Altria to Enter E-Cigarette Market

E-Cigarette

Altria Group Inc. made an announcement that it would create its own variation of e-cigarettes in the second half of 2013 amid signs the battery-powered gadgets, which turn heated, nicotine-laced liquid into vapor, are starting to go sales of regular cigarettes in the U.S., less than 10 years after appearing.

The CDC reports that more than 20% of adult smokers were users of e-cigarettes in 2011.

Altria, which is the manufacturer of popular Marlboro cigarettes and the owner of around half of the U.S. cigarette market, is playing catch-up to smaller competitors. Reynolds American Inc., being the second largest cigarette company, said it intends to broaden distribution of its Vuse e-cigarettes after providing them to test markets recently. Lorillard, which is the third biggest tobacco manufacturer, spent around $135 million a year ago to buy Blu Ecigs, a leading e-cigarette company.

U.S. retail sales of electronic cigarettes presented about $500 million in 2012, about 0.5% of the entire tobacco market, but are set to achieve $1 billion in 2013. Lorillard revealed that first-quarter sales of its Blu Ecigs leaped to $57 million, sequentially growing from $39 million.

Altria said its cigarette volumes dropped 5% in the first quarter from 2012. Lorillard and Reynolds said that e-cigs led to the approximated 6.2% industry decrease in regular cigarettes volumes over the same period, increasing from the typical 3% to 4% drops posted in recent times.

Electronic cigarette users say they choose this product to other smokeless tobacco products as it more closely mimics regular cigarettes.

Smokeless cigarettes have mostly evaded taxes and regulations – including bans in public areas – until now. The only state that presently taxes e-cigarettes is Minnesota, although bills are pending in Oklahoma, Rhode Island and Vermont. At least a dozen states have presented bills to forbid the sale of e-cigarettes to those under 18, according to the National Association of Tobacco Outlets.

The Food and Drug Administration said in January it intended to suggest regulations for tobacco products it doesn’t presently supervise, including cigars and e-cigarettes, by April but has yet to release them. An FDA spokeswoman also said “further research is needed” on the “potential health benefits and risks” of e-cigarettes.

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