NEW DEEP DISCOUNT SMOKELESS BRAND (BOBCAT) IS MAKING WAVES...

June 6, 2007 - NEW DEEP DISCOUNT SMOKELESS BRAND (BOBCAT) IS MAKING WAVES. Bobcat, a new smokeless tobacco brand, was launched recently by American Smokeless Tobacco Company (ASTC), a small private company. According to our industry contacts, Bobcat (the motto: "Price gets em, quality keeps em") has been selling out in virtually every store where it is sold. Therefore, we anticipate potential downtrading pressure on key brands (Grizzly, Copenhagen and Skoal). In our opinion, Bobcat, which has been rolled-out in roughly 19 key smokeless tobacco states and is positioned as a deep discount (4th tier) smokeless tobacco product, could actually have a greater impact on the entrenched players than investors first anticipate. Therefore, we maintain our cautious stance and Sell rating on UST (UST.N - US$53.4; 3M) and our Hold rating on Reynolds American (RAI.N - US$64.6; 2M), the owners of Conwood. (Bonnie Herzog, Tobacco Weekly Trends, Smith Barney Message Board)