FORT LAUDERDALE, Fla. -- Standing on the outside of a robust party, Imperial Tobacco not only knocked, it barged through the front door and in one swoop, took over the party--the e-cig party.
In just one piece of a dramatic sea-change that will transform the entire U.S. tobacco landscape, the British tobacconist acquired blu, the trendy Lorillard e-cig brand that owns 45% of the total U.S. electronic cigarette market, as an offshoot of Reynolds American Inc.'s acquisition of Lorillard Inc. (click here for coverage).
While details remain scare, observers expect Commonwealth-Altadis Inc., Imperial's American arm based in Fort Lauderdale, Fla., to tuck blu into its total-tobacco portfolio and feature it as a marquee asset.
Imperial Tobacco chief executive Alison Cooper on Tuesday touched on blu's domestic and global potential.
"This gives us immediate leadership in e-cigarettes with the No. 1 brand in the U.S., and it has great international growth potential," she said in a webcast. "[blu] is a strong brand franchise, and it's recognized that Lorillard has done a great job at building the brand in what remains a highly fragmented market."
She added in a separate statement, "We intend to internationalize blu, the U.S. leader in e-cigarettes and enhance its growth opportunity with our know-how." (Click here for coverage.)
blu Reach
Analysts and manufacturers of e-cigarettes and the rapidly expanding e-vaping/open systems market were taking in the rapid developments and speculating what impact the sale of blu could have on the $1.5-billion electronic-cigarette market.
In an updated note to investors late Tuesday, Wells Fargo senior tobacco analyst Bonnie Herzog said the deal "may spark further industry consolidation with e-cigs/vapor as the catalyst."
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She added, "blu being divested to Imperial surprised us as we believed RAI would pursue a multi-brand 'portfolio' strategy in vapor."
The country's No. 2 e-cig leader, Logic Technology, sees the blu deal as potentially accelerating consolidation of the electronic-cigarette segment, one that is currently cast with as many as 200 players.
"You are going to have five big brands: Mark Ten, Vuse, Logic, NJOY and blu," Logic president Miguel Martin told CSP Daily News. "It's hard for retailers to give space to more than five brands, other than open systems, perhaps. But as for electronic cigarettes, I think you'll find these five brands dominating the market."
As for the sale of blu, Martin sees both challenges and opportunities in the short and long run. "I don't think it changes the landscape. Lorillard spent a lot of money on blu, but they're main focus was Newport. … I think for Commonwealth-Altadis, it will be a primary focus.
"But as someone who's gone through major acquisitions at Altria, there is a lot of disruption. I see a lot of opportunity over the next four to six months [for us and other e-cig companies.]"
Martin, a former Altria executive before joining Logic last year, expects blu to remain a formidable player and the brand Logic seeks to surpass.
"I have taken blu very seriously and have spent a lot of time game-planning against them," he said. "They are the No. 1 brand, and we're No. 2. We're going to work very hard during this disruption. So for us, it doesn't affect our marketing strategy other than we're going to be aggressive in growing our business."
That said, Martin would be surprised if Imperial didn't optimize blu's brand equity. "I see blu being a big part of their positioning strategy" across cigarettes, cigars and e-vaping.
"I see them going to retailers, positioning themselves as 'we're your growth company.' I think they are going to be very aggressive. And anybody who thinks this hurts blu, I would disagree. Integration is going to be hard, but they have some very talented people. Kevin Freudenthal [president and CEO at Commonwealth-Altadis] is a bright guy. I worked with him, and he's very capable."
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