[Congressional Record (Bound Edition), Volume 149 (2003), Part 10]
[Extensions of Remarks]
[Pages 14022-14028]
[From the U.S. Government Publishing Office, www.gpo.gov]




                           SMOKELESS TOBACCO

                                 ______
                                 

                          HON. HENRY A. WAXMAN

                             of california

                    in the house of representatives

                        Wednesday, June 4, 2003

  Mr. WAXMAN. Mr. Speaker, the United States Tobacco Company has 
requested that it be allowed to market certain dangerous and addictive 
products as less harmful than cigarettes. UST would like to market 
these products immediately without regulation by a health agency.
  I recently obtained UST documents that speak to the clear need for 
effective and comprehensive regulation prior to any health claims for 
smokeless tobacco. Because it is in the public's interest to review the 
content of these documents, I am inserting them into the public record, 
along with a ``dear colleague'' letter I recently circulated, the UST 
response, and a letter I sent yesterday to House Committee on Energy 
and Commerce Chairman Billy Tauzin on this matter.

                                                   April 28, 2003.

       Should Smokeless Tobacco Be Marketed as ``Reduced Risk''?

       Dear Colleague: In recent weeks, the United States 
     Smokeless Tobacco Company, Incorporated (UST), the country's 
     largest manufacturer of smokeless tobacco products, has begun 
     to lobby Congress for permission to tell potential customers 
     that using smokeless tobacco is safer than smoking 
     cigarettes. The request follows a prior petition to the 
     Federal Trade Commission (FTC), which UST has now withdrawn, 
     in which UST proposed telling consumers: ``Many researchers 
     in the public health community have expressed the opinion 
     that the use of smokeless tobacco involves significantly less 
     risk of adverse health effects than smoking cigarettes.''
       It would be a serious mistake for Congress to endorse 
     ``reduced risk'' claims proposed by UST outside of effective 
     regulation of tobacco products. Attached are two documents 
     from the Campaign for Tobacco Free Kids on (1) smokeless 
     tobacco and (2) UST's request to Congress. I would draw your 
     attention to several key points:
       ``Reduced risk'' claims need to be scrutinized carefully. 
     If new claims that smokeless tobacco is safer than cigarettes 
     cause fewer smokers to quit tobacco altogether, or if these 
     claims encourage non-tobacco users--especially young people--
     to begin using smokeless tobacco products, any theoretical 
     benefit to those switching from cigarettes to smokeless 
     tobacco products may be undermined. That's why the Institute 
     of Medicine and other experts who favor risk reduction 
     strategies, including several tobacco control advocates cited 
     by UST, actually believe that such claims should be made only 
     with regulatory oversight. A regulatory system would allow 
     close monitoring of health claims and assessment of the true 
     impact on death and disease rates.
       The Swedish model does necessarily not apply to the United 
     States. UST points to Sweden as a country with relatively 
     high levels of smokeless tobacco use and relatively low 
     levels of cigarette smoking. Yet Sweden's situation is 
     considerably different. First, Swedish smokeless tobacco is a 
     different product from the one that UST makes. Second, Sweden 
     also has tight restrictions on tobacco products, including 
     high taxes and a marketing ban. Third, Sweden does not allow 
     health claims to be made for smokeless tobacco products.
       UST does not have a responsible track record. The U.S. 
     Surgeon General, the National Cancer Institute, and other 
     major scientific and public health agencies have concluded 
     that smokeless tobacco poses significant health risks, causes 
     oral cancer and other noncancerous oral conditions, and can 
     lead to nicotine addiction. UST, however, has recently 
     asserted that ``smokeless tobacco has not been shown to be a 
     cause of any human disease.'' The company also has a long 
     history of marketing to children, including flouting 
     restrictions on marketing to minors and the addition of 
     cherry, mint, and other flavorings that increase their 
     products' appeal to youth. This record indicates the need for 
     close regulatory oversight of any health claims made by the 
     company.
       With cigarette smoking responsible for more than 400,000 
     deaths in the United States each year, there is reason to 
     consider nonconventional strategies to save lives. However, 
     these strategies should be based upon science and carefully 
     monitored in a regulatory scheme to assure that they do not 
     cause more harm than good.
       If you would like more information, please do not hestitate 
     to contact Josh Sharfstein on the minority staff of the 
     Government Reform Committee (202) 225-5420.
           Sincerely,
                                                  Henry A. Waxman,
                                          Ranking Minority Member.

[[Page 14023]]

     
                                  ____
 Smokeless (``Spit'') Tobacco in the United States: An Overview of the 
         Health Risks and Industry Marketing Aimed at Children

       What do the experts say about smokeless tobacco?
       Smokeless tobacco in the United States causes cancer.
       Smokeless tobacco in the United States is not a safe 
     alternative to cigarettes.
       Smokeless tobacco in the United States is not regulated and 
     any health claims about the product have not been verified by 
     an independent, objective government authority.
       Smokeless tobacco manufacturers in the United States have 
     systematically marketed their products to children and 
     adolescents.
       Smokeless tobacco, and the manner in which it is 
     manufactured, marketed and sold, in the United States is 
     substantially different from what is occurring in Sweden.
       U.S. Surgeon General:
       ``After a careful examination of the relevant 
     epidemiologic, experimental, and clinical data, the committee 
     concludes that the oral use of smokeless tobacco represents a 
     significant health risk. It is not a safe substitute for 
     smoking cigarettes. It can cause cancer and a number of non-
     cancerous oral conditions and can lead to nicotine addiction 
     and dependence.''
       ``The scientific evidence is strong that the use of snuff 
     can cause cancer in humans. The evidence for causality is 
     strongest for cancer of the oral cavity, wherein cancer may 
     occur several times more frequently in snuff dippers compared 
     to non-tobacco users. The excess risk of cancer of the cheek 
     and gum may reach nearly fifty-fold among long-term snuff 
     users.''
       U.S. National Cancer Institute:
       ``The bioassay data strongly support the epidemiological 
     observation that ST is carcinogenic to humans. Twenty-eight 
     carcinogens have been identified in chewing tobacco and 
     snuff. The high concentrations of N-nitrosamines in ST, and 
     especially the high levels of TSNA, are of great concern.''
       ``The evidence that NNK and NNN play a role in human oral 
     cancer induced by snuff is strong. Both compounds are present 
     in significant amounts in snuff and in the saliva of snuff 
     dippers. They are metabolically activated in snuff dippers to 
     intermediates that bind to hemoglobin. They cause oral tumors 
     in rats and are metabolically activated by rat and human oral 
     tissue. Although there are many questions about the 
     mechanisms by which snuff causes oral tumors in rats and 
     humans, there is no doubt that the presence of NNK and NNN in 
     snuff is an unacceptable risk to people who choose to use 
     these products.''
       U.S. National Toxicology Program:
       ``The oral use of smokeless tobacco is known to be a human 
     carcinogen based on sufficient evidence of carcinogenicity 
     from studies in humans which indicate a causal relationship 
     between exposure to smokeless tobacco and human cancer.''
       ``Smokeless tobacco has been determined to cause cancers of 
     the oral cavity. Cancers of the oral cavity have been 
     associated with the use of chewing tobacco as well as snuff 
     which are the two main forms of smokeless tobacco used in the 
     United States.''
       World Health Organization:
       ``There is conclusive evidence that certain smokeless 
     tobacco products increase risk of oral cancer, specifically .  
     .  . smokeless tobacco in the United States.''


