Cigarette maker seeks profits by admitting smoking's dangers
DURHAM, N.C. (AP) -- In a sort of corporate judo, Bennett LeBow upended America's big cigarette makers five years ago when his Liggett Group, the smallest tobacco company, became the first to disclose documents showing the industry knew smoking was deadly
School anti-smoking programs get 'F'"It's a product that no question about it kills people," LeBow, chairman and chief executive officer of Vector Group Ltd., said in a telephone interview last week.
Now Big Tobacco, including Liggett, admits smoking is unhealthy. The companies are paying off a $206 billion lawsuit settlement with dozens of states -- repayment for the cost of treating sick smokers.
In the aftermath of the 1998 settlement, LeBow has started a new cigarette company built around the country's greater awareness of smoking's risks. A former cancer researcher is Vector Tobacco's vice president for public health affairs.
Vector Tobacco's products include one newly on the market -- a brand that promises fewer cancer-causing chemicals in every puff -- and one on the way next year featuring a genetically engineered, nearly nicotine-free tobacco.
The company, based in Durham, launched its Omni cigarette brand, priced on par with Philip Morris' industry leading premium brand Marlboro, last month with an advertising campaign. In it, LeBow says "there is no such thing as a safe cigarette," but that "if you do smoke, Omni is the best alternative."
It's not a safe cigarette, just less hazardous, company officials emphasize. Company scientists are working on removing more carcinogens and carbon monoxide, a key contributor to heart disease, from cigarette smoke.
Industry leader Philip Morris, R.J. Reynolds Tobacco Holdings Inc., and Brown & Williamson Corp. also are launching brands they say pump out lower levels of nitrosamines, considered by some scientists to be the worst cancer-causing compounds in tobacco.
Vector Tobacco's approach is different.
Standing apart from Liggett, the company is designed to respond to smokers' health fears, carve out a niche in a new market, and force its bigger rivals to catch up -- sort of like the competitive pressure created after the first carmaker installed lifesaving airbags.
"I think the same thing applies here," LeBow said. "Once you prove you have a safer product, how can you not put that on every product you have?"
Public health groups haven't been encouraged. A coalition including the American Cancer Society last week asked the Food and Drug Administration to require tobacco companies to prove claims that some cigarettes are safer than others.
"What they're doing is asking smokers to take their word for it that it's less dangerous. And as we've seen from tobacco companies, it's dangerous to trust them," said Barry Jackson, a Nashville, Tenn.-based cancer society lobbyist for the country's Southeastern tobacco-producing heartland.
The groups want sales of the new cigarettes stopped until their claims are proven by independent, third-party testing.
Cigarette smoking remains a leading cause of preventable death, taking 430,000 lives in the United States each year. About three-quarters of the 50 million smokers in the United States say they want to stop, though only a fraction succeed, Vector executives say.
LeBow said after Vector's low-nicotine smoke hits the market next year, the company will submit its research to the FDA and pursue regulatory approval to sell the product as a stop-smoking aid.
LeBow won't describe Vector Tobacco's financial prospects.
Profits last year for the Miami-based Vector Group were $174 million; R.J. Reynolds, the country's second largest cigarette maker and the biggest pure tobacco company, earned $404 million during 2000.
One financial industry researcher who has tracked the Vector Group -- previously called Brooke Group when it skated near oblivion in 1997 -- believes the alternative smokes could make about $250 million a year by capturing about 2 percent to 3 percent of the U.S. tobacco market.
"These are two new, revolutionary cigarette products," said Joel Luton, research director at APS Financial Corp. in Austin, Texas. Friends who have sampled Omni say it tastes like a conventional smoke, he said, an important element when considering sales potential.
On the other hand, Vector is trying to steal market share from industry giants Philip Morris and RJR. The keys, Luton said, are whether Vector will build consumer demand while expanding the number of stores Omni and the second, as-yet-unnamed brand are sold.
Vector Group president Howard Lorber said Omni is being distributed to 35,000 locations, thought packs haven't yet reached all the sites.
LeBow promised to move the new cigarette technologies into Vector Tobacco's sister company, Liggett, which now holds about 2 percent of the U.S. market for conventional smokes.
Selling cigarettes without addictive nicotine could lead buyers to quit shelling out for Vector or Liggett smokes, LeBow admitted. But the world's smokers won't lose the habit for decades, he predicted. If Vector is able to become the dominant company in a reshaped industry, and profits are reaped for a decade, that's fine with him.
LeBow owns about 38 percent of the company; billionaire financier Carl Icahn owns about 22 percent.
Though anti-smoking activists recognize that Vector Tobacco's parent company helped break down the industry's claims that cigarettes weren't addictive and unhealthy, previous experience with low-tar smokes shows skepticism is needed, Jackson said.
Big Tobacco introduced low-tar cigarettes in the 1970s implying they were healthier than their regular brands, he said. People defeated their own best intentions by smoking more low-tar cigarettes or taking the smoke deeper into their lungs, Jackson said.
"So now, here we go on to round two with Vector and others trying to bring safer cigarettes onto the market," Jackson said. "You know what they say, 'fool me once, shame on you. fool me twice, shame on me."'
The cancer society is optimistic that with time therapies will be developed allowing all smokers to quit, Jackson said.
LeBow said he supports FDA regulations and he's only too willing for health groups or anyone else to test whether Omni produces measurably fewer carcinogens.
Meanwhile, "it can't be any worse to have anything out there with reduced carcinogens."