R. J. Reynolds
The history of R. J. Reynolds spans more than one hundred years, during which time it has established itself as the largest tobacco company in the United States. It ranks third in the free-world behind B. A. T. and Philip Morris. The Company, named after its founder, commenced operations in 1875th specialized in tobacco products for eighty years until 1956, when an amendment to the corporate charter permitted diversification. Today R. J. Reynolds Industries has considerable interests in foods and beverages, transportation and energy. Prior to 1960 Reynolds' involvement in the tobacco business overseas had been limited to direct exports from the U. S. In that year it acquired control of Haus Neuerburg, a small manufacturer in West Germany, from which point the Swiss-based R. J. Reynolds (Europe) was established. In 1966 this Company was renamed R. J. Reynolds Tobacco International and its responsibilities were extended to include all Group tobacco activities outside the United States. In 1972 Reynolds held discussions with the Rembrandt/Rothmans Group with a view to developing co-operation throughout the world. These talks were broken off, and Reynolds then embarked on a period of direct international expansion. In 1975 the overseas tobacco interests were again reorganized with the creation of an autonomous subsidiary to control the Group's non-U. S. activities. This Company, R. J. Reynolds Tobacco International Inc., is located in Winston-Salem, North Carolina, and its international activities are organized into four principal marketing regions. R. J. Reynolds Tobacco Co., also based in Winston-Salem, is responsible for domestic sales and the U. S. remains by far the largest of its markets, accounting for more than 70% of total Reynolds cigarette sales. The Company continues to seek diversification opportunities outside tobacco and its most recent major acquisition in 1979 is the Del Monte Corporation, a food manufacturer, at a cost in excess of $600 Million.
Total Sales of R. J. Reynolds
Total cigarette sales of R. J. Reynolds, including manufacture on behalf of other major groups, have grown from 179 Billions in 1969 to 278 Billions in 1979, an average annual growth rate of 4. 5%. The most noticeable feature in the sales trend over the past ten years is the rapid expansion between 1973 and 1976, during which time there were several important acquisitions and license agreements, resulting in an annual growth rate of 8. 3%. The group currently holds a 10% share of the free-world market. In 1970 and 1971 license agreements were negotiated for the manufacture of group brands in the Philippines, Canada and Yugoslavia, and a new factory was opened in Puerto Rico. Prom 1973 to 1975 license agreements were arranged in Iran, East Germany, Vietnam, Greece, Spain, New Zealand and Bulgaria, and companies were acquired in Malaysia, Canada, the Canary Islands and Brazil. Control of a Mexican Subsidiary passed to a local company in 1975 and was replaced by a license agreement. Since 1975 there has been very little expansion of the tobacco side of the Company, although in 1979 license agreements were negotiated in Portugal and Andorra. In 1980 a license agreement has been arranged in China for the manufacture of CAMEL and, additionally, there is an agreement to sell two versions of WINSTON, as well as MORE 120 mm, in that market. Reynolds has also come to an agreement with Imperial Tobacco of the United Kingdom to take over their marketing and distribution in Germany, including the popular JOHN PLAYER and JOHN PLAYER SPECIAL brands.
Regional Sales of R. J. Reynolds
North America currently accounts for 77% of R. J. Reynolds total sales, followed by Western Europe with 10%, Latin America with 7%, and the Middle East with 5%. Since the mid-1970's Sales in the Middle East have grown at 20% p. a., and those in Western Europe and Latin America both over 13% p. a. The average annual growth rate in North America is, however, less than 1%. In terms of market share the company has 31% of the North American region, 10% of the Middle East, 5% of Latin America and 4% of Western Europe. In the rest of the free-world combined (Africa, Asia and Australasia) the Group has a share of only 0. 5%.
