August 12, 2009
Camel SNUS and then there were 12..
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In the Summer of 2006 Camel Snus was first introduced each can containing 20-pouches in two cities – Austin, TX and Portland, OR. Then in April of 2008 R.J.Reynolds lowered the number of pouches per container from 20 to 15. (At this time Marlboro Snus had 12-pouches per can.) Now Reynolds has again reduced the number pouches from 15 to 12-pouches per can and labeled the can "Special Trial Offer" and reduced the price per can to $1.99 (in North Carolina). The number of free giveaways have been reduced and no longer does the c-store get free cans to sell. Reynolds for the second quarter 2009 stated that Camel Snus achieved the equivalent cigarette market share of 0.3 percentage (Reynolds accounted a tin of snus equaling a pack of cigarettes since they are similarly priced.) I can tell you - from the c-stores we visit Camel Snus does not sell even at the $1.99 per can. In fact, just yesterday a c-store owner claims he even threw some cans out because it was taking up too much space in his cooler.
PM has revamped the Marlboro Snus concept with new packaging, product enhancements and pricing. Notice that there's only 6-pouches per container down from 12-pouches per container.
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Philip Morris promotion of Marlboro Blend No. 54 turned out to be a flop.. PM describes this product as a menthol-flavored cigarette with a tobacco blend that is described as having a richer, bolder taste.
The promotion period was suppose to be from June 17, 2008 - July 26, 2009. The introductory price will be $2 off per pack and $20 off per carton. Initially these
cigarettes were a big seller, in fact, one c-store owner stated that he could not keep enough in stock and the wholesaler had limited distribution. Sales were probably strong because of the price at $2.42 a pack compared to Newport at $4.63 a pack (North Carolina>. We have found that PM had problems making this menthol and the promotion period was cut short. Now with the Blend No. 54 at regular price there's not anything remarkable about its sales. PM recently closed a production plant in Cabarrus County, North Carolina.
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PM's premium moist snuff (Skoal, Copenhagen) versus price value/discount Conwood's Grizzly. (Conwood is a subsidiary of Reynolds American Inc.) Altria Group Inc. in early January 2009 completed its $10.4 billion acquisition of UST, Inc. At this time Altria's Michael E. Szymanczyk - Chairman and Chief Executive Officer indicated a little tweaking is necessary for the UST's premium brands - Copenhagen and Skoal to return these brands to some modest share growth. Meanwhile you have the discount brand Grizzly - the nations number one moist snuff brand - expanding its market share in the second quarter 2009 to 25.5 percent, up 2.2 percentage points.
Altria's first attempt at tweaking the UST's premium brands was to lower the price of Skoal and Copenhagen by one-dollar in the Southeast United States. As of February 1, 2009 the price of Skoal and Copenhagen was reduced - the promotion was suppose to last until March 28, 2009. After this promotion ended Altria cut the wholesale prices of its premium products about 20 percent.
Szymanczyk - regarding his moist snuff products emphasizes we're not trying to buy a business here (by continuing to reduce the price of their premium brands). What we’re trying to do is build brands Szymanczyk talks about loyalty to particular brands. UBS, New York, tobacco analyst Nik Modi decreases in the price did not boost the sales of Skoal and Copenhagen.
The price (in NC) of Skoal or Copenhangen is $3.99 a can and if you buy two the price is lowered to $3.49 per can. Grizzly stands at $2.09 a can. We believe that price is the most important factor for the buyer in this case. Sales of the premium brands have increased as the difference in price compared to Grizzly has narrowed. Some Grizzly users will switch because they do not like the connotation of dipping using a cheap discount brand.
Everything you wanted to know about returns of expired tobacco products..
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Cigarettes can't be returned to the manufacturer. On occasion small companies like Bailey's will come by the c-store and swap out the old for the new.Moist snuff - discount products like Grizzly cannot be returned but Conwood's premium brand Kodiak the salesperson will remove the expired cans and replace them.
PM's Skoal and Copenhagen can be returned if cans have expired. Prior to PM buying UST, Inc. (maker of the Skoal and Copenhagen) the salesperson would replace expired cans, they'd be flagged and then returned to the distributor. The c-store would get full credit for the returned cans.
The new procedure with PM in charge.. Only six percent of the total number cans sold can be returned. So the c-store owner reduces his inventory he has on hand and usually takes the credit on lesser PM brands like Red Seal and the discount brand Husky. The PM salesperson places the items to be returned in a box, a UPS label is attached and the returns are shipped to a PM warehouse.
Example of c-store clerk directly involved in steering a buyer to a different brand of cigarettes.. Patron asks for a pack of Newport and the clerk says, "How about trying Marlboro Light Menthols - you can save a dollar." In this case the customer would not switch.
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This news brief is getting kind of lengthy. We'll go ahead and release another update in about one week.
Previous C-Store Update..
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