Altria to Make Its Mark in E-Cig Segment

Nu Mark subsidiary will launch electronic cigarette "smartly" in second half

RICHMOND, Va. -- Wait until June. That's what Altria Group Inc. chairman and CEO Marty Barrington told analysts and others Thursday on when the company would reveal more details about its just-announced rollout of an electronic cigarette. Increasing awareness and trials among consumers has prompted Richmond, Va.-based Altria, which has been monitoring the category, to move ahead with the product.

"We are pleased to announce another step in our efforts to address the changing preferences of adult tobacco consumers. In the second half of this year, Altria's subsidiary, Nu Mark, plans to introduce an electronic cigarette into a lead market," Barrington said in a press statement on its 2013 first-quarter business results and full-year earnings guidance, as reported in a Raymond James/CSP Daily News Flash.

In a conference call with analysts, he offered a few more details. "Our tobacco operating companies remain very focused on understanding the evolving preferences of adult tobacco consumers and creating superior new products for them. In our core tobacco businesses, PM USA, USSTC and Middleton are making disciplined investments in innovation to expand the reach of their premium products to segments in which they are underrepresented. We have applied the same disciplined approach to developing innovative tobacco products for adult tobacco consumers who are interested in alternatives to traditional tobacco products," he said.

"Awareness and trial of e-cigarettes have increased over the last year, a subject to which we have been devoting attention and product development resources. We believe that Nu Mark should now enter the e-vapor category, and we expect to provide more detail on these plans at our investor day in June," he added.

Although June and second-half 2013 are not so far off, the company is already late to the party in terms of claiming a product in the burgeoning e-cigarette space. Exactly one year ago, Greensboro, S.C.-based Lorillard Inc. announced that it had acquired blu e-cigs; Winston-Salem, N.C.-based Reynolds American Inc. followed later in the year with the launch of its Vuse "digital cigarette."

But the timing was by design, based on the indications of the company's methodical strategy in approaching the category.

"We have devoted significant product development work to it. ... We have plans that I think will allow us to compete effectively in this area that's emerging. It's small, of course, relative to traditional tobacco products, but there's no denying that adult tobacco consumers have shown some interest in it," he said. "We'll learn our way in smartly. ... Our intention is to compete and to compete effectively."

He also said that much of the company's strategy "will be defined by what the FDA has to say about how they intend to regulate these products."

Pittsburgh-based Nu Mark, primarily focused on responsibly developing and marketing innovative tobacco products for adult tobacco consumers, also developed Verve, an experimental smokeless product--a nondissolving, lozenge-shaped nicotine disc--which the company began testing in 50 stores in Virginia last June.

Altria Group is the parent company of Philip Morris USA, U.S. Smokeless Tobacco Co. and John Middleton. Altria also owns Ste. Michelle Wine Estates, Philip Morris Capital Corp. and has a continuing economic and voting interest in SABMiller.

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