RESEARCH PAPER ON RJ REYNOLD’s AMERICAN
BACKGROUND HISTORY
Reynolds American, the second-largest tobacco company in the United States was formed in January 2004 and began trading publicly on the New York Stock Exchange as RAI in August 2004. Reynolds American is also known as the parent company of American Snuff Company (formerly Conwood Company, LLC), Santa Fe Natural Tobacco Company, Inc., and Niconovum AB. This company has approximately 28 percent of U.S. cigarette sales. The company offers products in all segments of the market and makes many of the nation's best-selling cigarette brands, including: Camel, Pall Mall, Kool, Winston, Salem and Doral.
In 1913, Reynolds Tobacco introduced Camel cigarettes, containing a blend of several different types of tobacco, a blend that would come to be called “the American blend.” Supported by a unique introductory advertising campaign, Camel became the first nationally popular cigarette in the United States. Reynolds Tobacco established virtually every packaging standard in the U.S. cigarette industry. The 20-cigarette pack was introduced by Reynolds Tobacco in 1913, and in 1915 the company introduced the one-piece, 10-pack carton. In 1931, Reynolds Tobacco became the first company to package its cigarettes with a moisture-proof, sealed cellophane outer wrap to preserve freshness.
In 1918, Richard Joshua Reynolds – Reynolds Tobacco’s founder – died at the age of 68. In 1925, Brown & Williamson purchased J.G. Flynt Tobacco Co. and its trademarks, including the popular Sir Walter Raleigh smoking tobacco. The following year, the company bought R.P. Richardson Company, which had just started to market manufactured cigarettes.
On March 24, 1927, in Winston-Salem, an announcement was made that Brown & Williamson was being acquired by London-based British American Tobacco plc. (BAT) and reorganized as Brown & Williamson Tobacco Corporation. This enabled the company to increase its production capacity and expand its distribution beyond the Southeast. To expand its manufacturing capacity, construction began on a new Brown & Williamson factory in Louisville, Ky., in 1927. The company’s Winston-Salem office personnel relocated to Louisville in January 1929, and in 1931, the company’s executive offices in New York also moved to Louisville. Meanwhile, B&W’s first national brand, Raleigh, was launched as a premium cigarette in 1928.
In 1933, B&W launched KOOL cigarettes, the first U.S. menthol brand to gain nationwide distribution and then introduced Viceroy as the industry’s first cork-tipped filter product. In 1954, Reynolds Tobacco also introduced Winston, the first filter cigarette to achieve a major success in the marketplace. Then introduced Salem the first filter-tipped menthol cigarette, in 1956. The Belair menthol brand was launched nationally by B&W in 1960. The Doral brand was first introduced by Reynolds Tobacco in 1969. It was repositioned and re-introduced in 1984. In 1980, B&W introduced Barclay, as an ultra-low “tar” filter. In 1984, B&W acquired the marketing rights for GPC. In 1987, B&W introduced Capri, a stylish cigarette with a circumference of only 17 millimeters, the first “super slim” cigarette. Reynolds Tobacco began diversifying into foods and other non-tobacco businesses in the 1960s. In 1970, the corporation formed a new parent company called R.J. Reynolds Industries, Inc.
In September 1985, Reynolds Industries acquired Nabisco Brands. In 1986, the parent company was re-named RJR Nabisco, Inc. In November 1988, RJR Nabisco entered a merger agreement with Kohlberg Kravis Roberts & Co. (KKR) for the acquisition of RJR Nabisco by KKR. The merger was completed in April 1989. The acquisition was valued at $25 billion, marking the largest corporate transaction in history at that time. After being privately held for a period, the company’s common stock returned to the stock market in 1991. In early 1995, KKR divested its remaining holdings in RJR Nabisco.
Prior to 1999, RJR was a subsidiary of RJR Nabisco Holdings Corp. (RJRN). In 1999, following the sale of the company’s international tobacco business to Japan Tobacco, Inc., the remaining tobacco and food businesses were separated, and RJRN was renamed Nabisco Group Holdings Corp. (NGH).
On June 15, 1999, the former parent company, RJR Nabisco, Inc., was renamed R.J. Reynolds Tobacco Holdings, Inc., and became an independent, publicly traded company again, with R.J. Reynolds Tobacco Company as its wholly owned subsidiary. The separation was accomplished through a spin-off of the domestic tobacco business, on a tax-free basis in the United States, to RJR Nabisco’s stockholders. In a stock distribution on June 14, 1999, RJR Nabisco stockholders of record as of May 27, 1999, received one share of RJR for every three shares of RJR Nabisco they owned.
On December 11, 2000, R.J. Reynolds Tobacco Holdings, Inc. acquired its former parent company, Nabisco Group Holdings Corp., in a transaction that netted RJR $1.6 billion in cash.In 2001, in Indianapolis, B&W began testing Advance Lights, a cigarette with reduced levels of many of the principal toxins found in cigarette smoke.
On October 27, 2003, R.J. Reynolds Tobacco Holdings, Inc. and British American Tobacco p.l.c. announced that they had signed an agreement to combine the U.S. assets and operations of R.J. Reynolds Tobacco Company and Brown & Williamson Tobacco Corporation, the second- and third-largest tobacco companies in the United States.
In July 2004 the U.S. business of British American Tobacco (Brown & Williamson) was combined with that of RJ Reynolds Tobacco Company, under the R.J. Reynolds name. R.J. Reynolds and Brown & Williamson were the second and third-ranking U.S. tobacco companies prior to the combination. When they combined, R.J. Reynolds became a subsidiary of Reynolds American, with BAT holding a 42% share of RAI. Santa Fe Natural Tobacco Company, which manufactures the additive-free Natural American Spirit brand of tobacco products, also became a subsidiary of Reynolds American at that time. Prior to becoming RAI operating companies, both R.J. Reynolds and Santa Fe were part of R.J. Reynolds Tobacco Holdings, Inc., which traded on the New York Stock Exchange as RJR. RJR became a subsidiary of RAI in July 2004. R.J. Reynolds was established as a tobacco company in Winston-Salem, North Carolina in 1875.
In 2006, Reynolds American expanded into the smokeless tobacco category, with the acquisition of Conwood, the second-biggest smokeless tobacco company in the United States. Conwood manufactures and markets moist and dry snuff, loose leaf, plug and twist chewing tobaccos. At the time of the acquisition, 70% of Conwood's sales came from the growing moist-snuff segment, with the Grizzly brand showing the fastest growth. Grizzly’s continued growth since 2006 has made it the best-selling brand in the moist-snuff category.
In 2008, RAI was recognized as a leader in corporate sustainability by being added to the membership in the 2008-2009 Dow Jones Sustainability North America Index (DJSI North American). RAI is the only U.S. tobacco company and one of 125 North American companies on the index. Selection for the Index is based on performance in a number of economic, environmental and social criteria.
The Wall Street Journal reported in November 2009 that Reynolds American intended to buy Sweden-based Niconovum AB, a maker of products such as nicotine gum, for $44.5 million. The deal was completed in December. Former Chairman, President and CEO of Reynolds Tobacco Daniel "Daan" Delen assumed the positions of President and CEO of Reynolds American on March 1, 2011, after former president, CEO and chairwoman Susan Ivey announced she would retire as chairwoman November 1, 2010 and as President and CEO effective February 28, 2011.