Altria Could Potentially Add $5 Billion In Value From E-Cigs
Altria Could Potentially Add $5 Billion In Value From E-Cigs
A recent article on Trefis, estimated that Altria could potentially add $5 billion in value from e-cigs.
Since the existence of electronic cigarettes, the tobacco market has been slowly, but surely feeling its impact. Though the e-cig industry is still very young and hasn’t quite matured, it has caused companies like Altria, a giant in the tobacco industry, to see a decline in shipment volume. Altria specifically seen a 6% decline y-o-y for the first half of the year. This has led to Altria and companies like it to enter the niche e-cigarette category.
Altria announced its entry earlier this year through one of its subsidiaries, NuMark, introducing the MarkTen electronic cigarette.
We believe this is a positive move and reflects the management’s focus on sustainable long-term value creation for its shareholders amid a rapidly declining market for cigarettes. – Trefis Team
Trefis says they believe Altria could potentially add $5 billion in value by selling e-cigarettes.
Most of the value is expected to come from the fast growing market for e-cigarettes, and the company’s expertise in building brands and handling tobacco litigations.
They expect the e-cigarette category to grow quickly, like many of us believe. In fact, we’ve already witnessed the e-cigarette industry to rise from being our little baby with so much potential, to an overgrown toddler that can be expected to eventually become a giant.
We expect the volume of traditional cigarettes sold in the U.S. to decline at ~4% CAGR in the long run on growing alternatives and rising excise taxes. To approximate the size of the e-cigarette market, we estimate that 75% of the decline in traditional cigarette volume gets converted into e-cigarette consumption in the long run and that one e-cigarette is equivalent to 15 traditional ones.
That conversion rate is why electronic cigarettes were invented. Traditional smoking is a thing of the past time, and the future for this e-cigarette industry looks promising, especially with estimates such as this.
To read the full article, visit: http://www.trefis.com/stock/mo/articles/203656/altria-could-add-5-billion-in-value-by-selling-e-cigarettes/2013-08-30
