RAI Pushes On in New Product Expansions

WINSTON-SALEM, N.C. — Several months since revealing that VUSE would begin rolling out nationally, Reynolds American Inc.'s digital vapor cigarette is set to reach 70,000 retail outlets by the end of this month.

The news came Tuesday during the Winston-Salem-based company's third-quarter earnings call as President and CEO Susan Cameron said she is "pleased with the results" of VUSE's national expansion. VUSE, a product of RAI subsidiary R.J. Reynolds Vapor Co., will double its retail presence next week. Another wave of expansion is slated for early 2015.

Cameron also reported that national distribution of ZONNIC gum, a nicotine-replacement therapy product, is seeing positive early results and "generating strong interest from retailers and adult smokers." ZONNIC, part of RAI's Niconovum USA, will be available in 8,000 select retail outlets by the end of October.

Innovation in the tobacco space comes as tobacco companies face headwinds in the cigarettes category, notably declining volume. However, Cameron pointed out that R.J. Reynolds Tobacco Co. saw cigarette volume decline moderate in the third quarter.

When asked if consumers were turning to vapor products and electronic cigarettes as a substitute for cigarettes — contributing to the declining volume — Cameron explained that it is still too early to tell. She said RAI will have additional updates on VUSE during its Investor Day in November. 

As for further innovation, the chief executive said: "We are clearly focused on next-generation product, but our priority is on VUSE."

The company kicked off a VUSE marketing campaign in September, with promotional activity focused on getting adult smokers to try the product.

On the Lorillard Inc. merger front, Cameron said the process is "progressing smoothly" and transition planning is underway. She expects the merger to close in the first half of next year.