UST Wine & Tobacco Names New CEO
EW YORK (MarketWatch) — UST Inc. (UST), the largest maker of smokeless tobacco products, said Thursday it would promote Murray S. Kessler to chief executive in January.
Kessler, who has been the company’s president and chief operating officer since November 2005, will succeed Vincent Gierer Jr., who will retire at the end of the year. Gierer, 59, plans to continue to serve as a non-executive chairman.
Kessler, 47, comes to his role at a time when UST is facing increased competition. Not only does the Greenwich, Conn., company have to continue to fend off lower-priced rivals, but it is facing new competition from major cigarette manufacturers now looking to enter the smokeless tobacco segment.
In an interview Thursday with Dow Jones Newswires, Kessler said he sees the entrance of companies such as Altria Group Inc.’s (MO) Philip Morris USA into the smokeless tobacco category as a validation of UST’s strategy to convert adult smokers into users of smokeless tobacco products.
“It’s a validation of everything we’ve been telling the Street for years,” Kessler said. “I think that it’s good news for the category. It brings increased awareness.”
UST’s products include Copenhagen and Skoal, but earlier this year, the company began test-marketing Skoal Dry, a small pouch of dry tobacco that can be tucked between a user’s cheek and gum, to meet the needs of smokers who are looking for an alternative to cigarettes as smoking restrictions grow more widespread.
The entrance of major cigarette makers into the category has helped smokeless tobacco products win more shelf space in stores and increase product awareness among cigarette smokers, Kessler said.
According to Kessler, the smokeless tobacco category is one of the fastest-growing consumer packaged goods in the U.S.
UST has been grooming Kessler for the CEO post for seven years by giving him increasing levels of responsibility, he said. Prior to becoming president and chief operating officer, Kessler had been president of the company’s U.S. Smokeless Tobacco Co. unit.
Kessler said he shares a “common vision” with UST’s Gierer.
In a press release, Gierer said Kessler has been “instrumental” in driving growth for the smokeless tobacco category and for the company’s cost-cutting initiative Project Momentum.
Analysts expect UST will provide more detail about its progress with Project Momentum, including more detail regarding when the cost savings will roll to UST’s bottom line, at a Dec. 19 analyst day. The analysts expect much of the savings from the project will be used to invest behind UST’s premium brands.
As for the company’s wine business, Kessler said, “I like the wine business. It has been accretive to our sales and earnings.”
According to Kessler, the wine business is 3% of the company’s per-share earnings, but represents 12% of UST’s earnings growth. At the same time, the business represents 12% of UST’s sales, but 20% of its sales growth.
Still, Kessler said he would like to see the wine business increase its rate of return.
UST shares were recently trading at $53.41, down 26 cents, or 0.5%. The stock hit a 52-week high of $57.42 Oct. 25.
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