Reynolds American Inc. is taking a bold — perhaps audacious — approach to entering the nicotine-replacement therapy marketplace, analysts say.
With the Zonnic gum of its Niconovum pharmaceutical subsidiary, Reynolds is asking consumers, particularly smokers, to trust the company that got smokers hooked on nicotine to have the expertise to produce the right cessation product for them.
Until four years ago, Reynolds' evolution into a "total tobacco company" was met with steep skepticism, if not derision, by anti-tobacco advocates.
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However, the launch of Zonnic in retail outlets in Des Moines, Iowa, on Sept. 3 represents just the latest innovation for Reynolds, following up on Camel Snus and three Camel dissolvable products.
Also on tap is Reynolds' version of an electronic cigarette (Vuse), smokeless pouches and pellets (Viceroy) and nicotine extract products such as lozenges. Vuse and Viceroy are being test-marketed in the Triad at select Tarheel Tobacco outlets.
"We hope the focus of Zonnic is on the message of the product, and not the messenger, because we believe Zonnic takes the smoker's perspective into cessation," said Tommy Payne, president of Niconovum USA Inc., based in Winston-Salem.
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The gum represents Niconovum's first product introduction in the United States. Reynolds bought Niconovum AB, based in Sweden, in 2009 for $44 million. Its products, which also include pouches and spray forms, are sold in Denmark and Sweden.
Payne said Zonnic already has been approved by the Food and Drug Administration.
Zonnic is the latest entrant into a nicotine-replacement therapy marketplace occupied by well-hyped products that have yielded mixed results at best in helping smokers quit.
The long-term effectiveness of NRT products was called into doubt in January by a study released by researchers at the Harvard School of Public Health and the University of Massachusetts at Boston.
The study of 787 adult smokers in Massachusetts found that the products, specifically nicotine patches and gum, "are no more effective in helping people stop smoking cigarettes in the long term than trying to quit on one's own," said Hillel Alpert, a research scientist with the Harvard group and the study’s lead author.
Gregory Connolly, director of the Center for Global Tobacco Control at Harvard, said the study "showed clearly that while the NRT products can help with quitting and withdrawal over two weeks to six months, they are not really designed to help with relapsing."
Payne said that although about 70 percent of smokers annually express a desire to quit smoking, only 10 percent are successful. Of that 10 percent, about 6 percent are successful through the use of NRT products, he said.
Stop-smoking aid
Undaunted by those realities, Payne said the appeal of Zonnic will be based "on its unique approach to brand positioning, distribution, packaging and price."
Each Zonnic package will contain 10 pieces, as well as "stop smoking aid" labeling. It will come in 2-milligram and 4-milligram mint styles, with the larger concentration aimed at adults who smoke within 30 minutes of waking up.
The 10-count package will sell for about $3. That's about half the price of a pack of cigarettes in the Des Moines market and about a third of the cost of similar NRT gums, according to Reynolds.
Most sellers of NRT products typically package their gum in quantities of 20 to 40, which Reynolds said can be a hindrance to someone just starting on the path to quitting.
Zonnic will be sold primarily in convenience stores and gas stations, which is where the majority of tobacco products are bought. Most NRT products tend to be sold in large quantities in drug and big-box retail stores.
"We want to bring smokers into NRT that haven't been in the category before, whether because of cost, access and motivation," Payne said.
Niconovum officials think they will earn smokers' confidence in Zonnic in part by taking "an inspirational, positive approach by speaking to adult smokers in a nonjudgmental, respectful manner."
Its marketing pitches include the messages "Each cigarette not smoked is a victory" and "It's more than quitting — it's succeeding.”"
That's in contrast, they say, to competitor Nicorette's marketing pitch that "quitting sucks" and its products make it "suck less." Because Zonnic is an NRT product, Niconovum will be able to use television and radio advertising as well as point-of-sale and direct-mail marketing.
Which means if Zonnic proves successful in Des Moines, Reynolds could go national with distribution fairly quickly, Payne said.
"These Niconovum products are a great, if not the best, example of transforming tobacco and providing products in tobacco and NRT that have a well-established variety of risk,"Payne said.
