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Altria’s Nu Mark Subsidiary: Innovation in Tobacco Products

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Sep. 22 2015, Updated 10:05 a.m. ET

Nu Mark’s overview

Altria Group (MO) has another core business subsidiary called Nu Mark. Nu Mark is engaged in the manufacture and sale of innovative products, including e-vapor products. Altria entered the e-vapor category in 2013 with the introduction of MarkTen e-vapor products in Indiana and Arizona. Nu Mark completed the national expansion of MarkTen products in December 2014.

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E-vapor acquisition

In April 2014, Nu Mark acquired the e-vapor business Green Smoke and its affiliates. Green Smoke has been selling e-vapor products since 2009. Nu Mark purchased Green Smoke for $0.1 billion, which included contingent considerations.

The acquisition of Green Smoke complements Nu Mark’s capabilities and enhances its competitive position by adding the e-vapor experience. It also broadens product offerings and strengthens supply chain capabilities.

Peers on acquisition spree

Following the Green Smoke acquisition, Reynolds-Lorillard Company (RAI) sold Blu eCigs to Imperial Tobacco Group (ITYBY) to continue to rely on its Vuse e-cigarette brand, which Reynolds had launched in 2013. Other companies like British American Tobacco (BTI) and Vector Group (VGR) also produce innovative e-cigs to meet consumer expectations. British American produces the e-cigarette Vype, while Vector produces the e-cigarette Zoom.

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In 2013, Altria entered into a series of agreements with former subsidiary Philip Morris International (PM). Under this strategic framework, Philip Morris is exclusively licensed to commercialize Altria’s MarkTen e-cigarettes internationally. In return, Altria is exclusively licensed to commercialize two of Philip Morris International’s RRPs (reduced-risk products) in the US.

To learn more about Philip Morris’ RRPs, please read “Philip Morris’s New Innovative Products in the Reduced-Risk Tobacco Market.”

Forward-looking

The growing worldwide health consciousness and the reduced demand for traditional cigarettes have led to an increased demand for innovative products. Nu Mark’s focus is on responsibly developing and marketing innovative products for adult tobacco consumers. It aims to succeed in the US e-vapor category in the long term.

Altria and Philip Morris International have exposure in the SPDR S&P 500 ETF (SPY), with 0.6% and 0.7%, respectively, of the total weight of the portfolio as of September 2, 2015.

In the next part of this series, we’ll look at Altria’s economic interest in SABMiller.

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