E-cigarette maker NJOY seen as takeover target
When NJOY throws a party tomorrow at the stylish Jane Hotel in New York’s West Village to pitch its latest smokeless electronic cigarette, the company will also send a reminder to traditional tobacco makers: the innovation of e-cigs is igniting growth.
The closely held company is introducing NJOY King nationally this week, with television and print advertising saying, “Cigarettes, you’ve met your match.” The goal is to make cigarettes obsolete, “replacing them as they are currently designed,” said Executive Vice President Roy Anise.
The market for e-cigs — nicotine-infused, battery-heated tubes that create vapour instead of smoke — may rise to $1 billion in the next three years from $300 million in 2012, said Bonnie Herzog, an analyst at Wells Fargo & Co. Altria Group Inc., the maker of Marlboro cigarettes, may buy NJOY or another company, following the lead of rival Lorillard Inc., which acquired Blu ECigs in April for $135 million, Herzog said.
“It is truly a wake-up call for Big Tobacco,” Herzog said this week. “If manufacturers can create something that tastes, looks, feels and smokes like a traditional cigarette with substantially less risk or harm, more consumers are going to try them and retailers are going to give them more shelf space.”
A single NJOY King sells for $7.99 and lasts as long as two packs of cigarettes, the company said. It is the same length and diameter as a traditional cigarette and has a spongy filter unlike its predecessor, which was made of steel and introduced by the company less than a year ago. Such improvements have led Herzog to predict that U.S. consumption of e-cigs may surpass demand for regular cigarettes over the next decade.
“We are going to become the new way to smoke with a product that as closely as humanly possible replicates the actual smoking experience,” said Anise, who joined NJOY in 2010 after spending 24 years at Altria, where he helped efforts to develop new tobacco products. “Our goal is to take a look at a cigarette like a Marlboro. How do we not just be as good, but how do we become a superior smoking experience?”
Altria, the largest seller of tobacco in the U.S., has yet to join companies from startups to Lorillard, the third-biggest U.S. tobacco company, in tapping demand for e-cigs.
Craig Weiss, chief executive officer of Scottsdale, Arizona-based NJOY, declined to comment on whether the company would be open to a takeover. Altria won’t discuss whether it plans to start selling e-cigs or whether it may make an acquisition to enter the category, David Sylvia, a company spokesman, said.
NJOY controls about 40 per cent of the U.S. e-cigs market, according to Weiss. Blu ECigs’ share is 25 per cent to 30 per cent, Lorillard CEO Murray Kessler said last month.