Friday, 10 April 2009 00:20

Lorillard Tobacco Part 2: living in the past; ignoring the EMAILS

Written by Larry Waters
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NOTE:  This is Part 2 of this series on Lorillard Tobacco.  Be sure and read Part 1; Lorillard Tobacco: living in the past; ignoring the FUTURE, first.

lorillard-logoWhen I spoke to Ronald S. Milstein; Senior VP, General Counsel, and former member of the Lorillard Tobacco Board of Directors in 2008, in addition to refusing to deny or confirm that Triumph Snus was now low nicotine, asked that I send him any further questions in writing and the Board of Directors will decide whether to answer them or not.

As flattering as that was, it was disappointing as well.  Since Swedish Match AB was making Triumph Snus for Lorillard, I was a big fan of, if not it's taste and lack of nicotine, it's real reduced harm aspects.  Even the taste was something I could get used to.  It would never replace the Swedish/Scandinavian Snus Brands I loved, but I was considering Triumph as a backup bedtime snus.  The undenied nicotine manipulation bothered me though.  Typical Big American Tobacco.  What also bothered me was that the LATEST Press Release on Triumph Snus was dated October 25, 2006.

 

I still had a lot of questions on Triumph regarding marketing and future plans.  Maybe they could be convinced to return the nicotine to a normal level; I naively thought.  Even RJ Reynolds spoke with me about Camel SNUS's nicotine levels and Philip Morris published Marlboro Snus's.  Maybe Ron Milstein was having a bad day.Truimph Original Snus allegedly marketed by Lorillard Tobacco

On March 19th, I sent him this very friendly and respectful email.  Most of it is based on documents Lorillard has published on their website so is public domain.  I had no reason to expect, especially after his invitation to send other questions by email, that I wouldn't receive a comprehensive response.  Here's the email:

...........................................................................................................................

Hello Ron!

We spoke on phone back in October 2008 concerning Triumph Snus and in particular its nicotine level. You deferred commenting on the nicotine reduction in Triumph and asked me to put my other questions in writing and send them to your attention. Thank you in advance for that invitation. I’ve held off doing so as I wanted to let some time pass and see what, if any, changes occurred regarding Triumph snus.

Not being able to really identify any core changes, I felt a follow-up after five months was in order. I hope you agree. America is very different today than it was in October 2008 and not for the better when it comes to tobacco products. I don’t want to be writing about Lorillard based on the company’s position in October 2008 unless it is unchanged.


While I would prefer for obvious reasons on-the-record responses with attribution to you or any other individuals at Lorillard who may be more appropriate, I am willing to quote “unnamed officials”, inside sources, or receive information on background.


If there are points or issues Lorillard would like to make public which I have not asked concerning primarily snus, but on the cigarette and tobacco market as a whole as you see it in March of 2009; 6 months from now, a year from now and five years from now, I would value your insights and as with all Lorillard’s responses, will publish them unedited and in context.
Since SnusCENTRAL.org is a snus-centric website, I’d prefer that be your focus. However, since the 46MM+ current American cigarette smokers are the target of both government at all levels and the general public, your thoughts on the future of cigarettes and tobacco products in general are also welcome.


My last article on Lorillard may not have been something Lorillard would publish as a press release, but it was factual, I quoted you unedited and in context.
I also called Lorillard/you for what I hoped would be a verifiable denial on the nicotine issue concerning Triumph snus prior to writing the article. The cards fell where you chose them to fall, but I felt it irresponsible to publish without giving Lorillard to respond first.

I hope you respect that and will not simply delete this email, but respond in the spirit of putting your position on the record and clarifying for current and especially the potential snus users in America as to Lorillard’s intentions and assessments.

1. Lorillard has responded to HR 1256, HR-2 as amended, and similar legislation with your Opinion Campaign. SnusCENTRAL.org supports your position and will be linking to your Opinion ads. What has the response from the general public and the media been to this campaign? This is not an intentional softball; I’m am genuinely fearful and keenly interested in the path Washington is leading us down, have wrote about it in the past, continue to do so, and would value your input on public reaction to the Opinion ads.

