RJR – More job losses!

This week it was again the turn of RJR employees to go through the down-sizing mill – this time 570+ white collar jobs in all sectors but espcecially R&D and IT.

The underlying cause is deteriorating volumes – both a shrinking market and a diminishing share. If there is ever an end in sight this situation has to turn around.

We wish the affected families and individuals all the best in this difficult time and for the future.

20 comments ↓

#1 TAZ on 09.12.08 at 3:41 PM

Here is another perspective regarding this story.

Shakeup at Reynolds American
Tobacco company’s restructuring, reorganization a likely “non-event” for retailers

By Bill Donahue & Steve Dwyer

– ADVERTISEMENT –

OAK BROOK, Ill. — Reynolds American Inc. (RAI) knows how to make headlines, too. A day after Philip Morris USA parent Altria Inc. dropped the bomb that it would acquire moist-smokeless tobacco leader UST Inc., RAI said it would restructure its brand portfolio and overhaul its organizational structure, along with that of its largest subsidiary, R.J. Reynolds Tobacco Co.

As reported in a CSP Daily News Flash yesterday, among the changes to its brand portfolio, RAI plans to scale back marketing and promotional support for the menthol brand Kool, shifting its status from “growth brand” to “support brand” while increasing its investment in the Camel and Pall Mall brands. Future marketing and promotional support for Kool will be targeted toward geographic areas where the brand demonstrates strong consumer appeal, the company said.

“It’s a smart move,” Nik Modi, senior tobacco analyst for UBS Securities LLC, New York, told CSP Daily News. “They were inefficiently spending money on Kool as a growth brand, so it makes sense to de-emphasize it in certain areas and focus more on the pockets of the country where it’s strong.”
The move could also help RAI develop “a flagship brand, such as Philip Morris has done with Marlboro,” and not just “a portfolio of products,” Lou Maiellano, principal with tobacco consultancy TAZ Marketing & Consulting Group, Levittown, Pa., told CSP Daily News.

Of all the brands in RAI’s stable, he believes Camel would best fit that bill. “Camel has a fantastic following in the 21-to-35 age segment,” he said. “In the past, a brand like Camel had to have the marketing support to grow, and now I think you will see an emphasis on this support, all within the spirit of turning it into a flagship brand.”

Maiellano said the restructuring could be “a precursor of the new RAI of the future,” but other than the realignment of brands, he does not envision the move affecting retailers to a great degree. “This is an internal move,” he said. “I see this as a non-event at retail.”

He added, “I see them as reformatting the company they hope it to be in 2009. They are reallocating funds to pave the way for new entries and new products. A huge part is that Reynolds is looking to put down a foundation of who they will be in the future.… It’s an evolving industry; it’s not like any of these moves had not been forewarned.”

Camel had been RAI’s “highest-priority growth brand” prior to the change, according to Maura Payne, RAI’s vice president of corporate communications. She said the restructuring would simply help “free up the resources to put behind the areas of opportunity we see coming.”

She told CSP Daily News, “I should think that would be heartening to the retail community,” she told CSP Daily News. “We believe there is innovation across the entire spectrum of tobacco products…. and we’ll continue on that path by putting more resources and energy behind the places we see as growth categories. This is a profitable category for retailers, and it will remain as such.”

In the wake of Monday’s Altria-UST deal, speculation loomed over the possibility of more consolidation in the months ahead. One analyst, who asked to remain anonymous, believed RAI’s move to de-emphasize Kool could be a precursor to purchasing Lorillard Tobacco Co., Greensboro, N.C., which owns the menthol segment’s leading brand, Newport. The analyst suggested there was “some degree of overlap” in terms of customer demographics between the two brands, with Newport having much stronger share.

“I think going back to what happened [Monday] with Altria and what we’re seeing elsewhere, it’s going to create more consolidation,” said Modi. “Reynolds has to do something. Swedish Match has to do something. Lorillard has to do something. It’s going to be an interesting next couple of months.”

As for RAI’s planned organizational restructuring, the company plans to lay off 570 workers, or about 16% of its work force, at company headquarters in Winston-Salem, N.C. The cuts are expected to begin in the third quarter and last through the end of 2009. Neither Conwood Co. LLC nor Santa Fe Natural Tobacco, both of which are RAI divisions, were affected by the restructuring, according to Payne.

“Our field trade-marketing folks that are calling on customers were not part of this analysis,” she said. “The job losses were primarily in the Winston-Salem area.… It’s probably too early to signal too much about the retail changes behind the decisions.”

RAI will record a pretax third-quarter restructuring charge of approximately $90 million, or about $55 million after tax. The $90-million charge represents severance, benefits and related
costs. Reductions in the RAI and R.J. Reynolds Tobacco work forces will generate savings of about $100 million by year-end 2010, with annualized savings of about $55 million thereafter.

