Tobacco Asia

Volume 18, Number 3

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10 tobaccoasia ©2014 October Multimedia Inc. TOBACCO ASIA is published five times annually in February, May, July, September and November by October Multimedia Co., Ltd. Production and distribution of TOBACCO ASIA is overseen by October Inter Co., Ltd., Vanit Bldg. 2, Room 1403A, 1126/2 New Petchburi Rd., Bangkok 10400 THAILAND. Tel +66 22 55 66 25, Fax +66 26 55 22 11. E-mail: web: From the Publisher EDITORIAL MASTHEAD Publisher Glenn Anthony John Associate Editor Andrey Medvedev Features Writers Jonathan Bell Chris Bickers Allen Liao Nattira Medvedeva Mike Phillips Thomas Schmid Zhao Rongguo Art Director Somjet Thitasomboon Translations Tran Tan Kiet Liao Tian Liang Nanthalee Rattanayong Administration Office Manager Sayaporn Wattanaking Editorial/Circulation Offices Tobacco Asia c/o October Inter Co. Ltd. Vanit Building 2, Room 1403A 1126/2 New Petchburi Rd. Bangkok 10400 THAILAND Tel (Thailand) +66 2255 6625 Fax (Thailand) +66 2655 2211 Surf's Up. Time to ride the coming wave of mergers and acquisitions As rumored, Reynolds American, the US cigarette maker with US rights to several brands that JTI (Japan Tobacco Inc.) owns globally (including Winston, Salem, Kool, etc.) recently acquired Lorillard, its smaller US competitor, for US$27.4 billion. This complicated deal also sees world #1 player (or #2 depending on who is counting and how they are counting) British American Tobacco spending US$5 billion to maintain the 42% share level it already has in Reynolds American in the newly merged company. Plus the deal importantly involves Imperial Tobacco Group which will acquire for US$7.1 billion a factory in North Carolina from Lorillard; several brands from Reynolds, including all those mentioned earlier; and, oddly, Blu, Lorillard's fast-growing e-cigarette brand in the US and its only major venture outside the US (having been introduced into the UK). Although Reynolds cedes menthol brands Kool and Salem to Imperial, they acquire Lorillard's flagship Newport, the best selling menthol in the US and the #2 brand there. The combined group will also retain brands such as Camel, American Spirit, and Pall Mall. Reynolds will undoubtedly put more fire behind its remaining e-cigarette brand Vuse. In the US, Philip Morris USA, alone holds 46% of the market largely with the Marlboro brand, according to Euromonitor. Reynolds currently has 25% with Pall Mall and Camel each comprising 8%. Lorillard currently has 12% due almost entirely to Newport. After the deal, Imperial, once a minor player, will be the third largest US manufacturer with a considerable 10% market share. Why do we care in Asia? This is a major deal involving global players. Unlike all the continuing and ongoing mergers and consolidations in the China market – the world's largest – this is a major deal in the US (the world's second largest tobacco market) involving major global marketers of tobacco products. More mergers and consolidations will likely follow, due to many shifts facing today's tobacco industry globally including changing consumption patterns, the rise of e-cigarettes, and the various and increasing regulations worldwide. The possible legalization of marijuana in the US may have an effect on traditional tobacco sales too. This merger is also the first sign of a predicted take-over by major tobacco companies of the marketing of e-cigarettes globally. And with that, the probable major consolidation of the hundreds of players in Shenzhen, the Wild Wild East of vaping producers. Glenn Anthony John Publisher/Editor

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