Tag Archives: Reynolds American
Facing heavy legal challenges from tobacco industry, the U.S. Food and Drug Administration has concluded to discard its nine graphic heal warnings for tobacco products and begin from the start again.
The federal body said it will return to the drawing board and develop new warnings rather than keep fighting against the tobacco companies for its present labels, among which are pictures of dead lungs and smoker’s corpse. The agency had a term until Monday, March 18 to request the U.S. Supreme Court to revise a ruling by an Appeals Court that upheld the decision that the requiring graphic labels infringed free speech rights protected by the First Amendment.
Reynolds American Inc. promoted a number of innovative smoke-free tobacco products which are about to be launched to the U.S. market, in attempt to rise the tobacco company’s performance and retain consumers in the segment.
RAI latest products, among which are an electronic cigarette and nicotine replacement treatment, are being introduced as the company deals with a challenging trade environment driven by to slipping demand for conventional cigarettes. Cigarette sales have been shrinking for several years, partly due to economic downturn and high unemployment which leads to less disposable income in adult consumers.
The tobacco giant is now willing to help smokers quit.
The second largest tobacco company in the United States, Reynolds American Inc., is using a daring strategy to come to the market of nicotine replacement therapies, according to experts.
Launching the Zonnic brand of nicotine gum, produced by its Niconovum pharmaceutical division, the Camel-maker is asking its smoking customers, to allow the company that made smokers addicted to nicotine to manufacture the most effective smoking cessation product for them.
Until recently, Reynolds American conversion into a “total tobacco company” was criticized by anti-smoking advocates.
Yet, the introduction, of Zonnic in stores across Des Moines, Iowa, scheduled for Sept. 3 is yet another landmark innovation for Reynolds American, after launch of Camel Snus and Camel dissolvables.
In addition, the company is also getting ready to launch an electronic cigarette (named Vuse), nicotine lozenges and smokeless pouches (under Viceroy brand name). Viceroy and Vuse will be test-marketed at certain Tarheel Tobacco stores.
“We believe Zonnic takes the adult smoker’s prospects into smoking cessation,” declared Tommy Payne, Niconovum USA Inc president.
On Wednesday Reynolds American announced its second-quarter business results, reporting that net income soared by over 35 percent as price increase and reduced expenses helped the company to recover from disappointing previous year results, which were affected by legal charges.
However the second-largest tobacco group across the nation also saw a much higher decrease in the number of cigarettes shipped versus the industry as a whole.
The N.C-based corporation declared considerable promotional campaigns by its rivals led to the 7 percent decline in cigarette volumes, which totaled 18.1 billion cigarettes, in comparison with overall industry decrease of 1.7 percent.
The leading tobacco companies state the new regulations oblige them to place federal anti-smoking warnings more prominently than their branding on packs.
Leading tobacconists request a judge to stop new health warning labels on cigarette packs, which comprise shocking pictures of dead lungs and other diseases, since they unfairly promote taking off a legal product from the market and will cost millions to make.
“It is the first time in the United States history that manufacturers of legal products were obliged to use the packaging of these products as advertising of governmental campaign against these products, and calling adult customers to shun them,” the plaintiffs wrote in the note to the lawsuit submitted to federal court located in Washington.
Philip Morris USA, Reynolds American and Lorillard are set to increase prices on their cigarette brands.
After Altria, the parent company of Philip Morris announced its cigarette price increase two weeks ago, its main rivals, Reynolds American and Lorillard admitted to follow the trend, approving five-cent price hike.
David Howard, senior communications manager at Reynolds American, said that the price hike would affect the company’s flagship brands, Pall Mall and Camel, and the support brands, including Winston, Kool, Salem and others. The price increase took into force last week.
He mentioned that the latest price change is a list-price rise intended to the cigarette-maker wholesale customers. Howard admitted that the company does not comment on retail prices, as they are set by the wholesalers.
Cigarette manufacturer Lorillard Inc.’s second-quarter net profit increased more than 10% as it sold Newport and Maverick cigarette brands at higher prices.
The third largest tobacco company cautioned that its third-quarter cigarette volumes will be affected because wholesalers stocked more than usual last year, and that could damage its earnings.
Lorillard gives significant attention to promotion of its brands, most of all on it currently launched non-menthol version of Newport.
The manufacturer didn’t give any guidance for this particular quarter.
Its shares dropped $5, or 4.4 %, ending trading at $107.29.
Investment analyst Vivien Azer declared that the company’s shares were under considerable pressure due to concerns about increase slowing down in the second half of the year, but the sell-out is “overdone.”
Lorillard spokesman stated that company’s net profit increased to $291 million, or $2.05 per share, for the period till June 30, up from $263 million, or $1.73 per share, a year earlier. The per-share figure was lifted due to lower number of outstanding shares.
The volume of cigarettes Lorillard sold increased about 10% to approximately 10.8 billion cigarettes on profits of 9.6 % from its Newport brand and nearly 21 % for its lower-priced Maverick brand, while it expected a 1.3 % decrease for the whole industry.
