Pall Mall in Black & White

Two more menthol versions joining Reynolds' Pall Mall Green

WINSTON-SALEM, N.C. -- R.J. Reynolds Tobacco Co. is aiming to capitalize on the recent surge in Pall Mall cigarette sales by extending its reach into menthol, reported The Winston-Salem Journal. The company has introduced Pall Mall Black and Pall Mall White to complement Pall Mall Green, its standard menthol style.

Reynolds spokesperson Richard Smith told the newspaper that the black style offers "a full-flavor tobacco blend," while the white style "has a smoother tobacco blend."

Smith said the company is introducing the new styles gradually, with national distribution planned by October.

He said Reynolds is adding the menthol styles to reflect category growth nationally as well as a shift in smoker preferences. "We believe Pall Mall is the right product at the right time, as the weak economy continues to affect adult tobacco consumer spending," Smith said. "We are seeing increasing rates of trial and increasing rates of conversion and sticking with the brand."

Menthol sales have declined in recent years, from 27% of all cigarettes in 2008 to 22% in 2010, according to the report, citing the Federal Trade Commission's latest report.

"Reynolds is target marketing these new cigarettes to price-sensitive smokers of higher-priced menthol brands," Bill Godshall, executive director of SmokeFree Pennsylvania, told the paper.

Reynolds officials hope the new Pall Mall menthols will boost momentum for what has become the nation's No. 3 cigarette brand, trailing only Philip Morris USA's Marlboro and Lorillard Inc.'s Newport.

Pall Mall not only has supplanted Camel as Reynolds' top brand, but also chipped away at Marlboro's grip on market share, the report said.

In response, Philip Morris has expanded the marketing of Marlboro Special Blends, its cheaper version of Marlboro. Discount competitors also have taken aim at Pall Mall by lowering prices, the report said.

As a result, Pall Mall's market share slipped 0.2 percentage point from the first to second quarter to 8.4%. Its volume was down 0.2% to 5.6 billion cigarettes compared with a year ago.

By comparison, Pall Mall had a 1.95% market share when Reynolds elevated it to a growth brand in 2006.

According to the report, Christopher Growe, managing director of Stifel Nicolaus Equity Research, said in July that the competition from Marlboro "is likely to serve as a headwind this year" for Pall Mall and "likely to temper the brand's growth."

Bonnie Herzog, a Wells Fargo Securities analyst, said the rivalry could turn into a marketing "bloodbath."

"Although we believe Pall Mall continues to resonate with value-seeking consumers, the brand is not immune to competitive pressures and, therefore, we are projecting a deceleration in the brand's growth," Herzog told the paper.

Pat Shehan, owner of Tarheel Tobacco in Winston-Salem, said it's clear the marketing is attracting smokers to Pall Mall, L&M and Marlboro Special Blends over sales of lower-tier cigarettes.

"I really believe smokers want a national brand and the manufacturers are pricing their cartons to put some brands back in their range," Shehan told the Winston-Salem Journal.

(Click here for previous CSP Daily News coverage of menthol.)