FLASR Widens Distribution of Portable Spittoon for Smokeless Tobacco Users

The tobacco industry is amazingly resilient. The evidence can be found in a recent comparison of the S&P 500 and a custom equal-weighted index of the five tobacco stocks in the S&P 1500, showing returns on the tobacco stocks to be more than double that of the S&P 500.

Tobacco companies have remained nimble throughout the industry transformation, diversifying and consolidating in some cases and passing on cost increases to consumers to counterbalance lower cigarette sales volumes in others. It’s with good reason that companies like Vector Group (NYSE: VGR), Altria Group (NYSE: MO), Reynolds American (NYSE: RAI) and Philip Morris (NYSE: PM) are all at or near record highs.

These companies have a presence in cigarette smoking “alternatives” as well, including electronic cigarettes and smokeless tobacco, an industry that, opposite to cigarette smoking, isn’t seeing a decline in use. Smokeless tobacco goes by a litany of names, including, dip, chew and snuff, to name a few. It’s a small industry (estimated $4.8 billion in 2010) relative to cigarettes, but growing year-over-year in the face of anti-tobacco campaigns and health consciousness among people. EuroMonitorforecasts the smokeless tobacco market to reach $9.2 billion in 2018, as “[the] high and rising cost of cigarettes and the strong marketing focus of tobacco companies on smokeless tobacco are set to contribute substantially to these anticipated increases.”

Data from the U.S. Centers for Disease Control and Prevention supports the growth, showing smokeless tobacco sales totaled approximately 124.6 million pounds in the U.S. in 2011, an increase from 122.6 million pounds sold in 2010. US Smokeless Tobacco Co, owned a subsidiary of Altria, controlled almost half of the volume share in 2013 with its Copenhagen, Skoal, Red Seal and Husky brands.

Spit Happens

While there are spitless tobaccos, the majority of consumers of smokeless tobacco suck or chew on the tobacco and spit out the build up of the tobacco juice. Depending on the surrounding environment, this can present its own set of challenges to discard the tobacco byproduct, albeit for sanitary or social reasons. FLASR, Inc. (OTCQB: FLSR) offers the Flasr™, a reusable portable spittoon solution that addresses the need to discretely dispose of moist tobacco juice build up while protecting against spills and escaping tobacco scent. The four-ounce flask is small enough to slip into a shirt pocket and comes with an innovative “Thumb-Lok Twist Cap” that can be opened and closed with only one hand.

There is relatively limited competition to FLASR in the tobacco accessory market that includes more than nine million Americans that use smokeless tobacco, namely the small, private companies Porta-toon, Mud Jug and Spit Bud. FLASR heralds its product as the next evolution in spittoons, providing users superior protection against spills and scent with a sleek design that has been optimized in size following extensive beta testing to determine what consumers what.

Distribution and Marketing is Key

Many small companies have a great product for an untapped market, but fail as a business because of a lack of understanding and executing on product distribution and branding. With a minimalistic business model to use a one-stop supplier, FLASR runs lean to focus its resources on getting in front of its target demographic. By large, this means men under the age of 35 and, more succinctly, with specific interests, including hunters and fisherman and fans of rodeo and NASCAR.

To reach the rodeo crowd, FLASR has partnered with the Professional Bull Riders 2015 tour, becoming a sponsor of PBR Built Ford Tough events; become a title sponsor of the 2015 Championship Bull Riding Tour; and signed Brennon Eldred, who just captured first place at the CBR World Finals at Cheyenne Frontier Days, as a spokesman. The company is also running ads in the print publication Professional Rodeo Cowboys Association magazine and on ProRodeo.com. In the motor sports space, FLASR is a primary sponsor for Ryan Sieg and RSS Racing and has sponsored Reed Sorenson and Tommy Baldwin Racing.

Elsewhere, T-Roy Broussard, the famous alligator hunter and star of History Channel’s “Swamp People,” has joined the FLASR team. Broussard came on in January as a spokesman Flasr, with the company customizing his boat and Pro Bass truck for the 2015 Walmart FLW bass fishing tour while releasing a matching signature edition camouflage gator print Flasr. As Broussard explained in a news announcement, in addition to protecting his boat and truck from spills, it’s important for a successful hunt to conceal the scent of tobacco because animals have such a keen sense of smell.

On a broader scale, FLASR is advertising through Google (NASDAQ: GOOG) and YouTube’s TrueView platform to raise visibility for its portable spittoon to targeted audiences. Further, 60-second television commercials for Flasr are being run through As Seen on TV Productions in target markets on the popular television stations Country Music Television, ESPN2 and Fox Sports.

With the advertising fanning out across the country, the next step is for FLASR to make its product more widely available and physically on display in front of consumers to supplement e-commerce sales on the FLASR website and Amazon.com. A national launch got underway in June via a relationship with Product Service Distribution Technologies, a company that has reaches into 85 percent of retail outlets in the U.S., to put the Flasr into 400 stores. The retail efforts got ratcheted up last week as FLASR penned a four-stage distribution agreement with Mr. Checkout Distributors. In each stage, the Flasr will be available in 625 stores in key smokeless tobacco markets for a total of 2,500 stores across the program. Servicing 35,000 convenience, grocery and specialty stores, Mr. Checkout is a big piece of the puzzle in getting FLASR a wider footprint in convenience stores, one of the most desirable retail locations for any company.

If FLASR gets prime point-of-sale display space near the counter and tobacco products in C-stores, it would seem likely to produce a boon in sales in combination with the substantial marketing efforts ongoing. C-stores are sought after outlets to drive sales, but the implications run deeper than that if the Flasr gets traction. Big box stores, such as Cabela’s, Bass Pro Shops and Gander Mountain where the Flasr would be a natural fit, typically are not the first to carry a product, but will follow after initial market acceptance.

FLASR is in its infancy and cannot be measured to bigger peers by traditional Wall Street metrics, such as a price-to-earnings ratio, assets, etc. at this point. This is about market opportunity and the diligence CEO Everett Dickson has performed to align the company to reach the right mass audience. Without speaking too speculatively, it seems that the company should be able to command a strong profit margin, assuming a 50 percent discount to retail price to distributors (meaning about $2.50 per unit) and manufacturing costs per unit to FLASR in the neighborhood of 50 cents each. Overall net losses are inevitable at this point with all of the marketing, distribution and branding expenses, but if the company is netting a profit on each Flasr, the overall spend will start to balance out in time. This latest distribution partnership is an exclamation point on marketing efforts and points FLASR in the direction towards positive cash flow. Now it’s a matter of seeing how fast the infrastructure and marketing architecture begin to bear fruit.