Tobacco companies market ‘orbs’ lower doses of nicotine

Bite-sized dissolvable “orbs” that look like breath mints and melt in your mouth are the tobacco industry’s latest attempt to fight falling U.S. cigarette sales.

Charlotte is one of two test markets for Winston-Salem, N.C.-based Reynolds American Inc.’s newest products: dissolvable, smokeless tobacco lozenges that come as orbs, sticks or strips.

The products all contain less nicotine than cigarettes, between 0.5 and 3 milligrams instead of 12 to 15. And, Reynolds spokesman David Howard said, they meet a “societal expectation.”

“There’s no secondhand smoke, no spitting and no cigarette butt litter,” Howard said.

But health officials still worry about the risks of smokeless options. Smokeless tobacco users may not get lung cancer, health experts say, but they risk mouth cancer, gum disease and tooth loss. Prenatal dangers for pregnant women also still exist.

“There are no safe tobacco products,” said Matt Carpenter, a clinical psychologist and associate professor at the Medical University of South Carolina who is researching the effect of smokeless products on smoking habits.

Huntersville, N.C., resident Joey Hodge, who has smoked for almost five years, sees the appeal of smokeless products that won’t be as tough on his lungs or make him smell like smoke. But the 20-year-old isn’t sold on Reynolds’s newest offering.

“They were definitely not the greatest thing I’ve ever tasted,” Hodge said. Plus, he added, the products “really didn’t do much” to satisfy his nicotine craving.

Hodge’s reaction isn’t the sort tobacco makers are hoping for. As cigarette sales slide because of the health risks and social stigma, tobacco companies are counting on smokers like Hodge to fuel the new smokeless market. The dissolvable products sell for about $2 for a 12-pack _ comparable, Reynolds says, to its other smokeless products.

“They can enjoy tobacco pleasure without bothering others and without having to leave the workplace, or the restaurant or the bar,” Howard said.

Analysts say new laws banning cigarettes in public places, like the ban on smoking in restaurants and bars that took effect in North Carolina last January, are among the factors driving a steep decline in cigarette sales.

“In recent years you’ve seen smoking banned in most states in most bars and restaurants. That kind of takes away the fun,” said Phil Gorham, industry analyst for investment firm Morningstar.

In its second-quarter earnings report last month, Reynolds reported the number of cigarettes sold in the U.S. fell 4.4 percent. Gorham said companies like Reynolds can combat falling sales by increasing prices in the short term, but they’ll eventually need to diversify revenues.

While American sales of cigarettes drop 3-4 percent every year, the market for smokeless products grew 3 percent in 2009 and 7 percent in 2010, said Mary Gotaas, tobacco industry analyst for researcher IBISWorld. This year, smokeless sales are expected to jump 8 percent, Gotaas said.

While Reynolds is testing its new dissolvables, Richmond, Va.-based rival Philip Morris has its own product in the works: a dissolvable tobacco stick.

The growth of smokeless products worries some public health advocates who think the new products appeal to children. During the first round of testing , the orbs’ packaging resembled Tic-Tacs, creating concern that children might confuse them with candy, said John Spangler, professor of family health and community medicine at Wake Forest Baptist Medical Center.

For this round of testing, there’s larger packaging and new warnings. Packages now say “This product contains nicotine and is for adult tobacco consumers only” and “There is no safe tobacco product,” in addition to one of four required FDA warnings.

The Tobacco Products Scientific Advisory Committee of the FDA is holding hearings exploring the implications of smokeless products. Right now, all tobacco products must be age-restricted and kept behind the counter, just like cigarettes.

Warning labels on smokeless tobacco products must cover at least 30 percent of the packaging and every product must carry one of four messages: “Smokeless tobacco is addictive,” “This product can cause mouth cancer,” “This product can cause gum disease and tooth loss,” or “This product is not a safe alternative to cigarettes.”

Senate OKs tax on some foods to balance budget

The Senate approved a $5.5 billion state budget early Sunday that's balanced by reinstating New Mexico's sales tax on certain foods and increasing the cigarette tax.
The food tax will generate $138 million, but it's expected to run into strong opposition in the House.
The Senate voted 23-19 to impose the gross receipts tax on a wide range of food products, including white flour tortillas, hard taco shells, candy and soft drinks.
New Mexico lifted its tax on food in 2005. The Senate proposal narrows the definition of food. It leaves products tax free if they are considered food under the federal Women, Infants and Children program. Supporters said it will encourage New Mexicans to eat healthier foods and could help reduce obesity.
"It is in effect a tax on salt, on sugar, on white flour and prepared foods," said Sen. Dede Feldman, D-Albuquerque.
The Senate approved tax measures to generate more than $180 million to balance next year's budget for public schools, colleges and government programs, including health care for the needy. The Senate worked past midnight to finish work on the budget, which passed 25-17.
Senate leaders fine-tuned the financial package Saturday to line up enough votes in the fractured chamber to pass the budget package, which relied on politically painful tax increases and spending cuts for education and governmental services.
The Senate approved:
u A House-passed measure generating nearly $16 million by expanding tax withholding requirements on partnerships and certain small corporations. The goal is to improve tax compliance by out-of-state residents. It passed 40-1.
u An increase in the tax on cigarettes by $1 a package to generate $33 million. New Mexico currently imposes a 91-cent tax on a pack of cigarettes. With the proposed increase, only 15 states would levy a higher cigarette tax. The bill passed 24-18 and was sent to the House.
With the revenues from the cigarette tax, the Senate dropped a proposal that would have cut the take-home pay of state workers and educators by requiring them to increase their pension contributions.
Public employee and educational unions opposed the higher pension payments, which would have lowered contributions by governmental employers by $27 million and increased employee contributions by a similar amount.
The Senate-passed budget will lower spending by about 3 percent next year from what public education, courts, colleges and state agencies were provided this year. The upcoming 2011 budget year starts in July.
"We've tried to spread this pain but we can't cover all of our bases," said Sen. John Arthur Smith, a Deming Democrat and chairman of the committee that developed the budget. "This is not a fun job, but we have to have a balanced budget."
With the Legislature scheduled to adjourn Thursday, the House and Senate will have little time to negotiate a a compromise budget and tax package.
A House-passed budget would cut total spending on education and government programs by about 1 percent next year. The House has approved $300 million in tax increases, including an upper-income surtax and a half-cent sales tax increase, to balance its budget proposal.
A special legislative session will be required later this year if the House and Senate fail to agree on a budget — as well as tax increases to balance the spending plan — before adjourning.
"That's the worst case scenario for us," said Smith.

