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Cigarette manufacturer Lorillard Inc.’s second-quarter net profit increased more than 10% as it sold Newport and Maverick cigarette brands at higher prices.
The third largest tobacco company cautioned that its third-quarter cigarette volumes will be affected because wholesalers stocked more than usual last year, and that could damage its earnings.
Lorillard gives significant attention to promotion of its brands, most of all on it currently launched non-menthol version of Newport.
The manufacturer didn’t give any guidance for this particular quarter.
Its shares dropped $5, or 4.4 %, ending trading at $107.29.
Investment analyst Vivien Azer declared that the company’s shares were under considerable pressure due to concerns about increase slowing down in the second half of the year, but the sell-out is “overdone.”
Lorillard spokesman stated that company’s net profit increased to $291 million, or $2.05 per share, for the period till June 30, up from $263 million, or $1.73 per share, a year earlier. The per-share figure was lifted due to lower number of outstanding shares.
The volume of cigarettes Lorillard sold increased about 10% to approximately 10.8 billion cigarettes on profits of 9.6 % from its Newport brand and nearly 21 % for its lower-priced Maverick brand, while it expected a 1.3 % decrease for the whole industry.
According to the company’s representative their non-menthol Newport cigarettes, launched in November, presented the bulk of the increase in Newport shipments during the quarter, but it also underlined that the price of promoting it affected its profit.
Competitors Reynolds American Inc. and Altria Group Inc. both declared selling fewer tobacco products in the same quarter.
Increased unemployment and growing cigarette prices and taxes have led many smokers to switch to lower-priced brands during the recession trying to save money. Lorillard’s Maverick and Reynolds American’s Pall Mall have been among the beneficiaries.
The majority of tobacco enterprises have been increasing prices and dropping costs in order to maintain profits up, as the recession and reducing demand affected cigarette sales. Tax increases and smoking bans have made cigarettes industry stricter.
Lorillard’s retail market share raised 1.4 points within the quarter to 14.2 % of the U.S. market. Newport’s share of the menthol cigarettes was firm at 36.6 %, while its main competitors have increased efforts to confer some of the raising menthol market.
The company’s gross revenue dropped to 35.4 % due to promotional costs for Newport non-menthol.
Lorillard it is the last one of the country’s largest tobacco companies to present second-quarter results.
The first was Altria Group, holding company of Marlboro producer Philip Morris, which declared that, while cigarette sales dropped, the prices were increasing. The top-brand Marlboro also lost its market share.
The leading privately-owned cigarette maker said last week it has purchased the rights for an aerosol nicotine-delivery technology created by Jed Rose, head of the Duke University Center for Nicotine and Smoking Cessation. The school was not part of the agreement with tobacco Company and won’t get any payment. Terms of agreement are not revealed.
“By removing the process of burning, developing a way of delivering nicotine through inhalation but without the hazardous chemicals, we might decrease the health complications and deaths related to smoking,” admitted Rose, who headed the initial tests in the 1980s which allowed to paving the way for development and commercial usage of nicotine patches as smoking cessation therapy.
“We hope that we created a technology that will help to leave tobacco burning in the past.”
Rose added that Philip Morris International, based in New York and Switzerland, will now focus on developing commercial products applying this technology. The nicotine-delivery system developed by Rose is different from the medical nicotine inhalers selling currently as cessation treatments since it delivers nicotine faster imitating nicotine delivery given by cigarettes.
“The other systems of nicotine delivery are not able to the satisfaction smokers they need,” Rose noted.
The agreement is an essential “step in the efforts to develop nicotine-delivery products that can potentially decrease the risk of smoking-related health complications,” Peter Nixon, Philip Morris International’s spokesman declared.
Nixon added that it might take up to five years to create a commercial nicotine product which could be used as an alternative to cigarette smoking.
The company’s shares gained more than 1 percent, totaling $70.42 after the agreement was revealed.
PMI move is the latest in the recent series of decisions by major tobacco groups to enter the market of smokeless tobacco products and innovative nicotine-delivery products while tax hikes, anti-smoking policies and social stigma contribute to falling demand for cigarettes.
In April, PMI’s main rival, British American Tobacco established a division named Nicoventures which will concentrate on alternative nicotine products. In 2009, Reynolds American, second-biggest tobacco group in the U.S. acquired purchased Sweden-based company Niconovum that manufactures nicotine pouches, gums and sprays helping smokers to quit.
“It’s a fact that people smoke to get nicotine fix and die from tobacco smoke,” states David Sweanor, a Canadian law professor who works with tobacco industry. The major question is, “Could you offer them nicotine without the tobacco smoke in a way that could be consumer acceptable.”
