Where There's No Smoke ...

Companies with tobacco alternatives look to the future amid challenges.

By
Linda Abu-Shalback Zid, Senior Editor

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When Star Scientific’s Ariva dissolvable tobacco entered the marketplace a decade ago, the company “felt comfortable” touting the product’s highlights: It contains fewer tobacco- specific nitrosamines (TSNAs) and therefore has been shown to be less harmful than other tobacco products.

Enter the FDA as tobacco’s regulating body in 2009. Under FDA regulation, that simple, science-based statement now constitutes a claim—a big no-no in today’s tobacco world.

“Under that structure, we’re not permitted to talk about the fact that the products have sharply reduced toxins. … It’s a real challenge,” says Sara Troy Machir, vice president of communications and investor relations for Glen Allen, Va.-based Star Scientific Inc.

Sandi Cook, manager of the Stop In Foods store in metro Richmond, Va., was among the first in her market to sell the dissolvable, prior to the FDA stepping in. Although Star guaranteed the product, she found she never needed to return any. “We put it out for customers to see it—put it in plain sight,” she says. “And when customers asked us questions, all of us were informed.” The store, part of the 90-store Roanoke, Va.-based Petroleum Marketers chain, keeps 20 packs in an enclosed see-through case and smaller packs hanging on a strip behind the cash register. While Cook was concerned about being hamstrung from keeping tobacco in plain sight or extolling Ariva’s lower-risk advantages, the store has benefited from a certain unexpected grass-roots reaction. Specifically, word of mouth from golfers who use it at nearby courses has made the location a destination for the products, with about three to four packages (in varying sizes and flavors) sold each day.

At press time, Star was gearing up to launch new versions of Ariva and Stonewall, with even greater reductions in TSNA levels: below detectable limits. This time, in addition to filing patents, the company has submitted an application with the FDA to market the products as “modified-risk tobacco” lozenges. It is the first such application filed with the FDA’s Center for Tobacco Products, according to the company. If the filing is approved, Star can explain the reductions in marketing materials.

Meanwhile, Star has massaged a somewhat vague message about its current cache, one that is admittedly a bit of a mouthful: “We have been able to say, because it’s broadly acknowledged,” Machir says, “that the most dangerous way to use tobacco is smoke, and that smokeless prod-ucts offer an alternative that does not require lighting up.”

READY AND WILLING

Meanwhile, nicotine users continue to seek alternatives in a world where they largely can’t smoke in public places, and where their standard go-to tobacco products are heavily taxed. Gels, nicotine waters, throat sprays and other alternatives are available, but they have not yet become a big part of the marketplace, according to Lou Maiellano, a tobacco consultant with TAZ Marketing & Consulting Group, Sevierville, Tenn.

He points to SmokeScents aroma-therapy inhalers and Aeros smokeless cigarettes as two products he finds “very intriguing.” The challenge, he says, is getting the products into stores and educating both consumers and retailers about them.

The SmokeScents inhaler is the size of a tube of lip balm. It contains organic green tobacco leaf and essen-tial oils, which are inhaled through the nose or mouth. Because it emits no smoke, it can be used nearly anywhere.

Aeros is shaped like a cigarette and comes 20 to a pack, with one pack lasting as long as one to three cartons of cigarettes. It is not an e-cigarette, because it contains no batteries or electronic components and emits no visible mist. To use Aeros Smokeless, one cuts off the ends of the sealed tube and “puffs” like a cigarette. It delivers no tar and .05 mg average nicotine per cigarette.

It is available via the Internet but not yet at c-stores, largely because of marketing restrictions. “That’s our Achilles’ heel,” admits Richard Horian, president of Corona, Calif.- based Woodleaf Corp., developer of Aeros. “All the laws are against advertising, so it really comes down to word of mouth.”

Winston-Salem, N.C.-based R.J. Reynolds Tobacco Co. is trying out its own alternative products in “lead markets,” according to spokesman David Howard. In 2009, the company introduced a line of dissolvable prod-ucts in assorted shapes and delivery methods. At press time, Camel orbs, sticks and strips were available in Columbus, Ohio; Indianapolis; and Portland, Ore. But as CSP headed to press, the tobacco giant was pulling out of these markets and heading to new (undisclosed) test markets.

“We have made the business decision to go to new lead markets in order to gain additional feedback and new perspectives,” Howard says. The company remains hopeful about the long-term viability of these alter-native smokeless options. “We also believe that these dissolvable tobacco products can meet societal expecta-tions, in that there is no secondhand smoke, there is no spitting and there is no cigarette-butt litter because the products dissolve.”

Howard agrees that marketing and educating consumers about products is a challenge, which is why the company tries lead markets first. “You want to educate consumers and retailers about the products,” he says. “That can be a key focus in our lead markets. We needed that awareness by adult tobacco consumers, and we have put a lot of attention and effort behind educating our retailers.”

While discussing these nascent, smoke-free products, it is critical that retailers not forget the girl who took them to the dance: Cigarettes easily remain the top-selling single category in convenience stores. That said, everyone, including the major tobacco manufacturers, agree that it is in the OTP arena, including this rapidly evolving segment of smoke- free options, where long-term growth can be had.

Howard says, “We believe that retailers that join us in this outlook of the modern smoke-free tobacco product offering are going to be at the forefront of having a viable tobacco category in their stores for the long term.”

