R. J. Reynolds Tobacco Company
|Founder(s)||Richard Joshua Reynolds|
|Headquarters||401 N. Main St., Winston-Salem, N.C., USA|
|Key people||Daan Delen, Chief Executive Officer|
|Parent||Reynolds American, Inc.|
The R.J. Reynolds Tobacco Company (RJR), based in Winston-Salem, North Carolina and founded by R. J. Reynolds in 1875, is the second-largest tobacco company in the U.S. (behind Altria Group). RJR is an indirect wholly owned subsidiary of Reynolds American Inc. which in turn is 42% owned by British American Tobacco of the United Kingdom.
The son of a tobacco farmer in Virginia, R. J. Reynolds sold his shares of his father's company in Patrick County, Virginia, and ventured to the nearest town with a railroad connection, Winston-Salem, to start his own tobacco company. He bought his first factory building from the Moravian Church and established the "little red factory" with seasonal workers. The first year, he produced 150,000 pounds of tobacco; by the 1890s, production had increased to several million pounds a year. The company's factory buildings were the largest buildings in Winston-Salem, with new technologies such as steam power and electric lights. The second primary factory building, built in 1892, is the oldest Reynolds factory still standing and was sold to Forsyth County in 1990.
At the beginning of the 1900s, Reynolds bought most of the competing tobacco factories in Winston-Salem. The company produced 25% of America's chewing tobacco. 1907's Prince Albert smoking tobacco became the company's national showcase product, which led to high-profile advertising in New York City's Union Square. The Camel cigarette became the most popular cigarette in the country. The Reynolds company imported so much French cigarette paper and Turkish tobacco for Camel cigarettes that Winston-Salem was designated by the United States federal government as an official port of entry for the United States, despite the city being 200 miles (320 km) inland. Winston-Salem was the eighth-largest port of entry in the United States by 1916.
At the time Reynolds died in 1918 (of pancreatic cancer), his company owned 121 buildings in Winston-Salem. He was so integral to company operations that executives did not hang another chief executive's portrait next to Reynolds' in the company board room until 41 years later. Reynolds' brother William Neal Reynolds took over following Reynolds' death, and six years later Bowman Gray became the chief executive. By that time, Reynolds Co. was the top taxpayer in the state of North Carolina, paying $1 out of every $2.50 paid in income taxes in the state, and was one of the most profitable corporations in the world. It made two-thirds of the cigarettes in the state.
Reynolds Co.'s success during this period can also be measured by the concurrent success of many Winston-Salem companies which received large amounts of business from Reynolds: Wachovia National Bank became one of the largest banks in the Southeast, and the company's law firm Womble Carlyle Sandridge & Rice became the largest law firm in North Carolina.
R. J. Reynolds Tobacco diversified into other areas, buying Pacific Hawaiian Products, the makers of Hawaiian Punch, in 1962, Sea-Land Service in 1969, and Del Monte Foods in 1979. Sea-Land was spun off in 1984.
Because of the company's diversification, the company changed its name to R. J. Reynolds Industries, Inc. in 1970. R. J. Reynolds Tobacco Co. was a subsidiary.
R. J. Reynolds Industries merged with Nabisco Brands in 1985, and the name changed to RJR Nabisco in August 1986. In 1987, a bidding war ensued between several financial firms to acquire RJR Nabisco. Finally, the private equity takeover firm Kohlberg Kravis and Roberts & Co (commonly referred to as KKR) was responsible for the 1988 leveraged buyout of RJR Nabisco. This was documented in several articles in The Wall Street Journal by Bryan Burrough and John Helyar. These articles were later used as the basis of a bestselling book, Barbarians at the Gate: The Fall of RJR Nabisco, and then into a television movie. As a result, in February 1989, RJR Nabisco paid executive F. Ross Johnson US$53,800,000 as part of a golden handshake clause, the largest such deal in history at the time, as severance compensation for his acceptance of the KKR takeover. He used the money to open his own investment firm, RJM Group, Inc. In 1999 RJR Nabisco spun off R. J. Reynolds Tobacco, which began trading on June 15 as R. J. Reynolds Tobacco Holdings, Inc., and a year later announced it would buy Nabisco Group Holdings Inc., the company that had been RJR Nabisco. This followed the sale of Nabisco Holdings Group to Philip Morris.
In 1994, then CEO James Johnston testified under oath before Congress, saying that he didn't believe that nicotine is addictive. In 1998, the company was part of the Tobacco Master Settlement Agreement with 46 US states, agreeing to pay smoking-related health care costs and restrict advertising in return for protection against private lawsuits.