             marketing smokeless (``spit'') tobacco to kids

       The smokeless tobacco companies have a long history of 
     creating new products that appeal to kids and marketing them 
     aggressively to children. Their efforts have created a whole 
     new market for spit tobacco--in kids.


         a shift from older to younger smokeless tobacco users

       Since 1970, smokeless tobacco has gone from a product used 
     primarily by older men to one used predominantly by young men 
     and boys. In 1970, males 65 and older were almost six times, 
     as likely as those ages 18-24 to use smokeless tobacco 
     regularly (12.7 percent vs. 2.2 percent. By 1991, however, 
     young males were 50 percent more likely than the oldest ones 
     to be regular users. (8.4 percent vs. 5.6 percent. This 
     pattern holds especially true for moist snuff, the most 
     popular type of smokeless tobacco. From 1970 to 1991 the 
     regular use of moist snuff by 18-24 year old males increased 
     almost ten-fold, from less than one percent to 6.2 percent. 
     Conversely, use among males 65 and older decreased by almost 
     half, from 4 to 2.2 percent. Among all high school seniors 
     who have ever used smokeless tobacco, almost three-fourths 
     began by the ninth grades.
       Despite some recent declines in youth smokeless tobacco 
     use, 14.8 percent of all boys in U.S. high schools--and 1.9 
     percent of high-school girls--currently use smokeless tobacco 
     products. In some states, smokeless tobacco use among high 
     school males is particularly high, including Montana (25.2 
     percent), Wyoming (28.6 percent), West Virginia (33.0 
     percent), and Arkansas (24.9 percent).
       UST (the parent company of the U.S. Smokeless Tobacco 
     Company) is the biggest smokeless tobacco company in the 
     Untied States. It controls about 40 percent of the total U.S. 
     smokeless tobacco market, including 75 percent of the moist 
     snuff tobacco market, which is both the largest segment of 
     the smokeless tobacco market and the only segment that has 
     recently grown.


                        strategies to hook kids

       According to internal company documents, UST developed a 
     strategy some time ago for hooking new smokeless tobacco 
     users, which means kids. As one document states: ``New users 
     of smokeless tobacco--attracted to the product for a variety 
     of reasons--are most likely to begin with products that are 
     milder tasting, more flavored, and/or easier to control in 
     the mouth. After a period of time there is a natural 
     progression of product switching to brands that are more 
     full-bodied, less flavored, have more concentrated `tobacco 
     taste' than the entry brand.''
       Following this strategy, in 1983-84, UST introduced Skoal 
     Bandits and Skoal Long Cut, designed to ``graduate'' new 
     users from beginner strength, to stronger, more potent 
     products. A 1985 internal UST newsletter indicates the 
     company's desire to appeal to youth: ``Skoal Bandits is the 
     introductory product, and then we look towards establishing a 
     normal graduation process.'' In 1993, cherry flavoring was 
     added to UST's Skoal Long Cut, another starter product. A 
     former UST sales representative revealed that ``Cherry Skoal 
     is for somebody who likes the taste of candy, if you know 
     what I'm saying.''
       Smokeless tobacco products have been marketed to youth 
     through a number of channels, including sports events like 
     auto racing and rodeos that are widely attended by kids. 
     Although the state tobacco settlement agreements have limited 
     UST's ability to continue to do brand-name sponsorships of 
     events and teams, UST continues to be a promotional sponsor 
     of both professional motorsports and rodeo and bull riding. 
     In motorsports, UST sponsors are Skoal Racing funny car team 
     on the National Hot Rod Association circuit. In rodeo and 
     bull riding, UST supports the Rodeo Cowboys Association, the 
     Professional Bull Riders, Inc., and the National 
     Intercollegiate Rodeo Association. As the general manager of 
     the College Finals said, ``U.S. Tobacco is the oldest and 
     best friend college rodeo ever had.''
       Continuing its efforts to lure and maintain young users, in 
     February 1999, UST ran a full-color advertising insert for 
     its Rooster brand smokeless tobacco in the Daily Aztec, the 
     college paper at San Diego State University. The ad offered a 
     sweepstakes for an all expenses paid trip to the Playboy 
     mansion and, in direct violation of California law, included 
     a $1.00 coupon. State enforcement efforts related to the ad 
     forced UST to pay a fine of $150,000 and also pay for a 
     parallel ad insert opposing smokeless tobacco use.
       From 1985 to 1999 (the most recent year with available 
     data), the total marketing expenditures of the top-five 
     smokeless tobacco companies in the United States (Conwood 
     Company, National Tobacco Company, Swedish Match North 
     America, Inc., Swisher International, and United States 
     Tobacco Company) have more than doubled, as have their sales 
     revenues. In 1999, these smokeless tobacco companies spent 
     more than $170 million to advertise and market their deadly 
     products. Some of these funds pay for smokeless tobacco ads 
     in magazines with high youth readership, such as Sports 
     Illustrated and Rolling Stone. In fact, despite the 
     restrictions placed on youth advertising by the Smokeless 
     Tobacco Master Settlement Agreement (STMSA), UST has 
     continued to heavily advertise in youth-oriented magazines. 
     For the period 1997-2001, UST's expenditures in youth 
     magazines increased from $3.6 million to $9.4 million, a 161% 
     increase.
       In August 2001, UST announced plans to market a brand new 
     smokeless tobacco product called Revel. UST is marketing the 
     new product as a way to consume tobacco in places or 
     situations when smoking is not allowed or is not socially 
     acceptable. Public health organizations and others are 
     concerned that this new product may lure even more kids into 
     smokeless tobacco use and addiction--both because of its 
     novelty and the misconception that it is a safe form of 
     tobacco use, and because it can be consumed much less 
     conspicuously than either cigarettes or existing smokeless 
     tobacco products at home, in school, and in other locations. 
     There is also a concern that some current cigarette smokers 
     who might ultimately quit because of the social stigma 
     associated with smoking, the inconvenience caused by smoking 
     restrictions at work and elsewhere, or a desire to protect 
     their family and friends from secondhand smoke will switch to 
     Revel or other smokeless products, instead.
       These public health risks are significant, especially since 
     the Star tobacco company has also begun selling a smokeless 
     product, known as Ariva, and has sold Brown & Williamson (the 
     third largest U.S. cigarette company) the right to market 
     Star's new product under B&W's own brand name.


