Tobacco Harm Prevention: A Case Study on Reynolds American
Abstract
Reynolds American, the second largest tobacco company in the United States, has
transformed its company due to the growing health complications and deadly
diseases associated with cigarette use. They have developed a tobacco harm
reduction continuum that promotes different smokeless tobacco products in place
of traditional cigarettes. It has been suggested that smokeless products are much
less dangerous than smoking tobacco, resulting in lower rates of cancer and disease.
Reynolds American is committed to spreading awareness about tobacco harm
prevention and leveraging new, less harmful products.
Keywords
cancer; cigarettes; health; Reynolds American; nicotine; smokeless; smoking;
tobacco; tobacco harm reduction; United States
Introduction
This paper will discuss Reynolds American, the parent company of R.J. Reynolds
Tobacco Company (RJRT), Santa Fe Natural Tobacco Company, Inc. and Lane
Limited. In specific, its aim is to give a detailed analysis of its Tobacco Prevention
Campaign and how it has affected the company.
Background
Reynolds American Inc. (NYSE:RAI) is the second largest tobacco company in the
United States. Its subsidiaries manufacture and market a variety of both cigarettes
(Camel, Pall Mall, Kool, Winston, Salem, Doral, Misty, Capri and Natural American
Spirit) and smokeless tobacco (Grizzly and Kodiak). The tobacco industry is a very
controversial and highly regulated industry; RAI’s tobacco prevention pillar resulted
from these strict regulations. 1
Strategy
RAI and its operating companies are committed to addressing the issues and health
concerns that are presented by tobacco products. The goal is to be very upfront
about these issues and to ensure that their consumers do not feel betrayed or
uninformed. Tobacco Harm Reduction (THR) is about reducing the risks that adult
tobacco smokers face. “The rationale behind tobacco harm reduction approaches is
that, while dependence on nicotine (the addictive substance in tobacco) underpins
most tobacco use, it is not what causes most of the harm.”2 This initiative was
enacted in order to provide RAI’s adult consumers with accurate information about
the product and to enforce regulatory policies that reflect the researched
comparative risks between cigarette smoking and smokeless tobacco products. 3
The goal in this aspect is to encourage smokers who are not able to quit tobacco
entirely to transition to smokeless tobacco products.
Research
RAI has done extensive research on the harm that cigarette smoking causes to
humans and the environment. It has acquired a superior knowledge base and feels
confident it can supply consumers with valuable and accurate information. In order
to be as clear as possible on the issue, RAI provides a plethora of research on it’s
website. “Cigarette smoking is the single most preventable cause of disease in the
United States. It has been associated with a number of diseases, including cancer
and heart disease.” This is stated directly on the website. 4 The fact-based
information about associated harmful diseases reduces liability concerns with the
Department of Health, Food and Drug Administration and the United States
Government.
RAI has found that there have been a variety of efforts implemented in order to
encourage smokers to quit and to discourage the initial beginnings of cigarette
smoking. These educational programs have been widely successful and have
decreased smoking rates dramatically. Adult smoking has declined from 42.4 % in
1965 to 19.3% in 2010. Additionally, cigarette use in high school students has
dropped from 28% in 2000 to 17.2% in 2009.5
However, 43 million Americans still continue to smoke cigarettes despite the
educational initiatives to prevent it. This is what RAI sees as its major problem, and
that there needs to be a different health initiative to reduce harm rates. RAI sees
tobacco addiction as an addiction like any other, for example, caffeine or alcohol. It
believes that adults are aware of the associated harm and should be able to make
the appropriate decision of whether or not they want to continue taking these
health risks. Despite this, a newer response to the problem has been to make a risk
continuum of different tobacco products and to educate consumers on the varying
health risks that these products have.
Detailed research has gone into accessing the harm of smokeless tobacco products
in comparison to traditional cigarettes. In 2004, a panel of experts (chosen due to
their knowledge of health risks associated with both smokeless tobacco and
cigarette use) met to assess the risk of these products. Overall, the panel concluded
that smokeless tobacco products reduced health risks by at least 90%. 6
This research is not negating that there is still risk associated with smokeless
tobacco products, but encourages transitioning to these smokeless products
because of the reduced effects. The risk of lung cancer for non-smokers is reduced
by 100 percent, in comparison to smokers. The panel also found that the risk of oral
cancer is still dramatically lower with smokeless tobacco. It is imperative that the
general public has an understanding of this because it is common belief that there is
a high risk of oral cancer (especially with products like Grizzly) because of the
concentration of tobacco placed in one’s mouth. The panel found this to be false,
and that the risk was actually 70 to 85% lower.
A 2007 report, conducted by the Royal College of Physicians, agrees with these
conclusions. These researchers concluded that it is the manner in which consumers
obtain nicotine that can be so lethal. “If nicotine could be provided in a form that
was acceptable and effective as a cigarette substitute, millions of lives could be
saved.”7 These researchers, as well as the panel, suggest that further research
support the existence of a “continuum of risk” with tobacco and nicotine products.