In 1999, R. J. Reynolds was spun out of RJR Nabisco. The same year, the company sold all its non-US operations to Japan Tobacco, which made those operations into its international arm, JT International. Consequently, any Camels, Winstons or Salems sold outside the US are now actually Japanese cigarettes.
In 2002, the company was fined $15m for handing out free cigarettes at events attended by children, and was fined $20m for breaking the 1998 Master Agreement, which restricted targeting youth in its tobacco advertisements.
In 2001-2011, the European Community was involved in three civil suits against R. J. Reynolds in the United States District Court for the Eastern District of New York, accusing the company of selling black market cigarettes to drug traffickers and mobsters from Italy, Russia, Colombia and the Balkans. The suits were unsuccessful.
On July 30, 2004, R. J. Reynolds merged with the U.S. operations of British American Tobacco (operating under the name of Brown & Williamson). A new parent holding company, Reynolds American Inc., was established as part of the transaction.
In May 2006 former R. J. Reynolds vice-president of sales Stan Smith pleaded guilty to charges of defrauding the Canadian government of $1,200,000,000 (CDN) through a cigarette smuggling operation. Smith confessed to overseeing the 1990s operation while employed by RJR. Canadian-brand cigarettes were smuggled out of and back into Canada, or smuggled from Puerto Rico, and sold on the black market to avoid taxes. The judge referred to it as biggest fraud case in Canadian history.
Since 2006, R. J. Reynolds has been the subject of a Farm Labor Organizing Committee (FLOC) campaign to reduce the exploitative nature of its tobacco procurement system. FLOC's goal is to meet with Reynolds executives, growers, and workers in collective bargaining to improve farmworkers' pay and living conditions. Although there are many layers of subcontractors within the procurement system that seemingly absolve Reynolds of responsibility, FLOC asserts that its executives have the ability to make changes within the system due to their wealth and enormous power. Despite repeated refusals to meet from CEO Susan Ivey, FLOC continues the campaign against R. J. Reynolds Tobacco Company.
In 2010, Reynolds American announced that the company would close its manufacturing plants in Winston-Salem, NC and Puerto Rico. Production from these plants will be moved to the Tobaccoville, NC plant.
Marketing, sponsorships and criticisms
The NHRA sponsorship lasted up to 2001, before a new governing rule stated the Master Settlement Agreement, restricting R. J. Reynolds to one sponsorship of a sporting event; as a result, they chose NASCAR, which lasted up to 2003.
In 1987, RJR resurrected the mascot for their Camel brand of cigarette, Joe Camel. Joe Camel, an anthropomorphic cartoon camel wearing sunglasses, was claimed to be a ploy to entice and interest the underaged in smoking. R. J. Reynolds maintained that Joe's "smooth character" was meant only to appeal to adult smokers.
This criticism was reinforced by a 1991 study published in the Journal of the American Medical Association  showing that more children 5 and 6 years old could recognize Joe Camel than could recognize Mickey Mouse or Fred Flintstone (coincidentally, Fred Flintstone was also once used to sell R. J. Reynolds' Winston cigarettes) and alleged that the Joe Camel ad campaign was targeting children, despite R. J. Reynolds' contention that the campaign had been researched only among adults and was directed only at the smokers of other brands. In response to this criticism, RJR instituted "Let's Clear the Air on Smoking," a campaign of full-page advertisements consisting entirely of large type text, which denied the charges and declared that smoking is "an adult custom."
In late 2005, R. J. Reynolds opened the Marshall McGearty Lounge in the Wicker Park neighborhood of Chicago as part of a marketing strategy to promote a brand of "superpremium" cigarettes and counteract local smoking bans in restaurants and cafes that took effect in 2006. The lounge, which offers thirteen varieties of exclusive "hand-crafted" cigarette, along with alcohol and "light food", has been "well received" in the neighborhood and by the targeted upscale market, according to company officials. The lounge has since been closed due to Chicago indoor smoking restrictions.
The company planned to open a second location in Winston-Salem in the summer of 2007, but scrapped those plans within weeks of opening, citing the increasing number of smoking restrictions in public places by state and local governments.
- Reese vs. Reynolds
In May 2011 a Miami-Dade Circuit jury awarded Julie Reese, an 82-year-old Cape Coral smoker represented by The Ferraro Law Firm, a total verdict of $1 million from R.J. Reynolds Tobacco, after she developed laryngeal cancer and chronic obstructive pulmonary disease. The jury found Reynolds to be negligent, guilty of fraud by concealment and fraud conspiracy, and guilty of placing a defective product on the market.
