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Altria Steps into E-Cigarettes

The giant tobacco maker Altria Company’s (MO) subsidiary, Nu Mark LLC, has revealed its plans to foray into the popular and successful world of e-cigarettes with its new MarkTen e-cigarettes. At the investor day’s conference, the company announced that it will introduce its first e-cigarette brand in Indiana in Aug, 2013.

E-cigarettes are gradually becoming very popular, especially among youngsters. They give the simulating effect of cigarettes and help people who want to quit smoking.

As a part of its strategy to expand into alternative tobacco products, Altria revealed its plans to expand the distribution of Verve Discs – a mint-flavored, chewable tobacco product that contains tobacco-derived nicotine – to additional stores in Virginia in the second half of this year. In Jun 2012, Nu Mark introduced Verve Discs, which has been widely accepted by the consumers as a substitute to harmful tobacco derivatives.

Altria’s focus on alternative tobacco products comes at a time when there is a general shift of consumers to low risk and smokeless tobacco products. To cater to the new consumer preference, Altria began working with Okono A/S, to develop innovative, non-combustible nicotine-containing products for adult tobacco consumers.

Moreover, the existing smokeless tobacco brands, like Copenhagen and Skoal, are also gaining retail share in the market. From 2008 to 2012, the combined retail shares of Copenhagen and Skoal rose from 47.5% to 50.6%. Copenhagen has ventured into newer segments by launching Wintergreen extra-long-cut, natural varieties.

Altria also reaffirmed its adjusted earnings per share outlook in the range of $2.35 to $2.41 for 2013, up 6% to 9% from $2.21 in 2012.

Altria’s first-quarter earnings were up 10.2% from the prior-year quarter on the back of higher pricing and cost reduction initiatives. Earnings also beat the Zacks Consensus Estimate. Though revenues slipped from the prior-year quarter, gross profits and operating income went up due to strict cost controls.

Altria’s close competitor, Reynolds American Inc.’s (RAI) subsidiary, R.J. Reynolds Vapor Company, is also focusing on the e-cigarette category and is expanding its distribution network of e-cigarette. In addition to this, the company has announced that its tailor-made e-cigarette, Vuse, will be available throughout retail outlets in Colorado from next month.

Another competitor, Philip Morris International Inc. (PM), is scheduled to prepare a set of ‘Next Generation Product’ (:NGP) in the year 2014, which is aimed at attracting adult consumers to smoke its products while reducing the risks related to tobacco products. The company plans to build manufacturing facilities in Europe to produce these NGPs. Currently, Altria which also competes with Lorillard Inc. (LO) holds a Zacks #3 Rank (Hold).

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