The Electronic Revolution
Are e-cigarettes the spoils of another gold rush or a harbinger of transformation for the tobacco category?
Amid a multitude of players on the market, here’s how some of the more successful electronic-cigarette companies are distinguishing themselves:
- Going “Big”: Admittedly, Big Tobacco was late to the e-cig game: R.J. Reynolds, Winston-Salem, N.C., and Altria Group Inc., Richmond, Va., are only just now testing their proprietary Vuse and MarkTen offerings, respectively. Wells Fargo analyst Bonnie Herzog doesn’t think their late arrival will hinder their success, thanks to the companies’ deep pockets and established success in the retail environment. Altria spokesperson Brian May echoed Herzog’s sentiments: “Electronic cigarettes are an extremely competitive category, but we’ve had a long track record in the tobacco category of being able to best meet the preferences of adult smokers.”
- Hiring “Big”: Alternatively, brands such as NJOY and Logic Technology have stocked their management teams with tobacco industry veterans: NJOY executive vice president Roy Anise and senior vice president of sales and distribution Vito Maurici previously held positions at Philip Morris USA, and Logic president Miguel Martin once served as a senior vice president for Altria.
- E-Cig-Tobacco Partnerships: Rather than develop their own product, other tobacco companies have opted to work with an established player. Like Lorillard Tobacco Co., which acquired blu eCigs in April 2012, National Tobacco Co. saw a benefit to a partnership and began working with Miami-based v2 Cigs in April. “Tobacco companies are not e-cigarette companies and e-cigarette companies are not tobacco companies,” says Ron Tully, National Tobacco’s vice president of public affairs. “That knowhow cannot be developed overnight.”
- “We’re Not Big Tobacco”: Given the mixed feelings about contracts and squeezed cigarette margins of recent years, some retailers may prefer partnering with independent electronic-cigarette companies, which some may find more flexible in terms of contracts and pricing, according to Tony Vecchie, senior vice president of sales and distribution for Northbrook, Ill.-based Eco-Cigs Inc. John Wiesehan III, vice president of sales for Ballantyne Brands, maker of Mistic, agrees that not having strong ties to Big Tobacco “can actually work in a brand’s favor, given the negative perceptions among the tobacco industry.”