HOLD THE NICOTINE?

Not all nicotine alternatives actually contain nicotine. As Maiellano puts it, “I think there’s a huge future for nontobacco smoking alternatives. Retailers and manufacturers who understand that are going to win in the future.”

Star Scientific recently ventured into the nontobacco alternative arena with the introduction of Cig-RX, designed to help smokers “fight the urge to light up.” It contains anatabine, an alkaloid found in tobacco, as well as in a number of foods, such as potatoes, green peppers and eggplant.

Because it contains neither nico-tine nor tobacco, it can be merchan-dised anywhere in the store, and the company is able to use direct marketing and even infomercials to spread the word. Star is working with a pharmaceutical marketer to explain the product to health-care providers, although the product is not marketed as a smoking cessation device. Cig-RX is considered a dietary supplement by the FDA and therefore is not permit-ted to make a “disease or treatment claim,” including smoking cessation, according to Machir of Star Scientific.

At the Colonial Pharmacy in Mechanicsville, Va., Cig-RX is even merchandised at the front counter. While pharmacist Matt Bennett says it has required a little bit of explana-tion, “It’s a few seconds—not to an extent that it takes me away from my work flow.”

Six-month sales data has been fair, he says, and Cig-RX typically is an impulse purchase at the front counter. However, he says, the patch and other replacement-type products went through a “boom period” after word had spread: “Everybody wants to try the next new thing.” At press time, Star was also looking at a version with a higher content of anatabine.

The Smoking Sucks lollipop from West Hills, Calif.-based Three Lollies LLC is also viewed as a supplement by the FDA. It uses essential oils and amino acids such as L-tryptophan (found in turkey) to help calm ciga-rette cravings. “A lot of research shows that smokers have a hard time not only giving up nicotine, but the whole behavioral aspect of smoking, where you’re taking out a cigarette and put-ting it in your mouth,” says Jim Path-man, president of Three Lollies. “So basically we’re replacing the behavior and replacing the addiction and the oral fixation.”

Smokey Mountain Snuff’s main offering is an herbal snuff or loose- pouch alternative, which has been on the market since 1985 and is con-sidered a food-grade product by the FDA. Dave Savoca, president of the Grand Rapids, Minn.-based company, says he has seen some recent growth due to the high taxes surrounding tobacco products, fewer places people can smoke and insurance companies testing for nicotine before providing policies. In fact, Smokey Mountain saw its “strongest growth ever” in 2010, according to Savoca. Numbers from Temple, Texas-based McLane Co. back that, with David Elkins, manager of retail services, saying Smokey Moun- tain is up 8% in distribution (before tax), according to McLane’s own trackings.

In 2010, Smokey Mountain launched its “straight” flavor, described as a “more mellow tobacco flavor with a touch of sweetness.” Because the company’s flavor trends follow the same trends as smokeless tobacco, “straight” has been very popular; that flavor should have launched three years ago, according to Savoca.

There are no age-restriction laws tied to purchasing Smokey Mountain products, but the company doesn’t want to be viewed as a “training-wheels product” and encourages retailers not to sell it to anyone younger than 18. The average customer is 42 years old and is typically a user or former user of smokeless tobacco.

“We’re essentially the nonalcoholic beer of the cat-egory, and we position it very much the same way,” Savoca says. Smokey Mountain has also launched Nix-It, an oral homeopathic spray designed to relieve nicotine cravings. Its blend of 11 active ingredients reportedly relieves symptoms of nicotine withdrawal: anxiety, irritability and dry mouth.

Savoca said the benefit of carrying such products is that they are “incremental to the category.” If a person decides to stop using tobacco or smokeless tobacco and switch to alternative options available in a c-store, the profit dollars can stay in the category.

THE ROAD AHEAD

Like health zones and other specialty sections in stores, these smoking-alternative products should be grouped in their own section, whether the store has tobacco or not, Maiellano suggests. While some manufacturers might not favor this approach, Maiellano says, “As a retailer, I’d say it’s not their business, it’s my business, and I’m going to put you together.

“For people to understand that there are alternatives out there, they need to help define a category.”

Paul Marquardt, director of marketing for Phoenix- based Prime Time International Co., says his company is developing both tobacco and nontobacco alternatives as the company completes its due diligence around regula-tory concerns. (At press time, he said it was too early to discuss the particular products.)

“No matter what the product is, I’m not pretending that this is going to be easy,” he says. “The most impor-tant thing we can do as a manufacturer and distributor is make sure that we’ve done our due diligence, and that when we bring a product to market we have set ourselves up so that we can defend the path we have chosen for us and our partners.”

To build a path toward sales’ success, retailers and manufacturers must band together to merchandise alternatives. “Collectively, I think we stand to gain a lot; independently, I think that the challenges are tenfold harder,” he says.

“What people need to understand is that it has huge potential, and there’s a lot of opportunity there—but we have a huge burden in terms of consumer education and awareness. We need to basically legitimize the category and build awareness collectively and responsibly.

Alternative Initiatives

  • Educate your employees on the new products and their point of differentiation.
  • Build an alternative set that also includes products that don’t contain nicotine.
  • Secure POP material from your supplier and consider segmenting the alternative section from the traditional tobacco set to accurately gauge its performance.

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