At the beginning of October 2013, it was announced that the American tobacco giant Lorillard had bought out the UK manufacturer of electronic cigarettes, SKYCIG, for the sum of £30 million. A further £30 million will be paid to SKYCIG if it fulfils certain economic targets by the year 2016, according to reports in the Montreal Gazette (http://www.montrealgazette.com/business/Newport+cigarette+maker+Lorillard+buys+UKbased+ecigarette/8981659/story.html).
SKYCIG will continue to operate under its brand name in the UK and the new owners have undertaken to retain the existing management and staff of the local company.
The shape of things to come?
Lorillard is the third biggest tobacco company in the United States. Now it has to be asked whether the tobacco giants have been amongst the first to see the writing on the wall and buy into one of the fastest growing competitors to its previous stranglehold on this particular market.
Giants such as Lorillard have many, many years of experience in marketing their product to generations of tobacco smokers and the same aggressive marketing can now be expected, it seems, with respect to electronic cigarettes.
Based in the US state of North Carolina, the company is now asserting that: “It has been Lorillard’s mission to be first and best in the electronic cigarette category,” said its CEO Murray Kessler in a statement issued at the beginning of October 2013. “Our mission is now a global one.”
The quest for worldwide domination is also seen in Lorillard’s acquisition of US electronic cigarette manufacturer Blu Ecigs in 2012 for a reputed $135 million. At that time the company defended its financial strategy in along the lines of the following statement from its CEO Murray Kessler: “(e-cigarettes) may present the most significant harm reduction option ever made available to smokers and we look forward to working with regulators around the world to confirm this conclusion.”
There may be many, of course, who see such global ambitions with more than a degree of alarm – the tobacco companies did little for its consumer base in the past, so why should they be entrusted to look after new generations of products based on the electronic cigarette.
Commercial leverage of the established tobacco companies
The major tobacco companies around the world, but especially those in the United States, have either bought into, or are monitoring closely, the electronic cigarettes industry as they strive to recover from the blows to their traditional business and diversify into new markets. Since electronic cigarettes burst onto the market almost ten years ago, sales have mushroomed so quickly that some industry commentators predict that e-cigs are going to be outselling sales of traditional cigarettes within a decade.
The market is growing at about the same rate in the UK as it is the United States, where it already accounts for some 1 per cent of the respective markets in conventional, tobacco cigarettes.
The American tobacco giants are generally seen to be in an especially strong position – both economically and politically – to weather any attempts by the US federal government to regulate the manufacture and supply of electronic cigarettes.
The US Food and Drug Administration (FDA), for example, is expected to set down marketing and product regulations for electronic cigarettes in the near future as part of its authority to regulate tobacco products. If the products are subsequently regulated as drugs or drug-delivery devices – classified as products for “therapeutic purposes”, for example – the tobacco companies are in a strong position to meet any trials, regulations or other restrictions on the marketing of electronic cigarettes. In the UK, of course, European legislation has already ensured that as from 2016, e-cigarettes will be treated as medicinal products.