Altria Group, America's biggest tobacco company and makers of the iconic Marlboro brand, is laying off workers to save $US300 ($425) million per year. Where are they going to put all that money? Into a true growth market: electronic cigarettes.
Today Altria, formerly known as Philip Morris, controls just over half of the traditional cigarette market in the US. But its sales volumes are down 2.6 per cent since last quarter. As the Wall Street Journal reports, the company wouldn't go into specifics about the layoffs, but said that it would definitely be putting more money into e-cigarettes:
When asked during the call what the company planned to do with the $US300 ($425) million in savings, [Chief Executive Marty] Barrington declined to offer specifics but did say the company continues to invest in "reduced harm products" such as electronic cigarettes and in its brands.
With American smoking rates plummeting over the last half-century, tobacco companies have scrambled to find ways to increase profits. The most popular strategy as of a decade ago was to expand in developing countries (especially in Asia) with less stringent laws about workplace smoking and cigarette advertising. More recently, the largest tobacco firms have been both buying up and starting their own e-cigarette brands.
Altria, has been behind the curve when it comes to the vaping market. The company is currently developing its iQOS e-cigarette, but competing tobacco companies have snapped up firms with some of the best brand recognition. For example, Reynolds, the second largest which recently acquired Lorillard, has the VUSE brand of e-cig. Before Lorillard was acquired they had purchased and then spun off one of the most popular e-cigarette brands, Blu.
The electronic cigarette market is still the Wild West in a lot of ways, with regulators debating over how to control the relatively new technology and public health advocates unsure about whether to promote them as harm reduction products or condemn them as just another harmful nicotine-delivery device.
Private businesses and local municipalities have come down hard on vaping in public over the past few years, and if history is any guide, we'll see more government regulation coming soon. But for now, businesses like Altria certainly see electronic cigarettes as a more palatable product than their old-fashioned cigarettes.
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