8
“THR has been described as having the potential to lead to one of the greatest public
health breakthroughs in human history by fundamentally changing the forecast of a
billion cigarette-caused deaths this century.”9
Evaluation
In response to the research presented by the 2004 panel, the Royal College of
Physicians and additional related cancer findings, RAI has worked with the
government to try and find common ground. In 2008, the American Association of
Public Health Physicians stated that the addition of Tobacco Harm Reduction to
current policies “could yield a 50% to 80% reduction in tobacco-related illness and
death over the first ten years, and a likely reduction of up to 90% within 20 years.”10
RAI is dedicated to ensuring that its operating companies are fully engaged with the
Food and Drug Administration, as well as other programs, on THR and education
programs. Discussion about installing policies of this nature is essential for the
pillar’s full development. Unfortunately, many government health agencies and
tobacco control organizations have not been fully supportive of this initiative, nor
have they endorsed it as a viable addition to existing abstinence policies.
There is possibility for legislative opportunities in order to improve public health
and reduce state healthcare costs. This could be done by creating a tier system for
health insurance rates based upon comparative risk in the form of tobacco used
(smoking, smokeless, chewing, vapor etc.). This could potentially reduce state
employees health care costs. At the very least, legislators should be challenged by
the immense opportunity and potential change that public policy leaders and
tobacco companies like RAI or Altria could make. 11
Analysis
In response to the problems at hand, RAI and its operating companies have worked
diligently to try and transform the U.S. tobacco industry. Its main focus is to
continue efforts in transforming the industry from being dominated by cigarettes to
a range of lesser risk products. RAI believes that this transformation is in the best
interest of its consumers, manufacturers, as well as society as a whole. Marketing
the benefits of these products while still meeting adult consumer’s preferences and
tobacco expectations is the main task at hand.
In order to do this, RAI has done extensive research, has made investments through
acquisitions, and has been promoting innovative product development with its
operating companies. The investments have been made specifically to emphasize
the changing nature of the industry while still striving to meet consumer
preferences. RAI notes that this transformation is an ambitious, long-term goal, but
feels it is in the best position to achieve market leadership through this endeavor
and is confident in a highly successful outcome.
These acquisitions began in 2004 with the merger of R.J Reynolds Tobacco Company
and Brown & Williamson Tobacco Corporation. Through this, RAI was born as a
parent company and immediately exuded a stronger force in the market, as well as a
succinct business model with a plan for the future. Two years later RAI was able to
move into the smokeless tobacco business by acquiring Conwood Tobacco Company
(now American Snuff Company). American Snuff Company is the U.S.’s second
largest smokeless tobacco company and produces the popular brands, Grizzly and
Kodiak.
In 2009, RAI continued its commitment to transforming the industry by purchasing
Niconovum AB. This Swedish based company markets innovative products such as
nicotine gum, mouth spray, and pouches. "ASC and Niconovum are integral
components to RAI's strategy,” said Daniel M. Delen, president and chief executive
officer of RAI. “The products these companies produce have the potential to
fundamentally change the impact that tobacco has on society.”12
RAI further solidified its success and position as the leader in modern smoke-free
tobacco products with the introduction of Camel SNUS. This innovative product has
so many positive attributes for the adult smoker as well as society as a whole. It is
heat-treated, does not require spitting, and is typically sold in pouches. This
product really took RAI to the next level and was a key product introduction.
Continuing with innovative products and expanding its operating companies have
been RAI’s main actions for transforming adult tobacco use.
Discussion
“The U.S. currently provides the best access to a wide variety of smoke-free
products, including traditional smokeless tobacco, Swedish SNUS, dissolvable
tobacco (sticks, strips, orbs and pellets), e-cigarettes, and pharmaceutical nicotine
(gum, lozenges, patches, nasal spray).”13 RAI is at the forefront of this
transformation. Although it is #2 for leading cigarette distributors in the United
States, it has made the greatest leaps and bounds into smokeless cigarette products.
Altria, the biggest supplier, has really only delved into smokeless tobacco from their
acquisition of UST Inc. and has a larger stake in pipe and cigar smoking. Despite
this, they are working diligently to transform consumer’s preferences to lower their
health risks.
RAI has definitely worked hard to change its company’s outlook in order to improve
the health and wellness of its consumers as well as the general public. It has
reduced the profit derived from cigarettes from 100% to 80%. Additionally, it has
been working adamantly to sell these new products, which are small in comparison
but are a part of a growing market. I believe RAI’s new e-cigarettes (VUSE_ will take
the transformation to the next level. While the prototype did not meet expectations,
it has been restructured in order to satisfy customers and create a flawless result.
Updates on this will be out in the next few months; it will undoubtedly be
instrumental to RAI’s continued success in the sector.
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