- The Washington Times - Wednesday, April 1, 2009

RICHMOND, VA. (AP) - Smokeless tobacco company UST Inc. has finished moving its operations from Connecticut to Richmond, where its new parent company, Altria Group Inc., is based.

Altria bought the maker of the Copenhagen and Skoal smokeless tobacco brands in January in a deal valued at $10.4 billion, plus the assumption of $1.3 billion in debt.

Daniel Butler, president of UST’s U.S. Smokeless Tobacco Company, said Wednesday that about 80 people are relocating from Stamford, Conn. Most have begun working at the Richmond office and the Center for Research and Technology, though others are still winding down operations in Connecticut over the coming months. About 350 people worked at the UST office.

Buying UST gives Altria a leading position in the expanding market for moist smokeless tobacco, which is chewed.

Altria, owner of No. 1 U.S. cigarette maker Philip Morris USA, which sells the Marlboro brand in the U.S., now controls about 50 percent share of the tobacco industry and offers leading brands in each segment.

Sales of smokeless tobacco have grown about 7 percent annually in recent years, and about 6.2 million Americans now use the products. Tobacco companies are aggressively pursuing smokeless tobacco as sales of cigarettes decline 3 percent to 4 percent each year.

“We think that there’s a lot of fuel left in that tank to continue to drive cigarette smokers to adopt moist smokeless tobacco as part of their repertoire of tobacco products,” Butler said in an interview before speaking at a country-western-themed introductory event for Altria employees that included a barbecue.

Altria hoped to enter the smokeless tobacco market on its own, capitalizing on its popular Marlboro brand with both moist smokeless tobacco and Snus, small, teabag-like pouches that users stick between their cheek and gum.

It discontinued market tests of the moist smokeless product after the UST acquisition, but it is expanding tests of Marlboro Snus to Arizona with redesigned packaging and other improvements based on customer feedback, Altria spokesman David Sutton said.

Butler said UST cut wholesale prices of its premium products about 20 percent this week to grab more market share and bring its prices closer to those of competitors.

“While we are very pleased with the success of our strategy to drive category growth in moist smokeless tobacco, we’ve been less than pleased with our ability to hold our share of the category,” Butler said.

Altria also owns cigar maker John Middleton Co., Ste. Michelle Wine Estates Ltd. and a 29 percent stake in brewer SABMiller PLC.

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