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June, 2009
Renegade-Auction

There’s a Lot of Smoke in this Crystal Ball.

What does the tobacco industry’s future hold? That is the multi-billion dollar question. There are lots of pieces in movement for the modern tobacco industry. Even aside from the economic turmoil of the last year - which may last another year yet - the tobacco industry would be an industry in flux. Government regulations, intent on snuffing out the industry by taking little bites out of the market at a time, manage to alter the landscape year-to-year. And year after year, tobacco companies stay on top of the choppy seas and manage to make more money than the year before. It’s just a resilient industry that way.

As the US Congress prepares to hand regulation of tobacco to the Federal government, Altria will have reason to celebrate as it will help cement their hold on the US market. Basically the new regulation will ban any new tobacco products from being introduced and relegate any print advertising to so-called “tombstone” ads which are simple black and white rectangle ads with text. The US government will also be able to dictate what “ingredients” go into cigarettes and make changes as they see fit. One massive change with this regulation is the possible end of clove cigarettes in the US, which will be banned as a flavored tobacco product (a grouping which happens to encapsulate nearly every variety non-typical tobacco variation with the exception of menthol, by-far the most popular flavoring of any importance for the US market). Of course, Indonesia, where clove cigarettes are the rule rather than the exception - where US clove leader, Djarum hails from - has much to lose from this bill as anyone. They are threatening to cry foul to the WTO as an illegal trade barrier, but it is unlikely that their protests will be heard.

Meanwhile BAT, who’s continued success may depend on being able to market safer tobacco products has just launched a new test in Germany and is looking for volunteers to test these new products. These don’t appear to be some form of dissolvable tobacco products such as RJ Reynolds has tested in the US, but actual combustible tobacco products which - theoretically - may, in the future, be marketed as safer tobacco products. Perhaps by being treated with enzymes which lesson dangerous properties or new filter technologies. The results will be published in a medical journal next year.

So as the all the pieces move across the board, it’s interesting to watch how these big players who can easily afford many of the best and brightest strategists to maneuver for their place in the new tobacco world.

- E. D.


Tobacco International - June, 2009

U.S. Tobacco Cooperative


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