Greensboro hoping Imperial can reignite KOOL & Co
A lot is riding on whether the majority of the US Federal Trade Commission (FTC) is correct in believing that Imperial Tobacco has the ability not only to maintain but ultimately to grow the market share of the US brands that it is due to acquire tomorrow.
According to a story by Mark Sutter for the Triad Business Journal; when the FTC voted 3-2 in late May to give its blessing to the acquisition of Lorillard by Reynolds American (RAI), one of its key findings was that, by requiring the merged company to divest certain brands and facilities to Imperial, a ‘sufficient’ competitive balance would be maintained within the tobacco industry.
‘Imperial is getting an experienced team with knowledge of brands and customers,’ the approving majority of the FTC commissioners said in a written opinion. ‘The evidence shows that Imperial can grow the market share of these brands through discounting and other promotional activity. Imperial has a successful track record of repositioning cigarette brands in other jurisdictions and growing the market share of those brands.’
The Reynolds/Lorillard merger is due to go ahead tomorrow at the same time as Imperial’s ITG Brands is due to acquire from the merged company the KOOL, Salem, Winston and Maverick cigarette brands, along with the blue eCigs electronic cigarette brand and other assets.
Sutter said that, in Greensboro, North Carolina, much depended on Imperial’s making a success of these brands.
Under the deal, the UK-based company was acquiring Lorillard’s headquarters on Green Valley Road and its Market Street manufacturing plant, and it was taking on its local work force of nearly 2,000.
Lorillard had not only been one of the city’s biggest private employers, but also one of its biggest property taxpayers. Its employees were annually among the most generous contributors to the United Way and other causes.
In her written dissent, FCT commissioner Julie Brill laid out the perils and challenges that lie ahead for Imperial given that, as expected, the deals go ahead.
She pointed out that while Imperial was getting only RAI and Lorillard’s weakest brands, Reynolds was picking up Newport, the country’s top-selling menthol cigarette.
Winston, KOOL and Salem were declining and unsuccessful, with a combined market share that had gone from 14 percent in 2010 to eight percent in 2013.
Finally, Brill argued that while Imperial was one of the largest tobacco companies worldwide and had had success overseas in reviving and repositioning brands, its track record in the US so far was poor.
In 2007, she said, it had bought another tobacco company, Commonwealth, and at that time had expressed aspirations to grow its brands in the US. Instead, Commonwealth’s market share had dwindled since that acquisition.
The full story is at: http://www.bizjournals.com/triad/blog/2015/06/can-imperial-compete-with-reynolds-and-altria-for.html.
