Lorillard Eyes New Market Segments

Published on May 16th, 2011 10:59

Lorillard Company plans to do its best to retain the leading position in menthol category of the U.S. cigarette market, and extend its product line to comprise other market segments; however, it is not going to change its strategy significantly, the company confirmed after performing operational review.

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Lorillard, the third-largest cigarette manufacturer in the United States according to sale volumes, declared in a slide view, during the analyst conference last week that it would keep to the product strategy, as well as the sales promotion and messaging strategies.

The company, which markets industry-leading Newport menthol, Maverick and Kent cigarettes, initiated its strategy review last year, shortly after the appointment of Murray Kessler as Chief Executive Officer, President and Chairman. Lorillard confirmed it had a meeting with more than 60 percent of active shareholders, employees, consumers and regulation agencies, during the review. Murray Kessler admitted three months ago that the group does not need a change in its course, a statement reiterated during the presentation last Wednesday.

Cigarette demand has declined in past years due to the spread of the bans on smoking in public places and tobacco tax increases. Nevertheless, sales remained strong for Lorillard, which continues to increase cigarette market share. Two weeks ago, the company revealed its first quarter revenue report, demonstrating the sales grew by 13 percent and revenues rose by 6.9 percent. However, the environment is challenging for Lorillard as the Food and Drug Administration is thinking over banning or restricting sales of menthol cigarettes. According to the report by the FDA advisory committee, ban on menthol cigarettes would benefit public health, yet, it did not recommend banning them.

Lorillard admitted it would look for growth opportunities in other market segments, among which are non-menthol cigarette market. Last fall, the company launched Newport Red, non-menthol cigarette, which showed a strong performance in promotion period. The group also admitted it will attempt to create a “more widespread” non- full flavor—ex-“light”–cigarette. At present, white-tip cigarettes account for 80 percent of this segment, whereas Newport cigarettes offer a classic brown tip.

Whereas cigars and smokeless tobacco attract investors, the company said it had no plans to enter either of these categories in near future. Main rivals, Altria and Reynolds American already entered the cigars and smokeless tobacco segments, and Lorillard admitted it would probably acquire a company to join too.

Lorillard CEO declared last week that tobacco products, which are closer to its main competence, are likely to be more profitable. The company did not have a major success in extending its product line beyond the menthol-flavored cigarettes in the past, although it launched Newport Slims and Newport M Blend in the 1990s in attempt to offer non-menthol cigarettes, but the brands failed to live up to the expectations.

By Joanna Johnson, Staff Writer. Copyright © 2011 TobaccoPub.com. All rights reserved.

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