Altria Closes UST Acquisition – What Does This Mean?

 

Altria Group Inc. announced on January 6th that it has closed its acquisition of UST Inc., the parent of US Smokeless Tobacco Company, in a $10.4 billion, or $69.50 per share, deal announced in September 2008.  Altria will assume $1.3 billion in debt. Altria’s purchase of UST gives it a leading position in the growing smokeless tobacco market. Altria Group CEO Michael Szymanczyk said the integration of UST will position the company well, as domestic cigarette sales are declining by 3-4% annually (AP 1/6). 

 

The long rumored, highly anticipated rumor has come to reality as the acquisition has come to a close. But now a new chapter will be written as the industry in the midst of it’s most severe challenges will watch how this acquisition plays it’s part in the never ending tobacoo saga.

 

So what does this acquisition mean to the industry?

What affect will it have on retail?

What about it’s affect on cobsumers?

Will it encourage the argument for the the reduction of harm of moist tobacco products?

What are your thoughts on how PM will integrate USST into their business?

How will it affect product development?

Will it affect taxation of moist tobacco products?

Will pricing of moist tobacco products be affected by the ever increasing price of a pack of cigarettes?

Or will the low end MST products hold pricing in line?

So many questions?

What do you think?

What does this acquisition really mean?

What’s the title of the next chapter?

74 comments ↓

#1 OTP Kid on 04.07.09 at 1:05 PM

Let’s all give a real sincere and warm “shout out” to good ole’ Murray Kessler, the ingeneous marketing whiz from Cambpell’s Soup who engineered this amazing deal! Congrats Murray! We are amazed at your ability to multi-task: insofar as being able to not only make sure that USST lost oodles of market share to Conwood, but to date-stamp, ala Cope, the termination dates of all the people that made you rich through their hard work as it translated to all of the stock options you cashed in when Altria closed the deal.

Is it true you might be joining AIG?

#2 Bill Godshall on 04.08.09 at 4:05 PM

Has Altria’s recent price cut for Skoal and Copenhagen resulted in increased sales / market shares?

#3 See store manager on 04.08.09 at 7:24 PM

Doubtful, my wholesaler did not order otp last week because of the floor tax issue. , thus I had alot of out of stocks last week and this week. So they already have some catching up to do. In addtition, as they phase out the UST reps (big mistake by the way) I can’t see them giving their all on smokeless. While price is important, it is just part of the equation in the otp category

#4 OTP Kid on 05.08.09 at 2:32 PM

Did anyone see the Philip Morris fella talking at the NATO annual awards dinner? The reason I ask is because no one could him speak as the entire room was talkng the entire time. I guess there’s not much worth listening to from PM these days…

#5 fedup on 05.08.09 at 6:54 PM

come on you mean no-one gave the almighty any respect? i feel so bad that’s a crying shame – you ever wonder how someone could work for PM – i actually heard someone at the show mention they were getting into the vaseline business – lmao

#6 Copenhagen Charlie on 05.11.09 at 10:30 AM

SO HERE IS WHAT IT MEANS! THE DEATH OF THE CATEGORY!

Subject: U.S. Smokeless Tobacco Brands 2009 Retail Program – Amendment

Dear Valued Retailer:

On May 1, 2009, USSTB announced the U.S. Smokeless Tobacco Brands 2009 Retail Program.

Today, USSTB is amending that announcement.

To participate in the Program, effective June 1, 2009, you must sign the Agreement and also meet the following minimum merchandising requirements by July 31, 2009:

• USSTB Share of Segment Space
• USSTB Interior Signage
• USSTB Fixture Headers, if applicable
• NSS Merchandising, if applicable
As a reminder, payments for the Return Rate Performance, under the Cents Per Can Payment Option of the Retail Program, are not available for June 2009.

If you have any questions, please call your PM USA sales representative.
U.S. Smokeless Tobacco Brands Inc.

#7 Icky on 05.12.09 at 9:46 PM

It will be interesting to see how many retailers and distributors take the time to undertsand how the PM programs will kill the fabulous growth in the snuff category. The funding they are offering is pitiful when considered against what you give up – meeting the needs and wants of consumers, your expertise in managing your own business, your soul to name a few. Let’s see some backbone.

#8 See store manager on 05.13.09 at 8:00 PM

“If you have any questions, please call your PM USA sales representative”…..yeah right…the clueless ones.

#9 OTP Kid on 06.02.09 at 5:38 PM

PM is now in the RYO business in Michigan and Maine, with L&M cans and pouches. Their effort is a joke, and all the retailers I have spoken to aren’t even planning on bringing the stuff in at this time.