           Health Risks Associated With Smokeless Tobacco Use

       Smokeless tobacco use can lead to oral cancer, gum disease, 
     and nicotine addiction; and it increases the risk of 
     cardiovascular disease, including heart attack. More 
     specifically:
       Smokeless tobacco causes leukoplakia, a disease of the 
     mouth characterized by white patches and oral lesions on the 
     cheeks,

[[Page 14024]]

     gums, and/or tongue. Leukoplakia, which can lead to oral 
     cancer, occurs in more than half of all users in the first 
     three years of use. Studies have found that 60 to 78 percent 
     of smokeless tobacco users have oral lesions.
       Constant exposure to tobacco juice causes cancer of the 
     esophagus, pharynx, larynx, stomach and pancreas. Smokeless 
     tobacco users are up to 50 times more likely to get oral 
     cancer than non-users. These cancers can form within five 
     years of regular use.
       Smokeless tobacco contains nitrosamines, proven 
     carcinogens, as well as 30 metals and a radioactive compound 
     called polonium-210. A study by the American Health 
     Foundation for the State of Massachusetts found that the 
     level of cancer causing tobacco specific nitrosamines (TSNAs) 
     in U.S. oral snuff brands were significantly higher than 
     comparable Swedish Match brands. These data suggest that it 
     is possible for smokeless tobacco companies to produce oral 
     snuff with significantly lower TSNA levels.
       This same study found that the two leading U.S. snuff 
     brands, Copenhagen and Skoal, had large increases in TSNA 
     levels when placed on a shelf at room temperature over a six-
     month time period. The TSNA levels increased 20 percent in 
     Skoal and by 137 percent in Copenhagen, while no significant 
     changes were observed in Swedish match brands.
       Chewing tobacco has been linked to dental caries. A study 
     by the National Institutes of Health and the Centers for 
     Disease Control and Prevention found chewing tobacco users 
     were four times more likely than non-users to have decayed 
     dental root surfaces. Smokeless tobacco also causes gum 
     disease (gingivitis), which can lead to bone and tooth loss.
       A number of researchers and at least one U.S. smokeless 
     tobacco company (UST) who point to the experience of Sweden 
     and their use of a smokeless product called ``snus'', as a 
     prime example of why smokeless tobacco is not harmful and 
     should be promoted as a harm reduction and/or smoking 
     cessation aid. However, upon closer examination the snus 
     experience in Sweden is completely irrelevant in the context 
     of the United States for a number of reasons. First, snus is 
     a different product from American smokeless products (even 
     the products sold by the North American division of Swedish 
     Match) in that Swedish snus is highly regulated and 
     manufactured according to strict standards. The makers of 
     Swedish snus (Swedish Match) are not allowed to make health 
     claims, and they are forbidden from even marketing the 
     product at all. In the United States, we have a situation 
     where all tobacco products (including smokeless products) are 
     exempt from product regulation and that have been marketed 
     irresponsibly to kids for decades. In addition, there is also 
     disagreement among the researchers as to whether snus has, in 
     fact, played a role in reducing smoking in Sweden.


             Industry Denials of Harms of Smokeless Tobacco

       Despite all the evidence of the harms of smokeless tobacco, 
     in April 1999, a spokesperson for UST, quoted in the 
     Providence Journal, claimed that it has not been 
     ``scientifically established'' that smokeless tobacco is ``a 
     cause of oral cancer.'' The Rhode Island Attorney General 
     subsequently filed a legal action against U.S. Tobacco for 
     violating the multistate settlement agreement's provisions 
     prohibiting false statements about the health effects of 
     tobacco products. As a result, UST was required to formally 
     acknowledge that the Surgeon General and other public health 
     authorities have concluded that smokeless tobacco is 
     addictive and can cause oral cancer and to pay $15,000 to the 
     Attorney General's office for efforts to prevent Rhode Island 
     youths from using tobacco.
       On February 5, 2002, in a letter to the U.S. Federal Trade 
     Commission seeking an advisory opinion to make statements in 
     its advertising that smokeless tobacco products are safe 
     alternatives to cigarettes, UST concluded that, ``. . . it is 
     USSTC's position that smokeless tobacco has not been shown to 
     be a cause of any human disease [emphasis added].''


            Smokeless Tobacco A ``Gateway'' To Other Drugs?

       High school students who use smokeless tobacco 20 to 30 
     days per month are nearly four times more likely to currently 
     use marijuana than nonusers, almost three times more likely 
     to ever use cocaine, and nearly three times more likely to 
     ever use inhalants to get high. In addition, heavy users of 
     smokeless tobacco are almost 16 times more likely than 
     nonusers are to currently consume alcohol, as well.
       A recent study in the American Journal of Preventive 
     Medicine found that ``snuff use may be a gateway form of 
     nicotine dosing among males in the United States that may 
     lead to subsequent cigarette smoking.'' Further, the study 
     found that ``the prevalence of smoking was substantially 
     higher among men who had quit using snuff than among those 
     who had never used snuff, suggesting that more than 40 
     percent of men who had been snuff users continued or 
     initiated smoking.


                         Types of Spit Tobacco

       Oral (moist) snuff is a finely cut, processed tobacco, 
     which the user places between the check and gum, that 
     releases nicotine which, in turn, is absorbed by the 
     membranes of the mouth.
       Looseleaf chewing tobacco is stripped and processed cigar-
     type tobacco leaves that are loosely packed to form small 
     strips. It is often sold in a foil-lined pouch and usually 
     treated with sugar or licorice.
       Plug chewing tobacco consists of small, oblong blocks of 
     semi-soft chewing tobacco that often contain sweeteners and 
     other flavoring agents.
       Nasal snuff is a fine tobacco powder that is sniffed into 
     the nostrils. Flavorings may be added during fermentation, 
     and perfumes may be added after grinding.
                                  ____


