RAI consolidates production

Source from:  Tobacco Reporter 05/31/2010

Reynolds American is consolidating and upgrading its factories to maximize cigarette-manufacturing efficiency and expand smokeless tobacco production capacity. The company is closing a cigarette factory in Winston-Salem, North Carolina, USA, and one in Yabucoa, Puerto Rico. Production from those two older plants will transfer to R.J. Reynolds Tobacco Co.s largest facility, in Tobaccoville, North Carolina. Meanwhile, American Snuff Company, LLC is expanding its smokeless tobacco processing and manufacturing capacity by investing in facilities in Memphis and Clarksville, Tennessee. "Our operating companies are optimizing their manufacturing networks to increase efficiency, upgrade and expand some operations, and reduce complexity," said Susan Ivey, RAI's chairman, president and chief executive officer. "These changes make our companies more efficient in light of the declining U.S. cigarette industry and growth in smokeless tobacco. Consolidating production into fewer and newer facilities will also facilitate cost-effective compliance with new federal regulation of the tobacco industry." Cigarette manufacturing volume and employees will begin moving from R.J. Reynolds' Whitaker Park plant to Tobaccoville this summer. Whitaker Park will cease manufacturing in mid-2011. Cigarette production at a Reynolds affiliate in Yabucoa will be transferred to Tobaccoville by the end of August 2010. About 60 manufacturing employees' jobs in Yabucoa will be eliminated. The company's distribution operations in Puerto Rico are not affected by the plant closure. In Memphis, American Snuff Co. is expanding its manufacturing operations using property and a facility purchased last year. Construction began in April, and the new facility will be fully operational in January 2012. The company's current plant, built in 1904, will close in 2012. American Snuff Co. is also doing construction in Clarksville to increase its tobacco-processing capacity. New tobacco receiving and processing operations and dry snuff manufacturing will begin in phases, and the facilities will be fully operational by early 2012. "The decision to close a plant is never easy," said Ivey. "These changes to our companies' operations footprint address last year's significant increase in the federal tax on cigarettes and new regulatory requirements. We must ensure that our companies are keenly focused on productivity and efficiency in order to continue to compete successfully in the years ahead." Independent of the changes to manufacturing facilities, Ivey also said work continues on determining the best way to redeploy R.J. Reynolds' former headquarters building in Winston-Salem. The company's real estate advisors recently contacted a number of commercial, nonprofit and economic-development organizations to gauge potential interest in the iconic building, Ivey said, and discussions are expected to continue throughout 2010. Enditem