Lorillard Inc. (LO), Altria Group Inc (MO), Reynolds American, Inc. (RAI): Will E-Cigarettes Destroy Big Tobacco?

Reynolds American, Inc. (NYSE:RAI), the maker of Camel cigarettes, is also trying to catch up. It is about to expand the testing of its Vuse e-cigs to retail outlets in Colorado. It’s Solo package, which will retail for $10, comes with an original or menthol cartridge.

Since a cartridge is equivalent to about a pack of cigarettes, there won’t be a difference in price between Vuse and traditional tobacco alternatives. And because it is a late mover, I don’t believe the Vuse brand will add value to the firm’s 2013 financial results. Still, the company has been able to successfully introduce new product concepts, like Camel Snus, a moist powder tobacco product.

Foolish final thoughts

E-cigs won’t destroy big tobacco companies; they may enhance them. Ultimately, this is an opportunity to increase the welfare of smokers. According to Goldman Sachs, for every pack of cigarettes sold in the U.S. about $3.16 goes to government agencies. E-cigs are not yet regulated and could be sold cheaper than conventional cigarettes.

While most tobacco companies are already in the game, Lorillard Inc. (NYSE:LO)’s Blu Cigs and Altria Group Inc (NYSE:MO)’s MarkTen look promising. Particularly, Lorillard’s strategy to reduce the price of the starter kit and decision to make it available in 110,000 retail locations should drive sales and profits.

The article Will E-Cigarettes Destroy Big Tobacco? originally appeared on Fool.com and is written by Adrian Campos.

Adrian Campos has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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