Chewing With Joe Camel

RJR expected to introduce smokeless tobacco brand next month

NEW YORK -- R.J. Reynolds Tobacco Co. (RJR) could enter the smokeless tobacco category as soon as next week, according to a research note from tobacco analyst Bonnie Herzog of Citigroup, New York.

We have recently learned [that RJR] will be entering the smokeless tobacco category in the near future with its Camel brand, potentially tying in with the Daytona 500 on February 19, Herzog wrote in a note dated January 29. We believe [RJR parent company Reynolds American Inc.] may reveal its new tobacco endeavor as soon as its fourth-quarter earnings call [image-nocss] on February 8.

Attempts to confirm the report with RJR officials were unsuccessful; however, Herzog said the new product is a full-flavor, straight-taste brand.

Herzog added that the introduction would be good for the tobacco industry and for Reynolds American. In general, we expect the market to react favorably to this announcement and believe that it is coming sooner than expected, she wrote. We believe the smokeless market could be an exciting opportunity for Reynolds, especially given the company's existing sales force and distribution channel, the very high margins on smokeless tobacco and the company's highly innovative team.

Herzog expects RJR will and should price the product as a premium smokeless tobacco because introducing the product at a lower price point could potentially hurt the brand equity of its successful Camel cigarette franchise.

In the past, Herzog has said she expects Philip Morris USA to also get in the smokeless tobacco game in the future. It's not known when that might happen.