                      USSTC Spit Tobacco Products

       Split Tobacco Is Harmful: The Surgeon General, the National 
     Cancer Institute and numerous other scientific bodies have 
     determined that there is conclusive evidence that the use of 
     the spit tobacco products sold in the United States, also 
     known as smokeless tobacco, increases the risk of serious 
     disease, including oral cancer. This conclusion is as true 
     today as when Congress mandated health warnings on all spit 
     tobacco products in 1986. This is not surprising because 28 
     cancer-causing chemicals have been found in these products. 
     Spit tobacco is not a safe alternative to smoking. Despite 
     this and a 1999 agreement with the Rhode Island Attorney 
     General by U.S. Tobacco Company (the parent company of U.S. 
     Smokeless Tobacco Company or USSTC) not to make statements 
     ``to any news media . . . to the effect that any of its 
     tobacco products do not cause or have not been proven to 
     cause adverse health consequences . . .'' USSTC claimed in a 
     2002 letter to the Federal Trade Commission (FTC) ``smokeless 
     tobacco has not been shown to be a cause of any human 
     disease.''
       Spit Tobacco and Its Marketing Should Be Regulated by a 
     Science-Based, Health Agency: USSTC wants government approval 
     for it to market its products as less hazardous than 
     cigarettes without any additional control over its marketing 
     or its products. Unless the U.S. Food and Drug Administration 
     (FDA) is first given meaningful authority over spit tobacco 
     products, including the authority to oversee the content, 
     manufacture, sale, and marketing of spit tobacco, this 
     request will only increase the harm caused by tobacco. Why is 
     this so? Absent such regulation, marketing by USSTC of its 
     products as less hazardous is likely to result in the 
     following:
       It will attract new young users to use spit tobacco by 
     communicating that it does not pose a serious risk. This is 
     precisely what happened twenty years ago when USSTC used 
     similar messages as part of a marketing campaign that led to 
     an explosive growth in youth spit tobacco use; and
       It may discourage some smokers from quitting by misleading 
     them to believe that smokeless tobacco products offer a safe 
     alternative to quitting.
       In addition, in the absence of FDA regulation there are no 
     manufacturing standards governing these products or their 
     relative safety. This is especially important because tests 
     have shown extremely wide variations in levels of toxins in 
     spit tobacco products across brands in the United States as 
     well as across the same brands over their shelf life.
       USSTC Markets Its Products To Youth: USSTC has a long 
     history of marketing its products to youth through the 
     development of starter products (pouches, long cut, etc.), 
     the addition of flavorings (cherry, mint), and the strategy 
     of graduating users from entry products to stronger ones. In 
     fact, it is the company most responsible for turning spit 
     tobacco from a product used primarily by old men and women to 
     one used by young people. Despite the restrictions placed on 
     youth advertising by the Smokeless Tobacco Master Settlement 
     Agreement, the U.S. Tobacco Company (UST) has continued to 
     heavily advertise in youth-oriented magazines. For the period 
     1997-2001, UST's expenditures in youth magazines increased 
     from $3.6 million to $9.4 million, a 161% increase. Without 
     regulation of the way its harm reduction claims are marketed, 
     there is absolutely no reason to believe that their marketing 
     will lead to anything other than an overall greater use of 
     tobacco products, with the attendant harm on public health.
       Comparing USSTC Products to Swedish Snus Is Like comparing 
     Apples To Ants: USSTC likes to compare its efforts to those 
     of Snus in Sweden and to claim that its products can be an 
     effective harm reduction strategy. The differences in the 
     Swedish and U.S. products and the differences in the Swedish 
     and U.S. regulatory environments render this comparison 
     ludicrous. Any gains that might have been achieved by Snus in 
     Sweden have been accomplished with a product that is many 
     times lower in cancer-causing nitrosamines and other toxic 
     substances than the USSTC products sold in the U.S. Sweden 
     also carefully regulates spit tobacco products and their 
     marketing. To prevent marketing claims from making these 
     products more attractive to non-users, Sweden prohibits ANY 
     advertising of the product and prohibits the kinds of claims 
     USSTC wants to make here. There is every reason to believe 
     that operating in an unregulated environment, a company such 
     as USSTC, with its

[[Page 14025]]

     long history of employing every possible marketing avenue to 
     attract youth, would only use health claims to further expand 
     its market, especially among youth.
       USSTC Should Support FDA Regulation of Tobacco As The 
     Solution: If USSTC is serious about reducing the harm caused 
     by tobacco, and about assuring that the marketing of its 
     products as less hazardous contributes to improvement in 
     public health, it would support the effective regulation of 
     tobacco products by the FDA as outlined by the major public 
     health groups. Less hazardous, nicotine-replacement therapies 
     are regulated by the FDA. Why should the manufacturers of 
     spit tobacco products, attempting to make similar health 
     claims, be treated any differently? Only regulation of spit 
     tobacco products by a qualified, science-based agency like 
     the FDA can assure that health claims for spit tobacco are 
     accurate, appropriate and protect public health.
                                  ____



