UPDATE 2-Philip Morris to test moist smokeless Marlboro

(Adds comments, competitor details, stock activity, byline)

CHICAGO, Aug 21 (Reuters) - Philip Morris USA said on Tuesday it would start selling Marlboro chewing tobacco in Atlanta this October, marking the latest step in the cigarette maker’s plan to diversify its lineup of tobacco products.

Smokeless tobacco is seen as an attractive new market for cigarette makers that have seen smoking steadily decline in the United States.

Philip Morris, the largest U.S. cigarette maker and a unit of Altria Group Inc MO.N, said it planned to sell original and wintergreen flavors and long-cut and fine-cut varieties of the product in the test market.

The company expects the products to sell for about $3 per can at retail, between the highest-priced and lowest-priced products in Atlanta.

The move comes after rival Reynolds American Inc RAI.N bought the Conwood smokeless tobacco company last year to tap into that market. Conwood's brands include premium-priced Kodiak and value-priced Grizzly.

Goldman Sachs analyst Judy Hong said the introduction creates the potential for pressure on Reynolds and longtime smokeless tobacco maker UST Inc UST.N.

UST Inc shares fell as much as 6.1 percent on the heels of the Philip Morris announcement. UST makes the premium-priced Copenhagen and Skoal smokeless tobacco products, and the value- priced Husky and Red Seal brands.

UBS analyst Nik Modi repeated his “buy” rating on UST. He said it would take several more quarters before Philip Morris would even consider a national launch of the new product and noted UST already sells Copenhagen and Skoal at an effective price of $2.50 to $3.00 per can in value packs.

Philip Morris said it was using the Marlboro name since smokeless tobacco users believe the brand stands for “flavor and premium quality.”

Marlboro is the top-selling cigarette brand.

Both Philip Morris and Reynolds are also test-marketing snus -- a smokeless, spitless tobacco product in a pouch -- to see if it is a viable alternative for smokers who have shunned traditional smokeless tobacco.

UST shares were down $2.93 at $49.03 in afternoon trading on the New York Stock Exchange, after falling as low as $48.77. Altria shares were up less than 1 percent at $67.37 and Reynolds shares were up 1.2 percent at $64.92.

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(Reporting by Jessica Wohl)

((Editing by Gerald E. McCormick/Andre Grenon; Reuters Messaging:; +1-312-408- 8132; e-mail: Keywords: ALTRIA PHILIPMORRIS/

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