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Snuff, Cigars Find Favor as Cigarette Prices Soar

Americans are turning to snuff, small cigars and roll-your-own cigarettes as the cost of conventional cigarettes soar, said researchers from the Harvard School of Public Health.

The change is reducing the health benefits that would stem from the 18 percent drop in cigarette smoking since 2000, said Greg Connolly, director of Harvard's Tobacco Control Research Program in Boston. The lower taxes and fewer indoor restrictions on products like snuff may help explain the trend, underscoring the need for similar taxes on all tobacco products, he said.

Americans bought 17.4 billion packs of cigarettes in 2007, down from 21.1 billion packs in 2000, according to data in a research letter published in the Journal of the American Medical Association. During the same period, sales of small cigars, roll- your-own cigarettes and moist snuff increased by an equivalent of 1.1 billion packs, based on the amount of tobacco and nicotine they contain, the study found.

"It would appear that one-third of the decline in cigarette sales was reversed," by the use of other tobacco products, Connolly said in a telephone interview. "Whether because of cost or the belief that these products are safer than cigarette smoking, consumers could be turning to these products in lieu of cigarettes. We may be overestimating the impact our programs are having on overall tobacco use in our country."

A package of 20 small cigars, the same shape, size and weight as a pack of cigarettes, was considered the same as a pack of cigarettes in the study. The only difference between the two is cigars are rolled in tobacco leaves, while cigarettes are rolled in plain paper, Connolly said.

A pack of cigarettes cost an average of about $3.93 at the end of 2007, including state and federal taxes, up from $2.93 in 2000.

Higher Costs

There is a 39 cent tax on each pack of cigarettes, compared with a 4 cent tax on a package of small cigars, Connolly said. In addition, cigarettes cost an additional 42 cents per pack because of the 1998 Master Settlement Agreement between major U.S. tobacco companies and 46 states. Most smokeless tobacco, roll-you-own cigarettes and cigars aren't included in the settlement, which also includes voluntary marketing and advertising limits on cigarettes.

Cigarette companies are entering other markets for tobacco with new products like snuff and snus, pronounced like goose, a small pouch of tobacco that is being introduced in the U.S., he said. The cost of moist snuff is 55 percent less a week for a typical user than the price of cigarettes, the researchers said.

"They are doing it because of the high profits, low taxes and the perception that these products are safer," Connolly said. "They aren't subject to indoor air laws."

Testing Products

Altria Group Inc.'s Philip Morris USA unit, the country's largest cigarette maker, doesn't make small cigars or roll-your-own tobacco, said spokesman David Sutton. The Richmond, Virginia-based company is test-marketing Marlboro Moist Snuff and Marlboro Snus in a small portion of the country, he said in a telephone interview.

There are different health risks from cigarettes and smokeless tobacco products like snuff and snus, and a field of researchers is looking into them, said Maura Payne, a Reynolds American Inc. spokeswoman, in a telephone interview.

"The regulatory and tax structure should reflect the significant differences in risk between combustible and non- combustible tobacco products," she said. "Taxes should not be used as a means of dissuading people from switching to lower risk categories from higher risk categories," she said.

The company, based in Winston Salem, North Carolina, acquired Conwood Co., the second largest snuff producer, in May 2006 for $3.5 billion. UST Inc., of Stamford, Connecticut, is the largest U.S. snuff maker.

Tuesday, June 10, 2008

Source: Bloomberg

Snuff, Cigars Find Favor as Cigarette Prices Soar