Lorillard to focus on profitable build-out of its Newport non-menthol business after federal review of public health impact of menthol cigarettes, CEO says; brand makes up about 90% of sales, holds 12% share in U.S. market

Michelle Rivera

October 24, 2011 (Associated Press) – Amid federal review of the public health impact of menthol cigarettes, last November cigarette maker Lorillard Inc. launched a non-menthol version of its popular Newport brand.

At the time, the Greensboro, N.C., company said the move would help to strengthen its position in non-menthol smokes. The company's Newport brand, until last year exclusively menthol, makes up about 90 percent of its sales. Newport holds about 12 percent share of the U.S. retail market, and a 36 percent share of the menthol market, despite declining cigarette demand.

Over the last year, the company has increased its spending to help promote the brand, which took a price increase during the quarter.

The Food and Drug Administration is conducting an independent review of research gathered by its advisory committee, which said that removing menthol cigarettes from the market would benefit public health because the minty flavoring has led more people to pick up smoking and makes quitting harder.

Many analysts believe the agency won't ban menthol, which about 19 million Americans smoke. Menthol cigarettes are one of few growth areas in the shrinking cigarette market.

A menthol ban or other restrictions on the flavored cigarettes would fall heavily on Greensboro, N.C.-based Lorillard Inc., whose Newport brand is the top-selling menthol cigarette in the U.S.

In a conference call with analysts Monday regarding the nation's third-largest U.S. tobacco maker's third-quarter earnings, Lorillard CEO Murray Kessler addressed the non-menthol version of its Newport brand:

"For us, we have a very clear strategy. We intend to responsibly bring Newport pleasure to all adult smokers, and our intent to do that is through the pillars that we talked about, which is right now, building our Newport non-menthol business profitably. ... Our levels of profitability and volume at the end of our first year of launch are dramatically higher than anything we originally modeled."

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