RICHMOND, Va. -- Following Philip Morris USA's announcement late last year that it was re-commissioning its York Manufacturing Facility in York Country, Va., a tobacco stock analyst is predicting a Marlboro moist smokeless tobacco (MST) could hit shelves in a test market sometime this year.
We understand that PM USA has been buying dark-fire tobacco from farmers for a few years, wrote analyst Nik Modi of UBS Securities, New York, in a research note. Combining this with PM USA's plans for the York facility and statements regarding adjacency expansion ([image-nocss] via Marlboro), we believe PM USA is closer to at least an in-market' test of a Marlboro-branded MST product.
In mid-December, PM USA announced the re-commissioning the York Manufacturing Facility to support the company's adjacency growth strategy. However, a PM USA spokesperson would not say if that specifically included a moist smokeless product.
[The adjacency growth strategy is] looking at ways to grow beyond our core business of cigarettes and looking at complementary tobacco or tobacco-related products or processes, the spokesperson told CSP Daily News. The York facility is going to support that, but for competitive reasons, we're not going to disclose what product might be part of that adjacency growth strategy.
PM USA plans to invest approximately $100 million in the facility and machinery and will initially employ more than 75 people, with more employees added in the future.
"We have owned the York facility for nearly three decades, though it has been closed since 2004." John R. Nelson, president, operations and technology, PM USA, said in a press release in December."Reopening the facility to support our adjacency strategy makes good business sense."
In 2004, Philip Morris USA moved the manufacturing operations from the York Manufacturing Facility to the Richmond Manufacturing Center to help streamline business operations. The site has been dormant since closure.
A Marlboro MST would be PM USA's second venture into the smokeless arena. In July, the Richmond, Va.-based company introduced a smokeless and spitless tobacco product dubbed Taboka in the Indianapolis market.
The company spokesperson would not offer specifics of the test thus far, but said, We're pleased with the distribution we've had in the Indianapolis area, and we're also pleased with the response we've had with the adult consumers in the marketplace.
Modi said he expects a national rollout of Taboka this year, to be bolstered by the Marlboro MST test later in the year. We believe initial [York facility] production will be Taboka, he said in the note. However, over the next year, we postulate that PM USA will likely test a traditional moist smokeless tobacco (MST) product, hoping to leverage the York facility to support a broader roll out.
He added, We believe the near-term dialogue will focus on the impact a Marlboro branded MST product will have on the overall industry and its main players. The key question: Does the Marlboro equity resonate with smokeless tobacco consumers?
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