To be sure, the merchandising contracts are not pushing minor brands out of stores completely. Retailers have found that some deep-discount brands offer attractive margins compared with the big boys. But for the smaller players, getting their products into the store can be an uphill climb."The big manufacturers make the contract requirements difficult for retailers to understand so they don''t know what is allowed," said Keith Grover, marketing manager for Sante Fe Natural Tobacco, maker of Natural American Spirit cigarettes. "We try to understand those programs and explain to retailers that, for instance, temporary price tags on the rack are permissible. But there''s a lot of ignorance about merchandising programs and retailers are unable to make an objective decision about profitability. Many times they don''t believe us."In a more recent development, the big tobacco companies have been pushing their merchandising away from tobacco-only outlets and toward c-stores, where price is secondary to availability for customers already used to paying a premium for other purchases, per a recent Convenience Store News survey.

This summer Philip Morris, which supplies about half of America''s cigarettes with its Marlboro, Benson & Hedges, Merit, Virginia Slims, Parliament and Basic brands, introduced the Accord battery-powered cigarette, a pricey gadget that reduces sidestream smoke, ashes and most lingering odor. For $40, consumers get a carton of specially made cigarettes, a battery charger, an instructional video and a "puff-activated" electronic lighter that holds the cigarette and allows smokers to wait hours between puffs. Since Accord burns at a lower temperature than normal cigarettes, it could introduce fewer harmful chemicals to the body, but the packaging currently does not make health claims. The high-tech smoke is not blowing their socks off, spokespeople say, but they plan to keep working on it and expanding awareness through direct-mail of the product, which has been five years and over $200 million in the making.A reduced-smoke cigarette is also in the works for B&W, a company representative said, but additional details were not available at press time.

All naturalPositioned as an all-natural, premium brand priced at 25 cents to 85 cents higher than standard packs, Natural American Spirit contains a blend of tobacco with no stems or artificial flavorings. For the menthol items, a chamber containing natural menthol is infused into the center of the filter to release a vapor into the smoke as it is inhaled--no menthol is added to the tobacco. Medium and light filter cigarettes have increasingly dense filters and porous papers to dilute the smoke with more air."The real benefit of carrying them is the trade margin," Tully said, with an average profit per pack of $1.02.Regionally popular in New Mexico, California, Oregon, Michigan, New York and Chicago, Tully reported the brand''s compound annual growth rate over the past eight years as 17 percent. This month the company will introduce a tobacco-free herbal cigarette and, by next January, will offer all varieties in hard packs. When the Master Settlement Agreement imposed marketing restrictions, Philip Morris and R.J. Reynolds back with tough tactics to squeeze their competitiors off shelves.

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