Lorillard -- manufacturer of brands including Newport, Kent, True, Old Gold -- and other big tobacco companies report earnings this week. And while cigarette usage has dropped, profits are expected to be up.
The product big tobacco sells is addictive. For a manufacturer, it doesn’t get better than that. So even though the market for cigarettes is declining, by three to four percent a year, customers keep coming back. But Tom Mullarkey, a senior equity analyst with Morningstar, says tobacco companies are thinking long-term and investing in new products like smokeless tobacco and Snus. Snus are similar to chewing tobacco, except the tobacco comes in a pouch, and there’s no spitting.
“It’s very big in Sweden,” says Mullarkey.
Matthew Hudak, an analyst with Euromonitor International, says sales of Snus in the U.S. are around half a billion dollars a year and growing. But, Hudak says, sales of e-cigarettes are growing even faster.
“What a lot of tobacco companies are already betting on,” he says.
According to Hudak, sales of e-cigarettes have been doubling for the past couple of years. In the meantime Tom Mullarkey says government restrictions make it difficult for new companies to sell tobacco. And a lack of competition means prices and sales are expected to stay high.