Altria will continue to test Marlboro Smokeless Tobacco Products..

September 9, 2008 - Altria claims they will continue to test Marlboro smokeless tobacco products after the acquisition of UST, Inc.. "We believe Marlboro has a role in the smokeless business," Altria CEO Michael Szymanczyk said during an investor call. "And frankly, this acquisition will add some benefits to the brand in terms of our ability to carry that forward in a financially disciplined way." Altria being financially disciplined in test marketing their smokeless products...

Regarding the smokeless, spitless tobacco product - Snus that is being tested in the U.S.. UST, Inc. executives are very disappointed in sales of the entire SNUS segment..

Initially, it was felt that just the Marlboro brands would make the smokeless entries successful. This just has not happened. Nik Modi, a UBS tobacco analyst has stated, "The Marlboro brand name is not as transferable as many originally believed." Altria's growth depends on the Marlboro name.. Kessler, CEO UST: Clearly Marlboro is a great cigarette brand. That said, history clearly shows that it is difficult to extend brands from one category to another. UST, Inc. NOT Worried About New Moist Snuff Entry - Marlboro.

While Altria expects cigarette consumption to decline about 3.5 percent this year, an acquisition of UST would give it a leading position in a $3.7 billion category of the tobacco business that is growing about 6 percent to 7 percent a year - overall moist snuff volumes grew about 7% in 2007 but UST's can volume, led by its pricey Copenhagen and Skoal brands, trailed behind at only 3.1% UST's premium brands (like Copenhagen, Skoal) have been losing market share to price-value/discount brands like R.J. Reynolds/Conwood's Grizzly brand. Marlboro moist snuff (MST) competes with UST's premium brands but at lower cost. UST's discount brand Husky does not sell as well as Grizzly. Ten years ago UST owned more than 80% of the smokeless tobacco market. By late 2004, the company;s market share had slipped to 68% and today it's less than 60%.

In response to a Kraft/CSP(Convenience Store/Petroleum)Daily News poll which asked, "If/when the Altria-UST deal goes through, what will happen to Philip Morris' Marlboro Moist Smokeless Tobacco?", more than 40% of the more than 110 respondents said "UST's brands will lead to its fading away." Nearly 35% said, "UST's expertise will help it thrive," nearly 6% said "other" and more than 17% said "I'm not sure."

References: Altria To Keep Testing Marlboro Products In Smokeless Market, Dow Jones, 9/8/2008; Altria Still Testing Smokeless Marlboro - Not pulling plug with UST acquisition, CSP Daily News, 9/10/2008 and UST Isn't Up to Snuff by Charles L. Norton, RealMoney.com, 4/11/2008.