With E-Cigs in the Crosshairs, Altria Looks to Other Tobacco Products

Loose moist snuff and portioned packages

The new no-nonsense approach that the Food and Drug Administration (FDA) is taking with electronic cigarettes has at least one tobacco company thinking it needs a backup plan should the vaping alternatives get shot down. Altria (NYSE: MO) is seeking regulatory approval for its Copenhagen moist snuff to feature a modified risk label attesting that it is safer than smoking cigarettes. A tobacco product that received such a label would be one that reduced the harm or risk of tobacco-related disease caused by other tobacco products.

Altria filed an application with the FDA to have Copenhagen's label read: "IF YOU SMOKE, CONSIDER THIS: Switching completely to this product from cigarettes reduces risk of lung cancer." The application comes a week after the regulatory agency clamped down on e-cig manufacturers and retailers for selling devices to underage users.

The implication is that Altria is not putting all its eggs in one basket. A modified risk label could be a competitive advantage, as it would seemingly convey agency approval of claims that the product is safer than other forms of tobacco.

Batting 0-for-35

So far, it's been impossible to get a modified risk label for tobacco. Since 2011, 35 applications have been submitted to the FDA, and not a single one has been approved. Eight received a response that essentially denied the application, but said they could be resubmitted with some modifications.

Data source: FDA.

Swedish Match (NASDAQOTH: SWMAF) has been among the more prolific filers. All of its applications -- which were rejected but can be resubmitted -- were for its snus, a moist snuff product.

Snuff is a smokeless, finely ground tobacco product that is inhaled (or "snuffed") into the nasal cavity. It delivers a quick hit of nicotine and (if flavored) a lasting scent. Moist snuff is finely ground tobacco and is also flavored. Snus is also a moist tobacco product, but it is finely powdered. Like chewing tobacco, moist snuff and snus are typically held in the mouth between the lips and gums.

There are three new applications pending at the FDA: for Altria's Copenhagen snuff product; British American Tobacco 's (NYSEMKT: BTI) Reynolds American snus; and Philip Morris International 's (NYSE: PM) heat-not-burn iQOS device.

Resort to Plan B?

Copenhagen has a growing share of the moist tobacco market, up from 31% in 2015 to 33.7% last year. Shipment volumes have jumped over 12% over the past two years to 531.6 million cans and packs, and Altria's smokeless-products segment grew both net revenue and operating companies income. However, much of the gains it achieved from Copenhagen were offset by declines with its Skoal brand.

The FDA is still deciding whether to allow the iQOS to receive a modified risk label (the product will be marketed in the U.S. under Altria's Marlboro brand), so Altria might not be waiting for that to happen. The FDA has threatened to take existing e-cigs off store shelves if the manufacturers don't come up with a plan to limit teenagers' access to the products. As a backup plan, Altria might want to get a different product on the market that it can claim is safer than traditional cigarettes.

The key takeaway

It's an uphill battle for the tobacco giant, but its application differs significantly from those submitted by Swedish Match, which sought the removal of the label that says snus can cause cancer in the mouth. Altria just wants it to say that if you stop smoking completely and switch to moist snuff, you have a lower risk of lung cancer.

That seems much more in line with the spirit of a modified risk label, and could have a greater chance of success.

10 stocks we like better than Altria Group

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Altria Group wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of August 6, 2018

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.