Philip Morris Enters Capsule Market

The tobacco company announces launch of Marlboro Black NXT, company’s first regular-to-menthol cigarette.

It appears that RJ Reynolds’s Camel Crush cigarettes, which were developed and introduced to U.S. tobacco market only 4 years ago, but gained a more than astonishing success already, have a rival in the emerging capsule market: recently Philip Morris USA made an announcement about its soon-to-be-distributed Marlboro Black NXT, which suggests a crushable menthol capsule.

Marlboro Menthol Cigarette

Marlboro Black NXT

Brian May, a spokesperson for PM USA, the property of Richmond, Va.-based company, Altria, said that Philip Morris USA is delighted to introduce NXT – first and only regular-to-menthol cigarette. Brian May added that the company created it in reply to changing adult smoker preferences.

The non-menthol option has a smooth tobacco flavor. Once a smoker presses the filter, the cigarette provides a unique, bold menthol taste.

Andrew Kieley, a research analyst for New York’s Deutsche Bank, added his positive comments on the company’s innovation in a September 10 report entitled “Capsule Clash.”

“NXT is another example of MO’s stepped-up brand-building on Marlboro, and novelty momentum versus rivals,” Kieley said. He added that the company considers that capsules are not drawing new smokers, but they are attractive as smokers are offered a new experience, are quickly increasing sales, and there is only one rival.

Although SymphonyIRI says that capsules make up only 1.8 percent of c-store single pack sales, capsules have as well got a fast growth of 34% YTD. Now, Reynolds American Inc., that is based in Winston-Salem, N.C., is the only main company that suggests a capsule product Camel Crush. Camel Crush was introduced in 2008 and represents 17 percent of Reynolds’ pack dollar sales.

Beginning with September 26, Camel Crush will have a rival in the capsules market, although at the first NXT will only be sold in regional markets with limited distribution.

Kieley said that Philip Morris USA expects NXT will mean some slowing of Crush. “Crush has first-mover benefit and should keep growing, but NXT is a direct overlap and attractively priced.”

In accordance with Kieley, Crush’s loss will be Altria’s gain and NXT should add to Altria’s market share momentum, via small but emerging capsule segment.

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