Why was Blu sold?
What mysterious forces drive market success for electronic cigarettes?
We are told that Blu still leads the market in convenience store sales, although it has lost market share recently, and no one knows what will happen next, now that it will be owned by a British, rather than an American, Big Tobacco company.
Logic comes next in convenience store, we are told, and after Logic comes NJOY, lagging behind after recent losses in market share, despite its vigorous campaign of television adverts, and its central role in the history of the product. In the field are also Big Tobacco products Vuse and Mark Ten, with big talk about how their national rollouts will revive their parent companies, hurting from flagging cigarette sales. The truth of the matter remains to be seen. The race is by no means over.
Analysts suppose that Imperial demanded that Blu be added to their stateside division, which is called Commonwealth, as a precondition for being part of the deal. Their presence as part of the deal may have had something to do with antitrust issues, since the Federal Trade Commission may have balked at having too many of the lucrative menthol cigarette brands in one company's hands. Lorillard's flagship brand has been the menthol cigarette Newport, but Reynolds also had two menthol brands, Kool and Salem, which were sold to Commonwealth (Imperial) as part of the deal, along with Winston. It is conjectured that Imperial demanded the inclusion of Blu. Reynolds was probably willing since they have high hopes for their new Vuse e-cig brand, and didn't want Blu around to compete with it. Furthermore, British American Tobacco, which owns almost half of Reynolds, has it's own e-cig, Vype, which would have made the competition triangular if Blu were still present. These interests were probably at the heart of the willingness to jettison Blu.
The above statistics on e-cig sales figures are convenience store statistics, to be sure, and online sales may mean a lot more, especially to the non-Big-Tobacco companies, whose most loyal clientele segments may be online.
Everyone expects "open vaping systems", or "vapor-tank" to outstrip these cigalike offerings in the long run. "The ciga-like category is really not where it's at right now, where it is is open vapor," says Cynthia Cabrera of the Smoke Free Alternatives Trade Alliance (SFATA). Open vapor systems aren't sold in the convenience stores, but in vape shops or online. Those outlets aren't monitored by Nielson and other market research enterprises, so there is an information gap about sales specifics.
Convenience stores get a higher percentage of the profits from independents, it seems, by contrast with the offerings of Big Tobacco. Companies that specialize in cigarette sale have long standing relationships with convenience stores, after all. They may simply use the same percentages that apply to their cigarettes. And let's face it, cancer sticks have been a staple of the convenience store budget for a long time, so it is easy to see why no one wants to rock the boat. But a higher profit margin for an independent e-cig may well be turning the tide.
Think for a moment about the typical convenience store customer for electronic cigarettes. Chances are this may be a smoker who has heard some of the news about e-cigs and smoking cessation, and he or she may have tried to quit, perhaps several times. Without any further knowledge, chances are he will pick the brand that has been most in the news, or that sits on the top shelf. In my local convenience store, Lorillard has clearly negotiated a top-of-the-shelf position for Blu, and there is a large Blu sign in the window. The uncritical would-be quitter is going to reach for a Blu, of course.
Once his or her quit attempt is going well, this customer is likely to show brand loyalty simply as a laissez faire tactic. It's working – why change horses in the middle of a stream.
The move to a tank system is a year or so down the road, once the customer realizes how much more variety is available one one leaves behind the attempt to imitate the smoking experience.