                                    US. Smokeless Tobacco Co.,

                                      Greenwich, CT, May 23, 2003.
     Hon. Henry A. Waxman,
     Ranking Minority Member, Committee on Government Reform, 
         House of Representatives, Rayburn House Office Building, 
         Washington, DC.
       Dear Congressman Waxman: I read with interest your ``Dear 
     Colleague'' letter dated April 28, 2003, regarding smokeless 
     tobacco in the context of tobacco harm reduction and the 
     attached documents from the Campaign for Tobacco-Free Kids, 
     portions of which are referenced in your letter. There 
     appears to be widespread agreement in the public health 
     community regarding your observation that ``with cigarette 
     smoking responsible for more than 400,000 deaths in the 
     United States each year, there is reason to consider 
     nonconventional strategies to save lives.'' As you are aware, 
     one such ``nonconventional strategy'' increasingly discussed 
     in the public health community is that cigarette smokers who 
     do not quit and do not use medicinal nicotine products should 
     switch completely to smokeless tobacco products.
       The debate regarding tobacco harm reduction and the role of 
     smokeless tobacco products as part of that effort is at a 
     crossroads. U.S. Smokeless Tobacco Company (``USSTC'') has 
     been actively and constructively engaged in discussing the 
     merits of that issue. Unfortunately, the Campaign of Tobacco-
     Free Kids does not seem interested in discussing the merits 
     of communicating to adult cigarette smokers that smokeless 
     tobacco is a significantly reduced risk alternative to 
     cigarette smoking. Rather, the Campaign for Tobacco-Free Kids 
     disseminates documents of the type attached to your letter 
     that have little relevance to the issue at hand, but contain 
     numerous statements that are inaccurate or misleading. 
     Several of those statements relating directly to USSTC 
     require a response.
       The Campaign for Tobacco-Free Kids' central allegation is 
     that USSTC has engaged in ``strategies to hook kids'' on 
     smokeless tobacco products. In particular, the Campaign for 
     Tobacco-Free Kids alleges that USSTC (i) employed a 
     ``graduation strategy'' for hooking new smokeless tobacco 
     users, which means kids,'' (ii) added cherry flavoring to 
     Skoal Long Cut in 1993 in order to appeal to underage youth 
     (iii) ``marketed to youth through a number of channels 
     including sports events like auto racing and rodeos that are 
     widely attended by kids,'' and (iv) places ``smokeless 
     tobacco ads in magazines with high youth readership, such as 
     Sports Illustrated and Rolling Stone.
       The allegation that USSTC engages in ``strategies to hook 
     kids'' could not be further from the truth. USSTC has made 
     clear its commitment to market its smokeless tobacco products 
     only to adults. For example, USSTC is the only smokeless 
     tobacco company to enter into the Smokeless Tobacco Master 
     Settlement Agreement (``STMSA'') with the Attorneys General 
     of 45 states and various territories. As a result, USSTC is 
     supporting programs to reduce youth usage of tobacco, and has 
     agreed to limitations on its advertising and marketing 
     efforts that might be attractive, in the view of the 
     Attorneys General, to underage potential consumers of 
     smokeless tobacco, even though USSTC's competitors have 
     agreed to no such restrictions.
       ``Graduation Strategy'' Allegations: USSTC does not employ 
     any marketing strategy based upon a theory that consumers can 
     be enticed to begin using ``beginner strength'' smokeless 
     tobacco products, and subsequently be caused to ``graduate'' 
     to smokeless tobacco products that are ``stronger'' or ``more 
     potent.'' Any suggestion that USSTC's line of products is 
     developed based upon ``graduating'' levels of ``strength'' or 
     ``potency'' is not true. Smokeless tobacco consumers remain 
     loyal to a single brand or switch among a variety of brands 
     according to their preference for flavor, cut of tobacco, 
     form and packaging. Moreover, there is no set pattern of 
     brand switching among smokeless tobacco consumers. They do 
     not conform to any so-called ``graduation strategy.''
       Company documents from the early 1980s reflect that there 
     were discussions among some at the Company about a 
     ``graduation process,'' ``hypothesis'' or ``theory.'' While 
     the term ``graduation process'' apparently meant different 
     things to different people, the theory seems to have been an 
     attempt by some to provide a shorthand explanation for 
     consumer behavior in switching between brands of smokeless 
     tobacco, including between the Company's own brands. The term 
     ``graduation process'' as used in the early 1980s: (i) did 
     not relate to marketing to youth, (ii) did not drive the 
     Company's marketing strategies, and (iii) is contradicted by 
     consumer behavior in the marketplace.
       Cherry Flavoring: The suggestion that cherry flavored Skoal 
     Long Cut was designed to appeal to underage youth is 
     baseless. Cherry flavored tobacco products have been on the 
     market since 1910. Since then, there have been dozens of 
     brands of cigars, chewing tobacco, pipe and other smoking 
     tobacco products with cherry flavor marketed to adults. The 
     use of cherry flavor tobacco products is not surprising. Many 
     products marketed for adults, such as Maalox, Alka-Seltzer 
     and Tums, are available in cherry flavor because of its 
     appeal to those adults.
       Sponsorship of Professional Motorsports and Rodeos: As 
     noted above, an underlying purpose of the STMSA contains a 
     comprehensive array of restrictions that substantially limit 
     the Company's activities with respect to marketing its 
     smokeless tobacco products. Among other restrictions USSTC 
     has agreed that it will not engage in brand name sponsorships 
     of concerts, events in which youth comprise a significant 
     portion of the audience, events in which youth are paid 
     participants or contestants, football, soccer, basketball and 
     hockey. USSTC's sponsorship of professional motorsports and 
     rodeos is part of the Company's efforts to promote its 
     products to adult consumers and is wholly appropriate under 
     the terms of the STMSA.
       Magazine Ads: As the Campaign for Tobacco-Free Kids is 
     fully aware, USSTC does not currently advertise in Sports 
     Illustrated or Rolling Stone. On June 7, 2002, USSTC 
     announced that in order to leave no doubt that its marketing 
     program is oriented to adults and adults only, it would 
     suspend advertising in a small number of magazines while it 
     reviewed concerns regarding possible youth readership, even 
     though the overwhelming majority of readers of those 
     magazines were adults. The magazines involved were Sports 
     Illustrated, Hot Rod, Motor Trend and sporting News. USSTC 
     stopped advertising in Rolling Stone in 2001.
       USSTC appreciates your interest in this important public 
     health issue, and looks forward to continuing its 
     participation in the debate regarding tobacco harm reduction 
     and the potential role of smokeless tobacco.
           Sincerely,
     Richard H. Verheij.
                                  ____

                                         House of Representatives,


                               Committee on Government Reform,

                                     Washington, DC, June 3, 2003.
     Hon. W.J. (Billy) Tauzin,
     Chairman, Committee on Energy and Commerce, House of 
         Representatives, Rayburn House Office Building, 
         Washington, DC.
       Dear Mr. Chairman: You may have recently received a copy of 
     a May 23, 2003, letter from U.S. Smokeless Tobacco Company 
     (UST) in connection with today's hearings on ``reduced risk'' 
     tobacco products. As you consider this letter, you should 
     know that it is deceptive on important issues.
       The UST letter was written in response to a ``Dear 
     Colleague'' letter that I wrote on April 28, 2003. My Dear 
     Colleague made two major points: (1) that public health 
     authorities have concluded that ``reduced risk'' claims for 
     tobacco products should be made only in the context of strict 
     regulatory oversight and (2) that the need for regulatory 
     oversight of such claims is underscored by UST's history of 
     untrustworthy marketing. The Dear Colleague attached two fact 
     sheets from the Campaign for Tobacco Free Kids. The fact 
     sheets detailed UST's use of a ``graduation strategy'' to 
     hook young users on low-nicotine products and then 
     ``graduate'' them to higher-nicotine products. They also 
     described the company's strategy of appealing to children 
     through the use of cherry flavoring in its ``starter'' 
     products.
       In its May 23 response, UST dismisses the allegation that 
     the company ``has engaged in strategies to hook kids'' as 
     ``inaccurate or misleading.'' UST claims that it does not and 
     has never used a ``graduation strategy,'' certainly not one 
     related to marketing to youth. UST also rejects as 
     ``baseless'' the suggestion that its cherry-flavored products 
     were designed to appeal to children.
       Since receiving UST's May 23 letter, I have obtained copies 
     of internal company documents that validate the points made 
     in my Dear Colleague and conflict with the assertions in 
     UST's letter. These documents show that the company planned a 
     ``graduation strategy'' starting with ``young'' consumers, 
     that the company has long known that flavoring in smokeless 
     tobacco products appeals to young smokeless tobacco users, 
     and that UST deliberately adds flavoring to ``starter 
     products.'' The documents also indicate that UST marketed its 
     products to children as young as 13 or 14. Copies of these 
     previously undisclosed documents are enclosed with this 
     letter.
       These documents and UST's response are relevant to the 
     Committee's consideration of UST's request for permission to 
     market smokeless tobacco as safer than cigarettes. While UST 
     may say that it would never

[[Page 14026]]

     abuse authority to make ``reduced risk'' claims, the 
     company's past practices--and its recent correspondence 
     denying these practices--call the company's veracity 
     seriously into question.