2. Regarding HR-2 as amended which has been approved by the Senate, signed by the President, and is about to go into effect, what is Lorillard’s reaction to the fact that all forms of tobacco; smokeless and cigarettes; will be subject to a tax increase EXCEPT cigars which will enjoy a decrease in Federal taxes? [Note: April 10 2009:  I may be incorrect on cigars based on SnusCentral.org Member comments.  It did read it that way in the version I was referring to though]

3. Regarding Triumph Snus:

a. Lorillard still does not mention Triumph on the corporate website. The URLs triumphsnus.com and www.triumphsnus.com appear to link to a search-generated advertising/parking site affiliated with a similar site at kolmic.com. Does Lorillard own these domain names or are you a victim of cyber-squatting?

b. Are you planning on launching a consumer marketing website specifically for Triumph Snus as Swedish Match recently did at www.generalsnus.com ? If so, when and under what domain name?

c. All Scandinavian/Swedish Snus manufacturers are publishing nicotine content information and most publish TSNA levels, even though they are not required to by Swedish law. PMUSA also publishes the contents and nicotine levels of the Marlboro snus products on their corporate website and has revealed their TSNA levels. Camel SNUS customer service will tell you, either by contact form or phone, the nicotine level they claim for Camel SNUS. Their TSNA levels have also been disclosed. Most of this is a new development since we spoke in 2008 and is for marketing purposes.

In light of this, has/will Lorillard re-think making public at least the nicotine levels of the current Triumph Snus? If so, could you please share it with me? Since Swedish Match manufacturers Triumph and there are certain government-mandated standards they must comply with, assuming you haven’t adversely and/or overly tampered with the non-mandated ingredients, Triumph should be head and shoulders above all its American Snus competitors in TSNA levels and ingredients. In light of the preceding, has/will Lorillard re-think making this information public? If so, could you please share them with me as well.

 

 

 

 

The Following Questions are Update requests on your Morgan Stanley Presentation of November 2008:

 

 

Continue to evaluate smokeless tobacco opportunities Any conclusions yet or still evaluating?

 

_ Swedish Match partnership From Lorillard’s perspective, how would you characterize the state of your relations with Swedish Match? Is the partnership still an active one or more or less static?

 

Triumph Snus

 

Test marketing began February 2008

 

Too early for conclusions In light of current legislative events, do you still consider it too early for conclusions? How many people at Lorillard Corporate are dedicated to the Triumph Snus project? How many C-Level Executives? Who is leading the project internally at Lorillard and what is their title?

 

Long term prospect In light of current legislation and competitive events, does Lorillard still consider Triumph Snus a long term prospect or has that changed to mid term or short term?

 

If a new major snus product and marketing initiative was very aggressively initiated in the American Market by a credible capitalized competitor(s), would Lorillard have the ability to react quickly with Triumph Snus or has that contingency been deemed unnecessary by Lorillard?

 

To extrapolate and tie back to public reaction, we’ve seen a disturbing trend in Congress and the White House to lash out with emotional and ill considered legislation driven by public demand and anger. National legislation targeting the AIG Executive Bonus’s to punitively tax the individual recipients or worse and so quickly generated and appears to have universal approval of both Houses of Congress and the White House, despite the fact of its questionable (at least to me) Constitutionality.

 

In 1992, the EU reacted exactly as above and instituted an EU-wide ban of Scandinavian Snus which exists to this day. Sweden as only exception in 1994 as a condition to their entering the EU.

 

If an event this were to occur in the United States evoking an AIG Bonus type of response and cigarettes to general or menthol cigarettes in particular were quickly declared a hazardous product and banned in the United States, would Lorillard be in a position to respond by significantly and aggressively replacing it with the smokeless tobacco vertical?

 

Cigarettes are on the road to extinction in the US and Lorillard seems cognizant of that by the Opinion ads. Six months ago, estimates put that occurring within 5 years. That timeline is now compressing. While anyone would have considered a quick ban incredibly unlikely even two months ago, the AIG Bonus issue and others demonstrate that if an over-stressed and very angry American public were to rise up as they did with AIG, the current Congress and President Obama would not hesitate to move swiftly rather than soundly. Does Lorillard have a worst case scenario strategy were this outrage to occur?

 

Leverage Lorillard sales and marketing To date, Lorillard sales and marketing has made no significant contribution to the Triumph Snus project, many customer-facing Lorillard employees seem to have little or no knowledge of the Triumph product, and no visible attempts have been made by Lorillard Marketing and no impetus by the Sales organization to change that. Does Lorillard plan to change that? If so, when?

 

RE: the above, the general focus of Lorillard seems to still be almost exclusively focused on the Premium Menthol Cigarette Market. In today’s economic times, the length of time they are expected to continue, and considering Lorillard’s urban focus regarding that market, is Lorillard’s vision simply a denial of current realities and a refusal to leave their comfort zone? Is Lorillard, as is epitomized by the Morgan Stanley presentation, a case of putting all its eggs in one basket? How will Lorillard respond (or is responding) to consumer inability; not desire; to afford Newport and other premium brands? How will the amended HR-2 which goes into effect on April 1 2009 affect the prices and sales of Newport? Can Lorillard survive a protracted price war or a significant decrease in Newport consumers?

