Altria lights up a cigar
Altria Group, the world's #1 seller of cigarettes and the parent company of Philip Morris, announced it would buy privately-held US cigar maker John Middleton. The deal, the largest tobacco deal ever for Philip Morris, is for $2.9 billion.
John Middleton was founded over 150 years ago. The company, which specializes in machine-rolled cigars, has about one fifth of the US market in that category. Middleton's Black & Mild five-pack is the best-selling cigar package in the US. The company also sells pipe tobacco, all in the US. The US cigar market is the largest in the world with about 49% of the worldwide sales, according to Altria's figures.
The idea is that Philip Morris's dominant distribution system for cigarettes will allow the company to sell the John Middleton brand cigars more widely and allow them to compete with the better known brands from cigar-industry dominators Altadis (which now owns Consolidated Cigar) and Swedish Match (which now owns General Cigar). Spanish Altadis, the world's largest maker of cigars by sales, owns such brands as Montecristo, Ducth Masters, and El Producto. Swedish Match (#2) owns, among other brands, Partagas, Cohiba, White Owl, and Macanudo.
While US cigarette sales are shrinking, John Middleton's sales have been growing over the past few years. Altria has also this year got into the snuff business, with Marlboro-branded snuff. Altria, which this year is spinning off its Kraft food division, is also planning to sell off its international cigarette business. So US sales growth is all the more critical.
The move follows other recent tobacco moves, most notably the purchase of Altadis by the UK's Imperial Tobacco Group. In 2006, Japan Tobacco bought the UK's Gallagher Group.
It's interesting that among all this global consolidation, Philip Morris is deciding to split its global operations from its US ones. Clearly, the perception is that the painstakingly grown global operations are worth more on their own than tied to the declining US ones.
10:12:20 PM 
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