Reynolds American Inc. says that its target on innovation and the creation of new products will help the firm remain competitive while tobacco use rates are decresing.
Reynolds American President and CEO Daan Delen said that the firm is focusing on the emerging smoke-free products such as snus and its new e-cigarette Vuse that provide greater potential for growth.
The cigarette maker said volumes have gone up this year in smoke-free groups such as moist snuff and snus, while cigarette volumes continue to drop.
But Delen stressed that cigarettes are still the primary focus and business for Reynolds American.
The U.S. tobacco market continues to provide about a $14 billion “profit pool,” about 85% of which is due to cigarettes.
But Reynolds American’s strategy on “transforming tobacco” is apparent as Delen spent significant time having a debate about other categories in promoting the company’s strategies toward development.
The firm’s Camel Snus product, a spit-free moist tobacco product that comes in small pouches, holds more than 80% of the snus market and has seen yearly boosts in volume between 8 % and 10 %. In contrast, cigarette volumes are decreasing about 3% yearly for the industry.
In the developing electronic cigarette category, Delen said RAI subsidiary R.J. Reynolds Vapor Co. is preparing to make a “big splash” after a limited launch of its Vuse product earlier this year.
Delen said that Vuse is more of a “digital cigarette” than simply an electronic one given its use of computer chips that Delen said help offer an experience closer to that of actually smoking. Delen said Vuse is also set apart by being created locally, while most electronic cigarettes are produced abroad.
Delen said that the company is not seeking to make a little splash in the category. “We are trying to make a big splash in the category.”
Reynolds American is also ramping up its nicotine replacement therapy sector with a nicotine gum called Zonnic that will be mainly sold in gas station, and closely priced as cigarettes.
Delen said that other cigarette makers are searching for emerging markets geographically to attract new consumers for cigarettes, while Reynolds American is targeting markets centered on emerging products.