(FROM THE WALL STREET JOURNAL 2/23/15)
By Tripp Mickle
Susan Cameron, chief executive of Reynolds American Inc., is
skilled at bringing two companies together. She proved that in 2004
when she guided Reynolds Tobacco Holdings Inc. and Brown &
Williamson through a $3 billion merger. She led the combined
companies for seven years and retired in 2011.
Reynolds's board asked Ms. Cameron to return last year to
oversee the company's $25 billion acquisition of Lorillard Inc. The
deal is awaiting Federal Trade Commission approval, but she is
pushing ahead with preparations to bring Lorillard's top brand,
Newport, into Reynolds, which will make the Winston-Salem,
N.C.-based company a stronger rival to market-leading Altria Group,
Inc., which makes Marlboro.
The Wall Street Journal talked to Ms. Cameron about the factors
that go into a successful merger, the ability to recruit young
workers to a tobacco company and the future profile of cigarette
smokers. Here are edited excerpts from that interview.
WSJ: What are the keys to combining two companies?
MS. CAMERON: Making sure you have a plan that all parties have
agreed to is essential. We set up planning teams right after this
transaction was announced.
A customer wants to order Newports from us, day one.
WSJ: How do you achieve that?
MS. CAMERON: You appoint people, and it's their full-time job
for two years. Somebody who is the project manager for the
manufacturer integration -- that is [his] job. You don't leave it
to chance.
WSJ: What mistakes have you made in previous mergers that you
want to avoid?
MS. CAMERON: In the first merger, I was convinced we could
create the new company's culture in three years. That was
ridiculous. I think it took seven or eight.
WSJ: Why does it take that long?
MS. CAMERON: It's generational. If you have managed a certain
way and you have been successful, by the time I get you to change,
you've probably now retired. And the next group is excited and
ready to manage people in the new way.
WSJ: How do you recruit employees to work in a stigmatized
industry like tobacco?
MS. CAMERON: People in their 20s and 30s are different from
people growing up in the '90s who watched these clowns up there
swearing nicotine was good for you. Ever since they have known
about tobacco, it's clear that it's bad to smoke. For this
generation, it's either they will or they won't. When we post a
job, I felt much worse in the '80s or '90s than I do today. It's
different.
WSJ: E-cigarettes are reshaping the tobacco industry. How do you
deal with a disruptive technology?
MS. CAMERON: Now the consumer doesn't expect to get a line
extension every three years; they want a new iPhone every year.
We've had to address that in the structure and the timetable to
make sure we can operate at a better speed to market.
WSJ: In the case of Reynolds's e-cigarette Vuse, what did you
do?
MS. CAMERON: Almost every company ordered [e-cigarettes] from
China. We took the punt that ours would work better and deliver
more satisfaction if we would do it here. We put a big, bold goal
out there that we would get this out the door in 18 months. It put
tremendous strain on the company. It's motivating people and
realizing this isn't your wheelhouse, so we probably need a new
wheelhouse.
WSJ: What does the smoker look like 10 years from now?
MS. CAMERON: The analysts always ask: What happens to
traditional combustibles? Honestly, it's too early to say. People
who would have started smoking combustibles, will they never smoke
a combustible and smoke an e-cigarette? The outcome of this will be
largely related to the consumers' ability to make educated
choices.
WSJ: What did you think of e-cigarettes when you first saw
them?
MS. CAMERON: We were actively looking at whether we should buy
[a company] in the space. A lot of other companies did. I asked our
R&D guys. They said we can make our own better. At the end of
2011, they had prototypes.
We saw it coming. There were patents for vapor that go way back.
But the interest for vapor was really brought to this market by
[shopping-mall kiosks] and the Internet. I'd like to think we were
the first large player developing in-house, because we're still the
only player that developed in-house.
WSJ: What challenges does vaping face?
MS. CAMERON: The problem is that all the science isn't in. We
have decades of epidemiology on combustibles. There's no
epidemiology on vapor. But everybody understands what's in that
vapor and what's not in that vapor -- burning plant. I'm hopeful
that education process will help people make choices. A decade from
now, you could have people only vaping.
WSJ: Is that the world you see?
MS. CAMERON: I would love to see a world where people who would
like to enjoy or desire to use nicotine could change the curve of
public health on that choice. That would be exciting for me. These
kinds of changes can be influenced by different things. Our
decision is we're giving consumers choices along that whole
continuum.
WSJ: Combustibles still deliver the majority of company revenue.
How much skepticism do you run into pushing vapor?
MS. CAMERON: What's nice about the strategy is that over time we
are very confident we will be able to have the same margin in vapor
as we have in combustibles. We can actually have a win-win strategy
in terms of being able to continue the revenue stream with a
different product category. We're not just making a strategy that
sounds good for the environment but is actually going to put us out
of business.
In house, we spend a large amount of time on the combustible
space. It's by far and away the largest profit generator, and there
are 42 million consumers out there smoking combustibles in this
country. While they desire to have a better alternative, until
they're actually making that choice, staying out in front of it and
offering choices we believe is the right thing to do.
WSJ: Do you run into employee skepticism around vapor?
MS. CAMERON: No. Employees love the vapor. They're proud they're
offering these alternatives. Our sales force, for instance, there
are a lot of people out there who have been offered Camel and may
have rejected that opportunity. Now they [the sales force] have
something else to offer.
---
Mr. Mickle is a Wall Street Journal reporter in Atlanta. He can
be reached at tripp.mickle@wsj.com.
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