition, blu will continue to blaze a path and lead an industry with so much potential and an extremely bright future.