Chicago's Wicker Park is where Brooklyn's Williamsburg and LA's Silver Lake once were. And Catching up fast. Milwaukee Avenue meets Damen Avenue just north of the tiny triangle of green that gives the area its name. And now, north and south-east of this junction, the low-rise landscape of shabby storefronts is growing sharp edges and fresh glazing. Fashion and design emporia, like Hejfina, and bare-concrete bars serving Asian/Argentinian fusion, such as Rodan, are replacing liquor stores and other essential services. On a February morning earlier this year, with temperature a long way south of zero, the most welcoming of Wicker park's recent arrivals is a café-cum-lounge-cum-bar (and much more, as it turns out) called Marshall McGearty. It is open for coffee and pastries, both excellent, and the woody and welcoming lounge is scattered with junk-store, but well maintained, mid-century furniture from the poppier end of the spectrum. The ceiling is an elaborately wrought shiny tin, and the walls are shingle or a black wallpaper with an elegant, silver tree motif. There is a feature fireplace, clever out-of-context leather club chairs, Louis XV sofas. The odd desk, standing lamps and Scrabble and Faulkner on the bookshelves. There is, of course, free Wi-Fi. Starbucks it is not.

What initially seems random, you soon realise, is carefully put together. This is thrift-store chic of the highest order. And it makes Marshall McGearty a very amenable place to read or work or exchange smart conversation. And/or smoke. It looks like a very good place to smoke. There is a huge collection of vintage ashtrays on display and out to use. And a lot of the customers - just the sorts you would expect and very scenic - are doing just that.

If you had bothered to read the lounge's insignia upfront, you would have seen the legend 'Marshall McGearty Tobacco Artisans'. Inside, at one end of the 44ft walnut and marble bar, is a cabinet display of tobacco blends in large jars, tagged with titles like The Earl, Muse, The Virginian, The Empress, North Star, Oriental Rose and The Standard. Each has an image taped across it. They are 19th-century fantastic and suggest these dried leaves, from Brazil, Thailand, Zimbabwe, Malawi and North Carolina, are the product of imperial adventure and entrepreneurship.

There is a menu system on hand, which describes the blends as it might coffee or wine ('light and smooth', 'mellow and flavourful', rich and full-bodied') and in front of each jar are cigarette packets to match the blends. Neither flimsy flip-tops nor squashable soft-packs, these are serious boxes, emblazoned in gold with gold-leaf paper and cards carrying the images of the haughty Earl and the flaxenhaired Empress. Behind the counter are a number of brass machines with levers and pulleys, pre-Fordist devices but clearly newly minted (patent-pending it transpires).

The lady behind the counter will explain that the machines are unique and can produce 20 freshly wrapped cigarettes as quickly as most baristas can whip you up a latte. She will suggest which blend might suit you. And tell you that Marshall and McGearty are two tobacco enthusiasts who decide to offer fellow puffers the finest smoking experience. Which is sort of true.

The lounge organizes smoking-related events, "know your blends' and such. At the bottom of its promotional material is marked, very discreetly, 'RJ Reynolds' (RJR), America's second largest tobacco company and owner of the Camel, Winston and Lucky Strike brands.

The Marshall McGearty Tobacco Lounge, it turns out, was launched at the fag end of 2005 after two years of out-of-the-box thinking by RJR and Quaker City Mercantile, a Philadelphia-based marketing and advertising agency. (The lounge was launched the same week that Chicago announced a phased ban on smoking in bars and restaurants; it is able to get around the ban because it is primarily, in terms of sales, a tobacco retailer, rather than a bar. It also has a NASA-developed air replacement unit and bars that prove their air is as clean as the outside can allow lighting up.)

The broad thinking behind Marshall McGearty is simple. People are trading up in their daily vices - coffee, chocolate and wine. There is a growing interest in superior ingredients; smart packaging; elaborate evidence or provenance and small-batch or bespoke production; and artfully designed retail outlets in areas of town where rents are cheaper but the demographics are heading the right way. So why not apply the same tactics to cigarettes? RJR's research suggests that 20 per cent of the cigarette-buying market would be interested in a high-end cigarette experience if such a thing were available.

Smokers are notoriously brand loyal; it takes a lot to drag them out of their preferred fug. In recent years, the value proposition has been big news. But hat interested RJR was building a new brand around a premium proposition. 'Marshall McGearty introduces a level of connoisseurship to tobacco that was previously reserved for luxury indulgences such as wine, single-malt scotches and cigars,' says RJR spokesman David Howard.

The concept is nominally the brain-child of Larry McGearty, creative director at Quaker City Mercantile, and Jerry Marshall, a senior R&D and blend specialist at RJR, committed and connoisseur smokers both. Says McGearty: "Jerry and I were sitting around one day and he was sharing cigarettes from all these villages and I was taken away. And we're like, no one's doing this right, man. People are doing wines and cigars, but what about tobacco?' Two years later they launched Marshall McGearty, the lounge, the cigarette, the brand.

What marks the enterprise out, beyond the fact that this is a completely novel approach in terms of cigarette sales and marketing is the execution and the precise way it is pitched. The lounge is a long way from faux-club cigar bar. Planted in a high-rent part of town that a clumsier corporation might have come up with. RJR and Quaker City Mercantile (formerly known as Gyro Worldwide) went for Wicker Park because, as Howard says, it is 'a heavy safe culture and boutique shopping'. But it also has edge. RJR wanted to be in an area where American Apparel was just setting up and Starbucks had yet to land. Quaker City Mercantile, working with the Otto Design Group, also of Philadelphia, created a space that sits very comfortably in such an area.

The packaging steers clear of the tired tropes that so often speak of luxury, and looks more like the offering of an independent record company. Rather than selling a lifestyle (legally difficult for cigarette companies), it is about supporting a pure, if slightly factional, product story. It is a classic marketing manoeuvre, 'seeding' a brand in the hippest of urban audiences, pulled off with great skill.

The experiment also recognises a shift in smoking habits. If most young people are not keen on maintaining a 40-a-day habit, they are open to enjoying smoking as a special treat, an indulgence on a big night out or, more sparely, over coffee. For the kind of habit, a premium priced cigarette promising big flavour and a certain discernment is just the job.

RJR is pushing forward very gently with the Marshall McGearty concept, slowly building the brand. A second lounge is to open this year in its home town, Winston-Salem in North Carolina. RJR won't say whether others will follow. But it is clear that the super-premium ciggie is what big tobacco did next.

1553 Milwaukee Avenue, Chicago
tel: 1.773 772 8410, www.mmsmokes.com