Altria's MST Strategy

Cigarette giant ramps up smokeless offering
RICHMOND, Va. -- The Altria Group, best recognized for its market-dominant cigarette Marlboro, is riding, not smokes, but moist smokeless to buoy profits in 2010 and the years ahead. Six weeks after its fourth-quarter report during which the MST division of Copenhagen and Skoal helped offset double-digit cigarette declines, the company is poised to extend the Copenhagen lines.

Modeled after the successful national rollout of Copenhagen Wintergreen, Altria continues to expand into long-cut with its nationwide launch of Copenhagen Long Cut straight and Copenhagen Extra Long [image-nocss] Cut Natural at the same introductory list price later this month.

For Altria, the strategy is to update to modern tastes the legacy Copenhagen brand it acquired little more than a year ago with its $11.7-billion acquisition of UST Inc. in late 2008. "What we have learned is Copenhagen is an iconic brand [that] has untapped growth potential," Copenhagen vice president of brand management Brian Quigley told CSP Daily News.

What Copenhagen has not done till recently, Quigley added, is move "into the flavors today's dippers are looking for."

Quigley, who was joined by Altria spokesperson Greg Mathe, said the two new lines will feature an attractive introductory price to run at least through April. Retailers will receive the same product guarantees and merchandising support they have received on Copenhagen Wintergreen.

Based on the performance of Copenhagen Wintergreen, the foray into flavor extensions bodes well for Altria.

An exclusive CSP-UBS tobacco convenience store survey in late January shows widespread support for Altria's investment into its moist smokeless portfolio. Asked, "do you think Copenhagen Wintergreen is a viable entry in the moist smokeless tobacco category?" more than 70% of 65 c-store chains, representing nearly 20,000, answered yes.

What was less certain is whether the USSTC division of Altria can recapture the premium-volume pricing that has been dented by strong performances in recent years by several nonpremium brands, most notably Conwood's Grizzly.

Asked, "Do you expect USSTC to return to positive premium volume growth (Copenhagen/Skoal) in 2010, 36 respondents answered no, while 29 answered yes.

During the interview with CSP, Quigley declined to share Copenhagen's pricing objectives. What is clear, however, is Altria's more holistic outlook toward the entire tobacco category.

Although the tobacco giant maintains distinct marketing programs for its cigarette, cigar and MST holdings, Mathe said the company's sales force is encouraging operators to increase their OTP sets. "Perhaps there's an opportunity to increase space for OTP in their stores," he said. "The goal is to get the [entire] tobacco category organized all behind the counter."

This way, Mathe continued, product "is easier to find, speeds up transaction time" and, most important, likely to bolster retailers' bottom line.

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