Some RJR brands out of stock for now
Smokers are scrambling to find some of their favorite Reynolds cigarettes.
R.J. Reynolds Tobacco Co. said yesterday that some of its major brands, such as Winston, Doral and Kool, have been out of stock on an intermittent basis for 1 1/2 months across the country.
The shortage has also affected several secondary brands more acutely.
"The issue arose from problems with a packaging-materials supplier not getting materials to us fast enough," said David Howard, a company spokesman. "We're working hard to have this problem rectified because we certainly recognize that being out of stock is an unacceptable position for any company."
The situation is expected to last a few more months, he said.
The cigarette shortages are "definitely affecting our business," said Jay Saul, the owner of Jay's Place, a convenience store in Winston-Salem's Washington Park neighborhood. Saul has put a handwritten sign on his counter explaining the reason for the lack of stocks.
"People come in here wanting their brand, and when we don't have it, they get a little agitated," Saul said. He said that Reynolds' brands comprise about 300 of the 450 cartons of cigarettes that he sells weekly, which includes about 120 cartons of Doral.
"I'm a little agitated, too, because you can't sell what you don't have," he said. "I've never had a problem like this before."
Wholesale Distributors of Thomasville Inc., one of the cigarette suppliers to Jay's Place, received a letter from Reynolds explaining the reasons for the shortages, said Brandon Murphy, an official with Wholesale.
"We're slowly getting more of their brands back to normal levels as they've stepped up production," Murphy said. "We're asking our customers to be understanding as Reynolds sorts the shortages out."
Howard said that the packaging problem was not related to Reynolds' decision in May 2005 to sell its RJR Packaging LLC division to five companies for $48.2 million. The companies agreed to long-term supply agreements with Reynolds as part of the deal.
Howard said he could not comment on whether Reynolds would pursue compensation from the supplier for lost sales.
Cigarette distributors and retailers said that the brands most affected by the shortages have been Monarch, Doral, Salem and Vantage.
Howard said that the shortage primarily has affected Reynolds' low-volume brands, which represent a small percentage of its overall production and sales.
But he said that there has been a ripple effect on some major brands as customers switched to cigarettes that have been available in stores.
"While we have gotten our stock back up on some brands, we're now out of stock on some of the brands that our customers have been switching to, which we're working hard to replenish," Howard said.
"It has been an intermittent problem nationally, hitting some pockets of the country, because we based our production on historic demand."
Howard said that Reynolds' manufacturing plants increased production levels and added overtime hours soon after being affected by the shortages. "We will work as long as necessary to replenish the stock back to normal levels," he said.
The problem is not expected to have a material financial effect on Reynolds in lost sales or overtime pay, Howard said.
Pat Shehan, the owner of Tarheel Tobacco in Winston-Salem, said that the shortages have had a limited effect on his sales even though some weeks it has affected up to 19 of the brands that he carries.
"We have had some customers walk out because they felt we just weren't ordering their favorite brands anymore," Shehan said. "But because many customers are willing to switch brands, at least temporarily, we've been able to weather the shortages."
Stock shortages tend to affect companies in two ways, said Michelle Roehm, an associate marketing professor at Wake Forest University.
"Loyal customers, when they go to a store and don't find a brand, they'll get back in the car and keep searching," Roehm said. "Nonloyal customers will look at a shortage as an excuse to try a competitor's brand.
"If it's a short-term shortage, companies usually don't see any significant sales losses.
"But if loyal customers continue to experience trouble finding their brand, they may get frustrated and go to a substitute brand, which is where there is the potential for a long-term sales dip," Roehm said.