Lorillard to Enter Market for Moist Smokeless Tobacco

Newport cigarette maker Lorillard Inc. announced Monday it will soon enter the market for moist smokeless tobacco products, but said that an earlier joint venture with Swedish Match AB to develop a new product in the U.S. had been mutually terminated.

Moist smokeless tobacco is a type of tobacco product that is popular in the U.S. and widely sold by companies like Altria Group Inc. through brands like Copenhagen and Skoal. Sales of these smokeless tobacco products have risen in the U.S. even as cigarette sales have dropped.

Lorillard didn't provide details of the new moist smokeless tobacco product it will sell in the U.S. but said that an existing joint venture with Swedish Match to develop a new "snus" tobacco product for the U.S. had been terminated. Snus is a nearly 200-year-old Swedish product. In 2006 Lorillard entered into a joint venture with Swedish Match North America to develop and study the possibility of marketing a tobacco product for the U.S. market called Triumph Snus.

Snus differs from most smokeless tobacco products in the U.S. as it is created through a special pasteurization process. It comes in small pouches and doesn't require spitting. On a conference call, Lorillard said the snus product didn't make gains in the test markets in the U.S. and that it may not have been the right time for the product in North America. Lorillard appears to be betting that Americans will continue to lean toward traditional formulations like moist smokeless tobacco, as opposed to newer forms they are less familiar with.

Other companies are still saying they believe snus has a future in the U.S. Altria and Reynolds American Inc. have launched snus products, but sales of these products have generally stayed relatively small. Both these companies, however, say they are expanding the reach of their snus products.

A spokesman for Reynolds American, David Howard, said the company has been very pleased with sales of its Camel Snus product and believes that it is a "viable" product. The company rolled out Camel Snus nationwide in the first quarter of 2009 after putting it in test markets for almost three years. "It's a small market but we believe there is potential growth for that market," Howard said. An Altria spokesman, Brendan McCormick, said the company is pleased with the results of its Marlboro Snus product in test markets and will be expanding it nationally at the end of March.

Swedish Match sells its flagship snus brand General in the U.S. as well as another brand called Catch. These were sold outside of the Lorillard joint venture and will continue to be sold here. Swedish Match will also continue selling the moist smokeless tobacco products, such as its Red Man and Timberwolf brands, it already sells in the U.S.

"We remain committed to the U.S. market," Lars Dahlgren, chief executive of Swedish Match said in an email statement. The company says the dissolution of the Lorillard joint venture has no bearing on its snus joint venture company with Philip Morris International Inc. That venture aims to distribute snus products outside of the U.S. and Scandinavia.

Lorillard's fourth-quarter earnings fell 6.2% on declining volume and increased manufacturing and marketing costs, though sales rose with the help of higher prices.

Lorillard dominates the market for menthol cigarettes. Lorillard's Newport brand represents the bulk of its U.S. sales, and its U.S. volume fell 6.5% during the quarter, though its U.S. market share rose to 10.32% from 9.86%.

Overall, the U.S. cigarette industry has seen volumes drop amid higher taxes and bans on smoking in public places. But Lorillard has held up better since its Newport brand has been able to grow its market share.

Thieves steal hundreds of cigarettes in South Yarra heist

THIEVES have made off with thousands of dollars worth of cigarettes during a brazen heist in South Yarra this morning.
A delivery van driver was travelling along Toorak Rd, near Chamber St, about 7am when two men approached the van and threatened him with a weapon.
The driver, 57 from Mulgrave, was ordered to get out of his white Mercedes van before the thieves drove it to nearby Claremont St.
They then unloaded the cargo of cigarettes into another white van before fleeing.
The delivery driver was uninjured and his van is undergoing forensic testing.
Armed Crime Squad Acting Sen-Sgt Andrew Stamper said police believe the thieves were well prepared.
“This appears to be a well planned robbery because of the time and location," he said.
Police are now hunting three men over the heist.