Check out the falling shipments of cigarettes with expectations of further declines in 2009.

Reynolds American posted a higher-than-expected quarterly profit as its Camel and Pall Mall cigarettes increased market share. But the company said it shipped 21.6 billion cigarettes in the fourth quarter — down 6.3 percent from a year earlier.

Reynolds, like other cigarette manufacturers, could face a difficult 2009. Not only has the recession crimped consumers’ ability to spend, but smokers will feel even more price pressure now that a 61-cent increase in the federal tax on a pack of cigarettes has been passed.

Reynolds CEO Susan Ivey told analysts that the increase in the federal tax will hurt industry volume and she also said some state tax increases will likely be passed, even though Reynolds will fight them.

Also in the basket:

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Coke Enterprises profit tops view

(Photo\Reuters)

Check out how it’s no longer cool to be Kool.

Reynolds American has given the Kool brand a demotion, moving it to what it calls a “support” brand – meaning it will actually get less support.

Before Tuesday, Kool had been a “growth” brand, which meant that, along with Camel and Pall Mall, it was one of the brands where Reynolds focused most of its marketing efforts.

Kool also had been Reynolds’ leading brand in the menthol cigarette market, a market that has been growing while the rest of the U.S. cigarette market shrinks.

Now Reynolds wants is leading brand, Camel, to be its leading menthol brand, too. So Kool gets kut.

But Kool can at least take heart that at Reynolds, the brand designations can fluctuate. Pall Mall was once a “support” brand, but Reynolds saw it growing even without the extra marketing dollars. So one day Pall Mall got the call to come hang out with the popular crowd. In other words, it was cool to be Pall Mall. 

(Additional reporting by Brad Dorfman)
    
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 McDonald’s August sales rise

KFC shoring up security for secret recipe (Associated Press)

(Photo: Reuters)

Check Out Altria Group’s $10.4 billion offer to buy UST Inc.

While rumors of the deal were reported last week, Altria, the maker of Marlboro cigarettes, issued its official offer on Monday to buy UST, the largest U.S. smokeless tobacco maker, for $69.50 a share in cash plus $1.3 billion in debt on Monday.  

Buying UST, which also owns Ste. Michelle Wine Estates, would be a quick way for Altria to reach into the growing smokeless tobacco market, as it seeks ways to diversify from the declining U.S. cigarette market.

But things aren’t that simple. While UST dominates the U.S. smokeless tobacco market, its main brands Skoal and Copenhagen are losing market share as people trade down to cheaper brands amid surging gas prices and a weak U.S. economy.

Price cuts is one way out for UST, according to some analysts, but others question if Altria will be able to do that.

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Fashion show music speaks volumes about brands 

Vintage jewels gain popularity as investments

Adidas snags Russian football deal from Nike

Macy’s Launches Own Jewelry Line — WWD (subscription required)

(Photo: Reuters)