PM USA Recasts Tobacco

Taboka introduced in Indianapolis as an alternative to smoking

Published in CSP Daily News

RICHMOND, Va. -- It's probably no coincidence that both R.J. Reynolds and Philip Morris USA are stepping out of their research and development sheds at the same time with test markets of new, first-time smokeless tobacco products. After all, analysts assume both cigarette makers' parent corporations were bidding to purchase the Conwood smokeless tobacco company, a plum that went to RJR parent Reynolds American.

Thus the race turned from acquisition to first-on-the-shelf with a new product. And once the smoke cleared, it's a dead heat as Winston-Salem, [image-nocss] N.C.-based RJR introduced Camel Snus in Austin, Texas, and Portland, Ore., and PM USA debuted Taboka in Indianapolis this week. Yesterday, CSP Daily News took a look at the RJR product. ( Click here to access the complete story.) Today, we feature PM USA's Taboka.

Taboka is a smoke-free and spit-free tobacco product designed as a smokeless-tobacco alternative to smoking, according to a PM USA fact sheet. It was developed as the company examined a number of potential models to grow our business beyond cigarettes.

The Taboka Tobaccopaks are tobacco pouches that come in two versions: Original and Taboka Green, which is a menthol version. Tobacco stock analyst Bonnie Herzog of Citigroup, New York, likens the new product most closely to United States Tobacco Co.'s Revel product. In a research note, she also said the unveiling of the product does not come as a surprise.

Philip Morris USA is entering [the smokeless-tobacco category] cautiously by (1) not yet leveraging its very popular Marlboro franchise brand name and (2) introducing this product in a very limited way by only launching it in one test market, in the Indianapolis area, she wrote. We're not sure we love the Taboka brand name and hope Philip Morris appreciates how important the merchandising of this new product will be. In other words, the company will have to be very clear in its communication with consumers so they understand what in fact this new product is.

According to a story in yesterday's Wall Street Journal, the product is a pouch that, when tucked between the teeth and gums, allows the flavor and nicotine in the enclosed tobacco to seep out. The product comes in containers of a dozen pouches with a $3.50 price point.

One marketing piece in Indianapolis included the slogan: Step away from the lighter. Tuck a Taboka instead, according to the WSJ report. Additionally, the product carries a surgeon general's warning that this product is not a safe alternative to cigarettes.

New smoke-free tobacco products have some antitobacco advocates worried, according to the report. Critics point out that, like cigarettes, the new products aren't subject to Food and Drug Administration oversight.

The introduction of Philip Morris's smokeless-tobacco product on top of Camel [Snus] last week gives greater urgency to FDA regulation of tobacco products, Matthew L. Myers, president of the Campaign for Tobacco-Free Kids in Washington, told the Journal. Our most serious concern is that the products will be marketed in such a way that will lead to more kids using tobacco and fewer adults quitting.

Meanwhile, Herzog believes Taboka is just the tip of the iceberg for PM USA. We fully expect Philip Morris to eventually enter the other-tobacco market much more aggressively over the next several months with different products, of course depending on the success of this particular test market, she wrote. We already know that the company has been diligent and has conducted numerous focus groups leading to this cautious launch of Taboka.

Tobacco stock analyst Bonnie Herzog of Citigroup will discuss the recent changes in the industry landscape during a Tobacco Update CSPNetwork CyberConference on Tuesday, May 16. Click here to register.