#10 Copenhagen Charlie on 06.27.09 at 3:36 PM

Altria Group, Inc announced June 26th that Murray Kessler, vice chair of Altria and president/CEO of UST LLC, will leave the company at the end of June, having overseen UST’s integration into Altria following the closure of the transaction in January 2009. (Business Wire 06/26)

#11 Anonymous on 06.28.09 at 1:26 PM

PM cleans house on everyone and every company they touch.

#12 GRIZWALD on 07.11.09 at 12:04 PM

Well I proudly must say that this acquisition has done absolutely zilch in derailing the growth of the new #1 brand in the moist category. Grizzly long cut wintergreen has now securely secured the top position. Poor tired old brands were bought by PM. And by the way the one thing that RAI has done right is keeping the MST folks on board. The early results from PM MST performance is just dreadful! Murray you left just in time! Grizzly what an amazing brand!

#13 OTP Kid on 07.13.09 at 1:34 PM

Breaking Story: Word has it that Walgreen’s is dicontinuing all USST products. Shelves are basically empty of Skoal and Cope. Can someone confirm?

#14 Desert Dude on 07.14.09 at 2:29 AM

Like Walgreens sold any anyway – i’m sure with the new return procedures a lot of folks will do the math. From what Grizwald says its pretty interesting to see PM floundering at this point!

#15 see store manager on 07.14.09 at 9:34 AM

Memo to Altria brass: You dumped the wrong sales force. You should have kept the Usstc force and dumped your “Altria yes men”.

#16 Copenhagen Charlie on 07.14.09 at 9:56 AM

It will all prove out in the numbers. PM just doesn’t care as long as they control share. They thought they knew what they were doing in Georgia but that never worked out with their own name. I wonder whether Marlboro is a tired old brand also as referenced above regarding Cope and Skoal!

#17 Tobacco Guy on 07.14.09 at 10:25 AM

UST moist snuff sales have declined dramatically since the acquisition by PM. They turned a (slightly) growing business into a declining business. Worse yet, they tied their share of the Moist Snuff rack to their can share of the category. Not a good idea with ever-declining share. At current share loss rates, they should lose around 3 slots by the time the current MST retail contracts are up.

#18 OTP Kid on 07.14.09 at 4:03 PM

OK so do any of you sour-grapes ex-UST guys know if Walgreen’s is disontinuing the lines or not?

#19 Tobacco Guy on 07.16.09 at 11:32 PM

I find out for you OTP KID.
I hear PM can’t even right side their cig numbers right now either.

#20 OTP Kid on 07.17.09 at 5:42 PM

Just received confirmation from a distributor that supplies Walgreen’s that only USST products are being removed from the set due to the Altria return policy. Not sure if this was initiated by Altria or Walgreen’s. Looks like a good day for Grizzly!

#21 smoker on 07.20.09 at 6:55 PM

It’s still very early in the game. I wouldn’t count Altria out. The track record speaks for itself coupled with the FDA passage. If they go down they’re gonna go down swing’n.

#22 Mr. Tobacco on 07.20.09 at 10:12 PM

It is too early to count PM out on the MST side. It will take a while for them to right the ship. On the downside for them are the risks from both Camel snus and newly introduced Camel MST (not to mention Grizzly). I believe they will stabilize, but getting back to growth will take time and be difficult.

Any thoughts from the community on the reduction in pricing on Skoal Edge? Threat to competitors or just blowing smoke?

#23 Copenhagen Charlie on 07.22.09 at 2:27 AM

Seems like Mr. Tobacco must be in disguise for Mr. PM.
There ain’t a chance in hell that they right side this ship!
Skoal Edge is a bad idea gone badder! Volume just tanked Mr. Tobacco. Pretty soon they will be giving it away. Who is running the moist ship at PM any way? Is it Mister Mike? I ask you a question Mr. Tobacco, How does a sales force that once had disdain for a product now embrace a product? Will be very interesting if you ask me but then I’m a long time Copenhagen dipper!

#24 Mr. Tobacco on 07.23.09 at 2:51 PM

Mr. Copenhagen Charlie,
I suspect you are right, and what you stated is pretty much what I feel half the time. The other half of the time I get nervous and think there must be a way that they figure this out. Let’s face it, Cope/Skoal are tired brands. Grizzly has all the thunder and is the market leader. They have taken some big actions this year, but no data I see shows any improvement in the business. At least it what growing under UST management. Unless something else changes, the situation should right itself to the detriment of PM. They tied their space to their share, and their share is declining. At the end of the the current round of MST retail contracts, they should have 3-4 fewer slots in the rack.

Leave a Comment