With tax hikes, smoking bans, health concerns and social stigma still cutting into cigarette sales, Reynolds American Inc. and other tobacco companies are looking to cigarette alternatives like smokeless tobacco and little cigars for sales growth.
Some, including Reynolds American, also have introduced snus — small pouches like tea bags that users stick between the cheek and gum — and dissolvable tobacco — finely milled tobacco shaped into orbs, sticks and strips.
The nation’s second-biggest tobacco company and maker of Camel, Pall Mall and Natural American Spirit brand cigarettes said the number of cigarettes it sold fell 6.8 percent to 18.7 billion cigarettes in the third quarter.
But the Winston-Salem, N.C., company sold 7 percent more of its smokeless tobacco including Grizzly and Kodiak and its U.S. market share of the segment grew 1.1 percentage points to 31.6 percent. Reynolds American also said its Camel snus products have more than a 70 percent market share of the small but growing category.
In a conference call with analysts Tuesday regarding Reynolds American’s third-quarter results, CEO Daniel Delen discussed the company’s growth opportunities.
QUESTION: When you think about the total tobacco strategy that Reynolds has been pursuing for the last few years, is there anything missing in your portfolio?
RESPONSE: The bulk of our business today as we sit here is still cigarettes and it will be for the foreseeable future. Of course we’re present and growing in the growing category of moist snuff, we’ve organically launched into the snus category. … We are testing dissolvables as we speak and certainly I think the concept there is very relevant. I believe that consumers will keep looking, potentially even beyond that for new ways to enjoy the tobacco experience. We’re quite happy with our footprint … but continue to look and continue to think about where this might be going in the future and what new opportunities may present themselves.
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