Where There's No Smoke

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The industry's rush to clear the air comes at a time of popular backlash against smoking in public places. Leading the charge is Surgeon General C. Everett Koop, who has called for a smoke-free society by the year 2000. Since 1974, 42 states and 1,000 municipalities have moved to restrict smoking in such open areas as restaurants, offices and hospitals.

As smokers have come under fire from all sides, U.S. domestic cigarette sales have been dropping 2% to 3% annually, to 29 billion packs last year. Fewer Americans than ever (55 million, or 26.5% of the adult population) smoke at all. The smokeless cigarette, Reynolds hopes, could help extinguish that trend.

That is just what has critics fuming. If the new cigarette actually satisfies a craving for nicotine without producing the smoke that annoys others, smokers might have less incentive to quit. Nonsmokers, meanwhile, might be just as vulnerable as before, or more so. "Now when someone lights up, you can see and avoid the smoke," says John Banzhaf, executive director of Action on Smoking and Health. "With the new cigarette, which still may give off dangerous chemicals, it will be harder to avoid."

Reynolds' smokeless-cigarette project, code-named Operation Black Hole, was conducted in total secrecy. But word began to leak out before last week's press conference. Amid rumors of a breakthrough, Reynolds stock jumped nearly three points, to 67 3/4, in heavy trading. Once the news was out, Wall Street took a more skeptical view. The new product, analysts agreed, would not boost Reynolds' profits anytime soon, and so its stock price settled back to 64 7/8 at week's end.

Still, some tobacco watchers think the innovation has the potential to transform the industry. Says Marc Cohen, a consumer-goods expert at the Sanford C. Bernstein investment firm: "The $64,000 question is: How will consumers react to it? Will smokers be satisfied? Will nonsmokers be satisfied?" If the answer is yes, the smoggy poker game, and other familiar scenes, could become a thing of the past.