Published January 11, 2007
NEW YORK – A new hand gel is starting to appear on drug-store shelves promising more than just an end to germs or dry skin — this one claims to satisfy users' tobacco cravings for up to four hours.
Walgreen Co. (WAG), the largest U.S. drugstore chain by sales, is now stocking its more than 5,500 stores with packets of Nicogel, a quick-evaporating gel made with tobacco extracts. The roll-out should be finished within a couple weeks, said company spokeswoman Carol Hively in an e-mail, adding that it costs $5.99 for box of 10 doses.
Nicogel, made by a unit of privately held Blue Whale Worldwide Inc., can be used when smoking is inconvenient, such as at work, on an airplane, in a theater or, these days, in almost any other public place.
Blue Whale, which also sells a smokeless tobacco substitute made from tea leaves, is hoping to cash in on the increasing number of smoking bans and the ill-effects of second-hand smoke, Chief Executive Bill Whalen said in an interview this week.
"The potential for this product is enormous," said Whalen, a horticultural geneticist with a business degree from the University of Pennsylvania's Wharton School. "The most important thing is smoking bans. (Also, more) people don't want to smell like smoke."
Nicogel, which is already sold in 40 other countries including the United Kingdom, France and Germany, could generate $200 million in U.S. sales this year, Whalen said, predicting that sales will reach $1 billion by the end of 2008.
Smoking bans, which have cleared some air in places such as New York, Washington D.C., Louisiana, and Philadelphia, are helping to make cigarette alternatives, like smokeless tobacco, the fastest-growing segment of the industry, according to Charles Norton, portfolio manager of the Vice Fund, which has $75 million under management.
The U.S. moist smokeless tobacco category, which is dominated by Skoal and Copenhagen maker UST Inc., is one-tenth the size of the cigarette market, but is seeing unit volumes grow 8 percent to 9 percent a year, Norton said. By contrast, U.S. annual consumption of cigarettes is falling 1 percent to 2 percent.
Cigarette makers such as Altria Group Inc. unit Philip Morris USA have been able to offset declining volumes by raising prices, Norton said.
MARKETING KEY TO SUCCESS
But Nicogel's success will hinge on marketing, Norton said.
"Even (for) the established smokeless tobacco companies ... it's all marketing and promotion spending and how aggressive they can be. For a small private company, I question how much marketing muscle they could put behind it," Norton said.
Nicogel plans to spend "upward of $15 million" this year on marketing campaigns in national newspapers and magazines, as well as through nightclubs and hospital chains, which Whalen said are interested in Nicogel for their patients, doctors and nurses.
The clear gel, which Whalen said will soon turn up in other large chains, has all the components of tobacco but lacks many carcinogens, which are formed as cigarettes burn.
Patrick Reynolds, spokesman for the Foundation for a Smokefree America, said many anti-smoking advocates will likely oppose the use of Nicogel, claiming that it enables smokers to avoid stopping.
"My feeling is different. I am OK with these products, which help a smoker get through nicotine cravings," said Reynolds, whose grandfather, R.J. Reynolds, founded the tobacco company that became Camel and Kool maker Reynolds American Inc. .
"Our feeling is that if you can ease a smoker's way ... if you can give them a little comfort or relief temporarily, we don't see anything wrong with that," Reynolds said.