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R.J. Reynolds Tobacco Company

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This article is part of the Tobacco portal on Sourcewatch funded from 2006 - 2009 by the American Legacy Foundation. Help expose the truth about the tobacco industry.

R.J. Reynolds Tobacco Co. is the manufacturer of four of the United States' 10 best-selling cigarette brands: Winston, Camel, Salem and Doral. Reynolds American, Inc. is the parent company of R.J. Reynolds, according to Reynolds American's Web site.[1] R.J. Reynolds Industries in 1985 encompassed tobacco, food, beverages, spirits and wines, food service and "specialty retailing." According to a 1985 corporate presentation, RJR Industries sought to reduce the company's dependence on tobacco earnings by diversifying into non-tobacco products and services.[1]

Contents

Conglomerate activities

According to the company's web site, the R.J. Reynolds Tobacco Company (RJRT) "is the second-largest cigarette manufacturer in the United States, with "Our company's rich heritage of innovation in the laboratory and in the marketplace continue to serve us well in successfully meeting the cigarette brand preferences of about 25% of the nation's 46.5 million adult smokers." RJR is headquartered in Winston-Salem, North Carolina. [2]

By 1989 Reynolds also owned Nabisco and Del Monte, and it was taken over itself by junk-bond leverage buyout specialists, Kohlberg Kravis and Roberts (KKR). The extend of the borrowings needed for the buyout left the company financially emasculated for many years (it had book debts of $25 billion) which allowed Philip Morris to dominate the market globally and control most of the political corruption activities.

But RJR-Nabisco still had enormous influence and bargaining power: at its apex in the late 1980s, KKR also controlled Wesson Oil. Ritz crackers, Winston cigarettes, Duracell Batteries, Safeways and Fred Meyer stores, Stop & Shop supermarkets, Bradlee Department stores, Auto Zone car parts, the Motel 6 chain and half-a-dozen CBS TV affiliates.

