Lorillard Inc. (LO), Altria Group Inc (MO): E-Cigs Could Help Reverse The Decline

E-Cigs

Another company looking at the e-cig market is Reynolds American, Inc. (NYSE:RAI). In its latest earnings, Reynolds American, Inc. (NYSE:RAI) management noted that Vuse, its e-cig offering, is growing rapidly.

“Vuse is quite different to what’s currently available in this fast-growing category. And we believe that this innovative product will offer adult tobacco consumers a vapor experience that’s significantly superior. R.J. Reynolds Vapor Company has exciting plans for the further expansion of Vuse this year. And you’ll be hearing more about Vuse soon.”

Tobacco companies haven’t provided much guidance in regard to the e-cig industry, but it does have a promising future. E-cigs need greater distribution to grow, as they aren’t being marketed or distributed the same way as traditional cigarettes. Now that Altria Group Inc (NYSE:MO) is entering the arena, the three major players (who control roughly 86% of the market in the U.S.) will start to aggressively promote their products. NJOY, another e-cig maker, is also expanding its offering by selling its products at Wal-Mart stores.

E-cigs can help change the social stigma around cigarettes because they are less unhealthy than traditional cigarettes, which could appeal to those who normally wouldn’t want to smoke something they see as cancerous. While e-cigs still have nicotine in them, which isn’t healthy, they do less harm to your lungs and are less likely to give you cancer. The American Association of Public Health Physicians supports sales of e-cigs to adults because they see them as saving the lives of 4-8 million American smokers who would normally have died due to tobacco use.

Final thoughts

You can’t keep raising prices forever, and with the increase in payroll taxes, plus the possibility of a cigarette tax increase, it will become harder and harder to pass through price increases. If cigarette makers keep passing through price increases, they risk losing market share, which leads to a conundrum of operating in a declining market, but not being able to do anything about it, until now. E-cigs, right now, are maybe 1% of the total cigarette market, but should be watched, as they have the possibility to reverse the decline of the tobacco market in the U.S. and save tens of millions of lives.

The article E-Cigs Could Help Reverse The Decline originally appeared on Fool.com and is written by Callum Turcan.

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