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Reynolds American’s American Snuff: Higher Pricing for 1Q16

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American Snuff’s revenue and operating income

Reynolds American’s (RAI) 1Q16 revenue for the American Snuff Co. increased by 7.5% to $0.22 billion compared to $0.20 billion in 1Q15. The increase was primarily due to higher pricing. The reported operating income increased by 12.7% to $0.1 billion in 1Q16.

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Market share and volume growth

The increase in operating income came about due to higher pricing and volume. American Snuff’s 1Q16 moist-snuff retail (XRT) market share rose by 0.2% to 33.4%, on volume growth of 3.3%, compared to industry growth of ~5%. The industry growth was impacted by the national expansion of competitive line extensions in the moist-snuff category in 1Q16.

The increased retail market share was driven by American Snuff’s flagship brand Grizzly. Grizzly’s market share increased to 30.8% on volume growth of 3.9% in 1Q16.

Peers in smokeless tobacco products

Other companies like Altria Group (MO), Japan Tobacco (JAPAF), and Imperial Tobacco Group (ITYBY) have a presence in the smokeless tobacco products. Marlboro Snus (MO), Skurf Snus (JAPAF), and Zerostyle Mint (ITYBY) are some of their smokeless tobacco product brands. To learn more about Altria Group’s smokeless product segment, please read A Glimpse at Altria’s Smokeless Tobacco Products Segment.

However, British American Tobacco (BTI) and Philip Morris International (PM) do not have a presence in smokeless tobacco products.

Continued innovation

American Snuff Co. is planning to focus on market share and profits from its Grizzly branded products through innovation, branding, and promotions. For example, Grizzly’s continued strong leadership position in the growing pouch style which provides pre-measured portions and is convenient than traditional moist snuff. Additionally, the popular Wintergreen flavor was being supported by its recently expanded Dark Wintergreen product.

Reynolds American (RAI) makes up 0.4% of the iShares Russell Top 200 Growth ETF (IWF).

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