Snus Maker Sets Its Sights on U.S.

Smokeless-tobacco giant Swedish Match AB, the dominant maker of snus in Scandinavia, plans to begin a major push into the snuscategory in the U.S. in the coming months.

The company, which to date has only dipped its toes into the small-but-growing segment of the U.S. smokeless-tobacco industry, is unveiling two new versions of its General brand for American consumers and sharply expanding retail distribution starting this month. Initial markets will be Chicago, Dallas and Philadelphia, executives said in an interview Thursday.

The effort underscores tobacco makers’ rising interest in expanding a product style that is popular in Sweden and Norway but relatively new in North America. Snus—a type of oral tobacco that comes in small pouches and requires no spitting—accounts for about 2.5% of smokeless-tobacco sales in the U.S., up from virtually no sales just a few years ago, according to Swedish Match.

The Stockholm concern hopes to grab market share from category leaders Reynolds American Inc., which sells Camel Snus, and Altria Group Inc., which markets Marlboro Snus and Skoal Snus.

Swedish Match said it intends to emphasize to consumers that General is an authentic Swedish snus that has been made in Sweden for more than 150 years. The new Nordic Mint and Classic brand cigarettesvarieties will sell at a slight premium to Camel Snus, the market leader in the U.S.

“We think snus in the U.S. is going to be a big category,” said Clark Darrah, vice president for next-generation products for Swedish Match’s U.S. division. “Globally, this is the biggest opportunity that we have.”

The rising demand for snus is part of an upswing in overall sales of smokeless tobacco in the U.S. The category’s growth of roughly 6% to 7% by volume in recent years stems in part from an increase in bans on smoking in public places and higher cigarette taxes, which have prompted some smokers to seek alternatives. U.S. cigarette sales volumes have been declining for years.

Rising sales of smokeless-tobacco products have raised concerns among some major anti-smoking groups, including the Campaign for Tobacco-Free Kids, which worry that such products will keep smokers from quitting tobacco altogether. Other public-health advocates, pointing to the difficulty of quitting smoking, argue that smokeless tobacco could play a role in reducing tobacco-related disease in the U.S.

Research has shown that snus is substantially safer than cigarettes. However, companies can’t make such health claims under a 2009 U.S. tobacco law unless they meet a series of high standards using scientific evidence. Swedish Match said it is looking into the possibility of filing an application with the U.S. Food and Drug Administration to have its snus products designated as “modified risk.” The rules and process for such applications are still being worked out by the FDA.

Swedish Match controls about 85% of the snus market in Sweden and about 70% of the market in Norway. More men consume snus than smoke cigarettes in Sweden, the company noted.

Mr. Darrah acknowledged that the company faces a significant challenge in trying to gain retail-shelf space in the U.S., where Altria and Reynolds dominate the cigarette and smokeless categories. “What we need to do is sell the opportunity to the retailer,” he said.

The company began selling General in the U.S. about five years ago, but sales primarily have been limited to tobacco shops. The company also focused initially on Swedish-American consumers.

Swedish Match will expand distribution into major convenience-store chains in the coming months. Mr. Darrah said the Nordic Mint variety that the company is introducing is designed to appeal to Americans’ interest in flavored snus products.

Mr. Darrah said the increasing anti-smoking regulations and declining societal acceptance of cigarettes in the U.S. have created an environment similar to the one in Sweden more than 30 years ago that helped foster the rise in snus consumption.

Swedish Match also sells mass-market cigars, matches and cigarette lighters. The company controls about 12% of the moist-snuff market in the U.S. with brands such as Longhorn and Timber Wolf. The leaders in that category are Altria, which sells Copenhagen and Skoal, and Reynolds, which markets Grizzly, the top-selling moist snuff.

By David Kesmodel
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