The stock of tobacco and wine purveyor UST
For the fourth quarter, overall revenues were up 5.2%, with sales from the smokeless tobacco segment up 4.9%. Meanwhile, revenue from UST's wine offerings improved 1.7%. Net income came in at $0.77 per share, or $128.8 million, compared to a loss of $3.82 a share, or $642.6 million, last year. (If you're wondering about the discrepancy, it related to expenses linked to a lost lawsuit, to the tune of $1.26 billion.)
Higher revenue from smokeless tobacco are partially due to price hikes instituted in November for UST's premium Copenhagen and Skoal brands, as well as Rooster and Red Seal. Rivals include Conwood, Swedish Match
Meanwhile, UST has disclosed plans to bolster its marketing expenses this year, earmarking $24 million, a good move seeing how discount rivals appear ready to get rough over snuff. However, one possible strategy the company cited in its latest 10-K is to turn some of the 46 million to 50 million smokers into "smokelesses" (my word, not theirs).
If there is any silver lining, it is the smokers who currently line the pockets of companies such as Altria Group
In its 10-K, UST said that while it won't go so far as to say snuff is "safe," it believes it causes fewer negative health effects than does the smoky variety. If the company can convince some smokers that chew is a cheaper (and healthier) answer to a habit that increasingly causes its users to withstand as many harsh elements as the postman, it could be positioning itself for growth (unless those folks just go for "The Patch," such as GlaxoSmithKline's
Despite the price-war doomsayers, an infusion of marketing expenditures intended to set UST apart from the rest -- including the smokin' portion of the tobacco industry -- could do a lot for UST's prospects.
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