RICHMOND, Va. — Lorillard Inc. CEO Murray Kessler says there’s no immediate need for the cigarette maker to venture into other forms of tobacco like its competitors.
In an investor presentation on Wednesday in New York, Kessler said the nation’s third-largest cigarette maker will continue to focus on its core business. Its flagship Newport brand holds about 35 percent of the marlboro cigarette market and about 10 percent of the overall U.S. cigarette market.
When Kessler joined Lorillard in September, he began a strategic review of the business. He said the Greensboro, N.C.-based company took a hard look at smokeless tobacco and cigars and recognizes them as attractive and growing segments but said it isn’t imperative to move into those categories right now.
“I don’t rule anything out. … This is something that we might be able to do, or might want to do, it’s not something we have to do,” Kessler said. “I don’t think Newport makes a whole lot of sense for a smokeless tobacco brand. … There’s just not a natural overlap in using the brand demographically.”
Lorillard’s competitors – No. 1 Philip Morris USA, the maker of Marlboro and owned by Altria Group ( MO – news – people ) Inc., and No. 2 Reynolds American ( RAI – news – people ) Inc., the maker of Pall Mall and Camel – have begun focusing on other products like smokeless tobacco and cigars as people buy fewer cigarettes. Tax increases, smoking bans, health concerns and social stigma have made the cigarette business tougher.
However, Lorillard has seen its cigarette volumes increase while its competitors have seen volumes fall.
In the first quarter, Lorillard sold 9.5 percent more cigarettes on gains from Newport and its lower-priced brands such as Maverick. In contrast, the company estimated that cigarette volume fell 3.4 percent across the industry.
Lorillard had a brief foray in the smokeless market with Triumph snus, which were discontinued. It had tried a Newport nonmenthol cigarette twice before and also briefly offered Newport Slims and Newport M Blend.
Moving forward, Kessler said Lorillard can expand its geographic sales profitably in the U.S. and boost revenue with variations of its brands.
Lorillard’s non-menthol Newport cigarettes, re-introduced in November amid a federal advisory panel’s review of the public health impacts of menthol cigarettes, is seen as one of those opportunities. The company said about 68 percent of people who bought it made it their usual brand.
Lorillard, the oldest continuously operating U.S. tobacco company, spun off from Loews Corp. ( LTR – news – people ) in 2008.
By MICHAEL FELBERBAUM
- Cigarette maker Lorillard 1Q profit rises
- Altria Group 1st-quarter profit up as Marlboro gains market share, company cuts costs
- Earnings Preview: Reynolds American’s 4Q
- Earnings Preview: Altria Group Inc.
- Ahead of the Bell: Tobacco companies