Top Markets of R. J. Reynolds
These Domestic markets account for nearly 88% of Reynolds world sales. The U. S. A. is by far the most important market for Reynolds who are the market leaders there. In Canada, R. J. R. - Macdonald have lost significant market share in recent years but remain in third position behind Imperial (BAT's associate) and Rothmans. The Brazilian company, although holding second place, has sales equivalent only to around 10% of those of the market leader Souza Cruz. The success of CAMEL FILTER in West Germany has improved Reynolds' market share but they remain in fifth position. The political situation in Iran has led to the termination of the license agreement, but it is believed that large quantities of U. S. made WINSTON are still reaching the market place. U. S. Imports form the bulk of Reynolds' sales in Spain/Canaries although they have an affiliate (Tabacos Capote S. A.) and a license agreement with the Monopoly.
Top Brands of R. J. Reynolds
WINSTON International brand US type blend King and long size filter Main packing 20 s. c. 3 row Main market U. S. A. Sales in 1979: 79 bns. 28% of Group business
SALEM/REYNO International brand US type blend King and long size menthol filter Main packing 20 s. c. 3 row Main market U. S. A. Sales in 1979: 23 bns. 8% of Group business
CAMEL International brand US type blend Regular size plain Main packing 20 s. c. 3 row Main market U. S. A. Sales in 1979: 19 bns. 7% of Group business
CAMEL FILTERS International brand US type blend King and long size filter Main packing 20 s. c. 3 row Main markets USA/ W. Germany Sales in 1979: 17 bns. Si of Group business
WINSTON 100'S International brand US type blend Extra length filter Main packing 20 s. c. 3 row Main market U. S. A. Sales in 1979: 15 bns. 5% of Group business
SALEM LIGHTS/ REYNO LIGHTS International brand US type blend King and long size menthol filter Main packing 20 s. c. 3 row Main market U. S. A. Sales in 1979: 14 bns. 5% of Group business
Summary of R. J. Reynolds
The main geographical, market, and brand features of R. J. Reynolds are outlined above. Other notable aspects of their business are as follows: - Main Countries of Manufacture: U. S. 84%, W. Germany 5. 5%, Canada 4% and Brazil 4%. These four countries account for 97. 5% of the Group's total manufacture. Exports and Licenses; 4 3 Billions were exported, 80% from the United States, the remainder from Germany and Switzerland. Licence agreements account for 3 Billions sales with Mexico, Peru (negotiated in 1966) and Spain being the most significant. Duty Free Sales: These exceed 5 Billions and are 2% of Group Business. U. S. Type Blends: Including German blends these account for 91% of the Group Total, with 4% each for English type and Brazilian varieties. Packing: Soft cup pack sales of 248 Billions are 89% of sales. Hinge lid sales of 18 Billions, 6. 5%. Menthol: Sales of 68 Billions account for some 25% of Group Sales. The leader in the menthol segment is the 'Salem/Reyno' House with Sales of 57 Billions. Menthol versions of 'MORE' and 'VANTAGE' take second and third places respectively. Tar Levels: These are reported for 87% of Reynolds Group Sales, of which, 46% of sales fall within the 1-16 mg. per cigarette rating. Brands recording less than 10 mg. tar include "DORAL II', 'NOW, and 'VANTAGE ULTRA LIGHTS', all in the United States. International Brands: These sales, which exclude the U. S. Domestic Market, amount to 53 Billions. The leading 'House' is 'WINSTON' with sales of 33 Billions, followed by 'CAMEL' (15 Billions), and 'SALEM/REYNO' (3 Billions). Taking into account the relatively poor sales performance over the past three years, the heavy reliance on the static North American and Western European Markets and the fact that a quarter of total business is in the menthol segment, (which has remained fairly steady over recent years) the prospects for R. J. Reynolds in the next few years do not look particularly bright. Nevertheless, the Group does have a very successful full-flavour U. S. Type International Brand in 'WINSTON' and is strongly positioned in the growing low-tar segment in the United States. Sales will probably grow at a slower rate than the 2. 5 % p. a., forecast, for the free-world as a whole, and its share of the total free-world market should consequently fall marginally below 10%.