Regional Report Triad August 2013

REGIONALREPORT Triad

Taking a charge

In the year since Lorillard Inc. bought blu ecigs for $135 million (cover story, March), the Greensboro-based cigarette manufacturer has built the electronic-cigarette brand into a powerhouse with 40% market share. Now rivals Winston-Salem-based Reynolds American Inc. and Richmond, Va.-based Altria Group Inc. are moving quickly to catch up — each suggesting that being first isn’t as important as being best.

On June 6, Reynolds, the second-largest cigarette-maker in the U.S., announced that it would start test-marketing its Vuse e-cigarettes in Colorado in July. (It had been doing limited testing in the Triad.) A week later, Altria — the biggest — said it would begin testing its MarkTen e-cig in Indiana this month.

E-cigs don’t burn tobacco. Inhaling powers an atomizer that turns nicotine-infused liquid into vapor. They can’t yet be marketed as a safer alternative to cigarettes, but smokers can puff away on them in many places where smoking is banned.

While not naming Charlotte-based blu specifically, Reynolds says poor performance among existing brands has left many potential customers unimpressed. “There is strong awareness of the category among adult smokers, and many are trying e-cigarettes, but few adult smokers are switching to them entirely,” says Stephanie Cordisco, president of R.J. Reynolds Vapor Co. “That’s because the products currently on the market aren’t providing everything adult smokers are looking for.” Vuse, assembled in Winston-Salem, uses a computer chip that ensures a consistent vapor draw, Reynolds claims. Altria boasts of “four-draw technology” that delivers “superior sensorial experience.”

There’s still plenty of room to grow e-cigarettes, with U.S. sales projected to reach $1 billion this year — up from $20 million in 2008. The Tobacco Vapor Electronic Cigarette Association projects “the entrance of the ‘Big 3’ tobacco manufacturers could catapult the growth of the e-cig category, driving the total conventional cig and e-cig profit pool up by a compound annual growth rate of 7%,” according to the Winston-Salem Journal. It’s not clear how long Vuse and MarkTen tests will last, but both companies are eager to put their distribution muscle to work.

But they’re still behind blu, which is on the shelves of 80,000 retailers and projects $250 million of sales this year. “A year ago, I told you it was a research project. It’s more than that,” Lorillard CEO Murray Kessler told analysts recently. “Today, it’s a long-term business growth opportunity. I’ve only had one or two opportunities like this in my career. And we’re going to take full advantage of it.”

84.2% – Altria, Reynolds and Lorillard’s combined share of U.S. cigarette sales in 2010, according to the Centers for Disease Control and Prevention.  

Briefs

MAYODAN — Sturm, Ruger & Co. will open a 220,000-square-foot plant here in a former Unifi textile mill. The Southport, Conn.-based gun-maker could eventually employ as many as 500, though it’s initially expected to hire 150 to 200 workers.

WINSTON-SALEM — Krispy Kreme Doughnuts extended CEO James Morgan’s contract, which had been set to expire at the end of June, through 2016 and increased his targeted annual bonus from 70% to 100% of his $742,630 base pay. Morgan has been CEO since 2008.

MOUNT AIRY — Ottenweller Co. will expand its local steel-fabrication plant, investing $1.5 million and adding 20 to its workforce of 60. The Fort Wayne, Ind.-based company will pay an average annual wage of $30,571, close to the Surry County average of $30,456.

GREENSBORO — FT Media Holdings, a new company based here, acquired Furniture Today Media Group from New York-based SANDOW for an undisclosed amount. The deal includes seven print and online brands, including the flagship Furniture Today, a weekly newspaper.