Monday, 27 September 2010 19:34

WHATEVER HAPPENED TO SNUS IN THE USA?

If I recall, the cost of a mini-snus factory should not run over $3 million.  That’s with standard primary and Mertz machines, plus re-wetting, and, the variable, refrigerated facilities for storage.  No white, unless you want to fake it, but then it looks like used Pampers.

  • Lab, small offices, locker/shower room, disposable food prep clothing, etc. and so forth. A mini-factory can be run with six people, a manager, and a lab guy.
  • Swedish Match requires a snus shelf-life of 18 weeks under proper refrigerated conditions.
  • Why has no one installed a simple Swedish snus factory in the USA?
  • What happened to the much ballyhooed American producers like Nordic-American?
  • Where did Swedish Match go, and why do they continue to annoy me anyway?

I ran a snus factory in Vargarda Sweden for Gallaher (now JTI) for two years.  The factory, formerly belonging to Gustavus AB, perfected its snus product under Gallaher, and launched a few interesting The Vargarda Snus Factoryproducts, the most important being LD, which, for the first time, put a major global cigarette brand into the world of Other Tobacco Products (“OTP”).

The factory bled money until one brief moment when we had reached an annualized volume (read: best month ever, and multiply by 12) of 10m cans with LD at 7 SKUs in 2006.

Why?  Labor:  52% of my cost.  Materials: 37%.  Tobacco and controllables:  The rest.

Factories need volume to break even and pay wages, and, without cigarettes, snus start-ups are not viable.

Well-meaning mistakes have been made in the US:  Liggett-Vector Group took the first plunge with two product lines (remember ‘Grand Prix?’), but they were imported and not true heat-pasteurized ‘Swedish’ snus products, despite their point of origin, SnusAB, in Sweden.

Liggett, internally, is dedicated to providing smokers with reduced-harm alternatives, and truly thought snus was one path to take. Yet, the consumers spoke, and, with an excise hike on smokes not having the hoped-for effect on smokeless sales, they eventually abandoned the project.  Close to my heart, as I worked for the sister company ‘Liggett-Ducat’ (LD) and Gallaher/LD in Russia for years.

Nordic-American Smokeless, close to my heart, as I ran the Norwegian sister trading company “Taboca AS” for 1 ½ years, also tried.  Co-investment with Swisher in a snus-y factory division in their Western Pennsylvania facility led to the launches of ‘Klondike’ and ‘Nordic Ice.’ “Snus-y?”  Because the product is fermented.  Just like the SnusAB product.  Many consumers complained on-line of its cloying sweetness and dryness.  Website is disabled.

American Smokeless (Discreet):  Tom, your website is gone (all searches go to UST), yet your snus has been rated the best of the lot for fullness of flavor.

RJRUSA and PMUSA?  If you are reading this, you know their products are generally reviled on a quality basis, especially for cloying sweetness and awful mouthfeel.  Yet, unfortunately, they hold the greatest promise of eventually providing the product you want.  Why?  They make cigarettes.  They have warehouses filled with snus-making equipment.  RJR has access to BAT’s snus-making abilities (major shareholder), and PM to Swedish Match’s (partners in snus outside Scandinavia.  1847.).

Swedish Match:  And this brings it down to the prime question-mark in the industry:  The major piece of news that never, ever happened in 2009/10.

Albeit, SWMA is fighting many battles:  The EU, for one, which in the Big Tobacco lunatic fringe, was closed to snus by Philip Morris International and/or Big Pharma in the 1990s.  Yet, the two companies (minus Big Pharma) are now great buddies for smokeless around the world, and SWMA seems to keep throwing local business into PMI’s maw (South Africa smokes being one).

But, the USA is anemic. Since SWMA has re-organized for the 1700th time, and now has a “smoke-free” division with world-wide coverage, the US gets the “Original Pursuit” campaign, which is a mono-brand (General) tribute to NYC drunks out on St. Patrick’s Day, art galleries, and some kind of hang-gliding.  And then, they announce the product’s availability has increased by 300 shops after 8 months.  Not in NYC or LA, or Chicago, mind you, but the USA.

When I worked at Pepsi, 300 shops in a start-up was 5 guys working for a week.  And the Swedish Match sales staff should know that.

In the US, the problem Swedish Match has had, in all its attempts at “educating” consumers these past two decades, is boring black and mustard-yellow cans, and ‘education’ campaigns at shops in major cities.

Go out there, and put your new products in 7000 shops.  ALL the Shell stations, and ALL the Exxon stations. ALL the 7-11’s.  You guys can get into 7-11…you’re all over them in Sweden and Norway. Invest money, knowing you will throw product away, but it’s better than the damned hang-gliding or art galleries.  No-one cares about that.

In the US, ONLY Swedish Match will get this ball rolling.  With its new innovative products and packaging, it can only succeed.  Increase shelf life, and get out of the fridge business, except in tobacconists, but get out there! You’ve got a whole damned sales force, and cash, and the best, most cared for products in the business.  Get your US snus factory open and kick some ass. Save some smokers’ lives in the process.

ANDREW ROMEO

Reporting for SnusCENTRAL.org
St. Petersburg (Russia) 2010

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