                       UST's Graduation Strategy

       UST states that it never employed a ``graduation strategy'' 
     in marketing its tobacco products and that any documents from 
     officials at the company discussing the strategy merely 
     reflected a ``hypothesis,'' ``did not relate to marketing to 
     youth,'' and ``did not drive the Company's marketing 
     strategies.''
       This claim is difficult to believe in light of the 
     documents that I have obtained. The documents show 
     definitively that a graduation strategy aimed at youth was in 
     fact the company's goal and that implementing this strategy 
     was the objective of the highest-ranking officials in the 
     company. In particular, a 1980 memo from the Senior Vice 
     President for Marketing and Sales to the Chairman of the 
     Board and President of UST sets forth two of the company's 
     marketing ``objectives'' as follows:
       Introduce an easy-to-use, ``starter'' product; and
       Provide new users with an easy graduation process.
       That this graduation process is aimed at young customers is 
     expressly stated later in the document. A chart labeled 
     ``Marketing Action/Staging,'' which includes specific dates 
     for implementation of each action as early as two months from 
     the date of the memo, reads as follows:

 
------------------------------------------------------------------------
               Brand/segment                          Objective
------------------------------------------------------------------------
Ball'n Chew Wintergreen Plastic Can.......  Introduce easy to use,
                                             ``starter'' product to
                                             increase consumer base,
                                             especially among the young.
Skoal Straight Plastic Can................  Introduce line extension to
                                             support ``natural
                                             vertical'' graduation
                                             process.
------------------------------------------------------------------------

       This document also contains a chart, entitled ``Product 
     Development and Positioning,'' that depicts ``young, newer'' 
     ``light'' users at the bottom of a continuum that ends in 
     ``older, confirmed'' ``heavy'' users. Marching up this 
     continuum are the company's smokeless products, with the 
     lightest products at the bottom and the strongest products at 
     the top.


              Use of Flavored Products to Appeal to Youth

       UST claims that cherry flavoring is common in adult 
     products like Maalox and Tums and therefore that there is no 
     basis to believe that the company used sweet flavors to 
     appeal to children. But the company had clear understanding 
     that favors appeal to young users and not to adults. In the 
     document quoted above, the Senior Vice President for 
     Marketing and Sales states the following ``assumptions'':
       ASSUMPTIONS:
       Younger and lighter users prefer a favor, not a natural.
       Older and heavier users prefer real tobacco taste and 
     strength.
       Happy Days [a lighter product] can be a better brand and 
     better ``graduator'' with a change in favor.


                      UST's Marketing to Children

       Another document indicates that the UST's sales force 
     marketed to children as young as 13 or 14. A memo from a 
     regional sales manager to UST's National Sales Manager 
     describes the effect of a competing product on sales of UST 
     products. The memo states that retailers report that Hawken, 
     a product from a UST competitor: ``is being used by young 
     kids and young adults. The age of the kids is from 9 years 
     old and up. I believe this to be true because outlets located 
     close to schools (all grades) are definitely the heavier 
     Hawken outlets we visited. . . . Also, the people who knew 
     about mouth tobaccos felt the sweet taste was a definite 
     factor with the kids.''
       This memo goes on to say that Hawken ``has reached kids 
     four or five years earlier than we have contacted them in the 
     past.'' Because the memo is describing a product being used 
     by 9-year-olds, the clear indication is that UST was 
     marketing to kids of 13 or 14 years.


                               conclusion

       As we consider UST's desire to market its products as safer 
     than cigarettes, we must keep in mind both the company's 
     marketing history and its continuing deceptions. Essentially, 
     UST is asking Congress to trust that the company will make 
     responsible claims about its products. But it is hard to see 
     how such trust is warranted given the company's track record. 
     Certainly, the company should not be permitted to make 
     ``reduced risk'' claims about its products without strict 
     regulatory oversight.
           Sincerely,
                                                  Henry A. Waxman,
                                          Ranking Minority Member.
       Enclosures (2).


               u.s. tobacco intra-company correspondence

                                                  January 4, 1980.
     From: Barry J. Nova, Sr., Vice President Marketing and Sales.
     To: Louis P. Bantle, Chairman of the Board and President.
     Subject: ``Moist'' Development.

       U.S. Tobacco has ``made'' the market in moist smokeless 
     tobacco; a segment that remains in the early stages of growth 
     on a product life cycle graph. We must continue to ``lead'' 
     the category in order to:
       Enlarge our consumer base;
       Preempt probable competition; and
       Maintain corporate growth and profit.
       A recent document from Peter directed itself to ``product 
     leadership''; to the methods of ascertaining the right 
     products in the right positions to meet potential user needs. 
     While some of the choices and recommendations might be 
     questioned, it is not the intent of the writer to mark down a 
     good beginning. Rather, in conjunction with those carboned 
     above it is the purpose of this memorandum to further define 
     marketing action needed to meet the following objectives:
       Introduce an easy-to-use, ``starter'' product;
       Provide new users with an easy graduation process;
       Develop better packaging; and
       Maintain a simplicity in the product line.

                        Easy graduation process

       There are two ``leaders'' extant in today's marketplace: 
     Skoal, with a wintergreen flavor; and Copenhagen, with a more 
     natural tobacco taste. While Skoal is the biggest seller, 
     reasonable percentage growth is still apparent in the 
     Copenhagen brand; and both continue to outpace Happy Days 
     (mint)--where about 20% of current poundage is samples--on a 
     poundage growth basis.
       In addition, two other ``natural'' brands continue to show 
     strength with very limited promotional support--W B Cut and 
     Key.
       Simply, then, we should concentrate on the two proven areas 
     of acceptability--Wintergreen and Natural; and build 
     vertically in these two flavors, permitting the consumer to 
     ``move-up'' or strengthen his pleasure in a taste that he is 
     used to and comfortable with. Even our new loose leaf chew 
     would fit comfortably in the pattern.
       And while we do feel that mint/spearmint is an acceptable 
     American flavoring in food and gums, it has not yet been 
     completely proven as a tobacco additive; and a triple flavor 
     track rather than a vertical duality would be too complex 
     now.

                        Simplified product line

       We cannot, and should not, attempt to be ``all things to 
     all people'' now. After all, it must be remembered that we 
     are just beginning to tap the market's potential, and that 
     the brands we sell, in most cases, seem to meet a need or a 
     want. To proliferate many new products/line extensions might 
     very well cause:
       Confusion among potential new users as to where to begin 
     and with what.
       Confusion among current users regarding what to move to; 
     possibly creating no new business, just a transfer of 
     business intra-line.
       Problems in media promotion: difficulty in creating strong, 
     separate positioning statements; lack of frequency to explain 
     all various elements.
       Trade dismay and lack of support. Moist has been 
     ``welcomed'' by the trade, but for the next four to five 
     years we will not be at the point where we can demand two to 
     three times the warehouse or retail shelf space that we now 
     enjoy. To try to put out a myriad of products is to run the 
     severe risk of alienating a carefully built trade rapport 
     based on good sales from consumer demand, as well as inviting 
     an ever-increasing damaged goods problem.

