Nik Modi, UBS analyst tobacco remains "economy resilient"..

December 10, 2008 - Nik Modi, senior tobacco analyst at UBS Investment Research presentation at CSPNetwork's Tobacco Update CyberConference (Swedish Match N.A. sponsors of the CyberConference). Despite predicting that a U.S. recession could last beyond the third quarter of 2009, Modi said that tobacco has held up "extraordinarily well," despite unemployment rates that have been at their highest since the recession in the early '90s and consumer confidence that reached a 20-year low this year.

He pointed out that although tobacco has seen some decline, it is outperforming other staples (such as beverages, food, cleaning products, beauty and personal care), and its decline rate has slipped merely from 2.7% in September 2007 to a 2.4% decline in September 2008. Modi added that with gas prices continuing to fall, the tobacco category "is a good place to be" from an in-store perspective. But the news wasn't all positive for cigarettes. Modi predicted that a federal excise tax increase was a foregone conclusion. "The question is when and how much," he said, adding that it was likely to be seen by the end of March 2009. (SCHIP expansion legislation time to try again.. - Funding for SCHIP lasts through March 2009).

Another opportunity for c-store retailers could come from consumers migrating to other tobacco products (OTP)-with 2009 potentially being a "breakout" year for smokeless growth. According to Modi, the smokeless category continued to show accelerated growth in 2008-with moist smokeless tobacco up 8.2% year-to-date and, as importantly, both premium and nonpremium segments are excelling.

Joe Teller, director of category management for Swedish Match N.A. - in his portion of the presentation - said that continued attention to the Other Tobacco Products (OTP) category from retailers is important for continued growth-particularly since 40% of cigarette smokers try to quit smoking at some point in time, and look for products to satisfy their nicotine urge. "My main theme is that next year I think we need to spend a little bit more time and a little bit more energy and I think what's going to happen is that we're going to get more results," he said.

Reference: Is Tobacco Recession Proof? Smoke, smokeless sales continue strong track despite economic challenges by Linda Abu-Shalback Zid, Consumer Store/Petroleum Daily News, 12/9/2008.