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Analyzing Reynolds American’s Vuse E-Vapor’s 3Q15 Performance

Penny Morgan

Reynolds American's 3Q15 Results Are In-Line with Analysts' Estimates

(Continued from Prior Part)

Overview of All Other segment

Reynolds American’s (RAI) 3Q15 revenue for its All Other operating segment rose 70% to $0.10 billion in 3Q15 against $0.06 billion in 3Q14. RAI’s All Other operating segment includes the following:

  1. RJR Vapor, which manufactures and markets the Vuse Digital Vapor Cigarette
  2. Niconovum USA and Niconovum AB, which manufacture and market nicotine replacement therapy gums under the Zonnic brand name
  3. SFR Tobacco International GmbH (or SFRTI), which distributes the Natural American Spirit brand outside the United States

Operating income and revenue

Operating income for the All Other segment fell to $0.13 billion in 3Q15. However, a rise in revenue was driven by the continued strong performance of the Vuse Digital Vapor Cigarette in 3Q15.

Vuse is an e-cigarette (electronic cigarette) produced by RAI’s subsidiary RJR Vapor. According to CEO (chief executive officer) Susan M. Cameron, the brand increased its number-one share position in the convenience store channel.

E-vapor versus peers

In an attempt to meet the growing demand for e-vapor (electronic vapor) cigarettes, many tobacco competitors also have a presence in the e-cigarette market. As a result, Philip Morris International (PM) is exclusively licensed to commercialize Altria Group’s (MO) MarkTen e-vapor internationally. To learn more, please read Altria’s Nu Mark Subsidiary: Innovation in Tobacco Products .

Other companies such as British American Tobacco (BTI) and Vector Group (VGR) produce e-cigarettes to meet consumer expectations. Vype and Zoom are the e-cigarettes produced by these companies.

Consumer engagement

With the help of its consumer engagement team, Reynolds American is focusing on adding more options to its traditional tobacco flavors. This would help adult smokers to switch to smoke-free alternatives.

As a result, RJR Vapor expanded four additional styles of Vuse cartridges nationally. The brand now offers crema, mint, berry, and chai flavors in addition to the existing original and menthol styles.

Reynolds American has exposure in the PowerShares Dividend Achievers ETF (PFM), with 1.1% of the total weight in its portfolio.

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