Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Up in Smoke: Altria Enters E-Cig Market

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

It was simply too big of a market to ignore. A few months back, I noted Goldman Sachs estimates that electronic cigarettes would become a $1 billion industry in a few years and Altria (NYSE: MO  ) was the only major tobacco company that did have an electronic loosey to call its own. I thought it was simply too lucrative an opportunity for the Marlboro Man to pass up and yesterday the tobacco giant confirmed it was indeed launching its MarkTen brand of e-cig in August through its NuMark subsidiary.

While the FDA wants to get its fingers into regulating them, saying their ability to help users quit smoking are unproven, I don't think that's the attraction of an e-cig from a smoker's point of view.

The government has caused smokers to be treated like pariahs and has taxed the bejesus out of tobacco such that a pack of smokes these days costs on average $5.51. In some states like New York, the price can run as high as $12 a pack, and as my Foolish colleague Selena Maranjian noted, that means some folks can spend a quarter of their annual income on cigarettes.

In comparison, an e-cig costs about $10 and a refill pack from Njoy, one of the product's first manufacturers, runs about $22, but is equivalent to a carton of cigarettes. That's a significant savings for a smoker, along with the added benefit that you don't get the 4,000 or so chemicals that are found in a regular cigarette, but, more importantly, none of the tar associated with them. It's the tar that kills you.

Designed to look and feel like a real cigarette, e-cigs produce a vapor, not smoke. Though there's a cigarette-like taste for the smoker, there's no cigarette smell.

With tobacco sales falling, all of Altria's major rivals have an e-cig product on the market already or have one coming to market soon. Lorillard (UNKNOWN: LO.DL  ) is now one of the leading e-cig manufacturers, having gotten into the business last year after acquiring blu eCigs for $135 million. It generated $57 million in sales in the first quarter and has more than 40% market share.

Because President Obama wants to hike cigarette taxes yet again, almost doubling the excise tax paid to $1.95 per pack, it's clear cigarette makers need to find an alternative source of income. Reynolds American (NYSE: RAI  ) , also late to the game, will launch its Vuse brand next month.

Wells Fargo says it's possible e-cig sales could surpass those of regular cigarettes over the next decade, which makes it understandable why Altria wants in. It also explains why the FDA wants to control the market since government coffers at all levels rely heavily on the taxes they levy on tobacco. Anything that diminishes their take causes them to tremble with fear.

Whatever regulation does ultimately get imposed, one big change is that it won't be hammered out in some smoke-filled back room. Rather, it may be one that's filled with vapor.


Altria has been the best-performing stock of the past 50 years, but as the number of smokers in the U.S. continues to steadily decline, is Altria still a buy today? To find out whether everyone's love-to-hate dividend stock is a savvy investment choice or a hazard to your portfolio, simply click here now for access to The Motley Fool's premium research report on the company.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2486885, ~/Articles/ArticleHandler.aspx, 9/30/2016 6:27:41 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 9 hours ago Sponsored by:
DOW 18,143.45 -195.79 -1.07%
S&P 500 2,151.13 -20.24 -0.93%
NASD 5,269.15 -49.39 -0.93%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

6/12/2015 4:05 PM
LO.DL $0.00 Down +0.00 +0.00%
Lorillard CAPS Rating: ****
MO $62.82 Down -0.95 -1.49%
Altria Group CAPS Rating: ****
RAI $47.13 Down -0.73 -1.53%
Reynolds American CAPS Rating: *****