Reynolds American’s CEO on Merging, Managing and Smoking

 Susan Cameron , chief executive of Reynolds American Inc., is skilled at bringing two companies together. She proved that in 2004 when she guided Reynolds Tobacco Holdings Inc. and Brown & Williamson through a $3 billion merger. She led the combined companies for seven years and retired in 2011.

Reynolds’s board asked Ms. Cameron to return last year to oversee the company’s $25 billion acquisition of Lorillard Inc. The deal is awaiting Federal Trade Commission approval, but she is pushing ahead with preparations to bring Lorillard’s top brand, Newport, into Reynolds, which will make the Winston-Salem, N.C.-based company a stronger rival to market-leading Altria Group , Inc., which makes Marlboro. If you want to know where to buy Marlboro cigarettes online, go to http://www.mydiscountcigarette.net/buy/marlboro

The Wall Street Journal talked to Ms. Cameron about the factors that go into a successful merger, the ability to recruit young workers to a tobacco company and the future profile of cigarette smokers. Here are edited excerpts from that interview.

 WSJ: What are the keys to combining two companies?

MS. CAMERON: Making sure you have a plan that all parties have agreed to is essential. We set up planning teams right after this transaction was announced.

A customer wants to order Newports from us, day one.

WSJ: How do you achieve that?

MS. CAMERON: You appoint people, and it’s their full-time job for two years. Somebody who is the project manager for the manufacturer integration—that is [his] job. You don’t leave it to chance.

WSJ: What mistakes have you made in previous mergers that you want to avoid?

MS. CAMERON: In the first merger, I was convinced we could create the new company’s culture in three years. That was ridiculous. I think it took seven or eight.

WSJ: Why does it take that long?

MS. CAMERON: It’s generational. If you have managed a certain way and you have been successful, by the time I get you to change, you’ve probably now retired. And the next group is excited and ready to manage people in the new way.

WSJ: How do you recruit employees to work in a stigmatized industry like tobacco?

MS. CAMERON: People in their 20s and 30s are different from people growing up in the ’90s who watched these clowns up there swearing nicotine was good for you. Ever since they have known about tobacco, it’s clear that it’s bad to smoke. For this generation, it’s either they will or they won’t. When we post a job, I felt much worse in the ’80s or ’90s than I do today. It’s different.

Altria and Reynolds American; Report 2014

Altria and Reynolds American, the maker of Winston cigarettes http://cigarette-deals.com/winston-cheap-cigarettes regularly raise their prices to offset declining cigarette shipment volumes. Bearish arguments against both companies usually declare that rising prices, exacerbated by higher excise taxes, will hit a ceiling and cause revenues to decline.

That argument initially makes sense when we compare the price of cigarettes in the U.S. to other nations. Forty percent of adults smoke in Russia, where a pack of cigarettes costs $1.74 with taxes included. By comparison, 18% of adults smoke in the U.S., where an average pack of cigarettes (averaged across all states) costs $6.36.

But when we calculate the price of cigarettes as a percentage of average monthly income (based on UNECE and ILO statistics), the average Russian spends 0.17% on one pack of cigarettes, compared with 0.14% for the average American.

Meanwhile, smokers in the U.K. spend $10.99 (0.32% of their monthly income) on a pack of cigarettes, yet the country has a higher smoking rate of 19%. In Australia, where a pack of cigarettes costs $12.14 (0.47% of monthly income), 17.5% of adults still smoke. These comparisons suggest that Altria and Reynolds American can probably afford to nearly double their U.S. prices over the next decade without any noticeable impact on smoking rates.

However, increased health awareness and public bans against smoking could reduce the nationwide smoking rate. Higher federal and state excise taxes, which rose over 120 times between 2000 and 2013, could also throttle tobacco companies' ability to raise their own wholesale prices.

Reynolds hires PepsiCo exec as next president

Reynolds American Inc, the manufacturer of Winston Classic cigarettes. has raised the diversity level on its executive leadership team again with the hiring of Debra Crew as president of subsidiary R.J. Reynolds Tobacco Co., effective Oct. 1.

Crew currently serves as president and general manager of PepsiCo North America Nutrition, a job she had been appointed to earlier this year. She also has served as president of PepsiCo Americas Beverage and of the Western Europe region of PepsiCo Europe.

The company said Friday that Andrew Gilchrist, president and chief commercial officer of R.J. Reynolds, will become an executive vice president with the parent company, also on Oct.

1. The company said Gilchrist's future role on the 12-member leadership team will be announced at a later date.

Crew will make $620,000 a year, according to a Reynolds regulatory filing Friday. She will get a signing bonus of $525,000 after Jan. 1. She will be eligible for an annual incentive plan payment estimated at $162,750. She has been made eligible for a long-term incentive grant of $1.5 million, vesting March 3, 2017.

Another part of Reynolds' incentive to Crew is agreeing to make her eligible for up to $6.7 million in restricted Reynolds stock units, some of which become fully vested Sept. 30, 2016, and the others Sept. 30, 2018. The restricted stock units are offered "to offset forfeiture of equity incentive grants at your previous employer."

Reynolds has a history of placing female executives into the R.J. Reynolds president role.

Lynn Beasley retired from the post after five years in January 2007 at age 49. Beasley was the highest-ranking officer left from the R.J. Reynolds team thatbought Brown & Williamson Corp. in 2004 to create Reynolds American.

