You Snus, You Win?
It may not have the buzz of e-cigs, but snus continues as a strong alternative offering.
It may have fewer players than that of the e-cig industry—which boasts anywhere from 250 to 300 manufacturers—and the mainstream media may cover it less. But amid the hubbub around electronic cigarettes, the snus segment is solidly establishing its staying power.
According to Nielsen Total U.S. Convenience numbers, the category was up 4% in the fi rst half of 2013. Even better, Joe Teller, category manager for Richmond-Va.-based Swedish Match, estimates that snus’ growth rates increased over the past several months to more than 8% can growth.
“The snus category is actually very healthy in convenience stores,” Teller says. Swedish Match’s General Snus’ numbers have steadily increased over the past two years, as have those of Winston-Salem, N.C.-based R.J. Reynolds Tobacco Co.’s Camel Snus.
Even manufacturers that aren’t enjoying the robust growth reported by Swedish Match appreciate the important role snus plays in their product portfolio. While Nielsen numbers show Altria’s Marlboro Snus and Skoal Snus products have experienced monthly declines in the double digits over the past two years, a spokesperson for the Richmond, Va.-based manufacturer says, “Altria’s tobacco companies continue to explore innovative products to meet the evolving preferences of today’s adult tobacco consumer. Pouches, including snus, have helped fuel the growth of the smokeless category and should be a part of a retailer’s product offerings.”
And though snus may seem like an extension of the moist-smokeless set, it’s not only smokeless consumers who are accounting for the increase in sales.
“There’s this dynamic that’s been happening in the United States with pouches,” says Lou Maiellano, a partner in and tobacco consultant for TAZ Marketing & Consulting Group, Sevierville, Tenn. “Folks are gravitating toward that segment, and it’s not just dippers: There are others looking for an opportunity to have tobacco satisfaction in a way that’s very discreet.”
It’s this discreetness that truly distinguishes snus from other alternative tobacco products on the market. Consumers do not have to spit—as they do with moist smokeless—nor are they subject to the smoke-free laws many states and cities are enacting against both traditional and electronic cigarettes. This distinction could be good news for snus manufacturers and c-store retailers alike, especially as more consumers become aware of snus’ unique attributes.
“As General Snus’ distribution and sales grow … I expect the snus category to deliver a 15% can growth per month to the convenience industry,” Teller says. “The bottom line is that the snus category is extremely healthy and will continue to be a growth driver for the category.”
While it may never overshadow electronic cigarettes’ growing excitement, snus will likely play an important role in the future of most successful OTP sets. Discretion Is KeyIn a category filled with more traditional forms of tobacco consumption—cigars, RYO, moist smokeless—the ability to consume tobacco without others knowing is what has allowed snus to stand out in the OTP set.“What makes snus unique is that it’s both discreet and it delivers the consumer the tobacco satisfaction they’re looking for,” Maiellano says. “It’s the real deal.”
With roughly 80% of market share belonging to Camel Snus, R.J. Reynolds Tobacco Co. is well aware of the distinct experience snus offers adult tobacco consumers. “Snus is heat-treated, not fermented like most moist-snuff products in the United States,” says Richard Smith, a spokesperson for R.J. Reynolds’ parent company, Reynolds American. “Camel Snus has less salt and moisture than most moist snuff, and does not require spitting. Camel Snus comes in a small, convenient pouch, allowing adult tobacco consumers to enjoy tobacco in a manner that is better aligned with societal expectations since with snus there is no secondhand smoke, no cigarette odor and no litter.”These characteristics not only distinguish snus from moist snuff or cigarettes, but also represent a continued industry trajectory toward unobtrusive, alternative ways of consuming tobacco.
“When you look at the growth of pouches and moist snuff, I think a lot of it is coming from smokers who are looking for a more discreet or convenient alternative to smoking,” says Sandy Fowler-Jones, Swedish Match’s director of communications and public relations. “I think as more smokers are looking for discreet alternatives to cigarettes and dippers who are looking for more discreet alternatives to dipping, the snus category is only going to increase.”“The tobacco category itself is transforming,” Smith agrees. “Smokelesstobacco volumes continue to increase, while cigarette volumes are declining. Retailers are aware of these dynamics and should plan their management of this important category accordingly, making sure they have the right products, the right brands and the right styles in stock to support the changing preferences of adult tobacco consumers.”
And while there are lots of smokeless tobacco products on the market, the momentum and numbers behind snus have proven it’s a product consumers are not only willing to try, but one many consumers come back for.“As our distribution accelerates, we’ve done a very good job of partnering with retailers in consumer programs to drive trial of the products,” says Fowler-Jones, pointing out that Swedish Match’s General Snus ended 2012 with a 10,000-store distribution and added 3,000 in the first quarter of 2013. “We’ve had very good trials and have seen some very good repeats with the snus products.”
