Officially Altria breaks up today into PM USA and PM International -whether you think this is a good move or not - the question is what’s next?
At PM USA I speculate they will pursue a US acquisition in the smokeless category - most probably Swedish Match or US Smokeless. Everybody else believes the top pick is Swedish Match, but I think the most likely candidate is USST.
Here’s why;
USST has the greater share of Premium (yes Premium) Brands in the smokeless category.
They have product development expertise.
An experienced sales force and, despite some pessimistic opinions, good marketing.
I know most of this applies to Swedish Match but USST has size -for this reason I see USST as a better fit for PM USA on this basis.
At PM International, the jewel in the crown must be China - did anyone hear the PBS news this morning - they said so too.
With 350 million male smokers in China, you don’t have to get much percentage penetration to have a huge volume (for Marlboro.)
Agree / diagree - post your view and let’s have a discussion?
Watch this space.
6 comments ↓
Stock sure started off very well! Look out world PMI will conquer!
At the investor’s conference in New York a few weeks ago on the new Altria-PMI split, Camilleri was asked about China but there he said effectively that China is pretty complicated and that his go it slow approach with their cross-sales arrangement was the best that could be done since 10% or more of State tax revenue comes from tobacco. Sure the USTR, who helped get competition into the Japanese, Taiwanese, Thai and Korean markets, is no longer in the tobacco game, but what about the huge trade imbalances with the EU too where once again the Chinese show they love to export but not import. PMI should work with Mandelson and force the Chinese to play fair. How long will the Chinese play by a different set of rules even though they join international groups like the WTO and then snub their noses at these groups creating their own separate rules like restrictions on where imported cigarettes can be sold. No wonder they have the world’s money in their banks and cranking out counterfeit Marlboro’s for sale in the US is part of it.
I wonder if the Chinese know the manner in which PM goes to business. This will be very interesting from my perspective knowing that PM is a very effective operating system.
I think that as the economy weakens USST will continue to suffer. Losing premium volume and share. This will weaken USST stock price. And as PM gradually continues to launch MOIST the USST position will weaken and then PM can go but them and then they will let the folks go rather quickly as seen with Middleton purchase. Then they will put contracts in place that will allow them to sure up premium volume and make it difficult for the rest of the OTP industry. I could be wrong but oh wow if I’m right. What you think John & others?
On Friday PM announced a reduction of the off-invoice allowance from $3.50 a carton to $2.60 a carton!
I believe the proper purchase you will see is USST being purchased by PM. The possibility of this is very close to reality!
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