Company History

  • R.J. Reynolds Tobacco Company was founded in 1875, when 25-year-old Richard Joshua Reynolds started a chewing-tobacco manufacturing operation in the town of Winston, North Carolina. (Winston would later merge with the nearby village of Salem, creating the city known today as Winston-Salem.)
  • In 1899, R.J. Reynolds cut a deal that gave Buck Duke's tobacco trust a two-thirds stake in R.J. Reynolds Tobacco Company. Reynolds secured the exclusive concession of shipping Camel cigarettes to the American troops fighting World War I in Europe.[3]
  • Although the town of Winston had only a few hundred residents and no paved roads, Mr. Reynolds saw two potential keys to business success: Winston was a production center for flue-cured tobacco leaf, and the town sat on a newly built railroad line.
  • Mr. Reynolds was the sixth of 16 children, and a Virginia native. He was a hands-on manager, who personally selected "recipes" and packaging for his products, and knew virtually every employee by name. He was instrumental in getting roads built in the town, helped establish a savings bank, and served as a city commissioner. He and his wife supported numerous educational and human-service efforts in the community.
  • Someone once said about Mr. Reynolds, "He can see further ahead than most people can see behind them."[4] Having started a chewing-tobacco business, he correctly anticipated the growth in popularity of smoking tobaccos - and introduced pipe tobaccos supported by memorable advertising campaigns. He then went on to revolutionize U.S. cigarette blends, marketing, and packaging.
  • In 1912, Mr. Reynolds devised an employee stock plan. It's been said that he feared Wall Street like he feared the devil -- and he wanted as much voting stock as possible in the hands of his employees. He used a profit-sharing formula that paid shareholders an extra dividend - and would make many RJRT employees very "comfortable" in the years ahead.
  • In 1913, Reynolds Tobacco introduced Camel cigarettes, containing a blend of several different types of tobacco that would come to be called "the American blend." Supported by a unique introductory "teaser" advertising campaign that hyped the start of sales of the cigarette long before it actually hit the market, Camel became the first nationally popular cigarette in the United States country. Reynolds Tobacco established virtually every packaging standard in the U.S. cigarette industry. The 20-cigarette pack was introduced by Reynolds Tobacco in 1913, and in 1915 the company introduced the one-piece, 10-pack carton. In 1931, Reynolds Tobacco became the first company to package its cigarettes with a moisture-proof, sealed cellophane outerwrap to preserve freshness.
  • The Reynolds Building - the new headquarters for Reynolds Tobacco Company - opened in downtown Winston-Salem on April 27, 1929.
  • In 1954, Reynolds Tobacco introduced Winston - the first filter cigarette to achieve a major success in the marketplace.
  • In 1956, Reynolds Tobacco introduced Salem - the first filter-tipped menthol cigarette.
  • In 1958, Reynolds Tobacco became the nation's leading cigarette manufacturer - a position the company held until 1983.
  • Reynolds Tobacco opened its new Whitaker Park cigarette plant in 1961, a few miles away from downtown Winston-Salem. Previously, all the company's factories had been downtown, in view of the headquarters office.
  • The Doral brand was first introduced by Reynolds Tobacco in 1969. (It was re-introduced in the value segment in 1984.)
  • In 1980, Reynolds Tobacco announced a multi-year construction and modernization program to upgrade its manufacturing facilities.
  • In 1982, Reynolds Tobacco opened another office building - the RJR Plaza Building --adjacent to and connected with its Reynolds Building headquarters. Reynolds Tobacco opened its newest and largest plant, the Tobaccoville Manufacturing Center, in 1986.
  • Reynolds Tobacco began diversifying into foods and other non-tobacco businesses in the 1960s. By 1970, the corporation formed a new parent company called R.J. Reynolds Industries, Inc.
  • In 1983, RJR founded its Social Responsibility Department as a response to the growing negative attitude towards smoking. The mission was to minimize the impact of various controversies surrounding smoking on the company's ability to meet its business objectives.[5]The Department did focus group research before the March 19, 1985 running of an ad titled "Of Cigarettes and Science" about the massive MR FIT (Multiple Risk Factor Intervention Trial) study. This study was the largest study of its time investigating the causes of cardiac disease and mortality. According to Larry C. White, author of the book "Merchants of Death: The American Tobacco Companies," this ad was a total distortion of an extremely important study of the relationship between a number of risk factors and heart disease. On June 16, 1986, the U.S. Federal Trade Commission filed a formal complaint against RJRT as a result of the ad. Administrative law judge Montgomery Hyun ruled in favor of RJRT, dismissing the FTC's complaint and holding that the ad was noncommercial speech and not subject to the FTC's regulation.
  • In September 1985, Reynolds Industries acquired Nabisco Brands. In 1986, the parent company was re-named RJR Nabisco, Inc.
  • In April, 1987, RJR began test marketing a new cigarette called Magna, that showed a glittering chromo logo with the brand name spelled out in bold script against a cherry-red background.
  • Also in 1987, RJR formed the Forsyth Tobacco Products division to market discount brands like Austin, Sundance, Scotch Buy and Cost Cutters (the store brand of cigarette for the Kroger Company.
  • In November 1988, RJR Nabisco entered a merger agreement with Kohlberg Kravis Roberts & Co. (KKR), for the acquisition of RJR Nabisco by KKR. The merger was completed in April 1989. The acquisition was valued at $25 billion, marking the largest corporate transaction in history at that time. After being privately held for a period, the company's common stock returned to the stock market in 1991. In early 1995, KKR divested its remaining holdings in RJR Nabisco.
  • On June 15, 1999, R.J. Reynolds Tobacco Holdings, Inc. became an independent, publicly traded company again, with R.J. Reynolds Tobacco Company as its wholly owned subsidiary. The separation was accomplished through a spin-off of the domestic tobacco business on a tax-free basis, to the stockholders of RJR Nabisco Holdings Corp.
  • On January 16, 2002, R.J. Reynolds Tobacco Holdings, Inc. acquired Santa Fe Natural Tobacco Company for $340 million in cash. Santa Fe Natural Tobacco Company, Inc. manufactures [Natural American Spirit] cigarettes and other tobacco products, and markets them both nationally and internationally.
  • In November 2005, the health advocacy groups The Campaign for Tobacco-Free Kids, the National Latino Council on Alcohol and Tobacco Prevention, and Floridians for Youth Tobacco Education warned that RJR was increasingly marketing to Latino children. The groups specifically objected to RJR's "Kool be true" campaign, which ran an eight-page color ad in Latina magazine featuring pictures of musicians and the line, "It's about pursuing your ambitions and staying connected to your roots." The Campaign for Tobacco-Free Kids suggested that the U.S. Federal Trade Commission collect data on how much tobacco companies spend advertising to different ethnicities. RJR spokesperson Fred McConnell called their cigarettes "multicultural," saying, "Do we want adult Hispanics to smoke our brand? Yeah. Just like we want African-Americans and whites to smoke our brands." [2]
  • November 28, 2007-RJR announces it will not advertise its brands in newspapers or consumer magazines next year.[6]

