NEW YORK -- Altria Group Inc. will continue to test smokeless tobacco products under the Marlboro brand name after its acquisition of smokeless tobacco maker UST Inc., company executives said during a conference call with investors yesterday, reported The Wall Street Journal. Altria on Monday announced a $11.7 billion agreement to acquire UST. (Click here for CSP Daily News coverage.Click here for retailer reaction.)
New York City-based Altria, maker of Marlboro brand cigarettes, has recently been testing smokeless tobacco products, such as Marlboro snus, in an effort to parlay the value of its brand in the smokeless market. But the company has had limited success, and in January it pulled one of its spit-free products from the market, said the report. (Click here for coverage.)
By linking up with Stamford, Conn.-based UST, Altria is hoping to tap into the company's brand cachet and institutional knowledge, said the Journal. Copenhagen, one of UST's premium smokeless brands, is one of the oldest American brands, dating to 1822.
"We believe Marlboro has a role in the smokeless business," Altria CEO Michael Szymanczyk said during the call. "And frankly, this acquisition will add some benefits to the brand in terms of our ability to carry that forward in a financially disciplined way."
After completion of the deal, Altria's goal is to push UST's brands, including Copenhagen and Skoal, to achieve modest share growth, the company said. Recently, UST premium brands have been losing market share to competitors who are able to entice cash-strapped consumers with cheaper products, according to the report.
There is a nearly $3 price gap between Copenhagen and its main competitor, Grizzly, a popular discount product made by Conwood Co., owned by Reynolds American Inc., Winston-Salem, N.C. (See Reynolds American story in this issue of CSP Daily News.)
Altria and UST executives said they plan to regain strength in the market partly by delivering better value to Copenhagen and Skoal consumers. They would not say whether that meant lower prices.
In response to a Kraft/CSP Daily News poll yesterday which asked, "If/when the Altria-UST deal goes through, what will happen to Philip Morris' Marlboro Moist Smokeless Tobacco?", more than 40% of the more than 110 respondents said " UST's brands will lead to its fading away." Nearly 35% said, "UST's expertise will help it thrive," nearly 6% said "other" and more than 17% said "I'm no sure."
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