Reynolds plans 350 job cuts under latest production consolidation strategy | Local

Reynolds American Inc. on Thursday announced its biggest workforce reduction in a decade — 350 full-time positions — as it consolidates more of its manufacturing output at its massive Tobaccoville plant.

Consolidation begins in April and will continue through 2024, Reynolds said in a statement.

The last time Reynolds cut more company-wide jobs was in March 2012, when it cut 10%, or 540 positions, the bulk of which occurred in the county. of Forsyth.

“We are focused on delivering long-term sustainable growth in a rapidly changing environment,” Guy Meldrum, president and chief executive of Reynolds, said in the press release announcing the planned job cuts.

The employees of the following establishments are concerned:

* Operations of Santa Fe Natural Tobacco Co. Inc. in Oxford, North Carolina will be transferred to Tobaccoville. The Oxford factory manufactures premium traditional Santa Fe Natural Tobacco cigarettes.

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* American Snuff Co. LLC operations at the Taylor Brothers plant at 2415 S. Stratford Road in Winston-Salem will also be transferred to Tobaccoville.

* ASC’s traditional oral operations in Memphis, TN will be relocated to Clarksville, TN, where Reynolds has another smokeless tobacco production facility.

Reynolds said in a follow-up statement that “the Tobaccoville plant plays an important role in our growth strategies, and we have made the necessary investments to accommodate additional production as we transition to this location.”

Reynolds declined to say how many local jobs are in the 350 cut. He said more than half of employees at closed facilities will have the option to transfer sites.

“While these changes are necessary to support the future of our business, they will be extremely challenging for our employees at manufacturing sites that are closing, and today we are focused on supporting them through this transition,” Meldrum said.

The manufacturer has not filed a WARN Act notice with the NC Department of Commerce.

Reynolds said it is offering a comprehensive package of severance and continuation of medical benefits to displaced employees, as well as outplacement support.

The primary reason for the latest downsizing appears to be the same as previous Reynolds downsizings this century – the continued decline in demand for traditional cigarettes nationwide.

Prior to Thursday’s announcement, Reynolds had between 2,000 and 2,500 employees in Forsyth, most at its 2 million square foot factory in Tobaccoville.

Reynolds did not provide a head count of Forsyth for several years.

Since 1983, when it had 15,500 full-time local employees, Reynolds has cut between 84% and 88% of its positions through at least 20 formal job cuts and/or voluntary severance offers to long-tenured workers. .

A better tomorrow

Reynolds is owned by British American Tobacco Plc.

BAT launched a growth initiative known as “A Better Tomorrow” in September 2019.

Reynolds said in the follow-up statement that “A Better Tomorrow is our corporate goal, which is to reduce the health impact of our business.”

“These changes to our US operations were initiated after a detailed strategic review revealed that we needed to address underutilization of certain facilities.”

The strategy also emphasizes capturing market share in smokeless and smokeless products, such as e-cigarettes, non-burning cigarettes, and oral products such as Camel Snus.

When the initiative was disclosed in 2019, BAT planned to cut around 2,300 jobs across the company, or 4% of its global workforce.

Reynolds said the latest downsizing is part of its “efforts to transform the business and position it for future growth” after the conclusion of a “comprehensive strategic review of its U.S. operations.”

“After our review, it became clear that we needed to align our manufacturing footprint with our growth strategies,” said Bernd Meyer, executive vice president of operations at Reynolds.

The RJ Reynolds Vapor Co. Vuse e-cigarette is the best-selling product in the United States and is close to the best-selling Juul.

However, vaping products account for just 6%, or $1.51 billion, of BAT’s overall U.S. convenience store sales over the past year.

By comparison, traditional cigarettes account for 84%, or $21 billion, of U.S. sales, and 10% for wet snuff and oral nicotine products, or $2.62 billion, according to the latest Nielsen report released Wednesday.

“The percentage of American adults who smoke has fallen from 21.5% in 2005 to just 12.5% ​​in 2020,” said Zagros Madjd-Sadjadi, professor of economics at Winston-Salem State University.

“Because of this, along with continued automation, I am not surprised that there will be force reductions occurring over the next three years.”

Madjd-Sadjadi said it was possible Forsyth could avoid a major employment impact with production coming from Oxford.

Discount history

The announcement to cut 350 jobs by the end of 2024 comes after BAT released its 2021 annual report on March 18.

He revealed in the report that the workforce of Reynolds American and its subsidiaries was cut by more than 10% last year to 4,405, from 4,921 in the 2020 report.

The company’s workforce is down 20% from around 5,500 as of December 31, 2016, according to Reynolds’ latest annual company report.

In September 2003, Reynolds announced plans to cut between 1,600 and 1,700 local jobs, including at least 800 in manufacturing, as part of a cost-cutting strategy that followed a comprehensive review of its business to find ways to improve performance and increase profits.

The manufacturer announced in September 2008 plans to cut 570, mostly white-collar, jobs as part of another cost-cutting initiative.

More recently, Reynolds cut hundreds of jobs through voluntary retirement initiatives, such as about 400 veteran manufacturing workers in December 2009.

Some of these positions have been replaced by new hires at lower cost or by contract workers.

Financial background

BAT spent $54.5 billion in July 2017 to buy the 57.8% of Reynolds American it didn’t already own.

The purchase made Reynolds the wholly owned US subsidiary of BAT after the company’s 142 years of independence. Legacy Reynolds shareholders own 19% of BAT.

BAT announced on Feb. 11 that fiscal 2021 revenue rose 0.4% to $33.92 billion.

Reynolds’ operating profit rose 11.9% to $7.3 billion. Sales rose 1.9% to just under $15.33 billion.

Sales break down as follows: +0.9% to $13.13 billion for RJ Reynolds Tobacco Co. and Santa Fe Natural Tobacco Co.; down 4.3% to $1.41 billion for American Snuff Co.; and up 43% to $739.7 million for “new categories” which include the Vuse e-cigarette with RJ Reynolds Vapor Co. and its modern orals and snus products.

Jack Bowles, chief executive of BAT, said Feb. 11 that the manufacturer is “on track to generate $6.6 billion in revenue and profitability in new categories by 2025 and developing opportunities beyond that.” of nicotine, leveraging our knowledge and capabilities in new categories”.

The A Better Tomorrow 2019 initiative kicked off BAT’s aggressive shift towards non-traditional cigarette products.

At that time, Reynolds spokeswoman Kaelan Hollon said the manufacturer “has already worked through most of these types of decisions through merger and integration, so any reduction here would be minimal”.

The 2019 restructuring, according to BAT, “would create fewer, bigger and more accountable business units; better leverage its Global Business Services activities; and simplify all key business processes and “ways of working”. ”

“Since I took on the role of CEO five months ago, I have made it clear that I want to make BAT a stronger, simpler and faster organization and ensure a future culture of fit,” said Bowles said in the 2019 release.

“My goal is to oversee a step change in the growth of new categories and significantly simplify our current ways of working and business processes, while delivering long-term sustainable returns for our shareholders. This is a first not essential to help achieve these goals.”

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