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Meet Snus and e-cigarettes, the tobacco industry's new growth areas

While cigarette usage has dropped, profits for the tobacco industry are expected to be up.

Lorillard -- manufacturer of brands including Newport, Kent, True, Old Gold -- and other big tobacco companies report earnings this week. And while cigarette usage has dropped, profits are expected to be up.

The product big tobacco sells is addictive. For a manufacturer, it doesn’t get better than that. So even though the market for cigarettes is declining, by three to four percent a year, customers keep coming back. But Tom Mullarkey, a senior equity analyst with Morningstar, says tobacco companies are thinking long-term and investing in new products like smokeless tobacco and Snus. Snus are similar to chewing tobacco, except the tobacco comes in a pouch, and there’s no spitting.

“It’s very big in Sweden,” says Mullarkey.

Matthew Hudak, an analyst with Euromonitor International, says sales of Snus in the U.S. are around half a billion dollars a year and growing. But, Hudak says, sales of e-cigarettes are growing even faster.

“What a lot of tobacco companies are already betting on,” he says.

According to Hudak, sales of e-cigarettes have been doubling for the past couple of years. In the meantime Tom Mullarkey says government restrictions make it difficult for new companies to sell tobacco. And a lack of competition means prices and sales are expected to stay high.

About the author

Sally Herships is a regular contributor to Marketplace.

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