R.J. Reynolds’ cigarette shipment volume

For the second quarter and the first half, higher pricing, lower promotional expense and additional productivity gains, including those from last year’s restructuring at R.J. Reynolds, more than offset the impact of lower cigarette volume, higher pension and legal expense, and MSA costs.
“R.J. Reynolds’ cigarette shipment volume fell 6.0 percent in the second quarter compared with an industry decline of 4.1 percent. That performance was significantly better than the first quarter, largely due to strong Pall Mall volume, as well as trade inventories returning to more normal levels after the federal tax increase,” said Daniel M. Delen, the company’s chairman, president and chief executive.
The company’s first-half cigarette volume decline of 8.1 percent was slightly higher than the industry decline of 7.1 percent.
R.J. Reynolds’ growth brands, Camel and Pall Mall, delivered a strong second-quarter cigarette market share gain of 2.6 percentage points, bringing their combined share to 12.7 percent. That drove the company’s total cigarette market share to 28.7 percent, up 0.4 percentage points.
Camel, the company’s flagship brand, continued to perform well, with a second-quarter total-tobacco market share of 7.8 percent, up 0.3 percentage points over the prior-year quarter.
Camel Crush, which uses R.J. Reynolds’ innovative capsule technology to offer smokers the choice of regular or menthol with each cigarette, posted market share of 0.6 percent in the second quarter even though it has received relatively low promotional support since its national introduction in the third quarter of 2008.
Camel Snus was expanded nationally in the first quarter and continues to gain awareness and trial. The company is also moving forward with its innovative line of dissolvable tobacco products. Camel Orbs went into three lead markets in the first quarter and will be joined by Camel Sticks and Camel Strips this summer.
Pall Mall, R.J. Reynolds’ other growth brand, performed extremely well in the second quarter, with continued high levels of trial and conversion. Its second-quarter market share rose 2.6 percentage points from the prior-year period, to 5.2 percent.
“Pall Mall is a high-quality, longer-lasting cigarette at an attractive price, so it’s particularly appealing in today’s economic environment,” Delen said. “The brand’s most recent promotional period, which coincided with the federal excise tax increase, was widely welcomed by adult smokers as they reevaluated brand choices in light of higher prices. The promotion ended in late May and many of the adult smokers who tried the brand are sticking with Pall Mall.”