Tobacco Harm Reduction

Market leadership through transformation

Reynolds American Inc. (RAI) and its operating companies are committed to transforming the U.S. tobacco industry, from one dominated by cigarettes to one offering a range of products that meet the expectations of adult tobacco consumers. Our companies believe this approach is in the best interest of consumers, manufacturers and society as a whole.

To achieve this goal, RAI has made significant investments through acquisitions, and by promoting innovative product development at our other operating companies. These investments underscore the commitment to fundamentally transform the tobacco industry while meeting the changing preferences of adult tobacco consumers. No other tobacco company is in a better position to achieve market leadership through this transformation.

We acknowledge that this is an ambitious long-term vision, but our journey is well under way and we are confident we will ultimately achieve our goals.

Preparing for the future through acquisition

In 2004, the U.S. businesses of R.J. Reynolds Tobacco Co. and Brown & Williamson Tobacco Corp. (B&W) were merged and a new parent company was formed. R.J. Reynolds immediately became a stronger force in the market with a focused business model designed to drive growth on key cigarette brand styles.

In 2006, RAI expanded into the growing smokeless tobacco category by acquiring Conwood Tobacco Company - now called American Snuff Company (ASC) - the nation's second–largest smokeless tobacco company. ASC produces well-known moist smokeless tobacco brands like Grizzly and Kodiak.

RAI further underscored its commitment to transformation when it purchased Niconovum AB in 2009. Niconovum is a Swedish-based nicotine replacement therapy company marketing innovative products under the Zonnic brand name in Sweden. Its nicotine gum, mouth spray and pouches use proprietary technology for nicotine delivery.

"ASC and Niconovum are integral components to RAI's strategy," said Daniel M. Delen, president and chief executive officer of RAI. "The products these companies produce have the potential to fundamentally change the impact that tobacco has on society."

Leading innovation in modern smoke-free tobacco

"R.J. Reynolds has a long history of leadership when it comes to new and innovative tobacco products," said Brice O'Brien, R.J. Reynolds' executive vice president of consumer marketing. "No other tobacco company has a track record that so clearly demonstrates its commitment to providing choice when it comes to tobacco products. We want to redefine enjoyment for adult tobacco consumers."

R.J. Reynolds solidified its position in 2006 as the leader in modern smoke-free tobacco products with the introduction of Camel SNUS.

Snus, which originated in Sweden, differs from traditional U.S. smokeless tobacco products in several ways. It is heat-treated, rather than fermented. It does not require spitting. And it is typically sold in pouches, rather than loose in the tin. Since both snus and moist stuff are smokeless, a growing number of adult tobacco consumers find them convenient to use in a variety of places where smoking is not permitted or appropriate.

R.J. Reynolds has run ads in magazines and newspapers informing adult tobacco consumers of Camel SNUS, encouraging smokers to consider switching to Camel SNUS.

"We want to appeal directly to smokers," O'Brien said. "Camel SNUS has so many positive attributes for both the adult tobacco consumer and for society that we believe adults who smoke should consider giving it a try.

Camel's line of dissolvable tobacco products followed Camel SNUS in providing adult tobacco consumers with even more choices when it comes to tobacco enjoyment. Camel Dissolvables come in three forms: orbs, sticks and strips. They are made with finely milled tobacco and are currently available in limited lead markets.

"Camel Dissolvables are a complement to our existing portfolio of products for adult tobacco consumers," O'Brien said. "These products provide an opportunity to meet both adult tobacco consumer and societal expectations, as there is no second-hand smoke, no spitting and no cigarette butt litter."

Investing in the future

In early 2012, ASC opened a new manufacturing facility in its hometown of Memphis, Tenn., This facility uses modern manufacturing equipment, including robotics, to substantially increase efficiencies over its former manufacturing facility. These improvements allow ASC to meet new regulatory requirements, while continuing to produce high-quality, innovative products.

ASC also substantially improved and modernized its Clarksville, Tenn. operation. The Clarksville location handles receiving and processing for moist-snuff and loose-leaf tobaccos, as well as the processing and packaging of dry snuff.

The new ASC facility follows other investments made in manufacturing capabilities. Recently, the company began a construction and renovation project at its Taylor Brothers smokeless tobacco plant in Winston-Salem. "We wanted to make sure we had the most modern and up-to-date facilities in the industry," said Greg Sawyers, senior director of manufacturing at ASC. "We need to be able to efficiently meet current market demand, as well as be ready for future growth."

Conclusion

RAI's operating companies are leading the tobacco industry in driving innovation. Their diverse portfolio of tobacco products makes them well-positioned to redefine enjoyment for adult tobacco consumers. By achieving these goals, the operating companies will work to achieve market leadership, as well as fundamentally change the tobacco industry.

"We are the right company at the right time to accomplish this goal," R.J. Reynolds' O'Brien said. "What a great feeling; to be successful in your business goals and to do the right thing. The future is truly exciting."

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