Reynolds American’s Newport News

Cameron details progress on newly acquired brand’s integration, strategy

WINSTON-SALEM, N.C. -- Following the purchase of Lorillard Inc. and the related divestures to ITG Brands, "the integration of the Newport brand is going very well," Susan Cameron, president and CEO of Reynolds American Inc., said Tuesday during the company's second-quarter 2015 earnings call. R.J. Reynolds strategy going forward will be to "energize and reinforce this powerful brand."

Reynolds American Lorillard Newport

The Winston-Salem, N.C.-based tobacco company acquired Lorillard, the maker of the Newport brand, for $25.9 billion in June. It has divested the KOOL, Salem, Winston, Maverick cigarette and blu eCigs brands to U.K.-based Imperial Tobacco Group's new U.S. subsidiary, ITG Brands LLC, Greensboro, N.C.

"Now we’re poised for new growth following the acquisition," she said. "The addition of the Newport brand will give R.J. Reynolds increased scale and improved operational efficiencies as well as higher sales volume resulting from the complementary nature of Newport and the rest of R.J. Reynolds cigarette portfolio."

She said, “We are getting to know the Newport consumer. We’ve picked up 50,000 additional retail contracts, many new customers and a significant database of those customers. And so we are working on our strategies to optimize our performance, and I think that you'll see a great run going forward.”

Cameron provided an update on the company's progress. She said that RJR Vapor VUSE Digital Vapor Cigarette "continued to perform well in the second quarter." VUSE is now in national distribution in more than a 100,000 retail outlets and has solidified its position as a top-selling electronic cigarette in the convenience-store channel.

"We continue to see great promise in the vapor category, and we will continue to innovate and invest" in Vuse and the marketplace, she said.

The company also contines to make "good progress" with the national expansion of Niconovum’s Zonnic nicotine-replacement-therapy (NRT) gum, and the brand will be in about 25,000 outlets. Zonnic is a leading NRT in the convenience-store and gas-station channel, "and we expect its phase expansion to continue into next year."

Also, R.J. Reynolds expanded Revo heat-not-burn cigarettes into Wisconsin in February "to gain learning on consumer interest in heat-not-burn products," she said. "Revo has seen consumer interest and trial, but actual adoption rates of the product have not met our expectation. As a result, R.J. Reynolds has decided to discontinue marketing support for Revo in Wisconsin; however, we do remain optimistic about the long-term potential for heat-not-burn, and we continue to work to improve this technology."

R.J. Reynolds new portfolio of growth brands, Newport, Camel and Pall Mall "performed well" in the second quarter.

Newport continued to advance in the second quarter, we share of retail shipments increasing four-tenths of a percentage point from the prior year quarter to 13.2%. Newport’s gains were driven by its strength in menthol, said Cameron.

Camel also continue to benefit from its menthol styles that use capsule technology, and the brands total cigarette retail market share was in line with the prior year quarter at 8.2%.

R.J. Reynolds Pall Mall value brand "is playing an essential role in the company's portfolio strategy by providing the right balance between market share and profitability. ... This true value proposition is expected to benefit from additional brand equity building efforts going forward resulting in increased trial and conversion."

Reynolds American is the parent company of R.J. Reynolds Tobacco Co.; American Snuff Co. LLC; Santa Fe Natural Tobacco Co. Inc.; Niconovum USA Inc.; Niconovum AB; and R.J. Reynolds Vapor Co.

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