         ``Easy-to-use'' starter product development and intro

       This must be our priority niche at present, for obvious 
     reasons:
       Expansion demands a continually enlarging new user base.
       ``Floating'' and saliva build-up are still negatives to the 
     ``beginner''.
       Most readily available entry segment for competition on 
     both a product development basis and ratio of pay-back to 
     investment. (And who is to say that a so-called ``starter'' 
     product cannot carve-out, in part, its own on-going user 
     base.)
       Happy Days, because of some difficulty in use and apparent 
     ill-defined flavor, may not be the best effort we can make 
     for ``starters''. It can be improved, and then perhaps, could 
     be positioned as part of the ``regular'' line.
       Good Luck, a technological advance in packaging rather than 
     a break through in taste, is selling reasonably well in most 
     test areas; but requires better flavor and a final, true 
     evaluation before capital is expended on additional 
     machinery.
       Our new, shag cut, ``balling'' smokeless brand (whether it 
     is truly ``balled'' or just flattened between the fingers) is 
     the one that ``gut'' feelings tell us can be the most 
     successful entry. It is easy to use. Saliva build-up is 
     minimal. It takes flavoring well. Raw materials are 
     available. Production methods have been proven. A machine to 
     pack both it and W B Cut could be ready by the fourth quarter 
     of '80. However, only thorough testing of the concept will 
     prove its validity.

                            Better packaging

       The general view is that the plastic can would be a 
     positive packaging step:
       Lower manufacturing costs;
       Decreases freight costs;

[[Page 14027]]

       Easier to open;
       Stands-up better in the wearing;
       Adaptable to holding lesser amounts of tobacco; and
       May keep product fresher, longer.
       A small amount of research done in our overseas market, 
     coupled with some results from Hawken testing in Jonesboro 
     indicate good consumer acceptance for the plastic container. 
     And it is understood that both Happy Days and Skoal can be 
     packed this way now, without any loss in product quality.
       However, we can visualize the possibility of some problems 
     that might occur:
       Consumer perception that change in package means a change 
     in formula and flavor. Panel testing can prove or disprove 
     this.
       Keeping the product fresher, longer could negate the 
     ``built-in obsolescence'' in the present container, thereby 
     lessening poundage. Still, good users might just use more 
     because it is fresher. The answer might be gotten through 
     focus groups.
       Finally, one important facet of plastic packaging--its 
     adaptability--needs further commentary regarding how 
     important it could become in creating new users and meeting 
     competitive pressure.

                        Supposition and strategy

       New users ``pinch'' less often and will use less tobacco 
     per ``dip'': Build up bottom of plastic can--without changing 
     height and circumference--in order to pack a ``full'' lower 
     weight in a ``starter'' product; i.e. .6 ounces.
       Pricing can be a determinant to trial; and may well be used 
     as a competitive advantage: Lower price on ``starter'' brands 
     to increase trial, lower sampling costs, and preempt 
     competitive, ``low ball'' pricing. for example:
       Present can price: UST, 42 cents; Jobber, 52 cents; Retail, 
     65 cents (packing half as much tobacco may save 20% or more 
     while maintaining margins).
       ``Reduced'' can price: UST, 33 cents; Jobber, 41 cents; 
     Retail, 50 cents.
       Possible result: More new users, happy with a ``fair' entry 
     price, unconcerned with lesser amounts of product, who can be 
     graduated to one of our ``regular'' products at a ``regular'' 
     price (and may want to ``move'' there faster since 1.2 ounces 
     at 65 cents is a better ``deal'') . . . and competitors who 
     probably will have to cut their own margins to find a price 
     point entry meaningfully below ours.
       The foregoing discussions point the way to the 
     recommendations included on the Product Development and 
     Positioning Chart that follows; after which a Marketing 
     Action Staging form indicates the H&D, research and market 
     testing required to prove their viability.

          Product development and positioning vertical duality

       Assumptions:
       Younger and lighter users prefer a flavor, not a 
     ``natural''.
       Older and heavier users prefer real tobacco taste and 
     strength.
       Skoal is our largest selling and fastest growing product 
     (and best known); all ``starter'' products should acquaint 
     people with its taste.
       Copehagen is our second largest selling product and its 
     growth could improve with a lead-in from a ``natural'' line 
     extension, whose name and blend have proven themselves.
       Happy Days can be a better brand and a better ``graduator'' 
     with a change in flavor.
       The ``top of the line''--W B--may yet be our fastest 
     growing product and deserves a place in both ``verticals''.

                                                                    MARKETING ACTION
                                                                        [Staging]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Manufacture/develop
           Brand/Segment                    Objective                period             Research period       Test market/period      Roll-out/period
--------------------------------------------------------------------------------------------------------------------------------------------------------
Ball'n Chew Wintergreen/Plastic Can  Introduce easy-to-use,  Blend and flavor--2/    Taste test with new    4 Markets: 2 control   By region, with
                                      ``starter'' product,    80; Hand pack for       Happy Days user        w/media; 2 reduced     promotional support,
                                      to increase consumer    research--3/80; Hand    panel, vs. Good Luck   price and weight w/    during 1981.
                                      base especially among   pack for test           and Hawken. In         media 9/80 thru 12/
                                      the young.              markets--8-12/80;       addition, test in      80.
                                                              Develop machine         potential user focus
                                                              packing by 1/81; Name   groups vs. Good
                                                              and label               Luck, Hawken and
                                                              development--3/80.      Happy Days 4/80 thru
                                                                                      8/80.
Good Luck Wintermint/Plastic Can...  Change to a new taste.  Blend and flavor--3/    Taste test with user   Current areas          By region as
                                      Evaluate ``bag''        80. Full production--   panel--new vs.         utilizing present      machinery becomes
                                      concept in terms of     6/80. Prototype         present product,       production capacity    available.
                                      future sales            machinery--9/80.        also gather user       fully.
                                      potential and machine                           profile and concept
                                      needs.                                          acceptance data--3/
                                                                                      80-6/80. Audit
                                                                                      selected outlets in
                                                                                      current areas to
                                                                                      determine future
                                                                                      national volume.
Skoal Straight Plastic Can.........  Introduce line          Utilize existing Key    Audit in test markets  4 Markets: 2           National, supported
                                      extension to support    blend, and change       at retail and          Copenhagen areas,      by ``. . .  Skoal,
                                      ``natural vertical''    label--3/80.            wholesale to           one with local adv.;   and new Skoal
                                      graduation process.                             ascertain new sales    2 Skoal Areas, one     Straight'' network
                                                                                      growth vs. ``pull      with local adv. 4/80   TV spot
                                                                                      down'' from existing   thru 9/80.
                                                                                      brands. 4/80 thru 9/
                                                                                      80.
Happy Days Wintermint/Plastic Can..  Change to a new taste   Blend and flavor--3/    Taste test--existing   None.................  National
                                      and evaluate with       80. Full production--   vs. new--with large                           distribution--8/80.
                                      current users.          7/80.                   Happy Days user
                                                                                      panel. 5/80-7/80.
W B Cut Wintergreen/Pouch..........  Introduce line          Blend and flavor--5/    Taste test in panel    None.................  Region by region
                                      extension to create a   80. Packing machinery   of W B Cut users. 6/                          distribution only
                                      ``top-of-the line''     developed and full      80-10/80.                                     after further
                                      duality.                production by 1/81.                                                   acceptance of
                                                                                                                                    natural brand is
                                                                                                                                    accomplished. 1/81
                                                                                                                                    thru 12/81.
Plastic Packaging..................  Evaluate consumer       Label development--4/   Full, large panel      None.................  National distribution
                                      acceptance of plastic   80. Possible new can    test for Happy Days                           beginning--1/81.
                                      can concept.            colorations--4/80.      with Happy Days
                                                                                      users--5/80-9/80.
                                                                                      Full, large panel
                                                                                      test for Skoal with
                                                                                      Skoal users--5/80-9/
                                                                                      80. Results should
                                                                                      be at least 95
                                                                                      percent positive.
Stetson Natural/Wintergreen Pouch..  Introduce a loose leaf  Per T. Cornell: Blend   Full, loose leaf user  8 test markets         National distribution
                                      chewing entry point     and flavor--2/80.       panel tests--Stetson   conducted in strong    3/81-6/81: supported
                                      toward capture of 10    Samples production--3/  vs. Levi Garrett,      loose leaf areas: 2    by national--media
                                      percent of market in    80. Production for      Red Man, Beechnut 4/   Stetson natural--      effort.
                                      three years.            test markets--7/80-1/   80-7/80: Name and      lower media; 2
                                                              81. Full production 2/  package design         Stetson natural--
                                                              81.                     perception testing     higher media; 2
                                                                                      in 2 focus groups, 4/  Stetson wintergreen--
                                                                                      80-7/80; Audit at      lower media; 2
                                                                                      wholesale and retail   Stetson wintergreen--
                                                                                      to determine           higher media 8/20-2/
                                                                                      movement and growth    81.
                                                                                      vs. competition.
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                  ____
                                  


