With its Blu Cigs Acquisition, Imperial Tobacco is believed to start making big leaps. The UK-based tobacco company has played a crucial role in the major tobacco merger between Reynolds American and Lorillard when it agreed to buy several cigarette brands from the two other tobacco companies along with Blue cigarette brand.
Imperial Tobacco’s CEO Alison Cooper has taken a big surprise step to the future when it recently acquired $7.1 billion purchase from the merger. One of the details of the deal is Blu Cigs acquisition.
Aside from Blu, the 113-years old Imperial will also acquire Salem, Maverick, Winston and Kool. Blu has been regarded as the largest ecig maker.
Cooper said that it is now the perfect time to get Blu. She, however, declined commenting on whether or not the inclusion of Blu in the deal actually persuaded her to agree to the deal. Reynolds CEO Susan Cameron stated that Blu was very significant to Imperial in the context of the divestiture package.
From Idler To Leader
The addition of Blu in Imperial’s portfolio immediately propels the tobacco company in the fast growing ecigarette segment. Tobacco firms all over the world are making fast moves in investing on ecigarettes while governments worldwide are struggling to keep up with their implemented vaping policies.
Tobacco analyst Philip Gorham at the Amsterdam-based Morningstar Inc remarked that it is most surprising that Imperial is taking the ecig business. Ecigs were most likely what sweetened the deal for Imperial.
Furthermore, Imperial’s US tobacco market share also propelled it from the 5th rank to the 3rd rank with the added 10% share. Richard Marwood from Axa Investment Managers (London) said that there were a bit apprehensive about the increasing exposure in the US. Marwood helps in overseeing the assets including BAT and Imperial Tobacco stocks worth $700 billion.
Lorillard was the first tobacco company to have ventured on ecigarettes when it purchased Blu ecigs in April of 2012 while Imperial was among the late movers. Imperial’s Puritane ecigs only went to market in February. British American Tobacco was ahead by more than six months in introducing its Vype ecigarette.
With major efforts investment of Lorillard on Blu cigs marketing, the brand was able to obtain less than 50% share in the US C-store market. In 2013, Blue cig sales totaled $230 million.
Things appeared to go quite well with Lorillard’s ecigarette venture because it also acquired a UK-based brand of ecig, Skycig, in October 2013. Skycig is now marketed as Blu UK and is planned to expand to Germany, Netherlands and France.
According to Blu UK CEO Jacob Fuller, the annual revenue could be up to 400% more, reaching 100 million pounds by end of 2015.
UK has seen such an amazing growth in ecigarette consumption in just the previous two years. A study commissioned by ASH, an anti-smoking lobby group, found that there are roughly 2.1 million Britons who are now using electronic cigarettes.
Now with Blu, Imperial’s presence and competitive ability in the ecigarette scene will be strengthened, according to London’s Fitch ratings analyst Ilana Elbim. The yearly revenue from the US will increase to roughly 2 billion pounds (24% of the group) after the 500 million pounds purchase. Imperial now sells cigarette brands like Fortuna, Sonoma and USA Gold in 20 US states after it has bought Commonwealth Brands (based in Kentucky) last 2007.
Marwood also stated that there is now an uncertainty clouding over menthol cigarettes as the US FDA considers imposing restrictive policies on menthol cigarettes like Salem and Kool. Apparently, Reynolds American also has acquired the Newport menthol cigarettes of Lorillard through this merger.