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For the first time, Lorillard Tobacco has decided to offer something other than a cigarette that needs a light. The tobacco giant is now in the electronic cigarette business, thanks to the acquisition of Charlotte-based blu ecigs. The company makes battery-powered smokes that don't actually smoke - the nicotine comes through a puff of vapor.
When blu ecigs launched back in 2009, demand was immediate and intense. But blu co-founder Jason Healy worried the company wouldn't be around longer than a few years. Federal regulators were training a skeptical eye on e-cigs and public health groups were calling for a ban.
Healy's outlook is markedly different today with blu's acquisition by tobacco giant Lorillard. "We're very secure in our position and future," says Healy. It helps that the FDA last year decided to regulate electronic cigarettes as tobacco products rather than "drug-delivery devices," which fall under stricter rules. But that also led to an explosion of e-cig makers.
blu has managed to maintain a spot near the front of the pack, which is a big reason for the Lorillard acquisition. In the process, Lorillard becomes the first major U.S. tobacco company to offer an electronic cigarette. Lorillard CEO Murray Kessler called the $135 million cash deal "relatively modest" in a call with investors.
"I view this more as a meaningful R & D investment to unlock a potentially large, long-term growth opportunity," said Kessler. U.S. sales of e-cigarettes and accessories are estimated between $250 million and $500 million. blu will be a subsidiary of Lorillard and remain headquartered in Charlotte. Jason Healy hopes the tobacco giant's deep pockets and long experience working with regulators will help blu innovate more quickly. "We've still got the same battles. . . we've just got better tools now," says Healy. And blu gives Lorillard a seat at the table as the FDA looks to further regulate a lucrative, emerging market.