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CHICAGO - The growth of a new smokeless tobacco product in the United States is nothing to spit at, but cigarette companies still rely on their standard method for increasing profits -- raising prices.

The two largest US tobacco companies -- Altria Group Inc and Reynolds American Inc -- have been expanding distribution of snus, a type of smokeless, spitless moist snuff tobacco popular in Scandinavian countries, as they look for products to sell to smokers trying to quit cigarettes.

Snus has been a moderate hit since Swedish Match AB brought it to the United States 10 years ago, but pushing new products has not driven profits enough to shift tobacco companies’ focus away from cigarettes.

Cigarette makers still count on raising prices to earn profits.

"(Tobacco companies) definitely see smokeless as a longterm piece of the business," said Morningstar analyst Phil Gorham. "But don’t be fooled ... even though it’s a growth category and cigarettes are in decline, it’s still a small part of the overall business."

Cigarette consumption in the United States shrinks more than 2 percent each year, according to Euromonitor International data, but companies such as Marlboro cigarette maker Altria, Camel maker Reynolds and Newport maker Lorillard Inc use price hikes to compensate.

That was harder to do in the last year as Reynolds used promotions to try to grab market share, said Gorham, who follows tobacco companies at Morningstar.

Gorham expects a 3 to 4 percent price increase from all three major players this fall.

The price gap between premium brands such as Marlboro and Camel is smaller than in past years, said Stifel Nicolaus analyst Chris Growe. Because of that, he predicted increases of at least 5 cents a pack for premium brands later in the year.

Still, focusing on cigarette prices does not prevent tobacco companies from trying to increase sales volume overall, which has led to the appearance of snus (rhymes with "loose") in convenience stores and gas stations.

Swedish-style snus grew 122 percent by volume in the United States in 2007-08 and 28 percent in 2008-09, up from a small base, according to Euromonitor data.

Stockholm-based Swedish Match reported US consumption of General brand snus was four times higher in 2009 than in 2008.

The overall smokeless tobacco category is growing by 6 to 7 percent a year, said Gorham, but compared with cigarettes, smokeless is tiny, and snus is even smaller.

Smokeless in total represents about 2 percent of tobacco companies’ revenue; snus makes up about 0.5 percent of moist snuff sales in the United States, according to Euromonitor data.

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