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Reynolds to Consolidate Vuse Production: Will it Boost Profit?

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Reynolds American Inc.RAI recently announced that it will consolidate the manufacturing operations of Vuse Digital Vapor Cigarettes, its e-cigarette brand, to enhance efficiency and cost effectiveness.

The tobacco maker has decided to shift the entire production of Vuse to its Tobaccoville facility which has been recently expanded and upgraded for this purpose. Currently, a part of Vuse's production takes place at a contractor's facility in Kansas.

Reynolds completed the national rollout of the brand in April. Vuse is a "digital" cigarette fitted with a proprietary computer chip that modulates its performance. The chip delivers consistent flavor giving Vuse an edge over other e-cigarettes.

The move comes a day after Reynolds announced that it will sell assets, including some shares of the Natural American Spirit tobacco brand in an all cash transaction worth $5.0 billion to Japan Tobacco Inc.

The sell-off is part of a divestiture announced by the tobacco maker during the Lorillard acquisition to meet the requirements of antitrust authorities.

Reynolds, currently carrying a Zacks Rank #3 (Hold), recently completed the takeover of its rival, Lorillard Inc., bringing brands like Camel and Newport under its banner. Meanwhile, the company has to contend with the growing anti-tobacco campaigns in the U.S.

The tobacco industry seems to be in troubled waters due to anti-tobacco campaigns gathering pace worldwide. Strict laws imposed by the FDA pose a significant headwind for tobacco majors like Philip Morris International Inc. PM , Reynolds, Altria Group Inc. MO and Vector Group Ltd. VGR .

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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.

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