Smith believes snus’ numbers will only grow with time, predicting, “As awareness of snus increases, these products continue to generate positive interest.”
The Awareness Hurdle
Snus is hardly a new product, having its roots in 19th century Sweden. Reynolds introduced Camel Snus in 2006; Swedish Match first brought General to U.S. markets in 2007. The relative newness of snus, combined with its similar appearance to traditional American chewing tobacco, has presented one of the biggest obstacles snus has faced in moving into the U.S market.
“When it was first being introduced into the U.S., I think there was a lack of awareness and a lot of misunderstanding about what the product was,” says Fowler-Jones.
Manufacturers are well aware of the differences between snus products and moist snuff: It’s fermented, not pasteurized; it’s refrigerated for freshness; it’s made in and imported from Sweden; consumers don’t have to spit. But that doesn’t mean that consumers—or even retailers—are always cognizant of these distinctions.
“Developing an awareness of this prod uct has been one of the biggest challenges to marketing snus in the United States,” Maiellano says.
Given the fact that Camel Snus dominates the market, it’s not surprising that Reynolds was diligent about educating the public on snus.
“Initially, there was a dilemma when it came to early marketing of the product,” says Maiellano. “What Reynolds did was plaster it on the front of every store door so everywhere you went, you saw this information on snus. They’ve done an incredible amount of marketing to develop that category.”
Like Reynolds, Swedish Match contends it’s the company’s job as snus manufacturers to further educate consumers about the unique attributes of the product, believing that once tobacco consumers are willing to try snus, they’ll be back for more.
“[Consumer awareness] is obviously very important,” Fowler-Jones says. “When you go back and look at the historical trend of the category, the category has done a good job of building up awareness of the word snus. As we’ve entered the market, more consumers have become aware of snus, have tried General and have been attracted to the product.”
Given the fact that most snus products have been available in the United States for such a short amount of time—and that U.S. consumers have probably been aware of such products for even less time—it would appear that there’s still ample room for growth.
“I think it’s going to continue to grow as it gains more awareness,” Maiellano says. “There’s still a strong opportunity for retailers out there because of the discreetness and the effectiveness of this product.”
Snus are not easily confused with electronic cigarettes based on appearance. Yet both offer smokers a smoke-free, more socially acceptable alternative to traditional cigarettes or dipping. And with electronic cigarettes likely to double in sales again this year, it’s understandable that snus sometimes gets dwarfed by the newest star of the smoke-free tobacco set.
But as more regulations and restrictions roll in, will electronic cigarettes continue to offer the same use-anywhere alternative snus boasts?
“While e-cigarettes are growing quickly in popularity, there’s the issue that consumption of these products is not discreet,” Maiellano says.
Although e-cigarettes emit only a vapor and therefore do not expose others to the secondhand smoke of traditional cigarettes, New Jersey, North Dakota and Utah have banned e-cig use in enclosed public spaces; cities including Boston, Seattle and Indianapolis have extended existing smoking bans to include the new products; and the California state senate also approved a bill that would include electronic cigarettes in the state’s smoking bans.
“On the contrary, with snus, you can use it in a bar, you can use it in your office,” says Fowler-Jones. “You can use it pretty much anywhere you’re not allowed to smoke but where consumers want to enjoy tobacco. Convenience is really the key benefit.”
There’s also the massive elephant in the room: FDA regulations, which have yet to be handed down on electronic cigarettes.
“There’s been a lot of focus on e-cigs, which are still in unchartered territory from a regulatory perspective; no one knows where that’s going to end up,” Fowler-Jones continues. “As far as snus goes, it’s something we’re fully invested in, something we fully believe in and something we’re going to continue to stand behind going forward. We really believe in this category.”
Even amid all the momentum and lack of usage restrictions, it’s important to remember that the size of the electronic cigarette and snus markets are drastically different: While e-cigs are predicted to top $1 billion sales this year, already accounting for a half-point share of total tobacco sales, snus is just one of many products that make up the $9 billion to $10 billion OTP category.
That doesn’t mean there isn’t room for both products, and more, as the public demands further alternative ways to consume tobacco. “Electronic cigarettes offer an experience more closely associated with smoking traditional combustible cigarettes, whereas products like Camel Snus are non-combustible tobacco products,” says Reynolds’ Smith. “Adult tobacco consumers are telling us they want convenient tobacco products they can use in a variety of settings, giving them the freedom to enjoy tobacco pleasure on their own terms.”