The premium cigarette category has been under pressure as consumers face economic challenges and unemployment remains high. Those challenges are in addition to the tax hikes, smoking bans, health concerns and social stigma that have made the cigarette business tougher.
The decline in cigarette volumes also has led to heavy promotional activity by the nation's largest tobacco companies as well as raising prices and cutting costs to bolster profits. The company has promoted Pall Mall as a longer-lasting and more affordable cigarette to capture smokers that are trying to save money, and has said half the people who try the brand continue using it.
Winston-Salem, N.C.-based Reynolds American Inc. saw volumes for Pall Mall fall more than 2 percent to 5.6 billion cigarettes during the third quarter and its market share grow 0.3 percentage points to 8.9 percent.
Meanwhile, volumes of its premium Camel brand grew 4 percent to 5.5 billion cigarettes during the quarter and its market share increased 0.4 percentage points to 8.9 percent of the U.S. market.
In a conference call with analysts on Tuesday regarding Reynolds American's third-quarter earnings, CEO Daniel Delen discussed the dynamics of the cigarette business.
"I think it's a little premature ... to say that the category is premiumizing again, or that in general premium brands are growing. I know Camel stands out as having significant growth, and it is as premium brand. But I believe it's largely due to some of the differentiated offers we have on Camel, particularly ... the four capsule SKUs that we have out there. They are doing particularly well in the marketplace. I think we still see a moderated trend, but the trend still exists to people moving from premium to value. It's just that Camel is counter-trend on that one."
- Consumer Discretionary
- Investment & Company Information
- Reynolds American