Reynolds American Rising to Top Big Tobacco Status Thanks to Lorillard Buy Out
Reynolds American is the nation’s second largest big tobacco company, but they are rapidly gaining ground on top rival Philip Morris USA. Earlier this year, Reynolds purchased Lorillard Inc. for over $29 billion and now the investment is paying off. By acquiring Lorillard, they also took control of Newport, America’s number one menthol cigarette brand. According to recent sales data, Newport is now representing a stunning 37 percent of Reynolds’ overall cigarette sales, with Camel ranking second at 26 percent.
Electronic cigarettes were another major factor in the Lorillard buy-out. Lorillard’s Blu Ecig is one of the country’s top selling cigalikes. Under the supervision of Reynolds American, Blu is now available in most major convenience stores, pharmacies, and even smoke shops. Reynolds own “Vuse” vaping device is also trending upward, with a 34.7 percent market share this month.
All things considered, Reynolds has seen 3.4 percent profit growth thus far in 2015. Cigarette sales are on the upward rise with growth noted from Newport, Camel, and Marlboro. Competitor Philip Morris USA is also showing growth, but they are trailing behind Reynolds with only 2 percent gains.
Financial analysts like Bonnie Herzog from Wells Fargo Securities expect to see continued spikes in cigarette sales throughout the rest of the year. “We expect strong manufacturer pricing in 2015 to continue, which should generate robust profitability growth,” Herzog said. She also believes this year’s sudden increase in cigarette sales is evidence that consumers are feeling more confident in the economy and are starting to feel secure enough to part with disposable income.
It could only be a matter of time before Reynolds overtakes Phillip Morris USA to win the top spot in the Big Tobacco competition. Do you expect cigarette sales to continue to climb in coming months?