Lorillard, Inc. (LO - Analyst Report) came out in support of the recently signed law, which prevents minors from buying electronic cigarettes. The legislation was signed into law by Kentucky Governor Steve Beshear and sets an example of responsible regulation. However, the company believes that the law should also be passed by all the states to prohibit the selling, furnishing and distribution of electronic cigarettes to minors.
E-cigarettes are becoming increasingly popular, especially among youngsters due to rising health concerns related to traditional cigarettes. These battery-powered devices turn a nicotine-based liquid into vapor. These were considered less harmful than traditional tobacco products and, therefore, major tobacco players like Lorillard, Philip Morris International Inc. (PM - Analyst Report), Reynolds American Inc. (RAI - Analyst Report) and Altria Group Inc. (MO - Analyst Report) capitalized on them. Lorillard’s blu eCig and SKYCIG brands, Reynolds’ Vuse and Altria’s MarkTen and Nu Mark brands have a strong foothold in the category. In Nov 2013, Philip Morris announced that it would enter the e-cigarette business in late 2015.
However, e-cigarettes are being strictly scrutinized by health regulators nowadays. In Mar 2014, the European Parliament imposed stronger rules on e-cigarettes, which state that e-cigarettes, with nicotine strength of more than 20 milligrams per milliliter, would need authorization as a medicine. Moreover, curative or preventive qualities of these products need to be proved. E-cigarettes below this level will face the same regulations as conventional tobacco products if their usage as a medicinal product cannot be proved.
These rules will pose a problem for the tobacco giants, which are already facing challenges in the form of strict anti-smoking campaigns launched by governments around the world. Tobacco companies are increasingly relying on packaging to build brand loyalty and grab consumer attention, especially after the government curbed advertising in magazines, and on billboards and TV.
However, it is also the responsibility of these tobacco companies to discourage youngsters from smoking cigarettes or e-cigarettes.
Lorillard currently has a Zacks Rank #3 (Hold).
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