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    Snus Snoozing?

    Some brands lag while others have legs, but all retailers agree more communication is needed to get the segment off the ground.

    By Mehgan Belanger

    Throughout the nation, "No Smoking" signs are becoming increasingly prevalent, as laws prohibiting smoking in bars, restaurants, casinos and elsewhere continue to pass. Seeing an opportunity, tobacco companies developed and began testing smokeless, spitless snus, targeting adult cigarette smokers looking to satisfy nicotine cravings in smoke-free places.

    Major cigarette companies developed products with flagship brand names -- R.J. Reynolds Tobacco Co. (RJRT) manufactured Camel Snus in Sweden while its U.S. operations were setting up, while Philip Morris USA (PM USA) gained learnings from a snus called Taboka before putting its iconic Marlboro brand name on a product in June 2007. In recent months, other players have brought spitless products to the table, including Lorillard and Liggett.

    Tobacco industry experts have claimed such products could be a significant player in the future tobacco category. It appears to be a win-win-win situation -- cigarette manufacturers diversify beyond a diminishing stick business; retailers gain a high-margin product; and adult smokers can use the product anytime, anywhere.

    And some retailers selling the product in test markets said snus is gaining traction.

    Since the summer of 2007, 16 TravelCenters of America and two Petro Stopping Center stores have been testing one of three snus brands. Tobacco category manager, Dave Stukus, said the Camel Snus product sells very well in Oregon and well in Missouri and North Carolina. Overall, he said it sells better than the other two snus brands the stores stock -- Marlboro and Triumph -- but acknowledged this could be because Camel Snus is stocked in many more markets than Marlboro Snus, and the Triumph product is too new to judge -- it was added in March 2008.

    Stukus also noted Camel Snus' merchandising is part of what has made it successful in stores. TravelCenters and Petro Stopping stores display the snus in a branded refrigerator on the front counter.

    "A customer can't help but ask the cashier about the product," he said.

    In Indianapolis, Village Pantry tobacco category manager, Steve Kidd, noted snus is doing better than he expected.

    "It has some legs," he said, noting PM USA's snus, which has been in 127 Indianapolis area stores since mid-March, is "growing every week,' and Camel Snus, in stores since the fall of 2007, has performed well out of the gate in 101 stores across Indiana, selling an average of approximately two cartons per week per store.

    However, other retailers selling the product said it will be some time before snus gains a foothold in the U.S., as sales and repeat business are slow. "I can't evaluate it for the cigarette companies, but for myself as a retailer, I would not deem it a success," said Lee Maxwell, tobacco category manager for Circle K Southeast, which has been testing Camel Snus in 21 stores in Raleigh, N.C., since July 2007. "It hasn't really met our standard for new products."

    E-Z Mart, which has been testing both Camel and Marlboro products in 45 Dallas/Ft. Worth area stores since August 2007, saw better performance from Marlboro Snus when it was promoted with coupons.

    "Initially, there was a huge amount of coupon drops on Marlboro Snus, and there was a lot of initial trial," said Bob Richardson, tobacco category manager for the Texarkana, Texas-based chain. Two months into the trial, stores were selling an average of 11.1 packs per store per week, all of which were coupon-driven, which he said "helped keep up initial consumer interest." Sales continually declined to a low of 2.3 packs per store per week in mid-February through the beginning of April. But for the most recent sales period as of presstime in late May, E-Z Mart sold an average 5.4 packs per store per week -- a gain Richardson attributed to a new $2.50 promotional allowance that cut the price to $1.79 per pack.

    Regardless of performance, all retailers selling snus said its success will rely on communication at the store level.

    "The best method to get people to try it is via our cashiers," said Stukus. "The key to retailer success is the store manager. In successful snus stores, we have some great store managers who have taken ownership, reordered product and made sure our cashiers are engaging the customer."

    Maxwell's experience at Circle K is similar. "In some stores snus is doing well, but in other stores in the same market area, even down the street, it's not doing well," said Maxwell, explaining stores successfully selling snus have employees who use the product and will communicate its features to customers.

    But communication doesn't come without its challenges, retailers said. Maxwell noted teaching consumers about snus goes against the industry's primary service -- convenience -- and is a hurdle the product must overcome to be successful.

    "We're convenience stores and the idea is to make customers' visit convenient and not slow them down," he said. "That conversation [with customers] sometimes doesn't take place."

    Similarly, "Employees can't all be the experts [snus] needs. Manufacturer representatives also need to educate consumers," which is more difficult than other tobacco introductions, Richardson said.

    "Consumers understand that a new brand of cigarettes is a twist on an old product. They have trouble getting their mind around what snus is," he explained. "Consumers see the product and think it's a moist smokeless tobacco. They don't understand the alternative uses snus has versus cigarettes and smokeless tobacco."

    Snus' success also hinges on promotions from manufacturers, according to retailers. Suppliers should keep promoting the product through coupons, free trials and bundles to encourage trial, said Stukus.

    Circle K's Maxwell cited one product's successful promotion through low-cost trial packs. Oliver Twist, a smokeless, spitless pellet product imported from Denmark by National Tobacco Co., was the first spitless OTP to be added to Maxwell's stores. Currently, it is stocked in all 363 stores in the region.

    "The way they have gone to market is with trial packs for 50 cents, with one pellet of each flavor and an informational brochure," he said, noting that the supplier encourages placement of the trial packs on the sales counter. "Customers can try the product at a low investment, sample all the flavors to see what they like, then come back and buy tins of the product."

    Despite the segment's mixed results so far, all the retailers believe snus has a future in the U.S., thanks to increased anti-smoking legislations that will help push the products' acceptance.

    "I think it's a chapter in the tobacco book of the future," said Stukus. "With annual cigarette consumption declining nationally by 3 to 5 percent, we need to find alternatives."

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