Big Tobacco Is Back to Business

OK, so the new year is here, and I bet you've made some resolutions. Maybe you want to lose a few pounds or start visiting the gym more often. Well, if you're a smoker who's looking to improve his or her health, Altria (NYSE: MO  ) has some help for you.

In fact, Altria is seeking the Food and Drug Administration's blessing of a health strategy promoting a move from traditional cigarettes to smokeless tobacco for smokers who have a tough time quitting.

Yep, part of the FDA's increased control of the tobacco industry via the Family Smoking Prevention and Tobacco Control Act is to find ways to cut tobacco-based health issues, and Altria (via its Philip Morris USA and UST operating divisions) is arguing that smokeless tobacco is one way to mitigate this risk.

Hey, at least this is one thing that Altria and Reynolds American (NYSE: RAI  ) can agree on. Reynolds American had previously corresponded with the FDA about the "real health benefits" that moving consumers from cigarettes to smokeless tobacco products can deliver.

I've got to say that I'm not sure how much benefit Altria or Reynolds would see in labeling smokeless tobacco as less harmful than cigarettes. In the U.S., male smokers outnumber female smokers, but it's hard to think that the 18.3% of American women who do smoke would consider moving to the messier smokeless product. Men who have a tough time quitting smoking may consider the switch to improve their health, but I'm not sure that these would be huge numbers. Instead, I'd think that the Vector Group (NYSE: VGR  ) would have a better shot at converting customers to its lower-risk cigarette products.

As an aside, Reynolds American and Lorillard (NYSE: LO  ) did recently receive some good news this week when a federal district-court judge ruled that tobacco companies can use color and graphics in advertising. Interestingly, Big Tobacco can expand marketing campaigns to imply that FDA-regulated products are safer than non-regulated goods. Most of the new, tougher advertising limits were upheld, though. All of this initial arguing may be for naught, as some legal experts forecast the U.S. Supreme Court will have the final say on the case.

And it's not like U.S.-based tobacco companies are alone in their strife; things aren't getting easier for global tobacco producers. British American Tobacco (NYSE: BTI  ) and Philip Morris International (NYSE: PM  ) have recently been hit with the news that Japan is raising its tobacco taxes, a move that will boost prices by about 33% this year.

All in all, it should be an interesting year for both American and international tobacco companies looking to navigate through increased government intervention and taxes. For 2010, investors can resolve themselves to watch the economy and dynamic regulatory framework for points to enter this high-dividend industry.

For related Foolishness:

Philip Morris International is a Motley Fool Global Gains selection. Looking for more advice in a topsy-turvy market? Give The Motley Fool's newsletters a try via the 30-day free trial.

Fool contributor Colleen Paulson does not hold positions in any of the stocks mentioned above. The Fool's disclosure policy resolves to keep no secrets.


Read/Post Comments (0) | Recommend This Article (16)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1079287, ~/Articles/ArticleHandler.aspx, 10/22/2014 2:49:14 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement