R.J. Reynolds Tobacco Co. (Reynolds American)

R.J. Reynolds Tobacco Co. was founded by Richard Joshua Reynolds in 1875 in Winston, N.C. By the mid-1880s, the company was producing more than a dozen brands of chewing tobacco, its chief product. In 1894, RJR spent $4,000 on advertising, but increased that to $20,000 in 1895, when sales doubled. Mr. Reynolds bought space in both trade journals and local newspapers, placing folksy ads that appealed to the farmers in his rural region. He also distributed circulars, testimonials and premiums to attract retailers as well as consumers. In 1899, financial troubles forced Mr. Reynolds to sell two-thirds of his business to James "Buck" Duke's American Tobacco Co. for $3 million. Under the purchase agreement, Mr. Reynolds continued to manage RJR, where, in 1907, he introduced Prince Albert smoking tobacco, a blend that eventually challenged American Tobacco's Bull Durham and Duke's Mixture, the national leaders. Sales of Prince Albert got off to a slow start, but swelled in 1910 after RJR retained N.W. Ayer & Son to handle advertising for the brand. Ayer's slogans included "The joy smoke" and "The smoke without a sting." RJR and the cigarette market In 1911, a federal court order dissolved the American Tobacco trust, and four major companies were spun off in the breakup, dividing the tobacco business among them. In the settlement, RJR took away about one-fifth of the chewing tobacco market, but did not receive any of the increasingly more-lucrative cigarette brands. RJR's earliest brands�the inexpensive Reyno and the pricey, cork-tipped Red Kamel�failed to entice consumers, despite promotions for those brands that ran the gamut from premiums to gifts of sophisticated cigarette lighters. In 1913, however, RJR seized a commanding position in the tobacco industry when the company introduced Camel cigarettes. RJR's rivals�American Tobacco, Lorillard and Liggett & Myers�had long favored Turkish and Bright tobaccos for their cigarettes, but RJR formulated Camel so that American Burley tobacco dominated the blend. In contrast to industry practice at the time, RJR abandoned premiums and priced Camel at 10� for a package of 20, a nickel less than Liggett's Fatima, Lorillard's Zubelda and American Tobacco's Omar. For weeks before Camels hit retailers' shelves, RJR placed ads in newspapers nationwide with the mysterious promise that "The Camels are coming." Follow-up ads promised, "Tomorrow there'll be more Camels in this town than in all Asia and Africa combined," and the final ads announced, "Camels are here!" After the launch, advertising from Ayer highlighted the brand's Turkish-domestic blend, which it alleged was superior to either strain of tobacco alone. The elimination of premiums was presented as a virtue: Smokers would receive "Quality, not premiums" for their dime because "the cost of the tobaccos prohibits their [premiums'] use." Camel became the first national cigarette brand and, by 1916, RJR's share of the cigarette market passed those of Liggett and Lorillard. By 1920, RJR was No. 1 in the cigarette category, having eclipsed American Tobacco. In response to Camel, American Tobacco in 1916 introduced Lucky Strike, its own blended cigarette, which captured 11% of the market in its first year, but its growth was slowed by World War I. (Both RJR and American Tobacco went to war, but because the U.S. government contracted to buy cigarettes based on prewar market shares, more Camels than Luckies saw action in Europe.) In 1925, Camel held 40% of the market, placing it ahead of L&M's Chesterfield (with 25%) and American Tobacco's Lucky Strike (16%). RJR's advertising budget nearly doubled in 1927�reaching $19 million�but by 1930, American Tobacco was outspending and outselling RJR. Marketing smokes RJR was the last of the "Big Three" tobacco companies to address women in advertising, running its first female-friendly campaign in 1929. The first of these magazine and newspaper ads showed two men offering Camels to an attractive young woman, who wondered whether she should accept the invitation to smoking pleasure and camaraderie. In addition to neglecting the female market, RJR ads created by Ayer failed to counter American Tobacco's claim that "toasting" made Lucky Strike a superior and more healthful product with "no throat irritation." Ayer also failed to take full advantage