R. J. Reynolds brands include Camel, Kool, Winston, Salem, Doral, Eclipse,and Pall Mall. Brands still manufactured but no longer receiving significant marketing support include Barclay, Belair, Capri, Carlton, GPC, Lucky Strike, Misty, Monarch, More, Now, Tareyton, Vantage, and Viceroy. The company also manufactures certain private-label brands. Five of the company's brands are among the top ten best selling cigarette brands in the United States, and it is estimated that one in three cigarettes sold in the country were manufactured by R. J. Reynolds Tobacco Company. In 2010 R. J. Reynolds acquired the rights to the smokeless tobacco products Kodiak and Grizzly dip.
In 1990, RJ Reynolds planned to launch a new cigarette brand called Uptown, aimed primarily at African-Americans. To appeal to blacks seeking a less pronounced menthol taste (similar to Lorillard's Newport, which was gaining share), Reynolds decided against using green on the packaging, and instead used black and gold, the colors of luxury European cigarettes.
Narrowing the marketing further, Uptown cigarettes were to be packed with filters facing down, the reverse of the usual arrangement . Market research indicated that many blacks open packs from the bottom, possibly to avoid crushing the filters. It was later discovered that cigarette packs were opened from the bottom for a different reason: "This phenomenon traces back at least to World War II, when cigarettes were a valued commodity among soldiers. Often a soldier temporarily without cigarettes and without funds would bum a smoke from a fellow soldier. It was impolite to refuse such a request. However, there were two occasions when a refusal was not considered impolite: if there was only one cigarette left in the pack and if the pack was not yet opened. A pack opened from the bottom and resting, as it normally did, in a shirt pocket would appear unopened. Therefore the soldier in possession of cigarettes would be able to avoid having to give too many away."
The promotional blitz was scheduled to begin on Feb 5 and Philadelphia was selected as the test market because of its large black population. Before it began, the campaign came under fire from religious, health and black-interest groups who expressed concerns about promoting cigarette smoking to blacks.
On January 19, 1990, Reynolds abruptly decided to cancel the cigarette, saying that the test marketing would no longer be reliable because of what it called, "the unfair and biased attention that brand has received."
The company's headquarters were located in the Reynolds Building in Winston-Salem for more than fifty years. Built in 1929, the 21-story building was designed by the same architects (Shreve & Lamb) who later designed the Empire State Building in New York City. In September 1977, R. J. Reynolds Industries moved the first of 1200 headquarters employees into the not-yet-completed, $40 million, 519,000-square-foot glass and steel World Headquarters Building being built across Reynolds Boulevard from the Whitaker Park cigarette manufacturing plant. At the same time, the company had plans for a new skyscraper downtown.
The current headquarters, the RJR Plaza Building, is 16 stories tall and was completed in 1982 adjacent to the original 1929 Reynolds Building. The tobacco company moved its headquarters to RJR Plaza in 1982, and the 1929 building continued to be used for some company offices until 2009; the older building currently stands vacant and has been considered for renovation as an upscale hotel.
With the parent company (renamed RJR Nabisco in 1985 after merging with Nabisco) planning to move its headquarters to Atlanta in September 1987, the company donated the World Headquarters Building to Wake Forest University in January 1987, and in July of that year, the company voted to move its Planters-Life Savers division to one-third of that building. In 2010, the building's tenants were Aon Corporation, BB&T, and PepsiCo.
It was announced in 2010 that cigarette manufacturing would cease at the company's Whitaker Park plant, located in Winston-Salem. Built in 1961, the plant had about 1 million square feet (90,000 m²) of manufacturing space. Manufacturing formerly performed at the Whitaker Park plant is to be consolidated in the more-modern Tobaccoville plant.
Macon manufacturing, located in Macon, Ga., resides in a 1.4 million square foot (130,000 m²) facility built in 1974. This manufacturing plant was formerly known as Brown & Williamson, which was purchased by Reynolds and eventually closed in 2006.
R. J. Reynolds has a tobacco-sheet manufacturing operation in Winston-Salem. The sheet manufacturing operation in Chester, Va. was closed in 2006. Also, there are leaf operations in Wilson, N.C.; tobacco-storage facilities in Blacksburg, S.C. and Richmond, Va.; and a significant research-and-development facility in Winston-Salem.
A manufacturing plant in Puerto Rico was closed in 2010.
Among these facilities, R. J. Reynolds employs approximately 6,800 people.
R. J. Reynolds' subsidiary R. J. Reynolds Tobacco Foreign Sales Corporation is established in the British Virgin Islands to minimize its tax liability.
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