Modi of UBS Securities believes RAI’s restructuring could lead to more store-level support for tobacco retailers. “Over the last few years [RAI] has made its IT infrastructure more efficient, so while we’re seeing a reduced headcount, they’re going to use technology instead of people,” he said. “And I think it’s likely that a lot of the savings will get reinvested back into the trade.”

#2 NC Tarheel on 09.22.08 at 11:37 AM

This really was no surprise to the folks at RAI. Many received info for a package. If you follow the investor line of thought this was all predicted. Some of the lost volume is purely a reflection on the decision to move away from promotions that gave away free product.

#3 Big Tuna on 09.23.08 at 12:13 AM

Let’s not kid ourselves folks this has been done to get ready for the next acquisition. The prize of the industry is the group from Greensboro. Don’t believe they want this to happen in Greensboro but think about it RAI will over pay for an extremely fine run tobacco company. They say money talks! From what I hear there is a lot of activity. It will be interesting!

#4 Johnie Jay on 09.24.08 at 1:17 AM

I thought folks knew this would take place after RAI put SAP in place. Better technology is supposed to reduce costs!

#5 tobaccotoxdoc on 09.25.08 at 5:58 PM

Tobacco is a high-technology business that requires experienced scientists to keep it propering. You don’t get ahead when you put experienced scientific talent on the street.

#6 Tom on 09.26.08 at 12:44 AM

I’m not sure what tobaccotoxdoc means when he says putting scientific folks on the street. Who’s doing that?

#7 tobaccotoxdoc on 09.26.08 at 9:29 AM

Voices on the street tell of RJR laying off or giving notice to some top-flight scientific talent.

#8 Tobocatman on 10.02.08 at 1:32 AM

So are the top flight folks responsible for the novel product – CRUSH? Why not develop cigs that are safer!!!

#9 tobaccotoxdoc on 10.02.08 at 9:16 AM

Even making conventional product with consistent smoke taste and smoking properties and packaging it so that it stays fresh takes top-flight talent. Remember, consumers evaluate our products stick-by-stick, and our job is to make sure they get stick-by-stick consistency.

Doing reduced risk smoking product development has gotten much harder since reductions versus conventional counterparts need to be evalauted with Health Canada smoking protocol. Take a look at the 2006 article by Laugesen & Fowles @tobaccocontrol.bmj.com . Download is free if you register.

#10 John Rolfe on 10.03.08 at 2:48 PM

The Crush filter has been in development for more than a decade by BAT, the 40% owner of RAI, and is made by the flavor and fragrance house Mane Fils in France. PM has looked at it too by CRUSH is the first launch that I know of.

#11 Tobocatman on 10.21.08 at 9:44 AM

The buzz on the street is that there has been no mention of the activity in the sales ranks. The announcement referenced here of 570 plus internal to W/S has now expanded to the sales team with some very seasoned veterans on the sales team being totally blindsided. Can anyone confirm this activity????

#12 CIG GUY on 10.27.08 at 11:39 PM

I don’t know the number but I can tell you two of my real good buddy’s took a package! And they sure were seasoned veterans!

#13 The OTP Kid on 10.28.08 at 9:55 AM

Tobacatman –

Not sure of the total numbers, but 5 of 6 Division managers in the great state of Ohio were let go. This fact I can confirm.

I cannot confirm whether or not ACORN had anything to do with it!

#14 Peter on 11.06.08 at 2:00 AM

I’m hearing that Reynolds is moving out of the “mini” Empire State Building located in Winston-Salem. Any truth to this?

#15 The OTP Kid on 11.07.08 at 12:59 PM

Peter – that’s confirmed. They are moving into the Plaza Building next door. Maybe they are trying to make sure nobody remembers what a great company RJR used to be, and the old building reminds people of that!

#16 TAZ on 11.07.08 at 7:09 PM

Philip Morris USA announced that it has notified 180 hourly employees at its Concord manufacturing facility in Cabarrus County, North Carolina that they will lose their jobs on January 30, 2009, following the company’s announcement in June 2007 to close the facility and consolidate operations at its Richmond, Virginia plant. (Business Journal of Charlotte 11/06)

#17 NWTobacco on 11.08.08 at 10:56 AM

It really seems like Reynolds has a lot on their plate. Does anyone have an idea of how serious the lawsuit with Star Scientific is that is going to a jury trial? What does it mean to Reynolds and their business?

#18 Big Tuna on 11.14.08 at 2:44 AM

I heard that this lawsuit was a pretty serious issue as it relates to the future of Reynolds. The word “crippling” was used! Can anyone shed light on this as I was not aware of it’s seriousness? Would really appreciate some insight!

#19 Bill Godshall on 11.14.08 at 4:15 PM

The lawsuit would be far more crippling to Star (if Reynolds prevails) than it would be to Reynolds (if Star prevails).

#20 kentucky rebel on 11.24.08 at 3:14 AM

I wish RJR would stop changing folks around. It seems like as fast as I get use to a new account executive they either leave or go away.

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