Citigroup analysts believe that an acquisition of Conwood by either Philip Morris or Reynolds may be a better strategy to enter the smokeless tobacco category.

An acquisition of Conwood, which is a private smokeless tobacco company with 25 per cent share, would offer several benefits to an acquirer including a quick market share grab, a platform to launch its own premium brand, substantial cost savings and synergies, and control of the deep discount segment, they argue.
"We think PM is the likely buyer of Conwood, but wouldn’t be surprised if there is a bidding war with Reynolds," says Citigroup's tobacco analyst Bonnie Herzog. "Conwood offers more strategic advantages than UST for either PM or RAI since there are more opportunities to increase margins."
The smokeless market would change with an acquisition of Conwood, mainly by eliminating an 'irrational' price competitor, she adds. (cg)