The advertisement features a scowling granny in an Argyle cardigan. “Dear Smoking Ban,” she says, brandishing a middle finger. The ad, which has appeared in several U.S. publications, touts Blu Ecigs, a maker of electronic cigarettes acquired earlier this year by Lorillard Inc. (LO) for $135 million in cash. “Take back your freedom to smoke anywhere with blu electronic cigarettes,” the ad continues.
“It’s the most satisfying way to tell smoking bans to kiss off. OK, maybe the second-most satisfying way.” In recent years, U.S. tobacco companies have rolled out a range of smokeless products, from battery-powered e-cigarettes to lozenges laced with tobacco. Lorillard, Altria Group Inc. (MO) and Reynolds American Inc. have tried various marketing tactics, including positioning the products as a way for nicotine addicts to thumb their noses at the anti-smoking police.
Yet because it’s hard persuading smokers that an e-cig or lozenge is a substitute for lighting up, these alternative products account for about 1 percent of the $90 billion U.S. cigarette market, said David Adelman, a Morgan Stanley analyst. “Consumers like the tobacco products they currently consume,” said Adelman, who is based in New York. “This isn’t like asking someone to change their laundry detergent or the type of mop they use.”
The industry is trying to goose sales as U.S. smokers, increasingly hemmed in by higher cigarette taxes and smoke-free zones, puff less and less each year. Cigarette volume has been falling at an annual rate of 3 percent to 4 percent. Meanwhile, sales of smokeless products, including traditional snuff, grew about 7.5 percent from 2010 to 2011, according to Euromonitor International.
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