Jump to full article: Globe and Mail (ca), 2008-11-28
Author: SEAN SILCOFF
Intro: When Altria Group Inc. agreed in September to buy UST Inc. for $10.4 billion (U.S.), it seemed like an obvious combination: largest North American cigarette maker buys largest North American "smokeless tobacco" maker. But while the two companies share one common material--tobacco--cigarettes and chew are otherwise very different businesses. . . .
Few businesses are as profitable as smokeless tobacco. UST dominates the trade in the U.S., with a 73% share of industry revenue and 60% of volume. Its operating profit margin of around 50% is double that of Philip Morris's. Of course, its revenue--estimated to be about $2 billion (U.S.) in 2008--is much smaller. As a result, smokeless tobacco will amount to just 9% of Altria's revenue base once the deal is done. The hope is that smokers will turn to chew when they're unable to light up. . . .
While sales, advertising and display of smokeless tobacco at retail are controlled in Canada, the U.S. does not prohibit the industry's sponsorship of events such as hot-rod racing and bull riding.
In Canada, social conventions are the main constraint on public use (including occasional "no spitting" rules). So far, Yukon, B.C. and Alberta are the only jurisdictions to have banned chew on schoolgrounds.
"The World Health Organization recommended that if you don't have it in your country, don't let it in," says Harvard's Gregory Connolly.
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