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Blu Cigs Gets Dumped As RJ Reynolds And Lorillard Merge

By Matt McConnell

Wednesday July 16, 2014
RJ Reynolds prefers the Vuse to Blu Cigs
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Blu Cigs are probably the best know e-cig brand operating today. Two years ago Lorillard bought Blu Cigs for a stunning $135 million. Lorillard also purchased Sky Cig in the UK and had a clear mandate to aggressively gain a major share of the e-cigarette business. Going by the sales figures, everything seemed to be going according to plan.

With Big Tobacco money and clout, Blu E-Cig was able to put its marketing into overdrive and has achieved unparalleled brand awareness in the electronic cigarette industry. Blu is essentially a household name as even those who know nothing about electronic cigarettes have heard of Blu Cigs. Now, they have been sold off and you are probably wondering why.

Blu E-Cig has serious cache established in the US and internationally. They have had celebrity endorsers, nation-wide TV exposure and the signature glowing blue tip is widely recognized. In terms of quality, the Blu Cig is a milder vape. Many brands provide a more satisfying vaping experience but none can match Blu in marketing and sales.

With so many positive indicators it would stand to reason that as Lorillard negotiated to acquire Lorillard, Blu Cigs would be regarded as a major asset. So why would Reynolds not want Blu Cigs?

In an age-old story being played out before our very eyes, R.J. Reynolds and Lorillard have decided to dump Blu in favor of a younger e-cigarette, namely the Vuse. It all began with the culmination of the merger between R.J. Reynolds and Lorillard.

R.J. Reynolds dumps Blu Cigs in favor of VuseReynolds American (NYSE – RAI) agreed to buy competing tobacco giant Lorillard (NYSE – LO). The deal saw R.J. Reynolds pay $24.7 billion dollars in a deal that will combine the two companies and put them in a position to challenge the biggest player in the tobacco business, Altria.

The merged companies also streamlined as they also sold off the Kool, Salem and Winston brands to Imperial Tobacco. Imperial also picked up Blu E-Cigs as part of the same transaction. In terms of tobacco cigarettes, Reynolds will be focusing on their premiere brands Camel, Pall Mall, American Spirit and Grizzly. In terms of e-cigs, the entire focus will be on promoting Vuse.

Blu E-Cigs Now Property Of Imperial Tobacco

Blu E-Cigs were sold off along with Kool, Salem and Winston to Imperial Tobacco. Reynolds indicated that divesting themselves of these properties will allow them to streamline operations and better compete.

Many Wall Street watchers were initially confused about why Blu E-Cigs would be sent packing. The e-cigarette business is still relatively small but it is growing by leaps and bounds. Many expect the e-cigarette industry to match tobacco within a decade. E-cig sales are expanding by 25% per year with no end in sight to that tremendous growth rate.

Blu E-Cigs are the most recognizable brand and their exclusion seemed to defy logic but there is a method to the madness. The newly formed conglomerate will be going all in on Reynold’s Vuse. R.J. Reynolds CEO Susan Cameron said that Vuse “offers superior technology and has received very positive results in its national rollout.”

Reynolds may have faith that Vuse is the best e-cig in the market based on sales figures but there are serious concerns about performance. Those concerns come from the comments of current Vuse customers.

Reynolds And Lorillard Will Focus On Vuse

Vuse electronic cigarette will be the focus of Reynolds efforts in the e-cig industry.The Vuse electronic cigarette was rolled out last last year in Colorado. It has since been rolled out in Utah as well. The company claims that they have gained market share in those locations and recently announced that the Vuse is on its way to the Philadelphia market.

There is no mystery to the success of the Vuse e-cigarette on the sales side of the ledger. With a massive retail network at its disposal, Vuse is found everywhere you can buy cigarettes in the states where it is currently available. The performance side of the equation, however, has drawn mixed reviews.

The Vuse electronic cigarette has drawn criticism for the expense of refill cartridges as well as limited flavors and nicotine level options. Choosing the right nicotine level is critical if smokers are going to have success with e-cigs as a genuine alternative. Along with limited options, Vuse e-cigarette users have complained of harsh vapor, short battery and cartridge life as well as defective cartomizers.

For consumers looking for the best e-cig, Vuse may not be the best choice. Our recommended e-cigarette brands all perform at a high level and offer better long-term savings. Be that as it may, the Vuse electronic cigarette has friends in high places and you can expect to see it heavily promoted on store shelves and in media.

As a result of the merger, Reynolds is looking from annual revenues of $11 billion dollars and more than $5 billion in positive cash flow. It remains to be seen if Reynolds will use some of those resources to improve Vuse. As it stands currently, consumers would be better served by sticking to one of our best e-cig brands.

The shape of the e-cig business is clearly changing each day. As the market continues to grow, and as tobacco sales continue to fall, industry watchers will be very busy for the next several years.

Matt

Team ECCR

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