Chewing and Smoking Tobacco and Snuff

SIC 2131

Industry report:

This industry consists of establishments primarily engaged in manufacturing chewing and smoking tobacco and snuff. Other tobacco product industries are discussed in SIC 2111: Cigarettes; SIC 2121: Cigars; and SIC 2141: Tobacco and Redrying.

By the late 2000s, 6.2 million Americans were using smokeless tobacco products, and sales were growing an average of 7 percent a year. More than half the U.S. market belonged to UST (United States Tobacco), which was purchased in 2009 by Altria Group, the largest cigarette maker in the world and owner of Philip Morris USA, for $10.3 billion. Second in the industry was Conwood Company, a subsidiary of Reynolds America. Companies that competed for a smaller share of the market included Swisher International, Swedish Match North America Inc., and North Atlantic Trading Company's National Tobacco. Moist packaged (as opposed to loose) snuff was the most popular form of smokeless tobacco in the United States in the late 2000s, according to Access magazine. Top brands in the industry included Copenhagen, Skoal, Red Seal, and Husky (made by UST); Grizzly, Kodiak, Hawken, and Cougar (by Conwood); Silver Creek, Redwood, and Kayak (by Swisher); Beech-Nut, Havana Blossom, Trophy, and Stoker (by National Tobacco); and Red-Man (by Swedish Match.

Sales by the leading manufacturers of smokeless tobacco demonstrated that the industry continued to hold its own in the late 2000s despite growing public health concerns and the lagging economy. UST reported sales of $790.3 million in 2008, a small percentage of Altria's total revenues of $15.9 billion. Conwood posted sales of $38 million; Swisher, $89.8 million; Swedish Match America, $188.6 million; and North Atlantic Trading Company, $122.8 million.

The snuff business enjoyed an upsurge in the mid-1970s after nearly half a century of lackluster sales. The hardcore market remained in the southern United States among the older population. However, in the mid-1970s snuff began to regain some popularity, especially as young men turned to it because they thought it was a safe alternative to cigarettes. Labels warning of dangers and a ban on television and radio advertising of smokeless tobacco were not required until 1986, when the U.S. Surgeon General proclaimed it a cause of mouth cancer and other oral diseases.

Demand for smokeless tobacco rose sharply during the 1980s and early 1990s. Among smokeless products, moist snuff was the leader with total U.S. output rising 83 percent from 1981 to 1993 alone, from 30 million pounds to 55 million pounds, respectively. In the early 1990s, as cigarette and cigar volume dropped, smokeless tobacco products grew between 3 and 5 percent in sales volume annually. By the mid-1990s, moist snuff had become the largest segment in terms of both total sales and volume produced. The increase was due to a number of factors: increased smoking restrictions; promotions and advertising; and the waning impact of tax hikes, negative publicity, and health warnings. Manufacturers of loose-leaf, plug, and dry snuff experienced a slow slide in volume sales but maintained profits through price increases.

Smokeless tobacco companies found creative alternatives to counter governmental restrictions. Advertising in magazines and at auto races and rodeos, as well as through direct mail campaigns, has been crucial in boosting sales and developing brand loyalty. These well-organized promotions and the introduction of new flavors strengthened sales of both loose-leaf tobacco and moist snuff in the late 1990s.

In the late 1990s and early 2000s, increasing public concern about tobacco-related health issues spawned a flurry of legal activity as states sued companies to compensate state health care providers for the cost of treating tobacco-related illnesses. In addition to the suits for smoking tobacco, UST and other smokeless tobacco producers were sued for injuries that plaintiffs claimed were caused by chewing tobacco. However, industry leaders such as UST enjoyed high profit margins; smokeless tobacco sales, particularly snuff sales, continued to rise as consumers associated more health risks with cigarettes. Although chewing tobacco sales declined 6 percent from 2002 to 2003, reaching 43.0 million pounds, snuff sales increased 3 percent to 71.6 million pounds. Imports of both chewing tobacco and snuff declined sharply in 2003, falling 19.4 percent and 18.2 percent, respectively. Snuff exports also dropped 1 percent that year, to 697,000 pounds, and chewing tobacco exports declined 4.1 percent to 117,000 pounds.

The tobacco industry faced significant challenges in the late 2000s when the Family Smoking and Tobacco Control Act was passed in June 2009. The bill placed the entire tobacco industry under the regulation of the Food and Drug Administration and included restrictions on such factors as ingredients, labeling, and advertising. The regulations also required smokeless tobacco makers to pull products from the market that were introduced after February 2007 and companies were not allowed to advertise that their products were healthier than cigarettes. Although some researchers claimed that smokeless tobacco was less harmful than cigarettes because it contains fewer carcinogens and does not enter the lungs, other studies found that smokeless may actually be more addictive than cigarettes because of its higher level of absorbable nicotine.

Smokeless tobacco makers were exploring new ways to provide products to their users in the late 2000s, including dissolvable tobacco pellets and "snus" (pronounced "snooze"), which was a type of spitless chewing tobacco sold in a pouch. Reynolds America marketed Camel Snus nationwide and was testing Camel Orbs (pellets) in a few markets. Around the same time, Altria introduced Marlboro Snus.

The future growth of the smokeless tobacco industry depends not only on public opinion of tobacco products but also on the effects of the new tobacco law. As bans and restrictions on cigarette smoking continued to spread, the smokeless tobacco segment was one of few in the industry showing growth. More than 970 million cans of moist smokeless tobacco were sold in the United States in the mid-2000s, and an estimated 8 percent of high school students used smokeless products in 2008, according to Access magazine.

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