The U.S. Food and Drug Administration is working to make up recommendations for companies interested in creating what the organization names modified-risk nicotine products.
“Changing regulations are contributing to an environment where competition would move this market category considerably,” the scientist added.
Philip Morris International, the leading private tobacco company in the world, yielding only to China National Tobacco Corporation, controlled by the government, spun off from Altria Group, owner of Philip Morris USA, which markets Marlboro, Parliament and other brands.
Last year Armenian government approved several regulations to control local tobacco market and major tobacco companies. Regional senior manager of Philip Morris International, the leading tobacco group in Armenia, Sargis Tsaghikyan stated that the tobacco giant is set to show another great performance capturing more market share in 2011.
Mr. Tsaghikyan said that Philip Morris Armenia offers solid and balanced brand portfolio in the local market, and is presented in all price categories, keeping in touch with all adult costumers’ needs. This makes the company believe that its business performance will be successful and the market share will continue to grow.
According to PMI Armenia is an emerging and very competitive market. And the Marlboro-maker has a 19.5 percent share of that market, the biggest among its major rivals.
In 2010 Philip Morris International offered the following brands to the Armenian smokers: Marlboro, L&M, Parliament, Chesterfield, Virginia Slims, Bond Street, Muratti Ambassador, Red&White and Assos Slims. L&M is the best-selling brand among PMI brands.
Last October, Armenian president signed into law amended Excise Tax Law and Tobacco Products Tax Law under which the tax rate difference among imported and locally manufactured tobacco products will be gradually reduced starting from Jan 1st 2011, therefore introducing equal approach to local and imported cigarettes. Philip Morris International welcomed these tax code amendments, as they are implemented in established time and prompt Armenian Tobacco Products Taxation equaling with World Trade Organization requirements.
Armenia adopted a universal and thorough legislative base to regulate tobacco industry and according to Philip Morris Armenia senior manager, the company is willing to cooperate with the government and public health authorities to establish norms and regulations for the domestic tobacco industry. The company believes it is vital that regulatory base is comprehensive, justified by evidence and covering all tobacco companies and products and that enforcement is adequate and even. These regulations could allow the authorities reach the public health objectives.
Philip Morris International is the largest international tobacco group in the world, selling its products in more than 160 markets. In 2009 the company had an approximately 15.4 percent share of global cigarette market excluding the United States, or 26 percent, excluding China and the USA.
On its official website, PMI states that smoking can cause addiction and severe health complications and recognizes that there is no safe form of tobacco consumption. The company supports strict and effective measure to regulate tobacco, and agrees that cessation should be the major aim of public health policies. At the same time Philip Morris International doesn’t target non-smokers and minors, and their marketing strategies are intended to adult smokers and set to encourage them top prefer PMI’s brands in favor of competitors’ products.
Tobacco adverts are prohibited throughout the European Union, however the number of cigarette ads in social networks, such as Twitter and Facebook is growing. According to health experts tobacco companies also increasingly use summer youth music festivals to promote their products and turn younger adults and teenagers into smoking.
Many music festivals held across the United Kingdom signed sponsorship deals with tobacco companies and agreements to install stands with their tobacco products. Lovebox festival, one of the biggest open-air events in the UK was partially sponsored by Rizla tobacco-rolling paper, a division of Imperial Tobacco which is not covered by the tobacco advertisement ban. According to Imperial Tobacco communications manager, sponsoring festivals is a legal activity, so the company believes they can use such events for promoting their products.
Another major music festival held last summer in Suffolk featured stands with Marlboro cigarettes. The organizers of the event signed partnership deal with Philip Morris International, so only Marlboro cigarettes were sold in the festival, with sales carried out by attractive girls wearing “Marlboro-featured” dresses and skirts. In addition, this year’s edition will feature similar partnership deal, this time with Imperial Tobacco.
The UK division of Japan Tobacco International also used music festivals for promoting its key brands Benson and Hedges, Camel and Silk Cut. These brands were selling at five large and brightly-illuminated stands and featured gift boxes with two cartons of cigarettes, a lighter and glow stick.
Action on Smoking and Health President Deborah Arnott criticized tobacco giants, saying that the tobacco companies are eager to attract new smokers, because their current audience either give up smoking or die prematurely.
She said that smokers tend to start their habit in their adolescence, so tobacco industry made a clever choice by starting sponsoring youth-oriented festivals. Whereas the majority of existing forms of advertising tobacco products are banned in the UK, tobacco companies found a loophole permitting them to promote their products among teenagers, added ASH president.
The recent nationwide survey completed by ASH demonstrated that 60% of adults who have children want laws banning tobacco ads during music festivals. So, the organization is planning to encourage the parliament to amend current tobacco-advertisement restrictions.
