Tuesday, August 21, 2007

Marlboro Smokeless On Sale In October

With all the talk of the upcoming Phillip morrris International (PMI) spinoff from Altria (MO), we seem to have forgot the future of the Phillip Morris USA (PMU) debuts this October.

PMU said on Tuesday it would start selling Marlboro chewing tobacco in Atlanta this October. PMU, the largest cigarette maker with over 50% of the US market said it planned to sell original and wintergreen flavors and long-cut and fine-cut varieties of the product in the test market.

The product will sell for $3 per tin, between the highest-priced and lowest-priced products in Atlanta. PMU said it was using the Marlboro name since smokeless tobacco users believe the brand stands for "flavor and premium quality."

In late April I posted "Much has been said about the possibility of MO buying UST for the smokeless business. It will not happen. Why? Smokers are quite possibly the most brand loyal folks out there, chew users, not so much (I speak from experience, used to be one). What does MO have? The #1 brand of cigarettes with over 50% market share. If they introduce a new product, it will be accepted much like the instant acceptance a new Budweiser product gets by beer drinkers. It will receive a trial by chew users who will be inclined to like it as it will be perceived as being a quality product. They will have no problems abandoning their current product to try the new Altria one. The cost/benefit of a self-produced product vs. an acquired product is huge for us shareholders as it leaves billions to be returned to us."

I love the idea of a Marlboro branded chew product. I have very little doubt it will be an immediate hit. Several people I know who chew are excited about the product and are definitely going to give it a test when it is available.

With smoking rates in decline, a new product with the Marlboro brand label will be a big boost to Altria's (and us shareholders) coffers.

With the anticipated success of this product, a fat dividend increase, a big share repurchse, and the PMI spin all expected soon, it looks to be a very exciting fall for shareholders.


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