Tobacco Company Merger Not a Great Concern for Producers

Triad-based Reynolds-American and Lorillard cigarette makers have agreed to merge, who together will have about 45% market share, with Phillip Morris continuing to have the majority of market share in the US.  Blake Brown, NC State Extension economist says producers should take note of the merger, but not be especially concerned:

“I think its something to take note of but it’s a trend we have seen for three decades. We have seen consolidation consistently and we will see some more. The part they need to be concerned about is what happens with e-cigarettes and noncombustible products. The new types of nicotine delivery will really have an impact on them over the next five years. It could have an impact on how much tobacco the companies need.”

There was an aspect of the merger that surprised Blake, as well as other market analyst:

“The fact that Reynolds decided to not keep the “Blue” brand of e-cigarettes and they sold that to Imperial. Analysts are speculating that could be to try to lessen the possibly the Federal Trade commission could not allow the bill to get through. The BLUE has about a 40% share of the e-cigarette market.”

Now days, the bulk of tobacco grown in North Carolina, and the US in general leaves the country.  Brown says some of those markets are in flux as well:

“Hopefully some of these markets like China will continue to be robust. The European market is going through many of the same changes that the US market is gong through.”

Dr. Blake Brown, NC State Ag Economist.