Pall Mall maker Reynolds American to close 2 cigarette plants, consolidate smokeless ops

Reynolds American to close 2 cigarette plants

RICHMOND, Va. — Tobacco company Reynolds American Inc. said Friday it will close two cigarette plants — one in its headquarters city in Winston-Salem, N.C., and another in Puerto Rico — as it adjusts to declining demand for cigarettes.

The nation’s second-largest cigarette maker said production of cigarettes like Camel and Pall Mall will start to shift to its largest facility in nearby Tobaccoville, N.C., this summer. It says about 60 jobs in Puerto Rico will be eliminated in the consolidation.

At the same time, Reynolds American said it will expand its smokeless tobacco processing and manufacturing capacity at facilities in Memphis and Clarksville, Tenn. The maker of Kodiak and Grizzly smokeless tobacco said the two plants will be fully operational by early 2012. Its current plant in Memphis built in 1904 will close the same year. Workers at that plant would be moved gradually to the new facilities.

“These changes make our companies more efficient in light of the declining U.S. cigarette industry and growth in smokeless tobacco,” CEO Susan Ivey said in a news release.

Reynolds American and other tobacco companies are focusing on cigarette alternatives — such as snuff and chewing tobacco — for future sales growth as tax increases, smoking bans, health concerns and social stigma make the cigarette business tougher.

In the first quarter, Reynolds said it sold 2.5 percent fewer cigarettes than a year earlier, when retailers and wholesalers cut their orders ahead of a one-time federal tax on inventory. Adjusting for those cuts, cigarette volume declined 4.8 percent. Its smokeless tobacco volumes, including other brands like Camel Dip, grew 12.2 percent from a year earlier.

The company also recently annnounced plans to combine its cigarette and smokeless tobacco sales forces by the end of the third quarter.

It also said efforts to sell or lease the iconic R.J. Reynolds’ headquarters building in Winston-Salem continue. All employees moved into a new building at the end of 2009.

Reynolds American shares slipped 34 cents to $52.31 in midday trading Friday.