Buying Cigarettes and Quit-Smoking Aids From the Same Company?
Why It Could Happen: A Look at the Changing Face of the Cigarette Business
By ALICE GOMSTYN
ABC NEWS Business Unit
Nov. 12, 2009 —
Why would a cigarette company buy a firm that makes products to help smokers quit?
It's a question that's left many scratching their heads ever since reports surfaced that Reynolds American -- the no. 2 U.S. tobacco company and the maker of Camel, Kool and Winston cigarettes, among others -- is in talks to acquire Niconovum.
Niconovum, a Swedish company, makes nicotine gum and other nicotine replacement products designed to wean smokers off of cigarettes. It was founded in 2000 by Karl Olov Fagerström, who the company's Web site trumpets as "one of the world's leading experts on smoking cessation and nicotine dependence."
Purchasing the company "runs totally counter to the mission statement of (Reynolds American subsidiary) R.J. Reynolds," said Gregory Connolly, a Harvard School of Public Health professor who researches tobacco products. "I'm astounded."
An R.J. Reynolds spokeswoman declined to comment on the acquisition reports, saying, "We have a longstanding policy of not commenting on stories based on rumors or speculation."
Niconovum did not respond to requests for comment from ABCNews.com.
David Sweanor, the former counsel of Canada's Non-Smokers' Rights Association, said he's been hearing from industry contacts and others about the potential acquisition for months. To Sweanor, the buy would mark the next step in something tobacco companies have taken a heightened interest in recently -- marketing nicotine products other than cigarettes, namely smokeless tobacco.
Reynolds America bought 200 hundred-year-old smokeless tobacco maker Conwood Company in 2006.
Chief Reynolds rival Altria, the country's no. 1 cigarette company, earlier this year closed on its purchase of U.S. Tobacco, the firm behind leading smokeless tobacco brands Copenhagen and Skoal.
These moves could help get the companies off "an unsustainable path" and compensate for falling cigarette sales, Sweanor said.
To be sure, the market for smokeless tobacco is still a fraction of that for cigarettes. But the volume of cigarettes sold at grocery stores, drug stores and mass merchandisers such as Walmart declined more than 5 percent since last October and was down more than 7 percent the year before, according to market research giant Nielsen.
Both anti-smoking products and chewing tobacco have seen increased sales.
Less Dangerous Than Cigarettes?
Sweanor, an adjunct law professor at the University of Ottawa, said that while smokeless tobacco products still contain addictive nicotine and have been linked to mouth and other cancers, they aren't as harmful to consumers' health as cigarettes.
Cigarette companies have become "social pariahs by selling a product that kills half their consumers," he said.
By selling smokeless tobacco, Sweanor said, cigarette companies can "morph the way many other industries have historically morphed into selling products that are far less hazardous."
The "less hazardous" claim eventully could win the blessing of the Food and Drug Administration. Star Scientific Inc., a company that specializes in smokeless tobacco, is seeking approval from the FDA to market two of its products as having "modified risk" under the new Family Smoking Prevention and Tobacco Control Act. It's a designation reserved for products that, according to the 2009 law, "significantly reduce harm and risk of tobacco-related disease to individual tobacco users."
Sweanor compared cigarette companies' shift to smokeless tobacco to automobile companies that now sell far safer cars and pharmaceutical companies that now sell life-saving drugs but that, a century ago, were "snake oil salesmen."
Altria, the country's no. 1 cigarette company, doesn't quite see it that way, making no claims that its smokeless tobacco products are any safer than its cigarettes.
"If a consumer is concerned about the harm caused by tobacco product, the best thing to do is quit," Altria spokesman David Sutton said flatly.
"For Altria," he later added, "the business is about providing a return to it shareholders."
The reason that Altria bought U.S. Tobacco is because the market for smokeless tobacco has been growing some 5 to 6 percent each year in recent years, Sutton said.
The purchase "was a good opportunity to acquire two leading brands in that category," he said.
Exactly why is the market for smokeless tobacco growing?
Experts say that the belief that smokeless tobacco is better for you -- or at least, less worse for you -- than cigarettes may be part of it. But the proliferation of smoking bans in the U.S., whether it's in restaurants or offices, also plays a big role.
"There's a wide variety of products at a wide variety of price points" that people can turn to when they can't light up, said Chris Growe, an analyst at Stifel Nicolaus.
New Potential for Quit-Smoking Products
Of course, there's a difference between cigarette alternatives like smokeless tobacco and the smoking cessation products of Niconovum, which are intended for short-term use.
For cigarette companies, said Connolly, the "true money is made with long-term use -- it's not something that people use for three weeks and then quit."
But, according to Sweanor, if Reynolds does buy Niconovum, the company may find new profit from their products by transforming them into longer-term nicotine substitutes that consumers could use for months or years instead of weeks.