of the new medium of radio until 1931, three years after "Lucky Strike Dance Orchestra" premiered. Camel's most memorable tagline of the 1920s�"I'd walk a mile for a Camel"�was not an Ayer creation, although the slogan has been variously attributed. In 1931, RJR moved its business to Erwin, Wasey & Co., whose first ad for Reynolds appeared in February 1931. Erwin Wasey turned to a $50,000 contest in which consumers were invited to come up with winning ideas about the benefits of Camel's new moisture-proof cellophane wrapper. But Camel sales continued downward even as advertising costs increased, and in November 1932, RJR moved to William Esty & Co., which put the marketer into musical programs aimed at young adult audiences. Esty's first campaign, unveiled in 1933, directly attacked Lucky Strike in ads that asserted that while it was "fun to be fooled," it was more fun to be "in the know"�about the cigarettes one smoked as well as magic tricks. The ads compared Luckies' "It's toasted" slogan to sleight of hand; Camel, the ads said, "No tricks. Just costlier tobacco and a matter of blend." By1936, Camel again outsold Lucky Strike and L&M's Chesterfield. In the 1940s, legal problems began to entangle RJR, and during World War II, Luckies again overtook Camel. In 1942, RJR installed an enormous billboard in New York's Times Square that produced15 foot-high smoke rings emanating from the mouth of an image of a U.S. serviceman. The war created millions of new smokers as the U.S. government made cigarettes part of every soldier's kit, and sales soared when servicemen came home. The entire industry took a black eye, however, when the Federal Trade Commission ruled that U.S. tobacco marketers were guilty of deception and making false claims in their advertising. Those rulings, however, did little to change industry practices and offered no damning evidence of the dangers of smoking. Early in the 1950s, however, health claims about cigarettes began to cause trouble for the industry's bottom line. Links to lung cancer In December 1953, two physicians, Ernst Wynder and Evarts Graham, induced a measure of panic in the tobacco industry by publishing an article that suggested a clear link between smoking and lung cancer. Within weeks of the article's appearance, the chief executives of the leading cigarette makers met in New York to discuss how best to deal with a potential crisis of public faith. Their response was two-pronged. First, they established the jointly funded Tobacco Industry Research Committee, to either prove that cigarette smoking was not dangerous or to find ways to produce safe cigarettes inexpensively. Second, they launched a PR offensive that, while affirming their commitment to the health of their customers, openly questioned the validity of the charges leveled against cigarettes. In this uncertain environment, RJR staged its comeback by introducing Winston filtered cigarettes. Whereas ads for other filtered brands emphasized the alleged health benefits of filters, Winston ran ads proclaiming that Winston "tastes good�like a cigarette should." By the end of 1956, Winston's good taste strategy made it the top seller among filtered cigarettes. In 1956, on the heels of Winston's success, Reynolds brought out Salem menthol cigarettes with a campaign created by Esty that suggested physical well-being and refreshment but avoided direct references to health. Salem was advertised as being as "Refreshing as springtime itself," and the brand soon outsold its Brown & Williamson rival, Kool. Although not created specifically for women, Salem found a niche among female smokers, many of whom erroneously believed that menthols were less hazardous to one's health than regular cigarettes. In the 1960s, Winston faced a challenge from Philip Morris Cos.' Marlboro man, and in 1962, RJR spent a staggering $28.8 million in spot TV and sponsorships, and print took a backseat to TV advertising. By the 1970s, however, RJR had to recalculate its ad strategies in light of increasing political pressure to regulate cigarettes and tobacco advertising. In 1964, U.S. Surgeon General Luther Terry issued a report specifically linking cigarette smoking with disease, especially lung cancer. In the months following the report, a legislative contest pitted the FTC against the tobacco industry and its allies, the Advertising Federation of