ITG Transformation Yielding Results for Cigars, Cigarettes
By Angel Abcede on Jul. 13, 2018GREENSBORO, N.C. -- ITG Brands has been on a mission since it emerged from the sale of Lorillard assets into the arms of Bristol, England-based Imperial Tobacco in 2015.
Since that acquisition, Imperial has “transformed” its U.S. business, repositioning several of its cigarette brands in the marketplace and maximizing the potential of its cigar business, according to Dan Carr, president and CEO of the Greensboro, N.C.-based ITG.
Speaking during an investor webcast on July 2, Carr said, “We set out a clear strategy to focus our investment and drive profitable, sustainable share with our asset brands, Winston and Kool, and we focused on turning around our mass-market cigar business, while delivering financial returns.”
Declaring that they delivered on their goals, Carr said their key “asset” cigarette brands have grown share by 50 basis points since 2015. At the same time, their cigar business has been a “huge success,” with share growing 150 basis points over the same period. The company has had “double-digit, post-tax return on capital in the first year and have consistently delivered strong revenue and profit growth,” Carr said.
Here are other insights Carr provided during the webcast …
Photos courtesy of Pixabay and respective brands
Cigarettes still in decline
Cigarette sales have seen a slightly higher rate of decline over the past year, Carr said, which he attributed to California’s 2017 state excise-tax increase and rising gasoline prices, leaving less money in consumers’ pockets. However, he said the U.S. profit pool has grown consistently over many years and he expected that to continue. In addition, he said cigarettes are highly affordable in comparison to other developed countries, which bodes well for future price leverage.
Repositioning Montclair and Sonoma
ITG repositioned its Montclair and Sonoma brands as part of its strategic change over the past couple of years, Carr said. He described the brands as “declining,” so the company opted to convert them into deep-discount brands. “That’s a segment we didn’t currently have in our portfolio, and we made the change,” Carr said.
Launch of Winston Black
ITG is currently launching Winston Black, a non-menthol, premium cigarette, Carr said. It will be priced at “parity” across the market, he said, but the company has also identified some markets where they will price it below the Winston line by about 15 cents.
Prioritizing Winston and Kool
Carr said the company has made clear portfolio choices to prioritize resources behind Winston and Kool with “meaningful investments behind equity building and consumer activations.”
He said, “New positioning work has enabled more modern imagery, building on the foundations of our brand heritage.”
Cigar changes
ITG has also restructured its mass-market cigar business, Carr said, with the company rationalizing its portfolio while driving growth. In a category that skews “prepriced,” Carr said it “owns” the superpremium category with its Backwoods brand and the premium category with its Dutch Masters line, while at the same time, operating in the two-for-99-cents segment with its Dutch and Phillies brands.
“We’ve also chosen to invest in the natural-leaf [cigar] segment which has been growing over two-and-a-half times the category rate over the last three and a half years,” Carr said. “This has been our fastest growing and most profitable segment, and [our brands] are the share leaders.”