Susan Cameron, Reynolds American's president and chief executive, said in a statement Crew's experience with some of America's best-known consumer brands "is extraordinary."

Big Tobacco Tries to Don A New Look: Are You Buying?

ig Tobacco wants to reclaim the hearts and wallets of most adult Americans by rebranding its tarred image — pitching “smokeless” e-cigarettes, embracing the mantra “harm reduction,” and funding science that could turn tobacco plants into life-saving medicine. That tactical shift, not surprisingly, has cultivated cynics like anti-tobacco crusader Patrick Reynolds, grandson of R.J. Reynolds, who calls the moves mere “window-dressing PR campaigns."

Even at Reynolds American Inc. (RAI) — maker of Camel cigarettes online and creator of the slogan “transforming tobacco” — spokesman Rob Dunham admits the strategy is “not without its challenges; there’s a lot of history to overcome.”

But amid perhaps the most ambitious image makeover in corporate history, Reynolds American’s new direction got a timely boost Tuesday. Its recently acquired subsidiary, Kentucky BioProcessing (KBP), emerged as a key player in developing emergency Ebola treatments used on two American missionaries. The medium to produce that medical breakthrough: tobacco plants.

“We embarked on a transformation agenda that, at its heart, is envisioning a tobacco industry that, at some point in the not-too-distant future, looks very different than the one we see today — or the one we’ve seen historically,” Dunham said.

“I’m not sure we would use the word 'rebranding.' The only reason I would balk at that (word) is it almost suggests we’re trying to somehow re-position as a PR exercise to get people to think differently,” Dunham added. “This is at the very core of our business strategy.”

At Reynolds American, top planks in that platform include “our commitment to reduce the harm caused by cigarette smoking,” curbing youth tobacco use, and “migrating historical cigarette smokers to other forms of tobacco that have the potential for far less risk,” Dunham said.

For RAI — and for its top competitor, Philip Morris USA — much of that migration is toward the industry’s fastest rising niche: electronic cigarettes. The battery-operated vaporizers deliver inhaled nicotine without the tar and combustion of traditional cigarettes. Some Wall Street analysts predict e-cigs alone may eclipse the traditional cigarette market within the next 10 years.

Reynolds American Overall Sales Rose 2.8%

Reynolds American Inc overall sales rose 2.8 percent to $ 1.93 billion, with all operating divisions reporting increased revenue. However, the revenue gain was offset by the cost of products jumping 34 percent year over year to $930 million. Other expenses were up 37.2 percent to $413 million.

Camel edged back ahead of Pall Mall for third place in cigarette market share at 10 percent to 9.5 percent, respectively. Both cigarette brands gained market share year over year even as their combined shipment volumes barely increased. The brands continue to trail Philip Morris USA's Marlboro and Lorillard Inc.'s Newport brands.

Overall shipments were down 3.8 percent year over year to 14.3 billion cigarette sticks. Reynolds' overall share of the cigarette market rose 0.1 percentage points to 26.7 percent compared with a year ago, including Camel and Pall Mall who have a combined 19.4 percent market share.

Market share for Grizzly was up 1.1 percentage points to an industry-leading 31.5 percent. American Snuff Co.'s overall moist-snuff market share rose 0.8 percentage points to 34.6 percent. Natural American Spirit had a 10.7 percent gain in shipments to 800 million cigarette sticks. It has a 1.5 percent market share.

Reynolds said a portion of the market share gains likely came from a decision by the group that measures market share to put more emphasis on sales from convenience stores and gas stations, where the majority of tobacco products are bought.

Bonnie Herzog, an analyst with Wells Fargo Securities, said she was not concerned about Reynolds missing earnings projections because of the market share growth in its four growth brands." "Reynolds' growth brands appear to be on solid footing," Herzog said. "Santa Fe and Grizzly continue to generate impressive results.

"We remain very optimistic that Cameron will be able to lead Reynolds into its next generation of growth, possibly global." Pope said the jockeying in promotional prices by the top three manufacturers could be in Reynolds' favor at the top end."Customers seeking a specific flavor or cachet are not fickle, flaky or ultra-price sensitive," Pope said.

Reynolds reaffirmed its fiscal 2014 adjusted earnings guidance range of $3.30 to $3.45 a share. Reynolds did not comment about a potential deal with Lorillard Inc., which has been speculated for two months. Reynolds did list among its investment risks the July 30 ending of the 10-year moratorium on British American Tobacco buying more Reynolds stock. BAT owns 42 percent of Reynolds as part of Reynolds' $4.4 billion purchase of Brown & Williamson Tobacco Corp. — then a BAT U.S. subsidiary — that was completed July 30,2004.

Camel maker plans big e-cigarette push

Reynolds American Inc., the maker of Camel cigarettes, is launching a revamped version of its Vuse-brand electronic cigarette in Colorado, with its sights set on expanding nationally.
The move being announced today at an event in New York City is the latest in an industrywide push to diversify beyond the traditional cigarette business.
Electronic cigarettes are battery-powered devices that heat a liquid nicotine solution, creating vapor that users inhale.
The nation's second-biggest tobacco company says that while many smokers know about e-cigarettes and are trying them, few switch entirely.
Reynolds says its rechargeable Vuse e-cigarette has technology that monitors and adjusts heat and power to deliver the "perfect puff."
The Winston-Salem, N.C., company did not disclose the exact size of the Colorado retail distribution or a timeline for a national rollout.