On the Call: Reynolds American Inc. CEO Susan Ivey

Source from:  The Associated Press 02/05/2010

Tobacco companies' cigarette shipments fell even faster in 2009 than in earlier years as vendors and consumers adjusted to tax increases including the federal hike of 62 cents per pack that took effect in April. Experts peg the decline industrywide in 2009 at 8 to 9 percent. Reynolds American Inc., the second-biggest U.S. cigarette company, is aggressively promoting its Pall Mall brand as a longer-lasting, more affordable cigarette, and it sold nearly 71 percent more of the brand than the year before, or 14.6 billion cigarettes, while the company's overall volumes declined 8.7 percent. Still, Reynolds American said its profit for the year fell 28 percent. In a conference call with analysts Thursday regarding Reynolds American's fourth-quarter and full-year earnings, CEO Susan M. Ivey talked about its Pall Mall brand. QUESTION: While Pall Mall is getting a good volume lift from promotions, your overall mix is declining and your profit doesn't appear to be growing as much as some of your competitors'. Why is this an effective strategy? RESPONSE: The economy is in a significant recession, unemployment levels are still rising and cigarette smokers experiencing a 25 percent increase in their daily expenditures. (Pall Mall) is a high-quality, longer-lasting cigarette … Consumers are clearly interested in honest value. … We believe the proposition continues to demonstrate its strength. As people try Pall Mall, we get about a 50 percent conversion to the brand and the brand is becoming increasingly popular. Enditem