On the Call: Reynolds American CEO Daniel Delen
After launching a revamped version of its Vuse-brand electronic cigarette in Colorado over the summer, Reynolds American Inc. is continuing to expand the brand.
The nation's second-biggest tobacco company rolled out Vuse in neighboring Utah within the last month and said Tuesday it plans a significant geographic expansion by the middle of 2014.
The nation's major tobacco companies, including rivals Altria Group Inc. and Lorillard Inc. are entering the category as part of a push to diversify beyond the traditional cigarette business, which has become tougher in the face of tax hikes, smoking bans, health concerns and social stigma. Other pure-play electronic cigarette companies like NJOY also are among the more than 250 brands in the marketplace.
Electronic cigarettes are battery-powered devices that heat a liquid nicotine solution, creating vapor that users inhale. Devotees say e-cigarettes address both the addictive and behavioral aspects of smoking. Smokers get their nicotine without the more than 4,000 chemicals found in regular cigarettes. And they get to hold something shaped like a cigarette, while puffing and exhaling something that looks like smoke.
The company said since its introduction of Vuse in Colorado in July, the e-cigarette category in the state has tripled and its brand is leading the market there.
In a conference call with analysts on Tuesday regarding Reynolds American's fourth-quarter earnings, CEO Daniel Delen discussed the electronic cigarette business.
"Trial of e-cigarettes has been high among adult smokers in the last couple of years, but repeat purchases were considerably lower. To us, that was a clear indication that the products from the market before Vuse simply weren't meeting smokers' expectations. That's why we're pleased by the fact that cartridges for Vuse are by far the brand's largest selling SKU. In fact, cartridges are making up about 80 percent of the brand's total sales volume. This demonstrates clearly that consumers are not just trying, but adopting Vuse, and this increases our confidence in the brand's potential among adult smokers who are switching to smoke-free alternatives."