R.J. Reynolds, the second-largest tobacco company in the U.S.,
last week held its first press conference in two decades to launch
Vuse, its "digital vapor cigarette." Marketed by its R.J. Reynolds
Vapor Co., Vuse will next month begin marketing in Colorado -- the
first state in an eventual rollout -- with print, TV and direct
mail marketing from CHI, London.
Altria, parent company of Philip Morris USA, the nation's No. 1
tobacco company, is expected to announce its own e-cigarette brand
at a June 11 investor event. And Lorillard, the third-largest
tobacco company in the U.S., will spend $40 million to market its
e-cigarette brand Blu, more than double what it spent on measured
media last year. "We see real opportunity for the e-cigarette
category," said Robert Bannon, director-investor relations.
Because e-cigarettes are unregulated by the Food and Drug
Administration, tobacco companies can tap certain media that have
long been unavailable to their traditional cigarette brands since a
ban on TV advertising took place in 1971.
Spending on e-cigarette TV ads increased 17.9% from 2011 to
2012, while print ad spending increased 71.9%, according to the
Citibank report. The rise in print spending could be a boon for
magazine publishers. Tobacco, once one of the largest advertisers
in U.S. magazines, retreated from print after the Master Settlement
Agreement of 1998 created broad restrictions on the marketing of
cigarettes.
While ads for Lorillard's Newport and Santa Fe Natural's
American Spirit (a subsidiary of Reynolds American) appear in
consumer magazines, Philip Morris USA no longer advertises in
print. This spring R.J. Reynolds returned to consumer magazines for
the first time in five years to promote its Camel Crush cigarette.
Regulation looming?
Tobacco has been a relatively uninspiring marketing story because
of the regulations and negative sentiment, said Michael S. Lavery,
an analyst for CLSA Americas, but that may be changing with
e-cigarettes: "Companies are advertising as much as they can before
any restrictions might come into place."
The continued growth of ad spending on e-cigarettes hinges upon
how the FDA decides to regulate the burgeoning category. Reynolds
American CEO Daniel Delen said that a decision was "imminent," at
which point Big Tobacco could again be turned away from TV.
Gregory Conley, volunteer legislative director for the Consumer
Advocates for Smoke-Free Alternatives Association, said that any
regulations the FDA may try to impose will likely result in a court
battle, thus preventing any regulations from going into effect
within the next year. "There definitely is an opportunity to get
back into media markets," he added.
Access to previously unavailable media does not mean marketing
e-cigarettes will be easy. Big Tobacco has to contend with a
lengthy reputation of being disingenuous. "Whenever a major tobacco
company introduces a product, we remember the industry's long
history of deceiving the public about the health risks of its
products," Peter Hamm, director of national communications for the
Campaign for Tobacco-Free Kids.
Marketing difficulties
The inherent difficulty in trying to market e-cigarettes as a "more
healthful" alternative to traditional cigarettes is that Big
Tobacco would bring scrutiny upon itself. As such, tobacco
companies have been cautious to market e-cigarettes only to
existing adult smokers looking for a viable alternative to
traditional smoking.
Blu deftly navigated this problem last year with its "Rise From
the Ashes" commercial. In the spot, formerly famous actor Stephen
Dorff called Blu a "smarter" alternative to smoking because it has
no ash or "offensive odor."
Daniel Herko, Reynold's senior VP-research and development, was
smoking Vuse while fielding questions at the Vuse press event. When
asked whether Vuse would be marketed as an anti-smoking device, Mr.
Herko said, "No, sir. ... And we're not making any health
claims."
More than 40% of smokers have tried e-cigarettes, but about 80%
go back to exclusively smoking traditional cigarettes, according to
Brice O'Brien, the company's exec VP-consumer marketing, so the
emphasis, for now, will be on providing an e-smoking experience
that accurately replicates the sensation of smoking a real
cigarette. Hence RJR's "Promise Landed" tagline for Vuse.
"For the first several years it's about product differentiation
and innovation," said Brice O'Brien, RJR's exec VP-consumer
marketing. "How that evolves -- does it become more emotional or
image-based? -- it's hard to speculate."
Striking a different path from its competitors will be key to
Reynolds' success with Vuse, according to CLSA's Mr. Lavery. "I
think … it's going to be a little tougher for Altria and
Reynolds to play catch up without a compelling product
differentiation," he said.
Cigarette advertising reached its peak in 1985 with $932 million
in media spending and has been steadily declining since, according
to Ad Age DataCenter's analysis of the Federal Trade Commission's
annual cigarette reports. In 2011, media spend was just $26.9
million. Those dollars shifted to promotional efforts including
events, coupons and retail display. Promotional spending increased
from more than $1.5 billion in 1985 to $13 billion in 2005 before
dropping to a little more than $8.2 billion in 2011.
Big Tobacco certainly won't reach its previous spending peak,
but moving smokers to e-cigarettes has ignited enthusiasm in a
previously dormant marketing segment. "It's a marketer's dream,"
Mr. O'Brien said. "You have a large and substantial consumer base.
They want to make this change."
