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US/WORLD: Smokeless Tobacco to Get Push by Venture Overseas

by Kevin HellikerWall Street Journal
February 4th, 2009

Swedish Match AB and Philip Morris International Inc. announced a joint venture Tuesday to market smokeless tobacco world-wide.

The deal offers both companies an opportunity to benefit from sales of smokeless tobacco, which is seen as a growth product because it is less dangerous than cigarettes. It also signals the possibility of an intensified industry effort to lift government bans on sales of snuff -- the largest smokeless category -- in much of the European Union, Australia, New Zealand and other potentially lucrative markets. Swedish Match also said the venture may develop smokeless products such as chewing gum.

[smokeless tobacco] Bloomberg News/Landov

Snus, a smokeless tobacco, is now banned in the EU except in Sweden.

The venture combines a world-wide giant in smokeless, Swedish Match, with the world's second-largest purveyor of cigarettes, PMI, an Altria Inc. spinoff. PMI holds the rights to sell the Marlboro brand owned by Altria's giant cigarette unit, Philip Morris, outside the U.S.

The venture could help PMI enter the smokeless market and help Swedish Match develop a global presence. In a joint press release, the two companies said they would seek to expand globally outside Scandinavia and the U.S. The announcement extends a trend of cigarette companies teaming with purveyors of smokeless tobacco. In the U.S., Philip Morris last month completed the $10.3 billion acquisition of UST Inc., the nation's largest smokeless purveyor. And the nation's No. 2 cigarette maker, Reynolds American, has entered the smokeless market via acquisition and new-product development. Sales of smokeless tobacco in the U.S. are growing at about 5% a year as sales of cigarettes decline.

Research has shown that Swedish-style smokeless tobacco, called snus, is substantially safer than cigarettes and potentially effective in helping smokers stop. In a joint press release Tuesday, Swedish Match and PMI said "there is a role for snus to play in tobacco harm reduction."

The combination could bring more pressure on governments to lift bans on snuff, which includes snus, in several countries. The bans, enacted amid the heat of battle between public health officials and cigarette companies reflected a desire to limit tobacco's reach. But a growing number of public health officials argue that the bans deprive cigarette addicts of a way to switch to a safer variety of tobacco. In Sweden, the rate of cigarette smoking among men has declined sharply as smokeless usage has climbed.

In the past, Swedish Match sought a repeal or amendment of the EU ban, only to be rejected as a tobacco company seeking to extend its reach. But while Swedish Match is predominantly a smokeless tobacco purveyor, PMI is a cigarette company, and that could make its leap into smokeless tobacco tricky for regulators.

"When you have a giant cigarette company saying we would like to market a product that bears a tiny fraction of the risk of what we're marketing now, how do you say no without giving that company a huge legal and public-relations victory?" asks David Sweanor, an academic lawyer and tobacco-control expert in Canada and Britain who has been a consultant to plaintiffs suing cigarette makers. Mr. Sweanor supports repealing smokeless bans.

Debate about the snus ban is also heated in Australia. In an October 2007 letter to the British medical journal Lancet, a group of public-health researchers from the University of Queensland noted that in Australia, "snus is completely banned from sale. Yet new tobacco products can be introduced to the market so long as they are smoked."

A Swedish Match spokesman in Stockholm said the venture isn't expected or designed to bring down the EU ban. In spite of the scientific evidence, spokesman Henrik Brehmer said, regulators "still say they believe it is a dangerous product."

Many public health officials in countries that ban smokeless tobacco argue that pitching it as a reduced-harm product could make it attractive to nonsmokers.

Moreover, the fact that smokers in large numbers have switched in only one country -- Sweden -- means that "advocates for liberalization of access...are almost certainly overhyping the potential for widespread adoption" among smokers, Simon Chapman, a professor of public health at the University of Sydney, argued last year in the Medical Journal of Australia.

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