Shop Talk

Retailers, consumers and prices

Check Out Line: Taxes up, cigarette shipments down

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SWITZERLAND/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.

Check Out Line: Not so cool for Kool

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kool.jpgCheck 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.

Check Out Line: Marlboro maker investing in smokeless tobacco

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cigarette.jpgCheck 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.

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