Bullish, But Not Complacent

Published in Tobacco E-News

Lorillard CEO talks growth strategy, legislative efforts at conference

By  Linda Abu-Shalback Zid, Senior Editor

BOSTON --Murray Kessler, CEO of Lorillard Inc., sounded confident as he addressed attendees at the Barclays Capital 2011 Back-to-School Consumer Conference.

He said Lorillard's cigarette volume has grown at approximately a 1.2% compound annual growth rate, while the rest of the industry has been declining about 5.1%. "When we grow and the industry declines, we gain market share," he said. And looking over the past 10 years, the company has grown from an 8.5 share to 13 in 2010, and in what has been a "spectacular year" has grown another 1.5 points on a year to date basis at the 6 month mark this year.

"Even in a difficult economic environment, we remain bullish, but we also don't want to remain complacent," he added. Lorillard's strategic plan going forward includes growing its nonmenthol cigarette business; building capabilities, such as strengthening its research and development and regulatory compliance groups; and doing a state by state "blocking and tackling."

He added, "We looked at total tobacco and the broader market. We didn't rule any of those out, but we came to the conclusion right now for our company that the biggest opportunity to create value remains a pure cigarette play." He added that any growth would be organic, and the company is not looking for acquisitions. "I rule nothing out, but it is not the company's focus."

Lorillard's recent efforts to keep up with volume include going to around the clock manufacturing and putting in new machines.

Kessler also addressed the FDA's review of menthol cigarettes. "The big question we get is: 'You've got the strategic plan, but will the menthol review from the FDA undermine that growth?' And we believe the answer to that is no." Kessler said, adding, "You're going to have to judge for yourself, but we think the science is clear that whether you look at biomarkers or toxicology or epidemiology, there is no scientific basis to say that a menthol cigarette is more harmful than a nonmenthol cigarette."

Greensboro, N.C.-based Lorillard Inc. is the third largest manufacturer of cigarettes in the United States. Founded in 1760, Lorillard is the oldest continuously operating tobacco company in the U.S. Newport, Lorillard's flagship menthol-flavored premium cigarette brand, is the top selling menthol and second largest selling cigarette in the U.S. In addition to Newport, the Lorillard product line has four additional brand families marketed under the Kent, True, Maverick, and Old Gold brand names.