Ryan Liptak, Ryan Merk, Mary Frances Meier

Microeconomics

Summary

As cigarette sales slowly decrease, some tobacco companies, such as Reynolds, are looking to increase their marketing of smokeless tobacco products.

Such products include:StripsLozengesSnuff or Snus

Ingredients of a Cigarette:

In addition to tobacco and nicotene, some other ingredients that go into making cigarettes include…

Ingredients in Smokeless Tobacco Products: Smokeless tobacco products usually

contain more nicotene than cigarettes, and still contain the harmful carcinogens found in their smoking alternatives.

Polonium 210, Formaldehyde, and Cyanide are some examples of such ingredients.

Though less likely to cause lung cancer, smokeless tobacco products have a much increased risk of oral cancers, and are not a safe alternative to smoking.

Reynold’s Marketing Points: CEO Susan Ivey believes that the

smokeless alternatives offer a “mess-free” option for consumers that need to get their nicotene fix.Reynolds promotes them as options when

lighting up is impractical or illegal.Ms. Ivey herself likes to use dissolvable

smokeless-tobacco strips when in company meetings.

Reynolds wants to market the smokeless products as a safer alternative to smoking, but are not allowed to under FDA regulations.

FDA concerns: Dr. Lawrence Dayton of the FDA voiced a

concern that children may be drawn to the brightly colored packaging of the products, as well as their “easily concealable size.”

Reynolds has also been criticized by anti-smoking advocates who are concerned that the smokeless products will appear to be candy to children, especially the dissolvable strips and lozenges.

Common Statistics: Currently, one in five American Adults are smokers

70% of the populations voiced a desire to quit smoking Reynolds hopes that a greater number of scientists and

health care professionals will find these new products to be less harmful than cigarettes.

Currently, only about seven million Americans use smokeless tobacco products Last year, sales for smokeless products rose about 7% Sales for cigarettes fell about 9% Smokeless products offer a bigger profit margin because

they are not as heavily taxed as cigarettes.

New Products:

Some of the new products being introduced include:Spitless SnusTobacco LozengesDissolvable Strips

Evolution of the Tobacco Industry CEO Ivey has outsourced payroll-

processing, and information technology, as well as decreasing the amount of employees by 32% since 2004.

more focused on new smokeless products, cutting 70% products Reynolds typically produced, which was over 600 items.These included “soft-pack” varieties of Kool,

Winston, and Doral

Goal is to reinvest this savings in smokeless tobacco

In 2006, Reynolds bought the makers of Grizzly, and in 2009, they acquired the makers of Skoal.

Cost Comparison of Cigarettes and Smokeless Products: The average cost of a pack of cigarettes

is about $4.50 to $5.00 The average cost of the smokeless

alternatives is $5 or $6 a tin.While the cost difference isn’t especially

large, it may be big enough to deter consumers from trying their alternative choices.

Over the Counter Products: About a year ago, Reynolds began to

look into getting into OTC Smoking cessation product market.$2.1 billion a year industry.

Reynolds purchased Niconuvum in December, a Swedish manufacturer of nicotene gum, pouches, and sprays.