Reynolds American Sees Smokeless Tobacco as the Future

With more regulation for cigarettes, the tobacco industry is looking for new ways to fire up sales.

July 06, 2011

WINSTON-SALEM, N.C. - With declining numbers of U.S. smokers and an increasing number of regulations concerning cigarettes, tobacco companies are seeking ways to boost sales through smokeless products, such as moist snuff and snus, the Wall Street Journal reports.

Reynolds American Inc. has begun efforts to push its smokeless products, but faces stiff competition from Swedish Match AB, which makes snus and has said it will launch a massive campaign to infiltrate the U.S. tobacco market this year.

As with other tobacco products, smokeless products can€™t make any claims without scientific evidence to back them up. Reynolds American CEO Daniel Delen has been tasked with finding a way to market his company€™s smokeless products. The Wall Street Journal recently interviewed Delen about smokeless tobacco and other issues.

Delen said that cigarette sales are still being impacted by the recovering economy. "The [unit] volume trends that we would expect have held constant, but people are shopping the category a little bit differently. We have seen down trading [to cheaper brands]. It kind of makes sense if you think about it from a shopper's point of view. Where do they mostly buy their tobacco? It's gas and convenience stores. If there's sticker shock at the pump, when they walk inside to buy their cigarettes, they are in a price-sensitive moment of the day," he said.

Growth of moist-snuff products has been driven by Reynolds American€™s focus on the smokeless category. "We see some organic growth in smokeless in general, but we also see consumers opting to switch between [the cigarette and smokeless] categories," said Delen.

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