Altria Eyes Second Quarter for Rollout of MarkTen E-Cigarette

Launch Sets Stage For War With Lorillard; CEO Says It's 'Early Days' in E-Vapor

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Altria is going deeper into the e-cigarette business with plans to roll out its MarkTen brand nationally beginning in the second quarter, the tobacco giant told financial analysts today.

Credit: Altria Group/ AP

The company, whose brands include Marlboro and Skoal, had been testing the so-called e-vapor cigarettes in Arizona and Indiana under its Nu Mark division. In Arizona, MarkTen has gained distribution at some 1,900 stores and market share of 48% in the segment since its introduction in December, executives told analysts at the annual meeting of the Consumer Analysts Group of New York in Boca Raton, Fla.

But as the marketer rolls out the brand nationally, it will be battling already established e-cigarettes, including Lorillard's Blu brand, the category leader by sales. Altria Group CEO Marty Barrington stressed that it is "early days in e-vapor" and that "leadership is going to be established over time." He said consumers are still surveying their choices adding that "we are leaders in every category in which we compete and we have exactly the same aspiration for e-vapor."

Indeed, the market still seems wide open, with brands such as NJoy and Fin jockeying for position. Both Altria and Reynolds American, maker of Camel cigarettes, were considered late to the e-cig game, rolling out products in test markets only last year. Reynolds American's e-cigarette product Vuse is currently available in Utah and Colorado, where a subsidiary called the R.J. Reynolds Vapor Co. is marketing the product through TV ads. It is expected to expand Vuse nationally by late second quarter, meaning all of the Big Three tobacco companies will be firmly in the e-cig business around mid-year.

Altria earlier this month announced plans to acquire the e-vapor business of a company called Green Smoke, which whose premium lineup includes rechargeable and disposable e-cig versions. Mr. Barrington declined to elaborate on how that business would interact with the Nu Mark brand.

The U.S. e-cigarette market is currently unregulated, allowing for brands to run TV ads. Altria has not yet taken advantage of the medium. Lorillard, which also spoke at the CAGNY conference this week, stated in a presentation that in 2013 it spent $40 million on national TV and print ads on its e-cigarette business, which has reached distribution at more than 136,000 stores.

The new investments come as sales of e-cigarettes are enjoying string growth in the U.S. Consumer expenditures jumped from $500 million in 2013 to about $1 billion in 2013, according to Altria.

But looming regulations from the Food and Drug Administration could limit marketing efforts. In its presentation, Lorillard advocated for "reasonable regulations," including minimum age of purchase laws, as well as product quality and safety standards. But the company argued for "marketing freedoms," including "broad retail and online availability," as well as the "freedom to communicate with adult consumers and inform them of product advantages and attributes."

Contributing: Michael Sebastian

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