WINSTON-SALEM, N.C. -- Reynolds American Inc. attributes much of its boost in first-quarter net income to strong performance by its Pall Mall, Camel and Grizzly brands. The income grew to $353 million versus $82 million last year, although last year's quarter included charges for settlements with the Canadian government. Reynolds' first-quarter revenue, however, was flat at $1.99 billion.
In particular, Pall Mall, positioned as having a unique longer-lasting proposition at an affordable price, is continuing to gain awareness and trial, according to the company. Its market [image-nocss] share increased 2 percentage points from the prior-year quarter to 8.5%. And the company said that about half the consumers who try the brand switch to it.
During the first-quarter 2011 earnings call Thursday, Daniel Delen, president and CEO, said that despite the troubled economy, the brand also has been able to increase profitability over the past year. "Obviously, I think Pall Mall had a great run more recently, but I would just remind everyone that Pall Mall was growing already even prior to this downturn over the last couple of years."
He added, "We continue to look for opportunities like that to make sure that the growth isn't just a volume and market share growth, but that it's also growing profitability and contribution to the company."
Camel also improved its market share by 0.7 percentage points to 7.8%. Delen attributed the increase in part to the capsule technology in its menthol styles. Camel's first-quarter menthol market share, including Camel Crush, increased 0.5 percentage points to 2%.
Delen said the company also launched a "Hump Day Sweepstakes" campaign at the end of March, which has already shown a "great response" from consumers. "The promotion encourages adult tobacco consumers to seize the hump day, and break free to explore the unexpected and get rewarded," he said. "This is part of Camel's brand promise to empower individual enjoyment for adult tobacco consumers."
It wasn't all good news for the company in cigarettes, however. While Camel and Pall Mall increased 13.5% in volumes, the total number of cigarettes Reynolds sold fell 5.2% to 17.2 billion cigarettes during the quarter, attributable to the company's other brands. This compared with its estimate of a 3.4% decline for the whole industry.
In smokeless, the company said it is seeing "steady growth" in Camel Snus, and that it has expanded the range of snus offerings. Camel's Orbs, Sticks and Strips also were introduced into two new lead markets--Charlotte, N.C. and Denver--and the company hopes to gain new insights from those markets.
As for moist smokeless tobacco, American Snuff's flagship Grizzly brand benefited from a packaging upgrade last year and from R.J. Reynolds' field trade marketing organization, which now has more than 2,000 trade marketing professionals.
The company's first-quarter moist snuff off-take share increased 1.3 percentage points from the prior-year quarter to 31.1%. Grizzly increased its share by 1.5 percentage points to 27.1%--further enhanced by pouch sales.
R.J. Reynolds is the second-largest U.S. tobacco company. The company's brands include five of the 10 best-selling U.S. cigarettes: Camel, Pall Mall, Winston, Doral and Kool. American Snuff (formerly Conwood Co.) is the nation's second-largest manufacturer of smokeless tobacco products. Its leading brands are Kodiak, Grizzly and Levi Garrett. Santa Fe manufactures Natural American Spirit cigarettes and other additive-free tobacco products, and manages and markets other super-premium brands. Niconovum markets nicotine replacement therapy products in Sweden and Denmark under the Zonnic brand name.
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