R.J. Reynolds History

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This article is part of the Tobacco portal on Sourcewatch funded from 2006 - 2009 by the American Legacy Foundation.

R.J. Reynolds Industries 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.[1]
  • 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."[2] 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. 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. [3]
  • The Reynolds Building - the new headquarters for Reynolds Tobacco Company - opened in downtown Winston-Salem on April 27, 1929. [5]
  • 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.) [6]
  • 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. Its mission was to minimize the impact of various controversies surrounding smoking on the company's ability to meet its business objectives.[7]

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.[8] By that point, the company 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.[9]
  • 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.[citation needed]
  • 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.[10]
  • 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. [11]
  • 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 extent of the borrowings needed for the buyout left the company financially weak 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. [12]

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, Safeway and Fred Meyer stores, Stop & Shop supermarkets, Bradlee Department stores, Auto Zone car parts outlets, the Motel 6 chain and a half dozen CBS TV affiliates. [13]

  • In 1992, the R.J. Reynolds Tobacco Company (RJRT) said it was "the second-largest cigarette manufacturer in the United States. . . 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. [14]
  • 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.[15]
  • 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.[16]
  • 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.[17]
  • 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." [18]
  • November 28, 2007-RJR announces it will not advertise its brands in newspapers or consumer magazines next year.[19]
  • On July 30, 2004, R.J. Reynolds merged with Brown & Williamson (the U.S. operations of British American Tobacco ). They jointly established a new parent holding company, Reynolds American Inc.
  • On July 15, 2014, Reynolds American bought the Lorillard Tobacco Company for $27.4 billion.

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References

  1. Burrough B, Helyar J. Barbarians at the Gate: The fall of RJR Nabisco, 1990
  2. R.J. Reynolds RJR History: Hallmarks of Company Heritage Report. April, 1999. R.J. Reynolds Bates No. 522914917/4924
  3. Gene Borio Tobacco Timeline - Chapter 6 - 1900-1950, www.tobacco.org/ resources/history, website, accessed June 6, 2011
  4. Gene Borio Tobacco Timeline - Chapter 6 - 1900-1950, www.tobacco.org/ resources/history, website, accessed June 6, 2011
  5. Gene Borio Tobacco Timeline - Chapter 6 - 1900-1950, www.tobacco.org/ resources/history, website, accessed June 6, 2011
  6. Gene Borio Tobacco Timeline - Chapter 7 - 1950-1999, www.tobacco.org/ resources/history, website, accessed June 6, 2011
  7. 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
  8. 8.0 8.1 Gene Borio Tobacco Timeline - Chapter 7 - 1950-1999, www.tobacco.org/ resources/history, website, accessed June 6, 2011
  9. 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
  10. R.J. Reynolds [ http://legacy.library.ucsf.edu/tid/kpt56a00 Savings Segment Review], Report, June 5, 1990, Bates No. 507529073/9084
  11. R.J. Reynolds Tobacco Company History: A Look Into Our Past, Company website, accessed June 6, 2011
  12. Merchants of Debt, George Anders, Basic Books, 1992, ISBN 0465045235
  13. Merchants of Debt, George Anders, Basic Books, 1992, ISBN 0465045235
  14. Merchants of Debt, George Anders, Basic Books, 1992, ISBN 0465045235
  15. Moonlight Tobacco: Rekindling the Romance Published article (publication unknown), November/December 1995, R.J. Reynolds Bates No. 518021800/1801
  16. R.J. Reynolds Tobacco Company History: A Look Into Our Past, Company website, accessed June 6, 2011
  17. Reynolds American Reynolds American Fact Sheet, R. J. Reynolds American 2011, accessed June 6, 2011
  18. California Health Care Foundation Anti-Tobacco Advocacy Group Alleges Ads Target Latino Youths, California Health Line (newsletter) November 21, 2005
  19. R.J. Reynolds To Stop Print Ads Next Year, Editor and Publisher (online), November 28, 2007