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Is Big Tobacco Making A Come Back?

When The Marlboro Man made his first appearance in the cigarette maker’s advertising in 1954, he became one of the first prolific characters’ representing a brand and opened the door for an industry that would spend more than $1 billion dollars in advertising each year over the next two decades. Since a ban on TV advertising took place in 1971 and the imposition of the Master Settlement Agreement of 1998 created broad restrictions on the marketing of cigarettes, “tobacco has been a relatively uninspiring marketing story because of the regulations and negative sentiment”, said Michael S. Lavery, an analyst for CLSA Americas.

That may all be about to change as three largest U.S. tobacco companies enter the electronic-cigarette (e-cigarette) market, Big Tobacco is poised to once again become a significant spender.  R.J. Reynolds, the second-largest tobacco company in the U.S., has announced it is poised to launch Vuse, its “digital vapor cigarette.” Marketed by its R.J. Reynolds Vapor Co., Vuse will begin marketing in Colorado — the first state in an eventual rollout — with print, TV and direct mail marketing from CHI, London.  Philip Morris USA, the nation’s No. 1 tobacco company, is expected to announce its own e-cigarette brand soon and Lorillard, the third-largest tobacco company in the U.S., will spend $40 million to market its e-cigarette brand Blu, more than double what it spent on measured media last year. “We see real opportunity for the e-cigarette category,” said Robert Bannon, director-investor relations.

The resurgence is due to e-cigarettes not yet being regulated by the Food and Drug Administration; tobacco companies can tap certain media that have long been unavailable to their traditional cigarette brands.  Spending on e-cigarette TV ads increased 17.9% from 2011 to 2012, while print ad spending increased 71.9%, according to the Citibank report.  The rise in print spending could be a boon for magazine publishers but the continued growth of ad spending on e-cigarettes hinges upon how the FDA decides to regulate the burgeoning category.  Reynolds American CEO Daniel Delen said that a decision is “imminent,” at which point Big Tobacco could again be turned away from TV.   Any regulations the FDA may try to impose will likely result in a court battle, thus preventing any regulations from going into effect within the next year, but the path back for tobacco companies dominance in advertising is largely out of their hands.

Lorillard is jumping out in front of the competition with the Blu Cig online marketing program which depicts a character called Bob, alias Mr. Cool, a 36 year old smoker of unknown occupation. A flashback to the Marlboro Man era, while television commercials feature Stephan Dorff, encouraging viewers to “take back your freedom” and proclaiming, “We’re all grown-ups here!”  One obvious marketing challenge for all the players is explaining the technology and the use of the new e-cigarette, an unnecessary effort once left to former generations of smokers of traditional cigarettes.

It is not likely that big tobacco will ever reach its marketing spend of previous decades, but the e-cigarette has caused excitement and enthusiasm among an industry that has for a very long time been the marketing’s industries most restricted and most dormant segment.   More than 40% of smokers have tried e-cigarettes, and to spite the fact that about 80% of them return to traditional cigarettes, there is a large consumer base that wants to make a change.  It promises to be a realization of what up to now has been just a pipe-dream for the tobacco industry.

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