Altria looks to capture different tobacco consumers with new products

Currently many cigarette smokers are getting more interested in trying various tobacco products besides cigarettes, than previous generations of smokers, and Altria Group Inc, parent company of the largest cigarette maker, Philip Morris USA, is looking on their recently-launched products to lure customers who are open to new products, according to the company.

The corporation, best-known for marketing the iconic Marlboro cigarettes, as well supported its profit forecast, published in January.

Altria, which also markets Copehnagen and Scoal smoke-free tobacco products and Black & Mild cigars, has witnessed a change in tobacco consumption patterns in the USA. Whereas the rate of cigar and cigarette smokers has been virtually unchanged, the consumption of smokeless tobacco has been growing.
Nevertheless, Marlboro – with roughly 42 percent share of the U.S. cigarette market – remains the leading brand in the group’s portfolio.

At the same time, many smokers have admitted to be trying new “reduced-risk” tobacco products, like snus and other smoke-free tobacco, due to health growing concerns and social stigma.

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Phillip Morris Starts Legal Suit against Australian Government

Today the leading cigarette manufacturer Philip Morris started a legal suit against the Australian government, which plans to remove company logos from cigarette packages and substitute them with horrible images depicting the consequences of smoking.

The government supposes that these images featuring blinded eyes, cancerous mouths and many other awful things will make the cigarette package less attractive to smokers.

Australian government authorities also think that the new regulations will make the country the world’s rigorous place on tobacco advertising.

But several enraged cigarette producers have since threatened lawsuits, declaring that the move illegally decreases the value of their trademarks. Philip Morris is one of those companies to lay an action for compensation.

“We would expect that the compensation would constitute billions,” said Philip Morris representative Anna Edwards.

The legislation, which will be revised by the Parliament, would prohibit cigarette manufacturers from placing their logos and various attractive images on cigarette packages. Brand names will instead be printed in a quite small font and depict large graphic warnings and grisly colored images of the consequences of smoking. The law would be gradual, starting in January 2012.

Hong Kong-based Philip Morris Asia Limited, laid an action on Monday declaring that the legislation infringes a bilateral investment treaty between Australia and Hong Kong. The tobacco enterprise states that the treaty defends the companies’ property, such as trademarks. The plain packaging plan strictly decreases the value of the company’s trademark, according to Anna Edwards.

“Our cigarette brands are the one and the most indisputable key valuable assets that we possess as a company – it is what allows us compete and moreover it’s what empowers us to differentiate our products. This move would significantly mean the confiscation of our brand in Australia,” Edwards stated.

Authorities are also eager to move forward the message that smoking affects your children.

The government disclaims that the given plan infringes any laws and declared that it would not stop.

“Our authorities are resolute more than ever to undertake everything they can in order to decrease the hazard caused by smoking,” Health Minister Nicola Roxon stated.

“We won’t permit be frightened by various tobacco companies, which take legal actions,” said Prime Minister Julia Gillard.

She also ignored Philip Morris’ threats stating that they are not going to allow tobacco producers to implement their skilful tactics.

The legal action laid on Monday starts a three-moth period of collaborations the two parties.

Philip Morris declared if a positive outcome is not achieved by the end of this period, it will require arbitration. The U.S. Food and Drug Administration (FDA) introduced similar graphic warnings for cigarette packaging last week.

Illegal Cigarette Trade in EU Peaked in 2010

Philip Morris International Inc. last week disclosed the results of its latest demonstrating that illegal sales of contraband and fake tobacco products across European Union reached record level in 2010 since the company began studying the market in 2006.

The research, performed by KPMG, assessed that yearly consumption of illegal cigarettes grew by 3.1 billion sticks in 2010 as compared to 2009 to an aggregate of 64.2 billion units, representing nearly 10% of overall cigarette consumption across European Union. According to the information provided by European Anti-Fraud Office, the EU and national economies missed 10 billion Euros in taxes in 2010 due to the growth in illegal sales.

KPMG has carried out similar researches annually as part of the landmark collaboration convention between Philip Morris International, The EU member-nations and the European Commission. The analysis and its main conclusions will be taken into consideration by European Anti-Fraud Office and national governments.

Speaking about the results of the study, Timothy Lindon, Chief Compliance Officer for the PMI, declared that whereas it has been evident that law enforcement authorities across the EU have been doing their best to eliminate the issue, the study shows that illegal cigarette trade has been on the rise and presents a great challenge for the EU member-states.

“The illegal cigarette trade throughout the EU is currently bigger than legitimate combined cigarette markets of France, Switzerland and Finland, and contributes to growing criminality in EU member nations, since revenues from illegal tobacco trade are regularly allocated to fund other illicit activities, such drug trafficking, human smuggling and terrorist attacks. In many EU member states, there are currently two different tobacco markets, one legitimate market which is decreasing, and an illicit unregulated cigarette market which is increasing.”

Philip Morris International is strongly against the illegal cigarette trade and has performed a wide series of actions to eliminate this rising issue, including introduction of a worldwide tracing system, all-round know-your-customer measures, customer education and cooperation with national governments. The solution to this problem is the cooperation on both national and international levels, among multiple parties, such as enforcement bodies, governments, cigarette companies, wholesales and retailers, as well as strict and globally-enforced convention on illegal cigarette markets that combats all forms of smuggling and counterfeiting of tobacco products.

