Will the Reynolds and Lorillard Merger Monopolize the Tobacco Industry?

Jun 15, 2015

After months of rumors and speculation, the FTC finally approved the $27 billion merger between Reynolds American and Lorillard. The deal has some breathing a sigh of relief and others worried that the merger will basically place the fate of the tobacco industry in the hands of a duopoly. Initially, merger opponents believed the deal would squeeze out U.K. based Imperial Tobacco group. However, a lucrative side deal effectively keeps Imperial in the game. The deal is supposed to close in June.

After the merger, Reynolds is expected to receive $11 billion in annual revenue, placing it behind industry leader Altria. To grease the wheels of the deal, both Lorillard and Reynolds agreed to give up a few brands to Imperial to sway fears of complete and total domination by the two companies. As a result of the deal, Reynolds will give Imperial: Winston, Cool, and Salem. From Lorillard, Imperial gets: Maverick, blu eCig, and a few manufacturing facilities in North Carolina, the chance to acquire most of the company’s existing management, sales and staff team, and guaranteed shelf space at retail stores for a designated period of time.

Still even after the merger and acquisitions of brands from Reynolds and Lorillard, Imperial will only have 10% share of the U.S. tobacco market, and most doubt that the company can make these lower performing brands really competitive in the long run. In addition, merger opponents believe the deal will lead to a price increase too.  Previously, discount brands were able to compete with larger brands, but now the industry operates under master settlement agreements that requires discount brands to pay a certain amount into an escrow fund to cover any potential claims against them. This makes owning and operating discount brands expensive to maintain.

This merger is guaranteed to change the tobacco industry forever. Although Altria still retains almost half of the market, the merger between Reynolds and Lorillard will give the new entity 34% of the market.

The tobacco industry is undergoing some exciting changes. Now is the time for entrepreneurs to invest in the tobacco market. Although tobacco is a longstanding and legitimate industry, traditional payment processors still consider the tobacco industry “high risk.” This means that online tobacco merchants will have a difficult time finding a legitimate payment processor. eMerchantBroker.com knows the key to successful high risk account management, and will take your online tobacco merchant account to the next level. Contact eMerchantBroker.com to open your own online tobacco account today.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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