Tobacco Company (USSTC) Essay
First made known to the market in the year 1934 by U. S. Smokeless Tobacco Company (USSTC), Skoal are moist smokeless tobaccos, better known as snuffs, in a can. USSTC is owned by UST, a company whose primary line of business is the production and marketing of moist smokeless tobacco products and premium wines. Environmental Analysis Twelve states—Washington, California, Colorado, Connecticut, Delaware, New Jersey, New York, Maine, Massachusetts, Montana, Rhode Island, and Vermont—currently require smoke-free workplaces for all workers, including restaurant and bar workers.
(Covino) Aside from them, a few more states such as Utah, Maryland, Arizona and Ohio are expected to follow. Considering this trend, sales for cigarettes will be drastically affected. However, this can be good news for smokeless tobacco products such as Skoal since it can be alternative for cigarettes and thus, sales for these products are expected to increase. US Smokeless Tobacco cannot advertise as heavily as other products in the United States.
In Canada, under the 1997 Tobacco Act, newspaper and magazine advertising is allowed in those publications having at least 85% adult readers; the law also allows tobacco companies to send advertisements to adult Canadians at their home. (Something To Chew Over) This is relevant for
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. Both male and female are included in the target market since cigarettes are geared towards either gender. Geographically speaking, both target markets live in the urban areas of the Southern United States. In terms of demographics, the main target market belongs to the broad C to upper B social classes. They work in a white collar job and usually lives with their significant other. The company’s secondary target market is usually still in their college years. They belong to the broad C to upper B families.
They have part time jobs and this contributes to their monthly income in addition to the allowance they get from their parents. As for psychographic characteristics, the main target market works by the day and goes home to their families at night. They smoke and go to coffee shops frequently. The secondary target market, on the other hand, has the independence to buy their own things but those belonging to this age group are still highly financed by their parents. They value the opinions of their friends and they love to hang out in malls. Product
Introduced by U. S. Smokeless Tobacco Company (USSTC), the Skoal has a wide line of items with its 21 flavors, cuts, and formats. To name a few, flavors varieties include the Original Skoal Wintergreen plus Mint, Classic, Spearmint, recent blends like the Berry, Peach and Citrus Blend. Cut variations include fine cuts and long cuts. Skoal also comes in two different pouch forms – Skoal Pouches and Skoal Bandits. Skoal Pouches are three times larger than the Bandits and is geared towards the adults because of its more robust and flavorful tobacco blend.
Skoal Bandits, on the other hand, are smaller and has lesser tobacco flavor. All Skoal products are packaged in Freshsnap cans that guarantee freshness through its best before date. The product’s competitive advantage is that is the only smoke-free tobacco that comes in 21 different flavors, different cuts and pouches. The company recognizes the wants of its target market and stays innovative to accommodate these wants. Skoal can be classified as a convenience product. They are bought often, require little service or selling, don’t cost much, and may even be bought by habit.
(Perreault 248) In the BCG Matrix, Skoal can be considered belonging to the Stars category. The company foresees a strong market growth in the years to come. In the late ’90s through about 2002, the category was growing about 1%, the years ’03 to ’05 saw a 5. 4% category growth, then this year has seen the category growth up to 8. 3%. (UST 2006 Analyst and Investor Conference) Currently, Skoal captures a huge chunk of US smokeless tobacco market with its 78% market share (combined with UST’s other brands, Copenhagen, Long Cut and Red Seal).
(Industry Analysis 7) In order to sustain the high market share and high industry growth rate, substantial investment must be undergone so as to further strengthen this dominant position. Promotion As a way of promoting Skoal, the company utilizes print advertisements in magazines whose readers are 85% adults. Aside from this, the company also uses one-on-one events as a way to let the clients know more about Skoal and try out its products. Skoal’s promotions includes reach-out advertising, and it includes a very, very successful direct mail program that we have been running to adult smokers; In 2006, the company mailed to about 2.
5 million adult smokers with a series of coupons and product information about Skoal and its products and have been very, very successful in converting about 5% of the people that we mailed to, to actual ongoing usage of moist smokeless tobacco products. (UST 2006 Analyst and Investor Conference) In addition, the company also has its own company website (http://www. ustinc. com/) and product website (http://www. skoalbrotherhood. com) that can be used as a tool for customers to access information about the product and the company 24/7.
The product’s unique selling point is that it is the only smokeless tobacco that offers several flavors, cuts and pouches. In its advertisements, Skoal sports the tagline “A pinch better. ” Skoal wanted to position to itself in its main target market’s mind as “the preferred way to experience tobacco satisfaction” – a vision that positions the company not as a smokeless tobacco company, but as a tobacco company whose consumer universe is all tobacco consumers. (UST 2006 Analyst and Investor Conference) Pricing
The company utilizes the prestige pricing strategy and this is congruent with the image the brand is trying to project. Since Skoal is the only smokeless tobacco that offers a variety of flavors, cuts and pouches, it is only right for them to charge a price premium to maximize their profits. Over its course of business, Skoal has undergone through several price changes. However, for the entire year of 2006, the company has not yet raised it prices. Murray Kessler, manager of Skoal said “Prices per can depends on how much we spend on the promotional front and it depends on what we do with the competitors.
” (UST 2006 Analyst and Investor Conference) So far though, the company does not see the need to raise prices. Comparing Skoal to other brands, it charges much higher prices as compared to competitors like Couper, Cougar, Gold River, and Grizzly but there are a few brands like Hawken and Kodiac whose prices are higher than Skoal. Sister brand Copenhagen charges the same price as Skoal. Distribution Skoal products can be purchased in several websites online and also several retailers. The company uses extensive distribution channels and which became an edge for Skoal.
UST’s long-established brands distributes through tens of thousands of small retail outlets, and the unwillingness of major tobacco companies to enter this market (due to the poor image and social unacceptability of the product) have made UST’s market position unassailable. (Industry Analysis 7) The company does not operate any retailing stores but instead relies on third party retailers to get their products to their target markets. So far, Skoal products can be found in the United States and some parts of Canada but the management is eyeing Eastern Europe as an opportunity to expand Skoal internationally.
Conclusion Skoal has been successful in implementing its strategy. Currently, Skoal belongs to the top of mind awareness of its target market when it comes to smokeless tobacco with it capturing 78% of the market together with its sister brands. In order to maintain this position, further significant investments in advertisements, branding, and promotions must be undertaken.
Covino, Renee. Smokeless is Smokin’ Hot. August 2006. 04 Dec. 2007 <http://www. tobonline. com/ArticlePages/ArticlePagesVol94/vol94p46. htm>. “Something to Chew Over.” 2006. A Review of Cigarette Marketing in Canada – 5th edition. 04 Dec. 2004 <http://www. smoke-free. ca/Filtertips-5/Skoal%20Ads. htm> Perreault, William and Jerome Mc Carthy. Basic Marketing. New York: McGraw-Hill, 2005. UST 2006 Analyst and Investor Conference – Final Fair Disclosure Wire. Waltham: Dec 19, 2006. Industry Analysis: The Fundamentals. 13 Jul 2004. Blackwell Publishing. 04 Dec. 2007 < http://www. blackwellpublishing. com/grant/5thEdition/pdfs/CSA5eC03. pdf> Skoal. UST Inc. 03 Dec. 2007. <http://www. ustinc. com/smokeless/skoal/>.