RJR SEES BRANDING IMPACT FROM TOBACCO SETTLEMENT: CEO GOLDSTONE WARNS FURTHER LIMITS COULD HURT CIG SHARE

By Published on .

Most Popular
Steven Goldstone, chairman-CEO of RJR Nabisco Holdings Corp., parent of R.J. Reynolds Tobacco Co., last week said the marketing curbs included in the proposed tobacco industry settlement agreement with state attorneys general will have a significant impact on cigarette brands.

Disputing tobacco critics who have suggested the agreement doesn't go far enough, Mr. Goldstone said in speaking to a conference of members of the Investor Responsibility Research Center in Washington that the marketing stipulations raise some real questions as to the agreement's overall value.

He warned against attempts to further strengthen the pact.

MARKET SHARE PROBLEMS

"The fact that there are marketing restrictions in the agreement that prevents our company from trying to recapture marketing share that it lost is a problem for our people who work" for RJR, he said shortly after delivering his speech.

In his talk to the group, Mr. Goldstone said "There is no . . . question that [the proposals] are also going to cause some of our consumers to trade down from some of our more expensive premium brands, like Winston and Camels, to some of the cheaper brands."

He said RJR gives up its marketing arsenal reluctantly.

"We are a consumer products company. We are giving up the freedom to communicate with consumers through a variety of channels," he said. "That is especially a problem at R.J. Reynolds, because we have brands such as Winston and Salem that have been declining for 20 years and we have a major competitor [Philip Morris USA that] has benefited from that decline.

"What we are asking RJR-with 25% of the market-to do is to give up many of the marketing tools they need to turn around their business," he continued, "and it comes at a time that we are doing a better job at . . . turning around our declining market position."

Mr. Goldstone said he felt RJR's legal position was strong in the lawsuits it faces and that wasn't what prompted it to accept the deal. He said his interest in agreeing was long-term predictability and a hope that tobacco makers could escape their reputation as being part of a "rogue" industry.

"I don't want to pull any punches here. I have ruffled a few feathers among our employees and among shareholders who felt we have made too many concessions," Mr. Goldstone said.

He said his hope was that an agreement would provide enough predictability to plan a business, possibly permitting RJR Nabisco Holdings to spin Nabisco Brands

In this article: