Non-menthol Newport could become a bestseller, Lorillard says

December 17th, 2010 00:00
Newport Non-Menthol cigarettes

In early November, Lorillard Tobacco Co, the third largest cigarette company in the USA, launched a non-menthol style of its flagship Newport brand, which according to retailers has aroused customers’ interest. In conformity with a “rough-math” analysis carried out by UBS Securities LLC, the latest addition to Newport brand family could get nearly 0.5 percent share of the cigarette market (almost 5% of total shipments of Newport) within the next 12 months.

“Taking into consideration an introductory, promotional program that provides discount of $1.65 per pack, making the wholesale price to be approximate to Maverick, we consider that Newport Non-Menthol may bring in around $100 million within the next year, Nik Modi, a UBS analyst, said commenting the report last week.

Though this is not the first attempt by Lorillard to launch a non-menthol style of its bestselling Newport brand, possible ban on menthol cigarettes, currently scrutinized by the U.S. Food & Drug Administration (FDA) would make the introduction of regular-flavored version “more meaningful,” stated the report. Lorillard’s last attempt to launch a non-menthol Newton was nearly a decade ago, but the nationwide launch wasn’t pursued, according to the report.

When the company initially announced about the launch of the non-menthol version 3 months ago, Lorillard stated it believes the latest product will boost its position in the cigarette market as well as its Newport brand family. The company said the new non-menthol Newport is a premium product marked by superb quality and refined tobacco taste, characteristic to Newport cigarette adult customers are used to.

Martin Orlowsky, Lorillard’s former President and chief executive officer said in a statement that they have been excited to launch new style of Newport, one of the most famous brands across tobacco industry. “With the launch of Newport Non-Menthol, we will have better opportunity to compete with our major rival, such as Marlboro and Camel, in the largest category of the national tobacco market, since the non-menthol segment accounts for almost 70% of total market volume,” he added.

According to another report by the UBS, Modi admitted that it is not likely that Lorillard will attempt to reach the moist smokeless tobacco (MST) segment, although the company is now presided by Murray Kessler, former CEO of UST Inc., a famous moist-snuff maker. Stating that introducing a new MST brand is very difficult, the report admits Kessler is fully aware of the competitiveness in the segment and that is the reason why it is not likely that Lorillard will introduce a product in that category.

Lorillard, Inc. is the oldest cigarette company in the United States, reported its net profit jumped by 16.6 percent to $274 million, and revenue grew by 12.6 percent to $1.07 billion during the three months to September 2010. The company reported cigarette shipments went up by 5.8% to reach 10 billion cigarettes, whereas major competitors #1 Philip Morris USA and Reynolds American faced a volume decline of 2.4 percent and 2.6 percent, respectively. Lorillard sells Newport, an overwhelming leader in menthol category, Kent, True and Maverick, sales of which jumped 30.9% for the quarter.

By Steve Shepherd, Staff Writer. Copyright © 2010 All rights reserved.

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