Philip Morris to Test Smokeless Tobacco

By STEPHANIE STOUGHTON

RICHMOND, Va. – Philip Morris USA, the nation’s largest cigarette company, said Wednesday it plans to test a smokeless, spitless tobacco product this summer in the Indianapolis market.

The news follows Reynolds American Inc.’s separate announcements last week that it would test-market a spitless tobacco called Camel Snus (pronounced “snoose”) and would purchase Conwood, a private smokeless tobacco company, for $3.5 billion.

Philip Morris said its entrant, dubbed Taboka, is designed for the adult smokers who are interested in smokeless tobacco alternatives but not necessarily the “chewing, dipping and spitting” products now on store shelves.

Michael Neese, a company spokesman, said the company has been “looking at potential moves into tobacco or tobacco-related products or processes that would allow (Philip Morris) USA to use its existing core infrastructure.”

Analysts had expected both Philip Morris and Reynolds – which are doing business in a shrinking market – to enter the smokeless business. Cigarette consumption in the United States has been declining over the last two decades due to health concerns, smoking restrictions and price increases.

“This is just the beginning for Philip Morris, and depending on the success of this new product … we expect the company to organically launch a full range of other smokeless tobacco products,” Citigroup analyst Bonnie Herzog said in a report. Organic growth typically refers to growth that is not fueled by mergers and acquisitions.

Herzog said she didn’t expect the product to have much of an effect on the bottom line of parent Altria Group Inc., the New York company that also owns Philip Morris International and most of Kraft Foods Inc. But after Altria’s anticipated yet unscheduled break-up, Philip Morris USA could become a solo company, and “these types of new product offerings will result in faster top-line growth and a better mix for the company,” she said.

Taboka comes in a small, inch-long pouch. It is expected to sell in Indianapolis for $3.55, about the same amount as a pack of Marlboro cigarettes there.

The new product will come in both regular and menthol tobacco flavors, with a dozen pouches included in each container. It is designed to last about twice as long as a cigarette, which takes an estimated seven minutes to smoke.