Published on October 20, 2009
In an effort to increase its presence in the falling cigarette market, Reynolds American decided to apply its innovative marketing mix, giving second life to a legendary brand which was almost forgotten by the American smokers. Industry analysts consider that nearly doubling percent of market share for resurgent Pall Mall brand, which has grown to 4.24 percents, could eventually affect Marlboro – the best-seller in the market.
Reynolds American received Pall Mall brand in 2004 after the merger of Brown & Williamson Tobacco Corp with RJ Reynolds, RAI’s major subsidiary. Experts admit that the growth of Pall Mall can be easily explained by the fact that RJ Reynolds offered smokers a brand of premium quality and discount price, a combination that is successful in encouraging customers to stay along with the brand when the discount program finished and prices went back.
Reynolds American lowered Pall Mall’s prices six months ago, captivating many smokers who wanted to pay less for cigarettes at the time of recession. This reasonable strategy resulted in a steep rise of market share, which climbed to 5.2 percent in April. So, when the discounts ended and price was increased to meet the expenses related to the federal tax increase, Pall Mall kept a high market share if comparing with 2008.
For instance, the sales of three best-selling brands - Marlboro, Newport and Camel were reportedly, down or even in the second quarter, according Inc./Capstone, a research company involved in analysis of tobacco market. The chairman of Reynolds American, Susan M. Ivey, stated that Pall Mall had become a high quality brand with a pleasant aftertaste and great price, and those three characteristics are known to be the principal components of a success among consumers, particularly within the actual economic reality.
She mentioned that Pall Mall promotional campaign which coincided in time with April’s federal tax hike has seen a great response from smokers, who adjusted their preferences to the necessity to cut expenses on cigarettes.
In 2006 Reynolds American divulgated the new marketing strategy, according to which Pall Mall along together with flagship Camel became the strategically-important brands, and thus, objectives of especial marketing efforts. Within three years Pall Mall’s share went up from 1.86% to 4.92%. Reynolds American spokesman David Howard said that the company is also interested in investing and marketing their top-selling snuff brand Grizzly, which is the most popular brand in this segment, and Camel Snus, which also contributed to strengthening Reynolds position in the tobacco market.
Experts admit that when Reynolds lowered price of Pall Mall it became the most inexpensive in the mainstream segment what was rapidly noticed by smokers who are faithful to discount brands. Cassandra Harlow, a Morgan Stanley expert in tobacco market confirmed the recently increased revenue forecast for Reynolds American conditioned by strong positions of Grizzly, Camel Snus, Camel Nr. 9 and Pall Mall.
Harlow added that enormous rise of Pall Mall would probably prompt Philip Morris to reduce its price on Marlboro to stop the further market share increase of the major rival, Reynolds American. The resurgent Pall Mall brand tasted the most success in the ‘60s, when it was a top-seller, but its recent rise is likely to return it to the group of most popular brands in US market.
