A New Way of Tobacco Company to Increase its Income
Tobacco Companies try to enlarge their business after smoking was banned, because the new anti-smoking legislation cut their profits. For example, Reynolds American Inc., the second- largest U.S. tobacco company, wants to buy a Swedish maker of nicotine gum and mouth sprays for to increase its biddings beyond cigarettes.
Reynolds, which makes Camel cigarettes and Grizzly snuff, wants to get closely held Niconovum AB as a way to extend consumers trying to stop smoking, said scientists. NicoNovum was formed in 2000. Its goal is to exploit the exclusive know-how of its founders within Nicotine Replacement Therapies (NRT) specifically in designing products, which would be more effective and consumer friendly than current products.
Niconovum, based in Helsingborg, makes Zonnic gum and mouth spray to reduce cigarette craving, according to its Web site. It was formed in 2000 by Karl Olov Fagerstrom, who beforehand worked on developing the Nicorette brand.
Reynolds Chairman and Chief Executive Officer Susan Ivey hope that buying Niconovum would improve the Reynolds income by using nicotine products less harmful than cigarettes.
In this year the company tested dissolvable tobacco tablets in the U.S. after introducing Swedish-style Camel snus. It also bought snuff maker Conwood in 2006.
David Sweanor, an adjunct professor of law at the University of Ottawa said: “It is one indication of the changing nature of the nicotine business.”
He also added that he supports small nicotine users off cigarettes because of the harm associated with lighting up.
Mr. Sweanor explained that he was told about the talks between Reynolds and Niconovum, and he said that the value of the deal may be 30 million euros ($49 million).
Another tobacco company, the Winston-Salem, North Carolina-based company, incorporated in 1890, first made chewing tobacco and now ranks second in U.S. sales behind Altria Group Inc., the maker of Marlboro cigarettes and Skoal snuff.
But Reynolds gained 16 cents to $48.60 in New York Stock Exchange composite trading Nov. 6.
- Reynolds American net income up on higher prices
- FDA: Dissolvable tobacco could cut health risks
- New tobacco products – Look and taste like candy
- Reynolds Seeks Success in ‘Total Tobacco Space’
- Reynolds Banks on Smokeless