Are smokers ready to put down their cigarettes and get their nicotine fix from a tiny pouch of tobacco placed between their upper cheek and gum?
Industry leadersPhilip Morris USA and R.J. Reynolds Tobacco have begun test marketing Swedish-style “snus” products using the names of their leading cigarette brands Marlboro and Camel. Snus, the Swedish word for snuff, is made up of finely shredded tobacco leaves encased in a tea bag-like pouch about the size of a Chiclet piece of gum.
Unlike the products used by most American dippers, Swedish-style snus uses a curing process that reduces moisture in the tobacco leaves. This, combined with placement in the upper portion of a person’s mouth where less saliva is produced, means those using it are less likely to spit than those who use a chewing tobacco, which is made up of long strands of moist, sliced-up tobacco leaves. This means snus is neater and more discreet than more conventional oral tobacco products. In fact, you could hold a conversation with someone who is using snus and not even realize it is there.
Still, most tobacco industry analysts--as well as the companies themselves--do not expect these products to generate significant revenue within the next few years. The products remain foreign to many consumers and, at the moment, their distribution is limited to a handful of test markets.
However, those on both sides of the tobacco debate are watching their introduction closely. Critics question the motives behind the products, saying they may be a way for the tobacco industry to recruit new tobacco users or keep current smokers from quitting.
The tobacco companies counter that the products are simply a way to diversify within their industry and give adults who enjoy tobacco more choices, especially as smokers face increased restrictions on where they can light up.
To be sure, there are good business reasons for the tobacco companies to consider diversification. The number of cigarettes sold in the U.S. has been declining at an average rate of about 2% a year, while sales of smokeless tobacco products are rising at about 6% each year.
“If your customers are leaving your category for another, isn’t it better to keep them in your franchise?” said Bonnie Herzog, a tobacco industry analyst at Citigroup.
Herzog expects the snus products will help fuel the future growth of the smokeless category, which is already benefiting from increasingly tighter smoking restrictions and a more favorable tax status.
But she expects the development could spell trouble for UST, the Stamford, Conn.-based company that leads the segment with its products Skoal and Copenhagen. Herzog has had a “sell” rating on UST. (She does not own shares of the stocks she covers.)
Making the Switch
UST has long pursued a strategy focused on getting smokers to put down their cigarettes and make a permanent switch to smokeless or use these products in places such as the office, a hotel room, or a restaurant where smoking is forbidden.
But UST’s experience shows that Altria Group's Philip Morris and Reynolds will have an uphill battle in teaching smokers to use snus. UST has had a Swedish-style product known as Revel in test markets for several years, but has yet to broaden its distribution nationally.
Last year, UST introduced Skoal Dry, another Swedish-style, pouch product. Its launch was partly born out of frustration over the difficulties associated with creating brand awareness for a product given the restrictions on marketing tobacco products.
Even with the more recognizable brand, its been difficult.
“This is a long, slow build,” said Dan Butler, president of UST’s U.S. Smokeless Tobacco unit. “You are changing consumer behavior.”
Butler said he welcomes the competition from Marlboro Snus and Camel Snus because it will help to raise awareness.
All three companies have been trying to spread the word about the new products through Web sites dedicated to the products and direct mail campaigns targeted to their extensive databases of smokers. Although both Marlboro and Camel are well-known brands, Philip Morris clearly has the numbers on its side. Close to half of all U.S. smokers, smoke Marlboros, while only about 7% of U.S. smokers puff on a Camel.
Reynolds is taking its marketing of Camel Snus a few steps further. The Winston-Salem, N.C., company is using newspaper advertising, which in the age of tight advertising restrictions on tobacco, is seen as a bold move. Reynolds also is sampling Camel Snus in age-restricted venues such as bars.
Greg Connolly, a professor at Harvard School of Public Health, said he sees the launch of the snus products as a “major public health concern.”
Connolly is especially critical of sampling programs Reynolds has hosted near college campuses in Columbus, Ohio. He sees these programs as a way to recruit younger smokers and support the Camel brand.
“This is the old college marketing program all over again,” he said. “Is their intent to instruct on snus or is it really an opportunity to push Camel cigarettes?” he asked.
According to Connolly, an agency such as the Food and Drug Administration should be overseeing the introduction of these products and examining what the intention of their marketing is.
“Without it, all we can do is think the worst,” he said.
Nicotine Levels Vary
One question on Connolly’s mind is: why are the companies are selling various flavors of snus products at varying levels of nicotine. He said he suspects the companies are testing to see which levels of nicotine are most effective in keeping dual-users hooked.
Philip Morris spokesman David Sylvia said the differences in the nicotine levels “are not significant.”
The variance in the levels, which are disclosed on Philip Morris’ Web site, are a result of the manufacturing process needed to make the various tobacco flavors, Sylvia said.
According to the Web site, Marlboro snus comes in four flavors: rich, mild, mint, and spice. The mild flavor contains the lowest level of nicotine with 14.30 micrograms per gram of tobacco product, while Marlboro Snus Spice contains 17.49 micrograms on a comparable basis.
Although the products remain in just a few test markets, tobacco industry analysts suspect it would be fairly easy for the companies to broaden distribution if the companies chose to do so.
The test markets give the companies time to tinker with the design and marketing message. For example, R.J. Reynolds changed the shape of their tin from a round shape to an oval shape. They felt the round shape caused confusion because it seemed too similar to the moist smokeless tobacco products.
What is going unspoken in this effort is that oral tobacco products have relatively less of a stigma attached to them because they have a lower risk of cancers associated with them. Since the products are not ignited, many of the disease-causing toxins associated with smoking are not present.
The tobacco companies consistently say they have no plans to promote the notion that smokeless tobacco products are healthier than U.S. products in their marketing. However, many people do consider oral tobacco products to be less dangerous than cigarettes because many of the disease-causing toxins associated with smoking are created when tobacco is burned.
There are epidemiological studies that support this idea based on the experience in Sweden, where men use snus more than cigarettes. This behavior has resulted in lower levels of tobacco-related diseases.
But the tobacco companies are not making these claims. Instead they are sticking with the warnings which include one that says: “This product is not a safe alternative to cigarettes.”