America and the National Association of Broadcasters. The result took the form of the Cigarette Labeling & Advertising Act of 1965, which required mild health warnings on cigarette packaging but blocked state and local actions against the industry and prevented federal agencies from taking action to regulate tobacco advertising. The tobacco companies also voluntarily agreed to withdraw from radio and TV by January 1971, and ad strategies shifted away from broadcast media (which had accounted for 80% of the industry's ad spending during the 1960s) and back to print and outdoor. Responding to health concerns As a consequence of the growing health concerns over smoking, RJR introduced Doral, Vantage and Now low- and ultralow-tar brands with ad campaigns that responded to consumers' and regulators' fears. Esty handled the premiere of Doral in 1969, with ads touting a "Doral diet"�low in tar and nicotine, high in taste and pleasure. In the 1980s, Doral was repositioned as a low-price bargain brand and assigned to Long Haymes Carr, and its sales improved. Leber Katz Partners directed the advertising for Now and Vantage, and the latter achieved early success in the low-tar market. By 1975, Vantage had a 3% share of the total market and briefly led the low-tar field. When Philip Morris introduced Merit in 1976, however, Vantage all but folded. In the mid-1980s, the industry was forced to settle some lawsuits and paid huge damage awards in others. RJR was eclipsed by Philip Morris, but merged with Nabisco to form RJR Nabisco. Nabisco's package-goods lines helped stabilize RJR's tobacco business while RJR struggled to come back in the marketplace, introducing the Joe Camel cartoon character�created by Trone Advertising�in 1987. RJR stuck with the "smooth character" for a decade but went through a series of agencies attempting to revitalize the Camel brand. Leaving Trone in 1988, RJR signed with McCann-Erickson, only to abandon it in 1989 in favor of Young & Rubicam. In 1991, RJR left Y&R for Mezzina/Brown, which continued to use Joe Camel until 1997. However, antismoking activists argued that the anthropomorphized camel was a means of attracting children and teens to the cigarette habit. RJR and its agencies argued in turn that the Joe Camel campaign was intended to update the brand and inspire fun among adults. In 1997, RJR introduced new packaging for Camel, featuring a more realistic figure of a camel, and a new tagline: "What you're looking for." In 1996, Long Haymes Carr took on the Winston account and created the confrontational "No additives, no bull" campaign. That year, Philadelphia-based Gyro relaunched RJR's Red Kamel cigarettes�absent from the market for 60 years�with the tagline "Back for no good reason except they taste good." In 1998, the tobacco companies became subject to new regulations that severely limited the manner and media in which cigarettes could be advertised in the U.S. In 1999, RJR Nabisco, under pressure from stockholders, spun off the former R.J. Reynolds Tobacco operations as R.J. Reynolds Holdings. In January 2002, RJR acquired Santa Fe Natural Tobacco Co., the maker of niche cigarette Natural American Spirit, as a wholly owned subsidiary. In 2003, R.J. Reynolds went through two major initiatives. First, although Philip Morris was the country's leading tobacco company, RJR certainly had the most exposure through its sponsorship with NASCAR and the racing league's premier series, the Winston Cup. NASCAR had taken off in popularity in the late 1990s and the early part of the new century, and was easily identifiable with its Winston Cup Series. But in February 2003, RJR announced its intention to withdraw as title sponsor of the racing series because of changed "business dynamics." In late October 2003, R.J. Reynolds Tobacco Holdings and Brown & Williamson Tobacco announced they would merge their U.S. operations and received full approval in early 2004. The new company, Reynolds American, became the second largest cigarette maker. The merger came as tobacco makers continued to lose ground to discount brands and industry leader Philip Morris USA, which at the time of the RJR deal controlled about half of the U.S. tobacco market. B&W controlled 10.6% of the U.S. tobacco market while RJR reached 23%.

R.J. Reynolds Tobacco Co. (Reynolds American)

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