UBS-CSP Report, Part III: Newport's 1%

That's the market share most c-store operators predict for Lorillard's nonmenthol cigarette this year

Mitch Morrison, Vice President of Retailer Relations

NEW YORK -- A year and a half since rolling out Newport Non-Menthol cigarettes nationwide, Lorillard finds its inaugural efforts to expand beyond its menthol platform running in neutral. Lorillard took a more than 20% price increase on Newport Non-Menthol and is holding share. Despite the manufacturer's aggressive marketing initiatives, few convenience retailers expect the nonmenthol line to exceed 2% market share in 2012.

An exclusive UBS-CSP/Tobacco E-News tobacco study found that nearly three-quarters of retailer respondents predicted that Newport Non-Menthol will have 1% or less market share; and only 2% of retailers thought the brand would hit at least 3% share.

"We were selling about five cartons a week when it was launched at the discounted price," one retailer said. "Now, we are at about two cartons a week."

Another retailer said that like other successful commercial brands unable to achieve success in new business lines, Newport's hallmark strength has not extended to other areas. "The play on Newport brand equity wasn't a viable strategy," the operator said. "Other high-profile brands, such as Clorox and Kleenex, provided a track record of reaching out too far with brand equity. Newport will always be associated with menthol."

Two other merchants shared similar sentiments, with one saying Newport Non-Menthol is "basically holding its own. Not good considering the time and amount of the discounts on this brand."

The other retailer said the brand's success has been largely built on discounts, not loyal customers. "It was increasing each month until last year's price increase. It has not returned to the highest lever it reached at our stores. It has leveled off as of end June 2012."

When Lorillard unveiled the nonmenthol cigarette two years ago, the company touted its entry into the lucrative, yet competitive fraught, arena. "With the introduction of Newport Non-Menthol," Martin Orlowsky, then-chairman, president and CEO, said in August 2010, "Lorillard will be afforded greater opportunity to compete in the largest segment of the U.S. cigarette market, as the nonmenthol category represents approximately 70% of total industry volume."

Since then, Lorillard was the first among the Big Three cigarette giants to launch into electronic cigarettes with its acquisition of blu ecigs earlier this year. Analysts have complimented the company for branching out beyond menthol, especially at a time when the FDA still has not ruled on whether it will further regulate, if not ban outright, menthol cigarettes.

To read Parts I & II, see Related Content below.

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