Philip Morris International is the number one international tobacco corporation, which manufactures seven of the world’s best-selling 15 global cigarette brands, including Marlboro, the top-selling cigarette brand in the world. PMI’s brands are available in almost 180 markets. In 2010, the tobacco giant accounted for approximately 16.0% share of the entire global cigarette market, excluding the United States, and 27.6% excepting the U.S. and China.

Philip Morris International acquires patent for an innovative nicotine-delivery system

The leading privately-owned cigarette maker said last week it has purchased the rights for an aerosol nicotine-delivery technology created by Jed Rose, head of the Duke University Center for Nicotine and Smoking Cessation. The school was not part of the agreement with tobacco Company and won’t get any payment. Terms of agreement are not revealed.

“By removing the process of burning, developing a way of delivering nicotine through inhalation but without the hazardous chemicals, we might decrease the health complications and deaths related to smoking,” admitted Rose, who headed the initial tests in the 1980s which allowed to paving the way for development and commercial usage of nicotine patches as smoking cessation therapy.

“We hope that we created a technology that will help to leave tobacco burning in the past.”

Rose added that Philip Morris International, based in New York and Switzerland, will now focus on developing commercial products applying this technology. The nicotine-delivery system developed by Rose is different from the medical nicotine inhalers selling currently as cessation treatments since it delivers nicotine faster imitating nicotine delivery given by cigarettes.

“The other systems of nicotine delivery are not able to the satisfaction smokers they need,” Rose noted.

The agreement is an essential “step in the efforts to develop nicotine-delivery products that can potentially decrease the risk of smoking-related health complications,” Peter Nixon, Philip Morris International’s spokesman declared.

Nixon added that it might take up to five years to create a commercial nicotine product which could be used as an alternative to cigarette smoking.

The company’s shares gained more than 1 percent, totaling $70.42 after the agreement was revealed.

PMI move is the latest in the recent series of decisions by major tobacco groups to enter the market of smokeless tobacco products and innovative nicotine-delivery products while tax hikes, anti-smoking policies and social stigma contribute to falling demand for cigarettes.

In April, PMI’s main rival, British American Tobacco established a division named Nicoventures which will concentrate on alternative nicotine products. In 2009, Reynolds American, second-biggest tobacco group in the U.S. acquired purchased Sweden-based company Niconovum that manufactures nicotine pouches, gums and sprays helping smokers to quit.

“It’s a fact that people smoke to get nicotine fix and die from tobacco smoke,” states David Sweanor, a Canadian law professor who works with tobacco industry. The major question is, “Could you offer them nicotine without the tobacco smoke in a way that could be consumer acceptable.”

The U.S. Food and Drug Administration is working to make up recommendations for companies interested in creating what the organization names modified-risk nicotine products.

“Changing regulations are contributing to an environment where competition would move this market category considerably,” the scientist added.

Philip Morris International, the leading private tobacco company in the world, yielding only to China National Tobacco Corporation, controlled by the government, spun off from Altria Group, owner of Philip Morris USA, which markets Marlboro, Parliament and other brands.

KT&G set to take the lead in slim-cigarette market with flagship ESSE brand

When asked what it the most popular cigarette brand in the world, the majority of adult smokers would probably name one of the iconic brands, such as Marlboro, Winston or Lucky Strike, produced by the world’s largest tobacco companies, Philip Morris International, Japan Tobacco International and British American Tobacco.

Nevertheless, if considering only the slim cigarette market segment, it seems that those legendary brands were bypassed by a newcomer, named ESSE and manufactured by South Korean KT&G, which has been steadily growing and capturing international market share.

The Seoul-based tobacco maker reported a two-fold growth in exports, selling 20.8 billion ESSE cigarettes on the international market, up from 11.2 billion in 2009, to outstrip its major competitors, Philip Morris’s Virginia Slims and British American Tobacco’s Vogue.

According to Euromonitor International, a UK consulting agency, KT&G sold 29.2 billion ESSE cigarettes in 2009, while PMI sold 17 billion Virginia Slim cigarettes and BAT sold 11 billion Vogue cigarettes.

“Since its launch in 1996, we have developed Esse cigarette brand as our global flagship brand. This premium brand is currently selling in more than 40 markets across the world including Middle East countries and Russia,” admitted Huh Up, director of global businesses for KT&G.

“It should be mentioned that ESE is currently the best-selling brand in super-slim segment of cigarette market in Iran, Indonesia and Uzbekistan. In Russia, ESSE holds more than 10 percent share of the super-slim segment.”

Mr. Huh mentioned that KT&G, former state-owned cigarette maker, entered the global cigarette market a decade ago, after the domestic market demonstrated saturation.

Trying to promote ESSE and make it a world-famous tobacco product, KT&G showed its potential at organizing various marketing events.

At present, the company is an overwhelming leader of the Korean cigarette market, with 85 percents of the domestic super-slim market.

When one of the styles of ESSE, was launched in the domestic market, it took about a week to reach milestone sales of 10 million packs, becoming the shortest ever period for the company.

Currently, ESSE offers many styles, such as ESSE Super-Slims Menthol and ESSE Super-Slims Special Gold.

“While exporting ESSE brand to other markets, we have opened several manufacturing units in major markets to keep up with growing sales”, Huh admitted. In addition, the company is set to promote its other brands and acquire competitive brands in order to become a solid player on the international tobacco market.

KT&G invested nearly $100 million to establish a production line in Kaluga Region, Russian Federation, in order to supply Eastern Europe region with ESSE cigarettes.

In addition, the company as well: opened manufacturing units in Turkey and Iran to work with Middle East and Asian markets.