Smokeless tobacco surge helps Tennessee farmers
Posted: Monday, February 7, 2011 8:01 pm
NASHVILLE (AP) — Smokeless tobacco is making a comeback and Tennessee farmers, factory workers and consumers are playing a part.
Two major manufacturers, Altria Group and its subsidiary Philip Morris USA and R.J. Reynolds, are battling for market dominance. Together they already control 90 percent of the American smokeless tobacco sector with brands such as Skoal and Kodiak.
Both have a large presence in Tennessee where farmers have eliminated 40 percent of acreage devoted to burley tobacco for cigarettes, but are expanding by 22 percent their tobacco fields that are used for chewing.
Altria Group owns the 100-year-old U.S. Smokeless Tobacco Co. factory near the state Capitol. And R.J. Reynolds runs its smokeless operations out of a Memphis factory.
Dave Kenner, 31, a construction worker, said he switched to smokeless tobacco because heavily taxed cigarettes cost too much to feed his two-pack-a-day habit. He told The Tennessean the tins of chewing tobacco cost less and still satisfy his nicotine urges.
“It’s more like three bucks a day, I still get the nicotine, and it doesn’t taste half bad,” Kenner said. “My girlfriend isn’t crazy about it, but she likes it better than smoking.”
The decline of rates of smoking in the U.S. has led to an unexpected boon for the smokeless tobacco industry, which has historically been centered in downtown Nashville and includes processing facilities all the way to Hopkinsville, Ky.
The U.S. Smokeless Tobacco Co. plant hasn’t had a layoff since 1988, even through the Great Recession. Plans now call for adding a second and possibly third shift of workers to the assembly line.
Altria Group bought U.S. Smokeless for $11.7 billion in 2009.
“We weren’t in the smokeless market, but our testing told us we needed to get into the space in a big way,” said Ken Garcia, a spokesman for Richmond, Va.-based Altria.
That’s turning out to be a profitable move for Altria. Last month the Fortune 500 company reported a 27 percent increase in fourth-quarter income, even while selling fewer cigarettes.
“It’s a growth industry for us, and we think it will continue to be for local operations,” Garcia said.
Revenue from smokeless tobacco brands including longtime Nashville products Copenhagen and Skoal grew more than 15 percent to $366 million in sales last year.
Wayne Whiting worked his way up to plant manager at the Nashville facility after starting on the factory floor in the mid-1970s at the age of 17.
“When I first started we ran two products,” he said. “Now we’re running a multitude of products and operate some parts of the plant 22 hours a day.”
These days smokeless tobacco comes in fruit- and mint-flavored products, are packaged to look like miniature cigarette packs and even come in “spit-free” form.
R.J. Reynolds Tobacco bought the 200-year-old American Snuff Co. in 2006 and last year the company said it would invest $133 million in a new manufacturing facility in Memphis.
The resurgence has helped farmers in Tennessee and southern Kentucky plug into new markets.
Between 2005 and 2009, the number of acres in Tennessee devoted to dark tobacco increased from 6,000 to 7,300, according to the Knoxville-based Center for Tobacco Grower Research, which receives funding from Philip Morris.
“The demand for smoking has gone way down, and farmers know what that means,” said Jane Howell Starnes, the director. “We’re seeing more switch completely from burley to dark (tobacco), but it’s still an uncertain future for farmers.”
Farmers bring tobacco to U.S. Smokeless’ Hopkinsville processing facility, where it is sorted, aged and then shipped to either the Nashville plant or one in Lincoln Park, Ill.
But anti-tobacco advocates point to new data that shows an increase in popularity of smokeless tobacco among teenage boys and say tighter regulations and stiffer taxes are needed.
“We’ve seen a big change in demographic for this from being primarily a habit for older men to a habit of younger men,” said Danny McGoldrick, vice president for the Washington-based Campaign for Tobacco Free Kids.
In 2012, the U.S. Food and Drug Administration is expected to report to the secretary of Health and Human Services on whether the products pose a threat to children and teens.
Information from: The Tennessean, http://www.tennessean.com
Published in The Messenger 2.7.11