UST will use cost savings to fend off tobacco rivals
UST Inc., the largest US snuff maker, will use $100 million in savings from spending reductions to market and discount products as Philip Morris USA and R.J. Reynolds Tobacco Co. expand into smokeless tobacco.
UST is responding to investor concern that competition from the two biggest US cigarette companies will cut into UST's two-thirds share of the smokeless category, Chief operating officer Murray Kessler said yesterday. The spending cuts may include firings and relocating the corporate headquarters from Greenwich, Conn.
"We've been incredibly aggressive, taking a hard look at our cost structure," Kessler said. "Shareholders are looking for consistent, long-term sustainable growth. They are not looking for a big pop in one year versus another year."
UST's focus is on increasing its market share to reward shareholders, not being bought by Philip Morris USA or another tobacco company, Kessler said. The company already is spending more than $90 million this year on marketing, coupons, and other discounts.
"Where we see our shareholders best served right now is to focus on growing our category and continuing to be successful in delivering a 10 percent-plus shareholder return," Kessler said.
"We don't talk rumor and speculation," he said, declining to say whether UST directors have discussed a possible takeover.
