) recently announced that the U.S. Food and Drug Administration
(FDA) has authorized the company to sell two non-menthol versions
of Lorillard's flagship Newport brand.
Lorillard's Newport Non-Menthol Gold Box 100s and Newport
Non-Menthol Gold Box are the first two products approved by the
FDA among 500 applications. The two products cleared by FDA
indicate that they have the same characteristics as the existing
ones in the market and thus will not raise any public health
questions. However, FDA has rejected four other applications of
Lorillard, but did not disclose the products.
Per the 2009 law, FDA's Center for Tobacco Products must
review all new cigarette or smokeless tobacco products, in
addition to regulating a number of aspects of tobacco marketing
and manufacturing. The law states that products introduced after
Mar 22, 2011 require pre-market approval by the FDA to be sold in
the market, which may be subject to similar or more restrictive
procedures. However, products introduced between Feb 2007 and Mar
2011, which are already available in stores, will be under FDA
Though the pre-market approval process takes about 90 days,
FDA is currently piled with 500 requests which are awaiting
approval before entering market and 3,500 requests for products
already in stores. This backlog is delaying the launch of the
tobacco products in the markets and thus hurting its
Besides these regulatory restrictions, tobacco companies are
suffering from the slowdown in tobacco industry, increasing
health consciousness among consumers and significantly higher
prices of cigarettes. Increase in cigarette prices has
significantly impacted cigarette volumes.
However, the company has been putting in efforts to revive the
volumes with new product launches. Despite the slowdown in the
tobacco industry and higher pricing, Lorillard has managed to
record retail market share growth over the last 10 years owing to
its Newport brand.
The company's launch of Newport Non-Menthol variety in Nov
2010 and the initiatives to expand the Newport Menthol brand has
gained good response, despite stiff competition. The company is
in the process of launching Newport Smooth Select Menthol
cigarettes in the second quarter of 2013.
Lorillard is also adapting to changing consumer demands by
investing in less-hazardous alternatives for tobacco. With the
acquisition of blu e-Cigs brand in Apr 2012, the company forayed
into the developing and profitable electronic cigarette
Lorillard holds a Zacks Rank #3 (Hold). Other cigarette
companies worth considering are
Reynolds American Inc.
Schweitzer-Mauduit International Inc.
), which hold a Zacks Rank #2 (Buy). Another consumer staples
Flower Foods Inc
) is also well placed with a Zacks Rank #1 (Strong Buy).
FLOWERS FOODS (FLO): Free Stock Analysis
LORILLARD CO (LO): Free Stock Analysis Report
REYNOLDS AMER (RAI): Free Stock Analysis
SCHWEITZER-MAUD (SWM): Free Stock Analysis
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