474 Report
Debt Policy at UST Inc.
Name: Siqi Han Student ID: 104116968 Professor: Yunbi An
1. Frame the issue. Briefly describe that UST is planning to reverse a long-standing conservative financial policy.
In the 1990s, UST is a major manufacturer of moist smokeless tobacco, controlling 77 percent of the market. Smokeless tobacco products both snuff (dry and wet) and chewing tobacco (loose leaf, plug and twist / volume) categories. UST was a market leader of the snuff product category, innovating with new product forms and flavors over the years. UST has also been a profitable company, boosting its shareholders’ earnings by undertaking measures such as increasing the cost of its products steadily with time. UST also benefited from the steady increase in market demand for smokeless tobacco given the rising restrictions on cigarette second hand smoke. UST was still criticized at the time for its tardiness with new product introductions and losing its market share to new and smaller competitors. In 1997, instead of cutting product prices to compete, UST introduced new line of lower priced products such as Copenhagen Long Cut and Rooster. UST also renewed its focus on the marketing campaigns, launching promotions and increasing couponing.
For years, tobacco industry had been embattled with health related lawsuits. Majority of these litigations were for cigarette companies in comparison to smokeless tobacco industry. Still, UST had seven pending health related lawsuits. UST has historically been one of the most profitable companies in corporate America. Even though S&P rated the debt of many tobacco companies as investment grade, its long term outlook of the tobacco industry was unclear given the rising restrictions on tobacco products and health awareness among consumers. Despite the questionable outlook of tobacco industry, in December 1998 UST’s board of directors decided for active capital
Name: Siqi Han Student ID: 104116968 Professor: Yunbi An
1. Frame the issue. Briefly describe that UST is planning to reverse a long-standing conservative financial policy.
In the 1990s, UST is a major manufacturer of moist smokeless tobacco, controlling 77 percent of the market. Smokeless tobacco products both snuff (dry and wet) and chewing tobacco (loose leaf, plug and twist / volume) categories. UST was a market leader of the snuff product category, innovating with new product forms and flavors over the years. UST has also been a profitable company, boosting its shareholders’ earnings by undertaking measures such as increasing the cost of its products steadily with time. UST also benefited from the steady increase in market demand for smokeless tobacco given the rising restrictions on cigarette second hand smoke. UST was still criticized at the time for its tardiness with new product introductions and losing its market share to new and smaller competitors. In 1997, instead of cutting product prices to compete, UST introduced new line of lower priced products such as Copenhagen Long Cut and Rooster. UST also renewed its focus on the marketing campaigns, launching promotions and increasing couponing.
For years, tobacco industry had been embattled with health related lawsuits. Majority of these litigations were for cigarette companies in comparison to smokeless tobacco industry. Still, UST had seven pending health related lawsuits. UST has historically been one of the most profitable companies in corporate America. Even though S&P rated the debt of many tobacco companies as investment grade, its long term outlook of the tobacco industry was unclear given the rising restrictions on tobacco products and health awareness among consumers. Despite the questionable outlook of tobacco industry, in December 1998 UST’s board of directors decided for active capital