4 Ways Reynolds American Can Move Forward With or Without Lorillard

Image: Reynolds American.

Cameron said that she anticipates adding more styles to the VUSE brand in the coming months, capitalizing on customer interest. As long as the vapor market stays strong, Reynolds' commitment to VUSE seems to have turned out well.

The moist snuff market remains highly competitive and the company's bottom line was affected in the fourth quarter by increased promotional spending and a modest decline in volume. This resulted in slightly lower earnings while the operating margin remained very strong. -- Cameron

One area of mixed results for Reynolds American was its American Snuff division, with its flagship Grizzly brand driving its overall results. As in the cigarette market, competition is fierce, and falling volume has put pressure on companies like Reynolds American to find ways to boost margins through pricing power wherever possible. Yet with the competitive environment requiring substantial promotional activity, Reynolds American has had some difficulty finding the right balance to maximize earnings.

Still, Reynolds is working at establishing a better mix. The expansion of Grizzly Dark Wintergreen has had positive results in certain areas, for example, and Reynolds hopes that national availability will pay off in better results.

At Santa Fe, performance was very strong once again. Higher pricing in the fourth quarter coupled with higher volume delivered operating income growth of almost 25%. Santa Fe's super premium Natural American Spirit brand added another 0.3 percentage point in market share to 1.8%, making it 1 of the top 10 cigarette brands in the U.S. -- CameronCEO Susan Cameron. Source: Reynolds American.

One of the surprising things about the cigarette industry is that even cash-strapped customers have remained willing to pay up for premium brands.

Reynolds' Natural American Spirit has been a huge success story, with the flagship brand of the Santa Fe division building itself into a top-10 brand. By capitalizing on that demand through judicious price increases, Reynolds American has tapped into the demand for organic tobacco made without additives, and that could help drive results regardless of what happens with Lorillard.

I don't have much more to add than I said in my prepared remarks. We are continuing to work with the FTC. The process is not a transparent one. We continue to be confident that it will close in the first half. And how that will all unfold, we will keep you posted when that -- when we know and it becomes public, but I have no real other comment to make. -- Cameron

The problem with the merger process is that executives generally don't make direct comments on what's happening, so it's hard to get a real read on the process. Still, the comments concerning a lack of transparency suggest a level of frustration on Cameron's part, which, given the ongoing delays, is understandable. Until the situation resolves itself -- and many hope that resolution is coming imminently -- you can expect Reynolds American to remain somewhat in flux.

Reynolds American had investors cheering its proposed merger with Lorillard when it was announced. Yet, based on the company's own comments, Reynolds appears poised to keep moving forward no matter what happens with the merger.

This $19 trillion industry could destroy the Internet

One bleeding-edge technology is about to put the World Wide Web to bed. And if you act right away, it could make you wildly rich. Experts are calling it the single largest business opportunity in the history of capitalism... The Economist is calling it "transformative"... But you'll probably just call it "how I made my millions." Don't be too late to the party -- click here for one stock to own when the Web goes dark.

The article 4 Ways Reynolds American Can Move Forward With or Without Lorillard originally appeared on

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

Copyright © 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics


Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More