In addition to festivals, tobacco companies also use social networks to promote their products in cyberspace. According o a research by Sidney University scientists, the employees of major tobacco companies are creating fan groups of certain cigarette brands, and joining smokers’ communities registered in Facebook and promoting their products there.
In the meantime, according to several sources, tobacco companies operating in the UK have agreed to initiate legal proceeding to overturn the ban on which was approved by previous UK government.
A research carried by U.S. Centers for Disease Control and Prevention (CDC) revealed that cigarette brands produced by U.S. tobacco companies in comparison with cigarettes brands produced in other countries, possess higher levels of toxic chemicals that provoke cancer.
As concluded the CDC research team, the USA tobacco mixture comprises more cancer-causing substances than cigarettes manufactured in Australia, Canada, and the United Kingdom.
In the course of research scientists examined 126 smokers from Australia, Canada, and the United Kingdom. The examined smokers were aged 18-55 years and smoked daily around 15 cigarettes for the last 12 months.
The examined participants were devoted to “American Blend” cigarette brand for more than 3 months. The CDC team hasn’t specified what kind of U.S. brand was used, only stating that it as a popular “American blend”.
Among the brands that appeared in research were Players in Canada produced by Imperial Tobacco, Lorillard’s Newport, Marlboro produced by Philip Morris USA, UK’s Benson & Hedges and Winfield in Australia produced by British American Tobacco.
More than 2000 cigarettes butts were examined by the research team.
After examining cigarettes made in Canada, USA, Australia, and the United Kingdom, the scientists found out that tobacco products from United States identifying as ‘American Blend’ contain high levels of tobacco-specific nitrosamines and cancer-causing chemicals that favor the development of malignant tumors.
Whereas cigarettes made in other countries contained other types of tobacco that have shown lower levels of carcinogens.
In order to calculate the levels of TSNA, the researches measured the quantity of these substances in cigarettes butts, in saliva and urine of those smokers who participate in the research. They came to conclusion that smokers of cigarettes made in USA were exposed to three-time higher levels of carcinogens than smokers who prefer cigarettes brand from other countries.
“It is obvious that cigarette brands that are produced in different countries differ in methods of fags’ production and also in applied ingredients”, said Dr. James Pirkle, vice manager for science at CDC’s National Center for Environmental Health. “All of those tested tobacco products demonstrate high amount of cancer-causing substances, although, the study shows that the levels of tobacco-specific nitrosamines differ from nation to nation, and cigs made in U.S. contain the highest levels of this substances” the scientist concluded.
The obtained data are published in the latest ‘Cancer Epidemiology, Biomarkers & Prevention’ Journal.
The present research is one more proof showing the severe consequences of tobacco usage,
that is the major cause of preventable deaths all around the world, tacking the lives of more than
5 million people per year.
According to the recent report presented by the World Health Organization, more than 8 million of people will die till 2030 if tobacco usage is not reduced.
Cigarette maker Philip Morris International says its third-quarter profit fell nearly 14 percent as the stronger dollar shrunk profit earned in other currencies.
The seller of Marlboro and other brands overseas sold fewer cigarettes because of higher prices and the weak global economy.
The company says it earned $1.79 billion, or 93 cents per share, in the three months that ended in September.
Revenue excluding tobacco taxes fell 5.3 percent to $6.58 billion.
Analysts expected profit of 89 cents per share on revenue of $6.71 billion.
Philip Morris International is the world’s second-biggest cigarette maker after the state-controlled China National Tobacco Corp.
In order to cope with declining sales, R.J. Reynolds Tobacco Co. used innovative marketing strategy to restore to life a cigarette brand with a 110-year-old history.
Industry experts admit almost doubling of Pall Mall’s share within the last year to 4.24 percent market share could ultimately impact on Marlboro – the nation’s best-selling cigarettes.
Reynolds obtained Pall Mall bran five years ago after the acquisition of Brown & Williamson Tobacco Corp.
According to analysts, Pall Mall’s rise is easy to explain as RJ Reynolds simply provided customers with a high-quality and inexpensive products and convinced them to remain with that brand when the prices went up back.
Reynolds decided to lower the prices of Pall Mall in the spring, the move which captured many smokers eager to cut expenses on cigarettes during the economic downturn. The wise strategy led to doubling Pall Mall’s share, which rose to 5.2 percent in the second quarter.
And when the discount program closed in the summer and prices went up to cover taxes, Pall Mall still retained an increased market share in comparison with the same period last year.
In contrast, the sale volumes of the three leading cigarette brands – Marlboro, Camel and Newport, remained even in the second quarter, as it was reported by Inc./Capstone, a company dealing with researches in the US tobacco market.
