Altria falling short on growth because of slowness in developing smokeless tobacco products..

June 12, 2008 - Formula for sustainable long-term growth is failing. Without the international unit that contributed about two-thirds of Altria's $13.2 billion in operating profit, the biggest U.S. tobacco seller is left to look for additional sales in a market where health-conscious consumers are smoking less and other buyers are cutting back as taxes push up cigarette prices. Altria pledged before the March 28, 2008 spinoff to enter the faster-growing, $3.7 billion market for snuff and snus through product development and a possible acquisition. Altria's CEO Michael Szymanczyk, 59, told the annual meeting on May 28, 2008 that the company would grow "organically" (within) because it "can start at the beginning and understand the consumer profiles." "The market believes ultimately that Altria may not be able to develop a successful organic smokeless strategy in a time frame that's required to offset declines in traditional cigarettes," Credit Suisse tobacco analyst Flippe Goossens said. Aquisitions have been the preferred means of entry in the smokeless market, which is dominated by the Skoal and Copenhagen brands from UST Inc. (UST Inc. is a holding company for its principal subsidiaries: USSTC and International Wine & Spirits Ltd.). Reynolds American Inc. bought snuff maker Conwood Co. in April 2006 and is test marketing Camel snus in New York and 16 other cities. British American Tobacco Plc, based in London, agreed in February 2008 to buy most of Denmark's Skandinavisk Tobakskompagni A/S for $4 billion. It was expected that Altria to make a bid for either UST or Swedish Match according to Goossens. Marlboro, the best-selling cigarette brand, hasn't managed to achieve the same success for its Swedish-style snus or Marlboro MST. UST's snus products also failed to win over U.S. smokers and traditional snuff users in about seven years of testing. CEO Murray Kessler said on April 24. "We've been very disappointed", Kessler said. Reference: Altria Snuff Plan Snubbed by Investors Seeking Growth (Update1) by Chris Burritt, Bloomberg.com, 6/12/2008.