 

Capital efficient entry to smokeless

 

_ Potential acquisition/venture opportunities Are there any companies in the smokeless tobacco vertical Lorillard is actively considering for acquisition in the short to mid term? In light of the Swedish Match/PMI Joint Venture, do you still feel SM is a viable acquisition? Are you actively considering/involved in any negotiations for venture opportunities? If so to either/both questions, I have to ask with whom although it unlikely you would reveal that unless it is imminent, but please feel free to prove me wrong.

 

Conversely, is Lorillard in serious discussions of any sort to being acquired by Reynolds America, Altria, or any other serious contender?

 

Is Lorillard actively considering or in serious discussions concerning the sale of the Triumph Snus …I hesitate to say Division, but the Triumph Snus name, products and associated rights to any other company and remove itself from the American Snus vertical in a significant way? Assuming first right of refusal by Swedish Match AB, has Lorillard engaged in any discussions with Swedish Match of late concerning this? If yes to any of these, any information concerning that.

 

_ Explore and evaluate potential partners Is this in progress in any serious way or does it fall under the “Too early for conclusions/Long term prospect” heading?

 

Expand product offering Is there any news on this front or does that also fall under “Too early for conclusions/Long term prospect”?

 

Expand geographic reach Triumph still seems to be languishing in the two original test markets (please feel free to correct me if I’m wrong here). Whatever the exact number of current markets, how many markets does Lorillard seriously intend marketing Triumph snus in by your one year corporate anniversary in June? How many by December 31, 2009?

 

_ Must create shareholder value Re: all the above questions and scenarios, has Lorillard yet to justify shareholder value?

 

_ Universe of targets is limited Considering all the Legislative restrictions at the Federal, State, and Local level on cigarette smokers, the pending and projected legislation at all levels targeting cigarette smokers in 2009, the cigarette tax increases already in effect, about to go into effect, and projected at the Federal, State, and Local levels to make up for budget short-falls due to the economy, does Lorillard still consider the potential consumer market limited in March of 2009? Are you still standing by the November 2008 assertion that the Universe of targets is limited?

 

 

These are my questions. I sincerely hope you will respond to them in some fashion in as timely a manner as possible. Pushing my luck, if you could reply with a approximate time-frame of when you feel I will receive your response, I would be grateful.

 

Hope all is well with you and Lorillard. At least you are profitable so AIG syndrome won’t affect the mass of Form 4 filings this month….hopefully. There are some who feel the anti-AIG legislation combined with President Obama’s mission to regulate executive pay is only the beginning. I’m also sure you know considerably more about this topic than I. I just know that for America’s sake, I pray this does not come to pass.

 

 

Sincerely,

 

Mr. UNZ

...........................................................................................................................

Fair questions I thought.  He obviously wouldn't answer a couple of them and I stated as much.  His not answering those couple of questions would be an answer in itself.  Some of the other questions were actually publicly answered on the Lorillard website.  I just wanted to verify they were still the company's position.  The lack of any page, section or even reference in the core website to Triumph Snus also baffled me.  Lorillard spent a lot of money on this ongong "pilot program" to nowhere.  Don't they even want to TRY to sell the product?

To his credit, Mr. Milstein did answer very promptly.  It just wasn't the answer I expected.  In reading his answer, keep in mind that I sent the above email directly to his personal email address at Lorillard; not some info@ type email address.  The response I received came directly from Mr. Milstein's said email address at Lorillard; not from info@ or from the Public Relations Department.  Here was his response:

...........................................................................................................................

Thanks for your email.

 

As a leader in a competitive industry, we obviously will not comment on current or future marketing plans for our products, or our relationships or intentions with our business partners. Further, we cannot speculate on the future of the industry, or say what our strategic response would be to a hypothetical situation.

 

And, since we are a publicly-traded company, all relevant information regarding our business is disclosed in our press releases and filings with the SEC and available to the public, and we believe that our operational and financial performance speaks for itself.

 

Thanks for your questions. Please review our 10K which contains the most up to date company disclosures and is available at our website under SEC filings.

 

Thanks for your interest in Lorillard.

 

 

The information contained in this email transmission may contain privileged and confidential information. It is intended only for the use of the

person(s) named above. If you are not the intended recipient, you are hereby notified that any review, dissemination, distribution or duplication of this communication is strictly prohibited. If you are not the intended recipient, please contact the sender by reply email and destroy all copies of the original message.

...........................................................................................................................

Hmmm.  No signature.  No "Hello, Mr. UNZ".  But coming from Ron Milstein's personal email account at Lorillard.  Was it a form letter or intentionly written like a form letter?  Was he being disrespectful to the leading Snus Advocate in America, Mr. UNZ?  At the time I replied to Ronald Milstein's email, these thoughts were in my mind.  Mr. UNZ does not like being casually dismissed.  I am polite even when pointed, though.

