UBS-CSP Report, Part II: Marlboro, Newport Positioned to Grow
New programs, but little market shifts among the Big Three brands
NEW YORK -- Price adjustments, a slate of new marketing initiatives and product rollouts are having little bearing on how retailers gauge the Big Three cigarette brands.
Philip Morris's Marlboro lines jumped five points over the first quarter of this year, at the expense of R.J. Reynolds' Camel and Lorillard's Newport lines, according to the exclusive quarterly UBS-CSP tobacco survey of c-store chains. Nearly half of the 60 companies representing more than 13,000 stores expected Marlboro to gain the most market share in 2012. [Number of respondents to the online survey increased since yesterday's story about electronic cigarettes, which cited 51 chains.]
See Related Content below for Part I.
Several cited Marlboro's aggressive discount programs as a key contributor. "Marlboro has the highest level of discounting in the Special Blends and 72s," one operator said.
Another merchant noted, "Marlboro has already gained approximately 1.5% with our chain; however that is just a recovery of market share we lost prior to the addition of the Flex Option." The operator then noted, "I do not expect any of the big three to gain any market share in the overall market."
With Altria and Reynolds American expanding into a total tobacco platform and Lorillard branching into non-menthol and electronic cigarettes, the Big Three as they are commonly known continue to sharpen their pricing and marketing strategies on what easily remains the largest category in the convenience channel--cigarettes.
That said, a review of the past two years shows that despite noticeably strong competition from Philip Morris, Newport remains, in the eyes of c-store retailers, the dominant menthol brand in the United States. In March 2010, for instance, when asked this same question--Among the Big Three premium brands, which do you expect to gain the most market share?--Newport registered only 13%, with Marlboro scoring 54% and Camel 33%.
Yet, in the most recent survey, Newport holds steady at 32%, trailing Marlboro by 16 points to Marlboro and outpacing Camel by 12%.
"We are in heavy Newport markets and as long as LOL [Lorillard] holds current discount rates Newport will continue to grow," an operator said.
UBS senior tobacco analyst Nik Modi is not surprised that Marlboro and Newport remain dominant in their core strengths, with Marlboro reining supreme in non-menthol and Newport in menthol, despite strong efforts by Reynolds to ramp up Camel, and Philip Morris to cut into Newport's menthol market share.
"Marlboro's improving trends are likely due to easy comparisons, the re-launch of Marlboro Black and the impact of the Marlboro Share Incentive program," Modi told CSP Daily News.
"For Newport," he added, "not much has changed. The brand continues to be the star of the [menthol] cigarette category as it continues to strengthen its core Newport franchise and maintains share of its Non Menthol variant."