Source: Business Week

Richmond, VA

Like other tobacco companies, Altria Group Inc. is focusing on cigarette alternatives such as cigars, snuff and chewing tobacco for sales growth as tax increases, smoking bans, health concerns and social stigma make the cigarette business tougher.

The smokeless tobacco category is growing at about 7 percent a year, but still remains small compared with cigarettes. The parent company of the nation’s biggest cigarette maker, Philip Morris USA, said Wednesday that volumes for its smokeless tobacco segment, which includes Copenhagen and Skoal, as well as Marlboro Snus, grew 16.4 percent in the third quarter and revenues excluding excise taxes increased about 11 percent to $363 million.

In a conference call with analysts regarding Altria’s third-quarter earnings, CEO Michael E. Szymanczyk talked about the company working with retailers to better align their shelf space with changes in the tobacco industry.

QUESTION: Is the investment to help retailers reallocate their space and improve their display units for smokeless products meaningful to call out?

RESPONSE: This is a category that has grown pretty substantially here over the last few years, but in retail stores, there hasn’t been any significant movement in the space. At the same time, the cigarette category has declined in volume. And while inventories have come down in the cigarette business, the actual physical space devoted to cigarettes hasn’t meaningfully changed. There’s a good opportunity to play catch-up here. … We’re helping retailers redistribute their space so it’s more consistent with their sales, and that will allow for a better performance, I think, in the smokeless business.