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Consumers Switching Between Tobacco Types

Altria details shift in usage; encouraged by early sales of Marlboro Black

BOCA RATON, Fla. -- Altria Group Inc. is seeing tobacco users switch between multiple forms of tobacco more often, vice chairman Dave Beran said while participating in the Consumer Analyst Group of New York (CAGNY) conference, reported Reuters.

Today's smokers are more open to trying different types of tobacco than smokers of previous generations, and Altria is working on new products to entice consumers who want a change from cigarettes, Beran told analysts and investors at the conference held in Boca Raton, Fla., this week.

Altria, whose other products include Skoal and Copenhagen smokeless tobacco and Black & Mild cigars, has seen a shift in tobacco usage in the United States. While the number of smokers of both cigarettes and cigars has remained relatively flat, usage of smokeless tobacco has risen. Still, Marlboro--with 42% retail market share in the cigarette industry--remains the dominant brand in Altria's portfolio.

Some smokers have been trying alternative products, such as smokeless tobacco, amid concerns about the health risks of smoking, the report said.

Altria is encouraged by the early sales of its new Marlboro Black brand, Beran said. Marlboro Black, which Altria's Philip Morris USA unit began shipping in December, had more than 1% retail market share earlier this month, said Beran, who is set to become Altria's president and COO in May.

The new product is what the company calls a bold, modern spin on the traditional brand, and is packaged in a black box for menthol and nonmenthol varieties.

The Marlboro brand had a 42% share of the market in 2011, down from 42.6% in 2010. Marlboro is the best-selling cigarette in all U.S. states, but like other cigarettes faces a continued decline in the number of American smokers.

Altria said it has not seen much of a change in the mix of premium and discount brands.

There has been some volatility among price-sensitive shoppers who seek out promotions and shift between different discount brands, but consumers who buy the company's premium products tend to be loyal, chairman and CEO Mike Szymanczyk told reporters at the conference.

About 90% of Marlboro smokers buy only that brand, according to the company's research.

During the presentation, Szymanczyk and other members of Altria's senior management team reviewed Altria's plans to continue delivering strong returns to its shareholders, the company said.

Richmond, Va.-based Altria directly or indirectly owns 100% of each of Philip Morris USA Inc. (PM USA), U.S. Smokeless Tobacco Company LLC (USSTC), John Middleton Co. (Middleton), Ste. Michelle Wine Estates Ltd. (Ste. Michelle) and Philip Morris Capital Corporation. Altria holds a continuing economic and voting interest in SABMiller plc.

The brand portfolios of Altria's tobacco operating companies include such names as Marlboro, Copenhagen, Skoal and Black & Mild. Ste. Michelle produces and markets premium wines sold under various labels, including Chateau Ste. Michelle and Columbia Crest, and it exclusively distributes and markets Antinori, Champagne Nicolas Feuillatte and Villa Maria Estate products in the United States.


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