According to the company’s representative their non-menthol Newport cigarettes, launched in November, presented the bulk of the increase in Newport shipments during the quarter, but it also underlined that the price of promoting it affected its profit.
Competitors Reynolds American Inc. and Altria Group Inc. both declared selling fewer tobacco products in the same quarter.
Increased unemployment and growing cigarette prices and taxes have led many smokers to switch to lower-priced brands during the recession trying to save money. Lorillard’s Maverick and Reynolds American’s Pall Mall have been among the beneficiaries.
The majority of tobacco enterprises have been increasing prices and dropping costs in order to maintain profits up, as the recession and reducing demand affected cigarette sales. Tax increases and smoking bans have made cigarettes industry stricter.
Lorillard’s retail market share raised 1.4 points within the quarter to 14.2 % of the U.S. market. Newport’s share of the menthol cigarettes was firm at 36.6 %, while its main competitors have increased efforts to confer some of the raising menthol market.
The company’s gross revenue dropped to 35.4 % due to promotional costs for Newport non-menthol.
Lorillard it is the last one of the country’s largest tobacco companies to present second-quarter results.
The first was Altria Group, holding company of Marlboro producer Philip Morris, which declared that, while cigarette sales dropped, the prices were increasing. The top-brand Marlboro also lost its market share.
Reynolds American Inc., the second-largest tobacco company in the US, reported July 22 that its Q2 earnings dropped 9.5 percent compared to the same period last year due to plant closings expenses and economic challenges.
RAI admitted that price increases in cigarette and smokeless tobacco segments and moist-snuff sale volume growth compensated the drops in cigarette volume.
The company sold 20.3 billion cigarettes during the Q2, which is 9.5% less than in 2009, in comparison to industry-wide decline of 7.1%. Despite the overall drop, major drive brands Pall Mall and Camel gained additional market share.
R.J. Reynolds, RAI’s cigarette-making division, reported its flagship cigarette brands Camel and Pall Mall showed increases in market share and volume. Pall Mall volumes gained 9.7 percent, and its market share added 1.8% totaling 7.0%/ Camel added 0.3% to its market share which now accounts for 7.8 percent.
RJR showed an overall solid performance, reporting a 6.9% drop in the second quarter in comparison to industry-wide drop of 7.1%. Key brands Camel and Pall Mall both posted gains, and currently comprise more than 50% of the cigarette-maker’s total volume and market share. These two brands posted a combined market share of 14.8 percent, growing by 2.1% during the second quarter.
Camel gained 0.3 percentage points to its market share in comparison to the same period in 2009. Its market share now totals 7.8%. The brand’s menthol varieties, such as Camel Crush, won 0.5% in the second quarter to reach 1.8% market share. Overall, Camel keeps boosting its performance as a total tobacco product.
RJR second major brand Pall Mall showed a more than impressive performance, growing its total share to 7 percent, up by 1.8% from the same period a year ago, and 0.5 points from the first quarter of 2010.
American Snuff Co. Reynolds American’ smokeless tobacco manufacturer, reported that total earnings reached $182 million up from $169 million in 2009, with major brands Grizzly and Kodiak performing very well.
American Snuff introduced a new style of its flagship brand Grizzly, named Grizzly 1900 Long Cut, a classic long cut product which showed an impressive performance during the second quarter.
The company’s premium Kodiak snuff reported an increased volume, despite experiencing a slight drop in shipments and being severely out promoted by competitor brands.
In addition RAI launched Camel Dip, a premium moist-snuff product which also performed nicely.
Camel Snus and Dissolvables
Camel Snus, the innovative smokeless product gained market share too. RJR plans boosting its share even more by introducing new styles of Camel Snus, Robust and Winterchill, which will provide a bolder and more inmtense tobacco taste.
Camel Dissolvable tobacco products, Camel Orbs, Sticks and Strips, are also being on demand, as customers show increased interest in this smoke-free product.
As more and more eating and drinking venues prohibited smoking inside at their own will, the latest Virginia Anti-smoking policy would not trigger much opposition in the state which is home to the most ancient traces of tobacco consumption originated in the Jamestown settlement more than four centuries ago.
Thus, beginning from December 1, Virginia became the 27th state to outlaw lighting up in restaurants and bars. The only exemptions make up those places where smoking sections are physically separated from non-smoking areas and having specialized ventilation system.
The ban is especially landmark for tobacco-loving Virginia, where tobacco plant is the most spread crop on source of huge revenue for the state coffins. The primary role of tobacco crop can be vividly demonstrated by seeing the roof of Virginia State Capitol located in Richmond, which is decorated by frescoes with golden tobacco leaves.
Moreover, the Capitol building is situated several blocks away from the largest manufacturing plant of Philip Morris USA, the maker of legendary Marlboros.
However, the proximity to cigarette industry did not stop City Councils of Richmond and North Carolina’s Raleigh, where leading tobacco companies, Philip Morris and Reynolds American reside, from implementing their own citywide bans on smoking in eateries.