Addiction or habit
Reynolds knows its tobacco evolution is being shaped in large part by how well it can live down — and learn from — its regulatory past.
FDA oversight of the tobacco industry strikes at the core of Reynolds' attempt to create a reputation as an innovator of products that could be less harmful to consumers than cigarettes.
Meanwhile, most anti-tobacco advocacy groups are scrutinizing smokeless innovations to determine whether they could serve a public-health benefit or work as gateway products to cigarettes, particularly for youths.
A major reason why there is doubt about Reynolds' intentions goes back to an image from 1994 that the company may never shake — James Johnston, its then-chairman, and six other stone-faced tobacco executives testifying before a congressional subcommittee that nicotine was not addictive.
Those statements, as well as the definitional wordplay regarding addiction and habit, created a level of distrust among critics for the tobacco-evolution motives of Reynolds and other manufacturers.
Analysts differ on whether Reynolds can make a successful NRT pitch to consumers.
"If it's a tiny product and Reynolds wants a public-relations blast for doing a good thing, I guess that makes sense,"said John Sweeney, a professor in the journalism and mass communication school at UNC Chapel Hill.
"But from the perspective of establishing a brand, I would be a nearly anonymous owner if I were Reynolds."
Sweeney compares the Reynolds initiative with Zonnic to an oil company investing in solar and wind energy from an overall industry expertise. "Reynolds does bring revenue, distribution and expertise that can help Zonnic NRT," he said.
Sweeney said using the Zonnic brand and touting the Niconovum pharmaceutical background is the right tactic to take with consumers.
Scott Ballin, past chairman of the Coalition on Smoking or Health, said he believes Reynolds can gain smokers’ trust in its NRT products.
"I am sure the tobacco-control folks will strongly criticize its effort, which is a mistake," Ballin said. He said they should qualify their support/concerns by indicating that Reynolds needs to develop a short- and longer-term business plan that phases out the deadliest form of nicotine products: cigarettes.
"The more tobacco companies move in this direction, the more difficult it will be for tobacco-control folks and pharma to criticize these FDA approval products," Ballin said.
Alternatives
Congress gave the FDA oversight over most tobacco products in 2009.
However, it has not set standards for smokeless tobacco product introductions. Most smokeless products carry a warning label that includes "This is not a safe alternative to cigarettes."
In May, Altria Group Inc. began testing in Virginia a nicotine-extract product called Verve, sold exclusively at Sheetz convenience stores.
It is a lozenge-shaped disc made of cellulose fibers and polymer and does not dissolve. It works by releasing nicotine over a 15-minute period as the user sucks or chews on it. Altria said each disc contains about 1.5 milligrams of nicotine, less than in many smokeless products.
The Campaign for Tobacco-Free Kids said it expects Reynolds to take the Zonnic products through the "appropriate regulatory process established to protect public health."
"The key issue here isn't consumer or advocacy support, but that the manufacturer follows the law and FDA effectively enforces the law to protect public health," the group said.
Bill Godshall, executive director of SmokeFree Pennsylvania, is a vocal supporter of using smokeless tobacco as a way to get smokers to try a potentially less harmful product than cigarettes.
"Smoke-free tobacco products are 99 percent less hazardous alternatives to cigarettes, and Niconovum's nicotine products are even less hazardous alternatives," he said.
He said Reynolds has contracts with 500,000 retailers, ensuring highly desirable shelf displays and many other competitive advantages for its NRT products.
Godshall expressed concern about whether the FDA will be objective in evaluating Reynolds' NRT products because of its "inaccurate claims about many tobacco manufacturers and products, and its opposition to all tobacco use, during the past three years."
Stephen Pope, chief global market strategist with Cantor Fitzgerald Europe, said he is intrigued by Reynolds' push into NRT products given its history and the direction of the industry toward smokeless products.
"Reynolds could play on the fact that (going through) the full course of NRT increases the odds of quitting successfully, and certain formats may reduce weight gain associated with quitting smoking," Pope said.
"If this could be backed up by proven, verifiable research, it may be an oblique way for Reynolds to build market share in a growing segment of the tobacco market when tobacco sales are falling." Enditem