Other RJR brands include Vantage, Excel, Jacks, Monarch, More, Sterling. RJR is also the manufacturer of Prince Albert pipe tobacco.

Political contributions

R.J. Reynolds gave $770,500 to federal candidates in the 05/06 election period through its political action committee - 16% to Democrats and 84% to Republicans. [7]

Subsidiaries

In 1995 RJR established a "microbrand" subsidiary tobacco company called Moonlight Tobacco that marketed offbeat brands of cigarettes. With Moonlight, RJR was hoping to capitalize on wave of popularity behind the emergence of microbrewed beers, like Red Dog and Red Wolf beers, apparent microbrews which were actually manufactured by the major beer companies Miller and Anheuser Busch. Moonlight's brands included Bees ("Honey toasted tobacco"), Politix ("Lighten Up and join the party!"), Jumbos (wide cigarettes), and an art deco-inspired brand called "City." Each brand was also available in light versions. The marketing technique of trying to fool consumers into believing a product is made by a small, off-the-beaten-path company was called "intrapeneuring," or establishing a smaller company inside a larger company. Philip Morris tried the same microbrand technique with its failed Dave's cigarette brand in 1994.[3]

Lobbying

Reynolds American, the parent company of R.J. Reynolds, spent $947,360 for lobbying in 2006. In-house lobbyists along with eleven outside lobbying firms were used.[8]

RJR Projects and Operations

Additional RJR documents

Letter to 5th grade class, 1972

A 1972 letter from T. K. Cahill of R.J. Reynolds Tobacco Company's public relations department was apparently written in response to a 5th grade elementary school class in Santa Monica, California, who wrote the company to protest a Winston cigarette advertisement that appeared in the Los Angeles Times. In the letter, Cahill assures the children that cigarette advertising is not directed at youth, but also tells them that "medical science has not found any conclusive evidence that an element in tobacco or tobacco smoke causes any human disease." (The first major Surgeon General's report definitively linking cigarette smoking with disease was issued in 1964, eight years before this letter was written). Then, in a classic example of the industry's use of the Council for Tobacco Research for public relations purposes, Cahill tells the children that,

... in a sincere attempt to determine what harmful effects, if any, smoking might have on human health, established The Council for Tobacco Research ... The answers to the many unanswered smoking and health questions -- and the true causes of human diseases -- can, we believe, be determined by scientific research. Our Company intends, therefore, to continue to support such research until the truth is known."[9]

Secondhand smoke strategy paper, 1994

A 1994 strategy paper from R.J. Reynolds (RJR) reveals the cigarette maker harbored a combative attitude towards public efforts to address problems posed by secondhand smoke. RJR says, "Federal agencies, Congress and state and local governments are pursuing increasingly aggressive regulatory measures to limit exposure to second-hand smoke, citing an alleged risk or hazard to the non-smoking public ... The stakes for RJRT and the industry have never been higher. We need to act immediately ... And we need to join the battle or engage the enemy on as many fronts as possible."