For instance, North Carolina, the second largest tobacco state behind Virginia, also banned indoor smoking on January 2, 2010. The NC legislation permits smoking in cigar clubs, tobacco shops and patios, similar to Virginia law. However, in contrast to Virginian ban, NC legislation would not exempt any eatery, no matter whether it provides smoking section or not.
Thomas Hoselton, spokesman for Virginia Restaurateurs Coalition said that uniform legislation with no exemptions would be more beneficial for restaurant owners, because they would not have to spend thousands dollars on designating a smokers’ section.
Owners of several venues like Richmond-based Jazz Café opted for making his place smoke-free long before the statewide ordinance entered into effect. However, for other like Hisham Arazi the smoking ban appears to be an unfair jeopardy for his small hookah lounge in Richmond. The Palestinian immigrant has to spend huge sums of money to build a separate section and install expensive ventilation system there in order to allow his customers smoke hookah a traditional Arabian after lunch pastime that became very popular across the nation recently.
Arazi said that even upon making required changes he would not be sure his business would survive, as anti-smoking advocates are eager to convince the legislature to cancel all exemptions.
The American Heart Foundation reported that 27 states and the District of Columbia have already adopted legislations to prohibit smoking in restaurants, and few of them provided exemptions for hookah bars.
Economists state that a partial ban on smoking like that in Virginia is not good for restaurant industry as it provides competitive disadvantages for small venues that are not able to build separate sections and have to become completely smoke-free, while their larger rivals would establish such smoker-friendly sections and attract more customers. They admit that comprehensive ban on smoking in restaurants would be more fair.
The Sharps, a farmer family from North Carolina has become famous for the high-quality tobacco they have been growing on their farms for many decades. However, when the federal excise tax on tobacco products was increased by 150 per cents, the Sharp family became frustrated by finding themselves somewhere near bankruptcy.
Peter Sharp, who has been growing tobacco from his early childhood and crops more than million pounds of tobacco on 500 acres every year, admitted that their customers reduced their orders on the threshold of inevitable sales declines. Mr. Sharp also said that they and other farmers would have to fire up to a half of their workers in order to cope with losses.
Following public smoking bans that were imposed in every state across the United States, state cigarette tax increases and constant influence of anti-smoking groups, the sales of cigarettes and other tobacco products were supposed to decline by almost 5 per cent in 2009.
Yet, with the new federal tax on cigarettes that jumped from 39 cents to $1.01 a pack on Wednesday, April 1, industry experts predict up to 10 per cent decline in the sales of cigarettes. Other tobacco products would also suffer.
Sharp said tobacco retailers have cut their orders by one third, and industry tycoons Philip Morris USA and Reynolds American reduced their orders for his tobacco by 5 percent when the bill regarding federal excise tax increase was signed into law. Growers admitted that the tobacco consumption cutbacks would definitely trigger a kind of a domino effect because farmers would have no money to pay salaries, to buy fuel and equipment. Therefore, that would have a huge and very grievous impact on the entire community, affecting many people.
Farmers who had been raising tobacco were always firmly protected by local authorities for many decades, like lawmakers from Michigan and New York rigorously defend their automobile industry and Wall Street, since tobacco growing still is a hugely profitable business. According to the reports, only in the state of North Carolina the tobacco harvest was worth almost $700 million last year.
However, politicians do not take care of ‘Golden Leaf’ anymore. Several years ago Congress abolished the price support and quotas for tobacco, the system that was established during Depression. Last week the Washington lawmakers went even further by providing the Food and Drug Administration with the powers to regulate tobacco products.
North Carolina Assembly members are now debating over increasing the state taxes on cigarettes and tobacco products to unimaginable and incredible $1 per pack. Just four years ago the state cigarette tax was only a nickel.
Kay Hagan, a Democrat Senator from North Carolina was initially against the federal tax hike, stating that her native state would lose almost $40 million in revenue and 3,000 work places. However, she then changed her mind, and voted for the corresponding bill, saying that she decided to support the health of future generations, an excuse, local farmers like the Sharp family simply does not understand.
Jeff Thompson, Sharps’ neighbor railed at the Congress decision, saying that those programs that would benefit many children across the nation should not be paid by a small group of tobacco consumers and growers only. He added that it would be fair if all the tax payers would have paid for that program.
Thus, the tax increase became another huge hit for the farmers who have just recovered from 25 percent sales decline in 2005 when tobacco quotas were abolished. Since 2005, farmers have turned their head to exports and new tobacco-containing products created by tobacco industry moguls.
During these four years tobacco industry has invented new marketing strategies, launching such products as snus, chewing tobacco and other products to the cigarette market. These products were supposed to become cheaper alternatives for cigarettes, but the federal tax hike affected them as well.
Tobacco growers also began selling their harvest to China and other countries, however farmers complain that cheap tobacco from Brazil and African countries restricts the volumes ordered from overseas and therefore could not help them to overcome losses.