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10TOBACCOOUTLETBUSINESSMARCHAPRIL2009NEWSTRENDSMARCHAPRIL2009HigHligHtsLawmakersLooktoRegulateSmallCigarsSmallcigarsusuallythesizeo-cigarettesando-tenavailablein-ruit-lavorsareincreasinglyinthecrosshairso-statelawmakerswhoseektotaxandregulatethemasheavilyastheydocigarettes.Lastyearthreestatesx14MassachusettsNewHampshireandRhodeIslandx14passedbillstotaxsmallcigarsatthesamerateascigarettes.AndinOctober2008BaltimoreMd.bannedSCHIPScuttlesStateTaxHikesNewfederaltaxwillmakeittougherforstatestoboostlocalcigarettetaxes.Theincreaseinthe-ederalcigarettetaxmandatedbythepassageo-theStateChildrenx19sHealthInsuranceProgrambillinFebruarywillmakeitmoredi-fcult-orstatestoincreasecigarettetaxesaccordingtotheTheWallStreetJournal.Approximately16statesarecurrentlyconsideringcigarettetaxhikesinordertobalancetheirbudgets.Buttheincreaseinthe-ederalcigarettetax-rom39centsperpackto1.01perpackwillmakeadditionaltaxhikesless-easiblereportedtheJournalbecausetheincreasewilllikelyleadtoadeclineinoverallsaleswhichwouldnegativelyimpactstatetaxrevenues.In-actevenstatesthatenactedtaxincreasespriortoSCHIPx19spassagehaveexperiencedthatissue.TheCenter-orPolicyResearcho-NewJerseyreportedthatsincethatstatex19scigarettetaxwasraised17.5centstwoyearsagothestatehaslost46millionintaxrevenueasconsumersstoppedsmokingor-oundalternatewayso-obtainingcigarettes.Economistsestimatethatincreasingthepriceo-cigarettesby10percentdecreasesconsumptionby4percent.Seex1cSCHIPFeelingtheSqueezex1dp.40-ormorein-ormationaboutSCHIP.SwedishMatchandPhilipMorrisInternationalAnnounceJointVentureThetwomanufacturersplantojoinforcestocommercializesmoke-freeproducts.CONTINUEDONPAGE12PMUSAReshux14fesTestingTestingofMarlboroMSTendswhileMarlboroSnustestingexpands.InJanuaryPhilipMorrisUSAPMUSAx14adivisiono-Altriax14announcedanendtoitsMarlboromoistsmokelesstobaccoMSTtestmarketinAtlantaGa.andsurroundingcounties.AcompanystatementaccompanyingtheannouncementnotedthatPMUSAremainscommittedtothesmokelesscategorybutis-ocusingitse--ortsonthesmokelesstobaccobusinessitrecentlyacquired-romUST.MeanwhilePMUSArevampedtheMarlboroSnusproductithasbeentest-marketinginDallasTexasandIndianapolisInd.andexpandedthetestmarkettoincludeArizona.MarlboroSnusisaspit--reesmokelesstobacco-pouchalternativedesignedespecially-oradultsmokers.ThenewMarlboroSnus-eaturesnewpackagingandproductenhancementsreportsPMUSA.InFebruarySwedishMatchABandPhilipMorrisInternationalPMIenteredintoanagreementtoestablishanexclusivejoint-venturecompanytomarketSwedishsnusandothersmoke--reetobaccoproductsworldwideoutsideo-ScandinaviaandtheUnitedStates.x1cThejointventurewillutilizethestrongcombinationo-SwedishMatchx19sproductdevelopmentandmanu-acturingexpertiseinthesmoke--reecategoryandPMIx19sextensivesalesanddistributionin-rastructuretodevelopbusinessopportunitiesworldwidex1daccordingtoacompanystatement.x1cUndertheagreementeachcompanywillowna50percentstakeandwilllicensetheirrespectivetrademarksandintellectualpropertytothejointventure.x1dSwedishMatchpresidentandCEOLarsDahlgrendubbedPMIasthex1cidealstrategicpartnerx1d-orSwedishMatchinthesmoke--reecategory.x1cThisagreementprovidesuswiththeopportunitytobringourqualityproductstoconsumersacrossabroadergeographyx1dhesaid.x1cThesmoke--reecategoryhasdemonstratedsubstantialgrowthinSwedenandNorwayoveranumbero-yearsandwebelievethatsmoke--reetobaccoproductsandespeciallySwedishsnushavepotentialoutsideo-theircurrentmarkets.x1dThejointventurewillbebasedinStockholmandhaveasix-memberboardo-directorswiththreenominatedbyeachcompany.