Reynolds American Q2 Performance Highlights

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.

Cigarettes

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.

Smokeless Snuff

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.

Snus – the Most Controversial Tobacco Product in the United States

Snus is the newest kind of dissolvable smokeless tobacco products recently introduced to U.S. tobacco consumers. Originated in Sweden, this moist tobacco product is looking like small teabags, as the tobacco is contained in dissolvable sachets.

Generally, a portion of snus is put between lip and gum and sucked for up to 20 minutes, and then removed. Snus is marketed as a spit-less product, but this can be achieved only if placing snus in a particular location in the mouth which almost lacks saliva.

In Sweden Snus is a traditional product, consumed by a great part of adult men. Snus is made from air and sun-cured tobacco, which also goes through the pasteurization procedure in order to destroy bacteria. During the storage by the manufacturers or by the sellers Snus is stored in refrigerators under certain temperatures and humidity levels.

In Sweden Snus is covered by the Swedish Food Act, under which the product should correspond with quality standards, named as the Gothiatek system. This system of quality indicators involves manufacturing snus applying a particular system that reduces the levels of tobacco specific nitrosamines (TSNA), carcinogens contained in tobacco.

Whereas Swedish Snus makers don’t market their products as safe, they are regarded as being less harmful the cigarette smoking because of the lack of tobacco smoke and low levels of nitrosamines. Snus provide high levels of pH, so that the speed of nicotine absorption increases, however the amount of nicotine in snus is similar to that in cigarettes.

Among health risks related to the consumption of Snus there are the following:

• Snus can trigger dental diseases like caries.
• Snus users are more likely to suffer from hypertension compared to non-users.
• The risks of cardiovascular diseases are two-time higher among Long term Snus consumers than among non-users.
• Female Snus consumers may be likely to have the same complications during pregnancy as the cigarette-smokers.
• Snus consumption causes nicotine addiction because these products contain nicotine as well as ordinary tobacco products.

Meanwhile, there is no regulation covering manufacture, sales and marketing of Snus in the United States. And the process of producing Snus and processing tobacco for Snus greatly differs from that in Sweden. Tobacco companies, which make Snus reported to the Centers for Disease Control and Prevention that Snus is portioned moist tobacco product and the sachets and packages are almost identical to other smokeless tobacco products.

The majority of smokeless tobacco products sold in the U.S. are made from fire-cured tobacco, processed using the fermentation technology that impacts on the levels of tobacco specific carcinogens. U.S. Food and Drug Administration required Snus makers to place the same warnings as on other smokeless tobacco.

According to several public health groups smokeless tobacco products bear the same health risks as cigarettes, However, until smokeless tobacco is not regulated, their manufacturers may state anything they want about these products.