The U.S. Food and Drug Administration (FDA) plans to make an announcement about whether sales of menthol cigarettes must be stopped.

Lorillard is the main company at risk, it produces Newport brand, the top seller in menthol category, which accounts for 35% market share. Newport is also the № 2 cigarette brand in the U.S. that comprises about 90% of Lorillard’s total sales. However Lorillard are up approximately 50%, since the FDA concluded that the withdrawal of menthol cigarettes from the market would improve public health in the U.S. Though, the panel hasn’t directly suggested a ban. That made investors to suppose with self-assurance that there would be none. They celebrated by buying up Lorillard shares, raising them currently to a 52-week high near $117, versus $76.77.

According to 2011 prediction of profits per share, Lorillard at present trades similar as Altria Group manufacturer of menthol versions of its best selling cigarette brand, Marlboro. It trades at a moderate discount to Reynolds American producer of the Salem and Kool menthol cigarettes. Still Lorillard is supposed to raise profits in the future by 10%, thus occupying a pace well ahead of its rivals.

Recently the FDA declared that the advisory panel’s report is being examined and that the changes could be real no later than June 24. Until this year, Lorillard, the third largest U.S. tobacco enterprise had faced its hares weakening behind the rest of the tobacco pack after June 2009, when the Family Smoking Prevention and Tobacco Control Act was introduced, allowing the FDA ability to control the tobacco industry in order to protect people and most of all children. After some time, FDA prohibited cigarette flavoring, but at the same time exempted menthol.

There are not so many smokers who like for instance chocolate or strawberry smokes, in turn menthols constitute one-third of the whole cigarette market. These cigarettes are preferred mostly by African-Americans and are very popular among youngsters. According to statistics, adolescents between 12 and 17 years smoke menthol smokes at a higher rate in comparison to other age groups. The FDA panel has found that menthol makes it easier to start smoking and therefore more complicated to quit.

Lorillard is quite small in comparison to the rest of the industry, with a $16 billion stock-market value. Despite the fact it has the industry’s best brand and the highest prices-per-pack, it is rather undiversified outside of its Newport brand, whose main customers are on the East Coast. Nowadays it plans to extend its Newport franchise into the Western states and also to create a non-menthol Newport Red and a menthol-light cigarette brand.

By Sara Norton, Staff Writer. Copyright © 2011 Cigarette-Store.org. All rights reserved.