Altria is joining the e-cigarette fray. The nation’s largest cigarette maker will debut MarkTen, its first electronic brand, this August in Indiana under its Nu Mark subsidiary.
The announcement makes Altria, owner of Philip Morris USA, the last of the major U.S. tobacco companies to recently make a push into the growing field of e-cigarettes, which command 1% of the cigarette market. The push in e-cigarettes comes as the traditional cigarettes face declining sales, tax hikes and increased opposition from health and anti-tobacco groups.
The recent push into e-cigarettes marketing by major marketers comes during an absence of government regulation in the segment. Spending on e-cigarette TV ads was up 17.9% from 2011 to 2012 and print ad spending shot up 71.9%, according to a Citibank report.
Altria CEO Marty Barrington declined to comment on marketing plans for the launch of the company’s e-cigarette during an investor presentation today in which it disclosed MarkTen.
Reynolds American's Reynolds Vapor Co., said last week it will bring a digital vapor cigarette called Vuse to Colorado on July 1, with eventual plans for a nationwide rollout. Lorillard, the third-largest tobacco company in the U.S., will double its marketing budget to $40 million for Blu eCigs, a company it purchased in 2012. On Monday, e-cigarette maker Njoy revealed it has raised $75 million in financing, backed by Napster founder Sean Parker and celebrities including Bruno Mars.
The slew of recent announcements highlights the industry’s reaction to falling sales of traditional smokes. Total tobacco volume based on pounds decreased 2% every year between 2009 and 2012, according to Altria.
Yet, analysts and executives agree the e-cigarette market is marked with ambiguity. David Adelman, a managing director at Morgan Stanley who covers tobacco, said it’s too early to tell whether e-cigarettes will have broad traction with consumers or remain a niche product.
Mr. Barrington described MarkTen as “a familiar draw with an appealing taste.” He said MarkTen’s technology is designed to provide a consistent experience that closely resembles the draw of a cigarette. The e-cigarettes will be priced around $9.50 and are disposable or rechargeable, with charging devices and additional cartridges available for purchase.
Altria has a number of advantages over its competitors, according to Mr. Adelman, such as its differentiated product and superior taste. One important unknown he noted was how effective Altria will be in branding itself in the category.
Mr. Adelman said he expects a cautious marketing plan. “To some extent, they are encumbered by the self-imposed responsibilities of being the market leader,” he said. “They are ultra-conscious. It’s not illegal to advertise Marlboro in magazines, but they don’t do it. They’re making a judgment and positioning themselves by being responsible to create more long-term regulatory certainty.”
Altria will not make a health claim with MarkTen. Per regulation, the packaging will carry a health warning.
Anti-tobacco groups fear that the industry will attempt to romanticize smoking through the unregulated e-cigarette channel. They are urging the Food & Drug Administration not to wait to assert jurisdiction over e-cigarettes and their marketing.
“Cigarette advertising was taken off TV precisely because of its powerful impact on impressionable adolescents,” said Matt Myers, president of the Campaign for Tobacco-Free Kids, adding that e-cigarette TV ads undermine years spent de-glamorizing smoking to children.
The FDA says more research is necessary before any claims can be made about health effects of e-cigarettes. Electronic cigarettes use battery power to heat a liquid nicotine solution, which creates a vapor for smokers to inhale.
Of the 56 million American adult tobacco consumers, about half say they are interested in trying innovative tobacco products, according to Altria research.