Home    Trade Shows    Advertising    Subscribe    Archives    Search    Tobacco Products International

October, 2009

Competition heats up for US smokeless market
New York - Altria Group Inc. recently reported it plans to unveil a new version of Copenhagen this fall, one of several moves aimed at boosting smokeless-tobacco sales amid tough competition from lower-priced brands.

The company will launch a long-cut wintergreen version of Copenhagen, a premium brand that will compete with Reynolds-American Inc.’s (RAI) fast-growing Grizzly long-cut wintergreen variety. Altria also said it plans to expand the number of markets where it is testing the sale of Marlboro Snus.

The moves come about eight months after Altria became the biggest player in smokeless tobacco in the US by buying UST Inc., owner of the Copenhagen and Skoal brands, for about $10 bn.

Earlier this year, Altria slashed prices of Skoal and Copenhagen in an effort to compete better with discount moist-snuff brands such as Grizzly. But the company has continued to cede market share to Grizzly and others. In the wake of the price cuts, the average US price for premium moist snuff such as Skoal is about $4.15, compared with about $2.75 for discount brands such as Grizzly and Swedish Match AB’s Timber Wolf brand. That price gap of about 50% is down from about 100% in the second quarter of 2008.

Grizzly’s market share is a bit higher than Skoal, though both are around 25%, according to analysts. Copenhagen’s is about 24%. A challenge for Altria is that the total discount category now accounts for more than half of industry volume, compared with less than 10% in the mid-1990s.

The company has been testing Marlboro Snus in Dallas, Indianapolis, and Arizona. The snus category is growing, and many of the smokeless manufacturers are trying to capture the market. Scientific research has shown that smokeless tobacco, and particularly snus, are safer for users’ health than cigarettes, however no manufacturers are currently overtly promoting this fact, and the rules for such are still somewhat in flux under new FDA oversight.

Philip Morris subsidiary cuts one-third of its staff
Belgrade - Philip Morris recently dismissed more than 300 people, or a third of its workforce, at a Serbian subsidiary in order to keep competitive, Beta news agency reported. More than 300 out of 910 employees were given notice, according to the report.

The job cuts and other measures planned were designed to enable Duvanska Industrija Nis (DIN) to become increasingly competitive due to lower prices and overall negative economic trends, the company said.

According to the latest official data for June, the unemployment rate stood at 26.8% in Serbia, which plunged into recession in the first quarter of 2009 as a result of shrinking foreign investment.

Philip Morris International bought DIN in 2003, paying 580 mn euros for a controlling 66% stake in the privatization of Serbia’s biggest tobacco factory.

United States
Star Scientific to seek OK for lower-risk tobacco
Petersburg - Star Scientific Inc recently stated that it plans to seek regulatory approval in early 2010 for tobacco products that promise reduced levels of carcinogens.

The company said its patented method for cultivation, curing, and preparation of tobacco will enable the company to achieve the lowest toxin levels anywhere in the world.

Star plans to submit the products for approval to the US Food & Drug Administration as “modified risk” tobacco products, under Section 911 of the new Family Smoking Prevention and Tobacco Control Act. The announcement comes on the same day that a ban on most flavored cigarettes goes into affect as part of the same legislation.

South Africa
Swedish Match finalizes the sale of its South African operation to PMI
Johannesburg - As announced this past summer, Swedish Match AB has sold its South African operation, Swedish Match South Africa to Philip Morris International. The sale has now been completed at a sales price of 1.75 bn ZAR plus a preliminary adjustment for cash and working capital amounting to 230 mn ZAR.

Tobacco International - October, 2009

Tobacco International is published by Lockwood Publications, Inc., 26 Broadway, Floor 9M, New York, NY 10004 U.S.A., Tel: (212) 391-2060. Fax: (1)(212) 827-0945. Printed in the U.S.A.. HTML production and Copyright © 2000 - 2009 by Keys Technologies and Tobacco International Magazine. All rights reserved.