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. Read more...

Decline in Cigarette Sales Offset by Use of Other Tobacco Products (OTP)..

June 10, 2008 - Research Letter: Trends in the Use of Cigarettes and OTP, 2000-2007, G. Connolly and H. Alpert, J. Amer. Med. Assoc. 299(22): 2629-2630, 2008. Between 2000 and 2007 cigarette sales in the U.S. declined 18 percent, from 21.1 billion packs to 17.4 billion packs. Over that same period, sales of OTP increased by the equivalent of 1.10 billion packs of cigarettes -- 714 million moist snuff, 256 million roll-your-own tobacco, and 130 million small cigars. This use of OTP offset the decline in cigarette sales by 30 percent. Cost is one reason for the upsurge in the use of non-cigarette tobacco products. Cigars, roll-your-own and smokeless tobacco products are generally priced lower than cigarettes. State and federal cigarette taxation polices appear to have been effective in reducing smoking, but small cigars and roll-your-own tobacco are taxed at 5 percent to 10 percent the rate of cigarettes, resulting in prices much less than an equivalent pack of cigarettes. Cigarette companies are responding to the changing pattern of consumption by entering other tobacco markets, including acquisition of major U.S. moist snuff manufacturer Conwood by R J Reynolds, and by marketing new snuff and snus (moist tobacco powder placed under the upper lip) products to attract new smokers and new tobacco users. The lower taxes and fewer indoor restrictions on snuff and other products may help explain the trend, underscoring the need for similar taxes on all tobacco products, Connolly emphasized. Smokeless tobacco is NOT a safe alternative to smoking and deserves no special treatment. Related paper: J. Bloom and M. Birnbaum, Low smokeless tobacco tax contributes to smokeless epidemic, Tobacco Control: 3: 299, 1994. Added references: Science Daily, Medical News and Bloomberg.com. (TobaccoWatch.com) Click on image to enlarge.. Read more...

EU extends review of British American Tobacco (BAT) and Skandinavisk Tobakskompagni (ST) tobacco deal..

June 9, 2008 - The European Commission delayed its decision on whether BAT can buy ST's cigarette business for Ł2 billion ($3.94 billion). BAT wants to buy 100% of the cigarette assets of privately owned, Denmark-based Skandinavisk Tobakskompagni with snus and roll-your-own tobacco in an immediately earnings-enhancing deal. The commission said the decision was delayed to June 27 from June 13, so that customers and competitors could review potential remedies that BAT has offered. Such remedies are offered to fix competitive problems identified by the Commission, the EU executive. (Reuters) (EU extends review of BAT/ST cigarette deal, bbj.hu, 6/9/2008) See related news briefs: BAT reported group volume sales up for first quarter 2008.. and
BAT to acquire most of Denmark's ST... Read more...

Japan Tobacco Inc. (JT) to launch the D-spec cigarettes "Camel Nutty Lights Box" in Southern Japan in July 2008..

June 9, 2008 - D-spec products produce less odor (less smoke smell) and are therefore more acceptable to people who find tobacco smoke unpleasant. JT introduced "Camel Menthol Box"" nationwide in March 2007, soon after a successful test marketing phase. "Camel Menthol Box," which is also a D-spec product, was well received in Japan, and its popularity led to JT's decision to introduce ''Camel Nutty Lights Box,'' as a non-menthol alternative for "Camel Menthol Box." With this new product, a total of 20-D-spec products will be available in Japan. As of March 31, 2008, D-spec products had grown to account for 4.59 percent of Japan's domestic market share, increasing 0.55 percentage points over the previous year. Reference: JT to Launch "Camel Nutty Lights Box" in Southern Part of Japan, 6/9/2008. JT holds the rights to the Camel brand outside of the Unites States through the acquisition of R.J. Reynolds International in 1999. A JT D-spec product Mirage Cigarettes was introduced in Canada in December 2007.
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