Unit volumes for Newport (both Menthol and Non-Menthol) were up 8.2%, and Maverick volumes were up 22.7%, with CEO Murray Kessler citing the introduction [image-nocss] of Newport Non-Menthol in the fourth quarter of last year as a "solid contributor."
As for Newport Menthol, Kessler said its net pricing was "very robust" in the first quarter, and the company pulled back on some buydown support. He added that the brand "is just very strong and continues to organically grow."
The total volume growth, along with higher prices net of promotion, translated to a 12.9% increase in net sales to $1.5 billion.
Meanwhile, the industry awaits the decision from the U.S. Food & Drug Administration's Center for Tobacco Products (CTP) on the fate of menthol cigarettes. The FDA's Tobacco Products Scientific Advisory Committee (TPSAC) panel said in March that the removal of menthol products from the U.S. market would be a benefit to the public health, although the CTP does not have to follow that recommendation. A report from CTP is expected in June.
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"We believe the evidence presented in both the industry reports and even in the TPSAC report itself supports the company position that no disproportionate menthol regulation is warranted," Kessler said, also citing black market implications as a reason for no disproportionate menthol regulation. "So hopefully, the worst is behind us," he said.
Kessler also addressed recent discussion focused on Philip Morris USA contracts. As previously reported in CSP Daily News, the PM USA contracts feature a Marlboro Leadership Price option for higher-tier retailers, which provides additional promotional considerations in exchange for a price ceiling on packs of Marlboros.
Kessler said the effect of the PM USA contracts on Lorillard brands depends on how much participation there is. Lorillard has an "equitable clause," in which if margins come down for Marlboros, they would also come down for Lorillard brands. "So presumably that would be a favorable impact," Kessler said
"The other important thing to know is we saw a lot of volume, which are not markets where they are even under contract. So presumably, it's no effect there."
He said the company would "very carefully" watch the situation, and may need to be a little more competitive in some modest areas. "So we'll see how it plays out, but it's a different answer if there's 10% participation or 90% participation."
In addition to Newport, Greensboro, N.C.-based Lorillard has four additional brand families marketed under the Kent, True, Maverick and Old Gold names.
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