On the Call: Reynolds American CEO Delen

Source from:  The Associated Press 04/26/2012

Reynolds American Inc., the second-biggest U.S. cigarette company, has aggressively promoted its Pall Mall brand as a longer-lasting, more affordable cigarette as smokers weather the weak economy and high unemployment. The company says that half the smokers who try the brand continue using it. Pall Mall had bucked overall industry trends in recent quarters with growing sales, despite industrywide declines in the number of cigarettes sold as taxes, smoking bans, health concerns and social stigma all increase. But the Winston-Salem, N.C., company's competitors took note, grabbing some of the market by increasing promotional activity to attract price-sensitive smokers with discounts. Reynolds sold about 5 percent fewer Pall Mall cigarettes in the first quarter as it faced a tough comparison to the year-ago period when volume grew 16 percent. Its U.S. retail market share held steady at 8.5 percent. In a conference call with analysts regarding the company's first-quarter earnings, CEO Daniel Delen discussed Pall Mall. QUESTION: How do you think about striking the right balance on promoting Pall Mall to increase volume and being comfortable giving up some of the price margins? RESPONSE: We manage Pall Mall both for market share and for profitability, and we look for an optimal balance between those two. … Pall Mall is the only significant brand in the marketplace that actually had net price realization during the first quarter. … In terms of its interaction with competitive brands, obviously Pall Mall held share year-on-year, which I think is quite an achievement given the array of brands that are actually trying to track it down. .. So for us really it's about balancing that volume and that market share. … Depending on what the promotional environment is, I'm quite confident in our ability to be able to continue to grow Pall Mall long term. Enditem