U.S. - Altria - did tweaking of Skoal and Copenhagen pricing help regain market share..

July 14, 2009 - This is the second in a three-part series analyzing the effect this spring's federal-excise-tax (FET) hike has had on tobacco retailing thus far.

Background: Altria Group Inc said on Tuesday, January 6, 2009 it completed its $10.4 billion acquisition of UST, Inc. greatly expanding Altria's presence in the faster-growing smokeless tobacco segment. Michael E. Szymanczyk - Chairman and Chief Executive Officer at Altria has indicated a little tweaking is necessary for the UST's premium brands - Copenhagen and Skoal to return these brands to some modest share growth. (Altria Group, Inc. Agrees to Acquire UST Inc. - Altria Group and UST Conference Call, Seeking Alpha, 9/10/2008.)

Altria's first attempt at tweaking the UST's premium brands was to lower the price of Skoal and Copenhagen by one-dollar. As of February 1, 2009 the price of Skoal and Copenhagen was reduced - the promotion was suppose to last until March 28, 2009. For further details on the arrangement C-store update - the battle for market share is on...

After this promotion ended Altria cut the wholesale prices of its premium products about 20 percent. Daniel Butler, president of U.S. Smokeless Tobacco Company: "While we are very pleased with the success of our strategy to drive category growth in moist smokeless tobacco, we've been less than pleased with our ability to hold our share of the category."

Part 2 of 3-part series.. According to a recent analysis by Convenience Store / Petroleum (CSP) and UBS, New York, tobacco analyst Nik Modi. Despite a 62-cent drop in prices (cut the wholesale prices of its premium products about 20 percent) for Altria Group-owned U.S. Smokeless Tobacco Co.'s Copenhagen and Skoal brands in March—timed to coincide with the April 1 across-the-board increase of the federal tobacco excise tax—premium-moist-smokeless can volume continues to slip.

According to Modi volumes of the two brands (Skoal, Copenhagen) now controlled by the Altria Group have continued to fall and lose share. Meanwhile, budget brands such as Grizzly are enjoying double-digit gains. It is clear that Altria's strategy has delivered mixed results. (Where's The Growth in Smokeless Tobacco Products...

Asked whether the price reduction of Copenhagen and Skoal have rendered a positive impact on volumes, 55% of retailer respondents said yes, while 45% answered in the negative. And within these two groups, a consensus emerged that the price reduction, while growing brand sales for some, has not grown the overall moist smokeless category.

Two other retailers offered contrasting experiences. "It has had a positive impact on Copenhagen and Skoal, and has slowed the growth of Grizzly product for right now," wrote one. Yet another operator said, "Not sure why, but these brands have slowed down in our area. Grizzly is the king in sales here."

Modi said he's not surprised by the mixed response. "Based on our field work, it seems that Copenhagen and Skoal continue to lose share at the expense of Grizzly and other low-priced brands," Modi said. "I expect the trend to improve over time, but consumers will have to get used to the new everyday low pricing vs. UST's old strategy of pushing two-pack deals."

Reference:
Altria Group's Big Promotion Tobacco-maker took a risk with its MST pricing strategy to mixed results by Mitch Morrison, CSP Daily News, 7/14/2009.

Part 1 of 3-part series: US - Effect of April 1st FET increase on tobacco retailing..