Big Tobacco’s U.S. market share is widened by Logic acquisition

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The top four mainstream e-cigarette brands in the U.S. are now in the hands of tobacco companies following Japan Tobacco’s (JT) agreement to purchase Florida-based e-cig firm Logic.

The deal, for an undisclosed amount, is set to be completed in the third quarter – assuming regulators approve – and will broaden JT’s portfolio with Logic’s range of cigalikes and cartridge-based products, including the new Logic Pro launched in April 2015.

Logic’s e-cigs are the fourth-best-selling by volume in mainstream retail outlets, according to the latest Nielsen figures, accounting for 8.2% of product sold. Reynolds’ Vuse product takes top position, with Lorillard’s Blu in second, then Altria’s MarkTen. By value of sales, Logic comes third with 14.5%, behind Reynolds and Lorillard again but ahead of Altria.

Apart from Logic, the only independent e-cig firm approaching these sales levels in U.S. mass-market retail is NJOY. Nielsen gives it fifth position by value and by volume, in both cases with around half Logic’s share. The Nielsen rankings cover retailers such as supermarkets and convenience stores, but exclude vape stores.

Going shopping

For JT, the Logic acquisition appears to be the latest step toward obtaining a wide range of alternative nicotine businesses.

In 2014 it bought Zandera, parent firm of the British e-cigarette maker E-Lites. Earlier this year it retained control of the Ploom ModelTwo heat-not-burn vaporiser as well as the Ploom name, after relinquishing its investment in that product’s Californian creator (now known as Pax Labs). It also has a snus operation in Sweden.

So, although JT’s president and CEO Mitsuomo Koizumi has explicitly said his company does not anticipate launching a new e-cig product in Japan or the U.S., it seems set on becoming a major player in diverse markets – in terms of both geography and product type – through acquiring existing businesses.

Indeed, this parallels its approach elsewhere: it has spent at least $2.1bn on acquisitions in the last five years, according to Bloomberg.

“Logic’s well established presence in the U.S., in addition to our acquisition of E-Lites in the UK, further underpins our global ambitions to become the leader in emerging products,” confirmed Masamichi Terabatake, executive vice-president and deputy CEO of Japan Tobacco.

Smoke-free

The takeover of five-year-old Logic, officially known as Logic Technology Development, will also put JT in the unusual position of having a major e-cig brand in the U.S. market yet no combustible products of importance there.

Internationally, it sells a number of R.J. Reynolds’ most successful cigarette lines, such as Camel and Winston, after acquiring Reynolds’ global operations in 1999. It also owns Silk Cut and some territorial rights to the Benson & Hedges brand through its UK subsidiary Gallaher Group, while its Mevius has been the market leader in Japan for decades.

In the U.S., however, its only combustible presence is through the relatively insignificant Wave, Wings and Export “A” brands, the last of these a well-known cigarette in Canada.

What This Means: While so much attention has been focused on the saga of Blu vs Vuse vs Altria’s MarkTen, JT has quietly emerged as a major player in both the U.S. and the UK.

There is no reason to believe its ambitions will stop there, and no reason either to believe the next territory on its list is necessarily Japan. For example, one of its main markets for combustibles is Russia.

The Logic acquisition could also have an impact on policy, insofar as it strengthens the argument (most likely a tinfoil-hat one) that the tobacco industry is investing in e-cigs to attract new users to nicotine and, thence, tobacco itself. However, the fact that JT’s combustibles business in the U.S. is so negligible rather negates that.

– Barnaby Page ECigIntelligence staff

Photo: Twentyfour Students

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