The past week has certainly brought new developments on the tobacco front. There have been rumours, yes, but to actually have them unfold right in front of our eyes totally beat speculations.
Proof that things have definitely been shaken up: two weeks ago, Phillip Morris was on the front of the race of the tobacco brand with the highest amount of sales. Reynolds American and Lorillard are close behind, at second and third place, respectively.
Then the status quo was rocked out of its foundations with the announcement of Lorillard being acquired by Reynolds American for a hefty $25-billion payment. This apparently spurred the united front that their rivals Newport and Camel have struck up. Clearly, they could not afford to be reticent in the face of one of the biggest and most significant mergers of all time in the tobacco industry.
But then here’s a twist that no one saw coming: on the heels of Reynolds American’s acquisition, it sold several of its subsidiaries to Imperial Tobacco, a tobacco giant based in the UK. The sold outfits were Kool, Salem, Winston and, surprise of all surprises, Blucigs.
Now why did the sale of Blucigs come as such a shock? Recent figures revealed that Blu is currently making waves, rising among the ranks as one of the bestselling electronic cigarette brands in the US. In fact, figures have come in, showing that 42 percent of all sales of e-cigs in convenience stores across the US are Blu’s e-cigs. And that’s for the month of June alone.
This was initially thought of by industry experts and business analysts as the main catalyst for the merger between Reynolds American and Lorillard. But clearly, with the sale of Blucigs to Imperial Tobacco, that was not the case at all.
Phillip Morris is now presented with a bigger threat. Not only does it have to contend with the combined strength of Reynolds American and Lorillard, but it also has to consider the huge possibility that Imperial Tobacco will now be making a bid for the top spot, what with Salem, Kool, Winston and Blucigs now coming under its control.
Speculations are rife on the true goal of Reynolds American. In an interview with Reynolds CEO Susan Cameron, she said the decision was spurred by the company’s decision to focus all its efforts on Vuse, Reynolds’ own electronic cigarette brand.
Cameron emphasised that letting Blu go was purely a business decision, and that Vuse is the better prospect, since it makes use of superior technology and shows greater promise. Reynolds is confident that, in a head-on competition, Vuse will be able to hold its own against Blu.
Imperial Tobacco, on the other hand, is ecstatic with the immediate results of their recent acquisitions. The company has now shot up through the ranks in the US market. When asked how Imperial Tobacco managed to score a coup and obtained Blu in a relatively short time, CEO Allison Cooper evasively implied that perhaps it had something to do with her charm.
What do you think of these recent developments? Which company did the right acquisition, and which one made a big mistake? What do you foresee about the future of these companies in the coming months, and what are its implications to the smoking population?