               U.S. Tobacco intra-company correspondence

                                                 January 21, 1980.
     FROM: A. E. Cameron, Regional Sales Manager.
     TO: Mr. R. R. Marconi, National Sales Manager.
     Re: Hawken review.

       Tuesday and Wednesday was spent in the tri-city area 
     (Briston, Tennessee; Bristol, Virginia; and Johnson City, 
     Tennessee) in an attempt to further evaluate Conwood's new 
     item ``Hawken''. I spent this time working with Mr. C. E. 
     Jordan, division manager. Factual information was hard to 
     come by in some of the areas; however, I will attempt to 
     cover what we found from consumers, retailers, and 
     distributors.

                               Consumers

       We were only able to actually discuss Hawken with two 
     consumers who have used the brand for any length of time. One 
     of these was a convenience store manager (male about 55 years 
     old). This man was supplied with samples on a regular basis 
     for at least four to five weeks. By this time he had 
     developed a taste for Hawken and now believes the flavor and 
     taste last longer than SKOAL, the brand he used before 
     Hawken. The second consumer was a 12 year old male and his 
     mother. He stated, and it was confirmed by his mother, that 
     all other brands of mouth tobacco he had tried to use would 
     make him sick. This included SKOAL, HAPPY DAYS MINT, and 
     several brands of scrap. He felt the cause with SKOAL and 
     HAPPY DAYS MINT was the brands were too hard to use, he could 
     never keep them together. Scrap produced too much juice and 
     he swallowed too much. He also felt Hawken's flavor lasted 
     longer. A very interesting observation--his mother was 
     delighted he had finally found a mouth tobacco he could use. 
     During my questioning of this lady, it was clearly evident 
     that she believes mouth tobacco is the least harmful of many 
     habits her son could develop; therefore, she openly 
     encourages him to chew. The price made no difference to these 
     two consumers.

                               Retailers

       While contacting most of the retailers we have had on the 
     ``Tracking Program'', we could only find two who definitely 
     believe Hawken is still increasing in sales. All others state 
     the brand has peaked and most report a decline in sales. 
     Every retailer stated that SKOAL definitely was hurt the 
     worst;

[[Page 14028]]

     however, they all state that SKOAL is coming back and is 
     either at, or close to its previous sales level. They all 
     report consumers of all ages are buying Hawken. Also, all 
     type of consumers are using Hawken. These retailers all agree 
     that the majority of Hawken is being used by young kids and 
     young adults. The age of the kids is from 9 years old and up. 
     I believe this to be true because outlets located close to 
     schools (all grades) are definitely the heavier Hawken 
     outlets we visited. Several retailers indicated that price 
     was a factor with the young kids. Also, the people who knew 
     about mouth tobaccos felt the sweet tests was a definite 
     factor with the kids. No retailer expressed any problem with 
     the lower price of Hawken. They all state their mark-up is 
     the same percentage as on SKOAL and other tobaccos.

                              Distributors

       Distributors all state that they did no more on Hawken than 
     any other new item. They all report that the brand has peaked 
     and they are seeing declines. No distributor indicated any 
     promotional activity was planned for Hawken.
       As you can see, all levels are pointing the same way on 
     Hawken. I believe the brand has hurt SKOAL and HAPPY DAYS 
     MINT as much as it is going to. Figures prove Hawken killed 
     our increase on SKOAL (30 percent); and at this point, we are 
     showing about 9 percent decrease in sales where Hawken is 
     available. At one point, our loss was well over 20 percent. 
     This has turned around and I believe SKOAL will be back to a 
     break-even point within the next few weeks. I feel by the end 
     of the next three-month tracking period, our increase will be 
     back to normal. I am not at all sure our increase won't be 
     greater than ever. It definitely is a fact that Hawken has 
     brought a lot of new consumers into the mouth tobacco market. 
     I think this brand has reached kids four or five years 
     earlier than we have contacted them in the past. Indications 
     are that some of these new users are moving up to a stronger 
     brand. Also, indications are that some older consumers are 
     moving from Hawken back to the brands they were using before, 
     and some consumers have begun mixing Hawken with SKOAL and 
     Levi Scrap. If these trends continue. Hawken may prove to be 
     a very good starter product for SKOAL.
       I am convinced we must continue our tracking of Hawken for 
     at least another three months before our questions can be 
     answered. However, all figures indicate Hawken, when 
     introduced in a new market, will kill our increase on SKOAL 
     and, in fact, cause a 10 to 20 percent loss for the first 
     three months.
       Our field personnel will continue to supply all information 
     possible on Hawken.

                          ____________________