The president of Reynolds American, Daniel Delen said that Pall Mall has been a premium quality cigarette with a great aftertaste and nice price, and those three features are the components of a major success in current economic environment.
He added that the discount campaign that coincided with April’s tax rise, has received a huge feedback from adult smokers, who revised their preferences adjusting to new prices.
Three years ago Reynolds revealed their latest marketing strategy making Pall Mall along with flagship Camel the principal brands, meaning that they would be the objective of excessive marketing efforts. Since that time, Pall Mall’s market share increased from 1.86% to 4.9%.
Reynolds spokesman David Howard as well mentioned the company’s investment in other tobacco products like Grizzly, the top-selling snuff brand in America and Camel Snus, which contributed to the increase of overall market share of RJ Reynolds.
Tony Kane, the owner of Tobacco Paradise in Charlotte says he thinks that altering prices helps Reynolds to move market share from Doral to Pall Mall.
Kane said that when Reynolds started discounting the brand it was the least expensive brand in the mainstream class, what didn’t come unnoticed by blue-collars and other customers who mainly prefer discount brands.
Kenneth Floam, a Morgan Stanley tobacco industry analyst said that he recently lifted the profits forecast for Reynolds American because of market successes of Camel Nr. 9, Pall Mall and Grizzly, the top-selling smokeless product manufactured by Reynolds Conwood division.
Flaom even said that the huge success of Pall Mall will likely force Philip Morris to reduce its price on flagship Marlboro to hamper the rise of Pall Mall market share.
The rebirth of Pall Mall is giving the brand, which was a best-seller in the early ‘60s, a chance to capture customers from Marlboro, Camel and Newport, said Morgan Stanley analyst.
The marketing efforts by Reynolds have been astonishing and worthy of great respect, according to analyst, because it is very difficult to resurge an ex-premium brand that was almost forgotten by the consumers.
The consumption of menthol additive, which is a chemical material received from a natural extract, has become known in the mid 60s whereas some cheap cigarettes containing second-grade tobacco has been available for quite a long time. However, many people still have not been aware of all the peculiarities of both of the latter tobacco products. Thus, this article will focus on the features of these items.
Smoking a cigarette which contains menthol additive brings sensations different to those from regular cigarettes. Smokers admit that menthol provides a sort of coolness in the mouth while smoking. Menthol additive as well provides a nice aftertaste in contrast to unpleasant taste of full flavor cigarettes made from poor tobacco. Initially such brand varieties like Voque Menthol or Karelia Menthol were introduced to market only as a test product that get an immense popularity after a while, whereas classic cigarettes were always there for people who could afford only them.
However, researches showed that smokers who preferred menthol cigarettes were likely to light up more frequently as the surveyed smokers admitted that menthol made them feel more satisfied and relaxed with each puff because of menthol sedative features. That sensation will never be reached with the help of regular cigarettes that smell worse than menthol and do not have antianxiety characteristics.
As regards the safety of menthol and regularly-flavored cigarettes, manufacturers of menthol cigarettes made numerous claims stating that their products are less harmful to health. But the recent peer-reviewed tests have proven that the menthol cigarettes are equally as hazardous as their full flavor counterparts.
The US Food and Drug Administration even pushed for banning menthol cigarettes, saying that menthol additive in compound with nicotine and other additives triggers much more negative consequences for health than regular cigarettes. However, please bear in mind that all cigarettes are hazardous for health and cause many illnesses.
According to the last year’s nationwide survey that focused on the smokers’ preferences, around 75 percent of the African Americans admitted to prefer menthol cigarettes, compared to only 25 percent that said to choose full flavor or light cigarettes. The issue was opposite with white Americans, as the main part of them preferred classic brands basing on their reliability and traditions.
Judging by price differences one can see that menthol cigarettes are less expensive than famous, legendary brands like Marlboro and Camel. The price of high quality menthol cigarettes is equal to that of cheap full flavor cigarettes.
Basing on the level of addiction of two types of aforementioned cigarettes, it was proven a long time ago that menthol cigarettes are much more addictive than full flavor cigarettes. It could be explained by the fact that the pleasant menthol flavor makes smoker want to light up more times than in case of classic cigarettes. In addition, full flavor cigarettes last longer than menthol ones.
In general, when speaking about distinctions between menthol and full flavor cigarettes, there are just a few significant to mention. The principal difference is the taste one, since the booming popularity of menthol cigarettes is explained by its pleasant aftertaste. Countless smokers across the world switched to menthol cigarettes, what prompted major tobacco companies to launch the menthol varieties of such famous cigarettes like Camel, Winston, Marlboro and Virginia.