Altria Will Use 'Marlboro' In Smokeless-Tobacco Push
Altria Group Inc. will continue to test smokeless-tobacco products under the Marlboro brand name after its acquisition of UST Inc., company executives said during a conference call.
After years of merger speculation, Altria on Monday announced a $10.4 billion agreement, including options and restricted stock, to acquire smokeless-tobacco maker UST.
The move is the cigarette maker's biggest since spinning off Philip Morris International Inc. in March.
New York-based Altria, maker of the popular Marlboro brand cigarette, has recently been testing smokeless-tobacco products, such as Marlboro snus, in an effort to parlay the value of its brand in the smokeless market. But the company has had limited success, and in January it pulled one of its spit-free products from the market.
By linking up with UST, of Stamford, Conn., Altria is hoping to tap into the company's brand cachet and institutional knowledge. Copenhagen, one of UST's premium smokeless brands, is one of the oldest American brands, dating to 1822.
"We believe Marlboro has a role in the smokeless business," Altria Chief Executive Michael Szymanczyk said. "And frankly, this acquisition will add some benefits to the brand in terms of our ability to carry that forward in a financially disciplined way."
After completion of the deal, Altria's goal is to push UST's brands, including Copenhagen and Skoal, to achieve modest share growth, the company said. Recently, UST premium brands have been losing market share to competitors who are able to entice cash-strapped consumers with cheaper products.
There is a nearly $3 price gap between Copenhagen and its main competitor, Grizzly, a popular discount product made by Conwood Co., owned by Reynolds American Inc. of Winston-Salem, N.C.
Altria and UST executives said they plan to regain strength in the market partly by delivering better value to Copenhagen and Skoal consumers. They wouldn't say whether that meant lower prices.
UST's CEO, Murray Kessler, will stay on as vice chairman of Altria, reporting directly to Mr. Szymanczyk.