Today is the first in a series of interviews CSP Daily News is holding with top executives in the vaping community. Joe Murillo is president and general manager of Altria’s Nu Mark LLC, whose portfolio includes MarkTen and Green Smoke.
CSP: Take us into the decision-making process of how Altria came up with the name Nu Mark and the product MarkTen? What is the meaning of MarkTen, and what should the consumer perceive when he/she sees the MarkTen product?
Murillo: We think MarkTen is a premium name that is meant to appeal to adult smokers and vapers looking for a familiar experience.
CSP: Companies like NJOY, blu and Logic had permeated the e-cig space for several years before MarkTen entered the market. Why the delay in rollout? Would you agree with observers that Altria as an entity was biding its time to determine whether the world of e-nicotine was a fad or trend?
Murillo: I really reject that notion. It’s still very early days in the e-vapor category. The category continues to rapidly evolve. It’s also important to remember that while adult smoker interest in these products is high, we are still not seeing widespread conversion of adult smokers to e-vapor products. I think that’s because no one e-vapor product today meets the interests of adult smokers and vapers.
Nu Mark’s goal is to achieve a leadership position in the U.S. e-vapor category. In just one year, we’ve taken several steps to position us to do just that, including the national rollout of MarkTen e-vapor and the Green Smoke acquisition. Think about that: In one year, we’ve introduced products nationally, and we’ve acquired a terrific company in Green Smoke. That speaks to what we can do in this category.
Nu Mark is using the scale and expertise of Altria’s service companies, which have helped enable Altria’s tobacco operating companies to succeed in the major tobacco categories, to accelerate Nu Mark’s progress and our ability to lead the category.
CSP: Many, notably Wells Fargo analyst Bonnie Herzog, predicted a few years ago that instead of launching its own product, Altria would look to acquire a leading brand, based on the company’s record of acquiring mature brands in the OTP (other tobacco product) space (e.g., U.S. Smokeless Tobacco). Will Nu Mark consider acquisition in lieu of or in addition to future product innovation?
Murillo: I think Altria’s tobacco operating companies have an unmatched record of innovation in the tobacco category. While I can’t talk about Nu Mark’s future plans, we did make a terrific acquisition earlier this year when we bought Green Smoke. Green Smoke is a really innovative e-vapor company that brings with it talented people and a history of innovation that matches our own. Adding Green Smoke to the mix allows us to build a product pipeline to complement our current MarkTenproducts.
CSP: Please share some insights from your rollout. Observers say it’s too soon to judge the strength of MarkTen and RAI’s Vuse since both brands are very much in the trial stage with coupons driving up volume. Would you agree with that assessment?
Murillo: Without a doubt, awareness and trial are important for any new-product introduction. I agree that its early days in this category and we shouldn’t jump to any conclusions. In fact, MarkTen e-vapor is just now reaching full national distribution. I can tell you we’re pleased with how MarkTen e-vapor has been received by retailers and the initial adult vaper feedback I hear every day. We know our unique FourDraw technology is of particular interest to adult smokers and vapers. I’d also look to what retailers say about MarkTen e-vapor—being voted the best new e-cigarette by retailers in CSP’s Retailer Choice Best New Product Contest speaks for itself.
CSP: A year from now who do you expect to be the front-running e-cig brands?
Murillo: That’s really impossible to predict. I think the best answer to that question is another question: What’s it going to take to be a leading brand in this category? I think it’s all about understanding what adult smokers and vapers are looking for in this category and being able to build the right brands and products that meet those interests. I think we should be well positioned to do that in the long-term.
CSP: It’s been striking how much has changed in the past year. We have seen e-cigs shift from unstoppable new segment to struggling in the wake of the broader e-vaping trajectory. Where do you see e-cigs in two to three years within the broader total-tobacco backbar? Will e-cigs follow the path of snus as a very small, niche player, or a potential equal (near equal) companion to cigarettes, or something else?
Murillo: It’s hard to predict where this category will go. It’s still early days, and we see adult smokers and vapers looking and trying a variety of products because no single product best meets their interests today. I believe that’s why you see that adult smoker interest in these products is high, but we still are not seeing widespread conversion of adult smokers to e-vapor products. I also think how the FDA regulation is implemented and how the states legislate these products will play a role in shaping the future of this category.
CSP: Many e-cig users say the big problem is e-cigs simply do not adequately replicate the cigarette experience. Several smokers I spoke to say there’s nothing in the e-cig experience that replicates the combustion experience of cigarettes. Do you see this as THE major obstacle inhibiting long-term e-cig growth, or do you believe there are other factors (number of puffs, battery life, etc.).
Murillo: I think its early days in this category, and the people who can innovate the fastest to create the experience adult smokers and vapers are looking for will win. There’s no question that no one has it right just yet. It’s going to take the right mix of understanding adult smoker and vaper preferences and understanding technology to develop the right product offering combined with the right brand building to meet these interests.
CSP: Speaking of vaping, as MarkTen improves market share, it is doing so in a somewhat uncertain e-cig arena. Is Nu Mark or Altria currently planning rollout or trial of other vaping products over the next 12 to 18 months? Are you looking at potential acquisitions in the e-cig/vaping arena?
Murillo: Our competitors would love it if I shared our detailed plans for the next year! Obviously I can’t spell out our plans, but I can tell you that we are excited about our pipeline of e-vapor products. We look at the national roll out of MarkTen as the beginning of our path in the e-vapor category.
I have a sign in front of my office that says Nu Mark is committed to “relentless innovation.” We strive to show that commitment every day. In fact we’ve already announced that this November we’re introducing the new MarkTen 2.5% NBW nationally in addition to our current product. And we have other things in the works. It’s exciting times at Nu Mark; stay tuned.
CSP: Looking at Altria’s total portfolio, where do you see Nu Mark fitting in? Is it a growth player? Is this the first of a broader portfolio of MarkTen products akin to the family of Marlboro brands?
Murillo: Again, I can’t get into specific future plans. Of course, we’ve already announced that in addition to the original MarkTen, we are also offering the new MarkTen 2.5% NBW product in November.
CSP: MarkTen so far has avoided embracing flavors. Is that something the division is reconsidering or open to reconsidering?
Murillo: We understand that flavors are an important factor for adult smokers and vapers interested in the e-vapor category. In addition to the original MarkTen e-vapor, we have a lead market in our home state of Virginia where we have additional flavor varieties called Robust and Smooth Mint in market.
CSP: From the Food & Drug Administration’s deeming regulations to local ordinances, some of which treat the e-world like cigarettes, what do you consider responsible regulation and what is overreaching, whether on the local, state or federal front?
Murillo: We start from a place that says e-vapor products are not cigarettes and shouldn’t be regulated or legislated like them. For example, we don’t think it makes sense to automatically sweep e-vapor products into existing smoking bans, but we do think it makes sense to prohibit their use in places like schools or other places meant for children. On the regulatory side, we do think FDA science- and evidence-based regulation of this category makes sense and have shared that perspective many times with FDA.
I think on all these issues—whether state or local legislation or FDA regulation—it’s important for the retail community to be engaged. I’ve seen it several times; the voice of the retailer makes a difference.