Best selling e-cigarette company Blu Cigs was recently acquired by America’s third-largest tobacco company, Lorillard. The $135 million business transaction is part of a strategy to seek cigarette alternatives as demand for tobacco declines.
Yesterday, Lorillard Inc., has announced the acquisition of all the assets of US e-cigarette supplier Blu Cigs, for $135 million in cash. The e-cigarette company will retain its management team as well as its current headquarters in Charlotte, North Carolina. ”Blu ecigs are the perfect adjacency for us to participate in the smokeless market, but in a Lorillard way. That is, e-cigarettes offer many of the benefits of other smokeless products but do so in a way that is familiar and enjoyed by current adult cigarette consumers. We believe that Blu will benefit from Lorillard Tobacco Co.’s regulatory experience and sales infrastructure, which are needed for it, and the category, to reach its potential in a responsible manner,” said Murray S. Kessler, chairman, CEO and president of Lorillard Inc.
Jason Healy, president and co-founder of Blue Cigs, had this to say regarding the deal: ”This is a very exciting move for me and my team. I am particularly excited about what this means for the brand and our customers. It gives us access to the tremendously experienced team and resources at Lorillard and will allow us to move to the next level on our expansion and product development. I’m happy to say that now as part of Lorillard, Blu ecigs will be able to deliver an even greater level of quality and innovation to its customers that they have come to expect from Blu.”
Asked what the acquisition of Blu by Lorillard would mean for e-cigarette users, Heally said that ”from an operational
point of view, it will be business as usual for our customers, retailers and other partners through a normal transitional period. Following this transition, we look forward to expanded distribution capabilities that will be communicated in the near future.”
This is pretty big news, both for Blu Cigs, and the whole electronic cigarette business. Tobacco companies had announced their intention of investing in tobacco alternatives, and there were rumors about some of them developing their own e-cigarettes, but this major acquisition is the first real proof they mean to get involved in the e-cigarette industry. A lot of people had foreseen that the big three would at one point try to get their big piece of the lucrative electronic cigarette business, and it looks like that’s what we’re moving towards.
To many experts analyzing the current state of both the tobacco and e-cigarette market, the recent acquisition seems like a “if you can’t beat them join them” kind of move. Along with their announcement of the Blu Cigs acquisition, Lorillard also reported the number of cigarettes it sold fell about three percent in the first quarter of 2012, compared to the same period of last year. The decrease is mainly a consequence of lower unit sales volume, a result of trade inventory pattern fluctuations, partially offset by higher average prices. Basically, high unemployment and rising cigarette prices are causing smokers to smoke less and switch to less expensive brands, to save money.
Electronic cigarettes are a $500 million business in the US alone. Now that may seem like pocket change compared to the $100 billion generated by cigarettes, but e-cigarettes are much faster growing right now, and Lorillard has apparently realized there are considerable profits to be made from the vaping industry. And they are not the only ones. Buyout firm Catterton Partners has invested $20 million in Sottera.Inc, which makes NJOY e-cigarettes, to help it get into big retail stores like Walmart. The game is certainly heating up…