...........................................................................................................................

Ron,

 

To say that I'm extremely disappointed by your form letter response would be an understatement. Among all the manufacturers I've contacted both in the US and in Scandinavia, Lorillard certainly stands alone in their bunker mentality.

 

Your response answers a number of my questions concerning vision, market awareness, and the realization that this is the tobacco industry in 2009; not 1969. If this were 1909 instead of 2009, your response would be similar to that given by a horse and carriage dealer when asked for their thoughts on the automobile.

 

The thought of purchasing some stock and asking these questions again at your annual shareholders meeting this year did cross my mind, but I have no faith I'll receive any answers or a financial return on my investment.

 

[Redacted Statement:  Confidential to SnusCENTRAL.org]

 

I'll go ahead with my Lorillard update article based on your canned response. Since it is an unsigned canned response which contains no information not available on your website, obviously the "privileged information" disclaimer is of no significance ethically or legally. Out of courtesy, be assured I will not publish your direct email address.

 

I doubt Lorillard realizes the opportunity they just squandered. Should they have an epiphany, I would welcome a more positive response.

 

Sincerely,

 

Mr. UNZ

 

 

 

*****************************************************

The information contained in this email transmission may contain privileged and confidential information. It is intended only for the use of the

person(s) named above. If you are not the intended recipient, you are hereby notified that any review, dissemination, distribution or duplication of this communication is strictly prohibited. If you are not the intended recipient, please contact the sender by reply email and destroy all copies of the original message.

 

*****************************************************

I held off writing about this exchange as I wanted to some more digging and frankly, of the list of articles I have yet to write, Lorillard not being a serious player in the United States snus market doesn't give them a lot of priority.

What I discovered digging around Lorillard.com both gladened me and saddened me at the same time.  Ron Milstein wasn't zeroing in on me to be dismissive of:  Lorillard is dismissive of everyone who visits their website.  The perfect example is our old friend nicotine.

This hyperlink goes to Philip Morris's website and the Marlboro Snus Nicotine page.  This hyperlink goes to the Lorillard Tobacco Tar and Nicotine Page.  Compare the two and as a consumer, a stockholder, a potential investor, or a journalist.  Which company do you think shows more favorably?  Which company do you think is showing respect for their consumers and stockholders?  Which company comes off as secretive and not really caring what anyone thinks?  Which company spends more time ofuscating information than sharing it?

If Philip Morris USA and Lorillard Tobacco were the only two companies you could invest in, which appears the wiser investment?  If you as a consumer only had the choice (God Forbid!) of being only able to choose between Marlboro Snus and Triumph Snus, which would you be more comfortable putting into your mouth:  the known or the unknown?

As a consumer, Marlboro Snus is still lower in nicotine than regular and above Swedish/Scandinavian Snus but has raised their nicotine levels significantly (look at the bottom number:  not the top one). Marlboro Snus is not pasturized to kill cancer-causing micro-organisms and is not REAL snus in the true sense of the word.

Triumph Snus?  Who knows?  They not only won't tell us but make it very clear the corporate view is that consumers and shareholders not only don't even have a right to know, but are an inconvienience to be barely tolorated

Philip Morris also has another page:  Understanding Nicotine Numbers. It leads off with this very interesting statement:

Marlboro Nicotine disclosure statement

Since Lorillard would be required by law to measure and disclose the nicotine levels of their snus products to HHS, why wouldn't they just publish the information?  Why make consumers, shareholders, potential investors, and journalists have to go through the time of filing a Public Information Request with the US Department of Health and Human Services?   Why would they inconvenience HHS and force it to spend taxpayer dollars answering requests that Lorillard should simply make public?

The answer again saddens me.  Lorillard simply doesn't care.  About anyone.  Except their Executives whose new Bonus and Compensation Plans take up most of the agenda at the Lorillard Tobacco Annual Shareholders Meeting on May 21st 2009.  Attending Share Holders could ask the questions I didn't get an answer to.  After all, they own Lorillard.  My guess is any questions of that nature will be squashed on procedural grounds.

Lorillard says it's the oldest tobacco company in America tracing its roots back to 1760.  The big question is a year and a half from now, will there even BE a Lorillard Tobacco Company.  Or will it have taken it's place along side the Horse and Carraige Industry in the Museum of Obsolete Thinking?

Yours in Snus,

Mr. UNZ10% Snus Discount for New Customers at SnusCentral.com !
Activist Snus Guru
Reporting From SnusCENTRAL.org

Founding Member; SnusCENTRAL.org

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