The plan lists strategies for fighting public health efforts on the secondhand smoke issue, including convincing the public that "there is a controversy, case is not closed," that "your lifestyle could be next," and substituting the term "prohibition" for "smoking ban" in all communications; convening "a high-level think tank of philosophers, professors, scientific ethicists, sociologists, historians, economists, psychologists ... to provide new ideas on the issue;" recruiting minority groups, hospitality associations, labor unions, libertarian groups and labor unions as tobacco industry allies on the secondhand smoke issue.

A handwritten notation on the document's second page poses the question, "Do we have sufficient information to prove that smoker segregation is sufficient to eliminate NS [nonsmoker] risk--perceived or otherwise?" This reveals that RJR planned to advocate mere segregation of smokers in enclosed spaces without fully knowing whether such action really provides adequate health protection to nonsmokers.

RJR also proposes using joke books, cartoons, tabloids and country/rap songs as vehicles to disseminate the company's messages about secondhand smoke.

The cigarette maker further planned to put on its own "science and policy forum" about secondhand smoke to highlight "improper use of science" and "call for responsible use of science in formulating policy." RJR proposed that the forum "could be held in Washington, D.C. and sponsored by an institute or reputable think tank," to lend prestige and obscure tobacco industry involvement in the event. In formulating plans for the forum, RJR cites what it believes to be misguided previous public health issues:

"An overview of examples of where issues were driven by flawed science...such as... pesticides, asbestos, ozone depletion, acid rain and resource depletion."[10]

Personnel

[11]

Contact Details

Consumer Relations Department
P. O. Box 2959
Winston-Salem, NC 27102
Web: http://www.rjrt.com/home.asp

SourceWatch Resources

External links

References

  1. ↑ Horrigan EA Jr., Wilson JT, R.J. ReynoldsA Perspective on the Mission and Strategic Direction of R.J. Reynolds Industries, Inc. and a summary of the Corporate Plan for 1985 (850000) through 1987 (870000). Summary of Corporate Plan Presentation by J. Tylee Wilson and Edward A. Horrigan, Jr. January17, 1985 (850117) Bates No. 505169187/9200
  2. ↑ Merchants of Debt, George Anders,Basic Books, 1992, ISBN 0465045235
  3. ↑ Burrough B, Helyar J. Barbarians at the Gate: The fall of RJR Nabisco, 1990
  4. ↑ RJR History: Hallmarks of Company Heritage Report. April, 1999. R.J. Reynolds Bates No. 522914917/4924
  5. ↑ Nordine RC, McKee MK, Fackelman E, Osmon H. R.J. Reynolds Consumer Research Proposal. Social Responsibility Creative Exploratory Focus Groups Marketing proposal. August 30, 1983. Bates No. 503760666/0667
  6. ↑ R.J. Reynolds To Stop Print Ads Next Year, Editor and Publisher (online), November 28, 2007
  7. ↑ 2006 PAC Summary Data, Open Secrets, accessed July 2007.
  8. ↑ Reynolds American lobbying expenses, Open Secrets.
  9. ↑ T.K. Cahill, R.J. Reynolds Public Relations Department The letters you and other members of your class wrote to various officials of our Company regarding a WINSTON ad you saw in the Los Angeles Times have come to this department for reply. Letter. 1 page. April 7, 1972. Bates No. 500671015
  10. ↑ R.J. Reynolds Secondhand-Smoke Plan Report. April 6, 1994. 4 pages. Bates No. 512046746/6749
  11. ↑ Management, accessed July 2007.

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