Money smells of menthol at Lorillard, a Reynolds American (RAI) subsidiary. Flagship brand Newport is its best-selling menthol (and non-menthol) cigarette and the #2-top selling cigarette name in the US, accounting for about 86.5% of sales. Other brands include the premium and discount lines of Kent, Old Gold, and True as well as a UK-based electronic cigarette label SKYCIG. The company sells its lineup to wholesale distributors (who supply retail and chain stores and government agencies). Lorillard was known as the Carolina Group until 2008, when it split from former parent Loews. RAI bought it in 2015 for $27.4 billion, combining the #2 and #3 cigarette makers. The company is the nation's oldest continuously operating tobacco business.
Change in Company Type
Lorillard was purchased by rival Reynolds American (RAI) in 2015. In connection with the $27 billion deal, Lorillard and RAI sold the KOOL, Salem, Winston, Maverick, and blu e-Cigs brands to British firm Imperial Tobacco Group for about $7.1 billion to satisfy US anti-trust regulators.
Lorillard serves customers in the US, including its possessions and territories, and the UK.
Sales and Marketing
Lorillard supplies about 500 direct buy customers, primarily wholesale distributors that service more than 400,000 retail outlets, chain stores and government agencies, such as the US Armed Forces. McLane Company accounts for nearly 29% of the company's sales. The cigarette maker purchases more than two-thirds of its tobacco from Alliance One International (formerly DIMON).
Lorrilard's revenues grew by 1% in 2014. Net sales from Lorillard's cigarette segment increased by 1.6% in 2014 thanks to higher prices, partially offset by lower unit sales volumes.
Electronic cigarette sales decreased by 28%, as a result of the impact of a lower price on rechargeable kits that were introduced in 2013, partially offset by sales from 2014 product launches, (including blu eCigs PLUS+ kit and tank products and cherry disposable products).
In 2014 Lorrilard's net income increased by 1% due to higher sales and a decrease in selling, general, and administrative costs (down 2.6% due to the absence of the $20 million in estimated costs to comply with or otherwise resolve the U.S. Government Case judgment incurred in the first quarter of 2013).
Cash flow from operating activities increased by 11% in 2014, due to a decrease in inventory and pension and post-retirement contributions, and higher depreciation and amortization, partially offset by a decline in accounts payable and accrued liabilities, a decrease in accrued settlement costs, and higher tax payments.
The tobacco company is also chasing after the fast-growing electronic cigarette market as more restaurants, companies, and municipalities implement non-smoking rules.
Mergers and Acquisitions
Delving into the fast-growing market for electronic cigarettes, Lorillard acquired the assets and operations of SKYCIG, a UK-based electronic cigarette business in October 2013 for about £30 million ($48.6 million). Lorillard plans to pay another $48.6 million in 2016 if certain financial benchmarks are achieved. SKYCIG operates as a subsidiary of Lorillard.
Lorillard and its rivals face an ever challenging regulatory environment following the passage of the Family Smoking and Tobacco Control Act by the US Congress in June 2009. The landmark legislation grants the US Food and Drug Administration (FDA) substantial power to regulate tobacco products, including authority over marketing, as well as candy flavorings (such as menthol) and nicotine in tobacco products.
Responding, the cigarette maker, along with Reynolds American and others, filed suit against the FDA protesting its "unprecedented restriction" of First Amendment rights. In 2010 a court axed the law's ban on using color and graphics in certain tobacco products and on statements by tobacco makers about the regulation; a subsequent ruling in 2012 by a federal judge declared unconstitutional the FDA's requirement for stronger warnings and pictures on the top half of cigarette packages. An appeal by the Justice Department in the US Court of Appeals for the District of Columbia was heard in April 2012, with a decision to be announced at a later date.
An equally significant legal challenge that Lorillard and other cigarette makers face is small scale civil litigation from individual plaintiffs seeking significant judgments. For example, a Florida court in spring 2012 ordered Lorillard to pay a widow $25 million in punitive damages after she was awarded $16 million in compensatory damages. The company planned to appeal.
The company was founded in 1760 by French immigrant Pierre Lorillard.