Tobacco giant Altria Group Inc., looking for growth opportunities in alternatives to conventional cigarettes, has invested in a Chesterfield County-based chain that has grown to become the largest U.S. retailer of vaping devices, commonly referred to as electronic cigarettes.
Henrico County-based Altria recently made a minority investment in Avail Vapor LLC, an executive for Altria said Thursday at a meeting of industry analysts and investors hosted by the company in Richmond.
The investment in Avail comes as Altria, parent company of the nation’s largest cigarette maker, Philip Morris USA, looks to also become the market leader in a wave of novel nicotine-delivery products that the company wants to market as less risky to health than conventional cigarettes.
Avail Vapor, founded in 2013, has opened 102 stores in 12 states specializing in high-end types of electronic cigarettes.
Unlike conventional cigarettes, the e-cigarettes or vaping devices do not burn tobacco. Instead, the battery-powered devices heat a liquid solution of nicotine, flavorings and other ingredients to produce a vapor that the user inhales.
Avail has a laboratory in Chesterfield where it makes liquids for vaping devices, and the company has been positioning itself to offer that service to other e-cigarette sellers. James Xu is the company’s co-founder and CEO.
Altria did not disclose the dollar amount of its investment in Avail, nor its ownership stake.
Maggie Gowen, marketing director for Avail, said the company believes Altria’s investment “helps our business continue to grow.” She said Avail’s mission of helping smokers transition to vaping has not changed.
Altria already has introduced its own brand of e-cigarette, MarkTen, which is sold at about 65,000 stores. MarkTen is among a class of e-cigarettes designed to closely mimic the experience of smoking a conventional cigarette.
Vape shops such as Avail, however, cater to consumers who prefer different varieties of devices and a large selection of flavorings.
“We have already benefited in various ways from this investment in Avail,” said Jody Begley, president of Altria’s product development subsidiary, Nu Mark LLC.
“Through their retail stores, we have learned a great deal about educating adult tobacco consumers about new products,” he said about Avail.
Altria said its MarkTen e-cig has about a 13.5 percent market share in the category. The Vuse e-cig introduced by its top competitor, Reynolds American, has about a 30 percent share, according to Nielsen data. Reynolds American was acquired in July by British American Tobacco.
Altria and Reynolds American also are vying to get FDA approval for cigarette-like products that heat tobacco instead of burning it.
Altria has exclusive rights in the U.S. to sell one such product, iQOS, under a licensing agreement with Philip Morris International, which was spun off as a separate public company in 2008 by Altria to sell Marlboro and other cigarette brands outside the U.S.
Altria’s investor conference, which was webcast, gave an overview of the company’s business units and growth strategies, as conventional cigarette consumption has been slowly declining.
Executives emphasized the company’s strategy to maintain its market-leading position in conventional tobacco products, while also introducing innovative, non-combustible nicotine products, many of which it hopes to eventually advertise as “modified risk” products under rules set by the U.S. Food and Drug Administration.
In July, the FDA acknowledged that a “continuum of risk” exists among different types of nicotine products. The agency also said it was exploring regulating the amount of nicotine in conventional cigarettes, a possible way to get more smokers to switch to non-combustible products.
Altria executives said Thursday that they were not surprised by the announcement. The FDA has had the power since 2009 to regulate nicotine levels, and Altria, which 10 years ago opened a large research center in downtown Richmond, has been preparing for that.
“We have done extensive work on nicotine reduction,” said Murray Garnick, who leads Altria’s regulatory affairs department.
That research has included developing tobacco seed varieties with “substantially reduced nicotine,” which the company is planning to further research, he said.
Altria’s strategy is a “portfolio approach,” in which it plans to offer consumers a variety of product options, said Martin J. Barrington, the company’s chairman, chief executive officer and president.
“We strongly believe that businesses that are great over the long term, like ours, both maximize today’s business while preparing for tomorrow’s, and Altria has been doing just that,” he said.