Altria (Philip Morris USA) - UST Deal Debate - Analysts differ on possible acquisition of smokeless tobacco company..

February 5, 2008 - Altria (Philip Morris USA) - UST Deal Debate - Analysts differ on possible acquisition of smokeless tobacco company.. Altria has been seen for years as poised to make an acquisition in the smokeless tobacco market. Altria CEO Louis Camilleri has said that much of Altria's U.S. growth will come from an "adjacency strategy," where the company focuses on noncigarette products, such as smokeless tobacco. See related news brief below: With organic (internal) development in the smokeless tobacco arena failing look for Philip Morris USA to expand through acquisitions.. PM USA's organic entries in the smokeless tobacco category have stumbled and buying UST (principal subsidiaries: U.S. Smokeless Tobacco Company and Ste. Michelle Wine Estates) would give Altria an instant boost in that market. UST is the world leader in smokeless tobacco products; their popular brands Copenhagen and Skoal are each worth more than $1 billion at retail. In the fourth-quarter of 2007 UST profits posted a 1.4% rise, but suffered a decline in market share for its core smokeless tobacco business. (This decline is most likely caused by increased interest in the moist snuff deep-discount tier products like Swedish Match's Longhorn or Conwood's Grizzly - TW.) Conwood Co., the second largest maker of smokeless tobacco products in the U.S., was acquired by Reynolds American acquired in May 2006; , Conwood’s moist snuff products are Kodiak in the premium tier and in the Grizzly in the deep-discount tier. Moist snuff accounts for about 75% of the Conwood's business. It should be remembered that smokeless tobacco sales have a long way to go to catch up with cigarette sales. An estimated 371 billion cigarettes were consumed in the United States in 2006 and cigarettes account for more than 90 percent of expenditures on all tobacco products in the U.S. Total United States expenditures on tobacco were estimated to be $88.8 billion in 2005 of which $82 billion were spent on cigarettes. (TobaccoWatch.org)