American Snuff settles into new Memphis digs

Added: (Thu Feb 02 2012)

Pressbox (Press Release) - Memphis is hundreds of miles from Tobacco Road, but a major tobacco company has staked $130 million and the growing part of its future here.

Reynolds American Inc. later this month finishes moving its smokeless-tobacco American Snuff Co. and 170 employees from a 100-year-old plant near Downtown Memphis to a new, $130 million plant in Southeast Memphis.

Blending and packaging of flagship-brand Grizzly, Kodiak and other moist snuff products has already started in the 787,500-square-foot former HP distribution center at 5106 Tradeport.

The move from the old plant on Keel, north of Downtown, is 60 percent complete, said Gene Crain, American Snuff's senior director of manufacturing.

Cigarette smokers in the U.S. still outnumber smokeless tobacco users about 44 million to 7 million, said David Howard, Reynolds American's senior communications director.

But cigarette sales -- obviously under pressure due to health issues, societal changes, rising taxes, and smoking restrictions -- have been dropping yearly now for two decades.

Meanwhile, sales of smokeless-tobacco products have risen 5 to 7 percent annually. Typically, users pinch or "dip" the fine particles of cured and fermented tobacco, placing it between their cheek or lip and gums.

"Reynolds approved a $130 million project in Memphis," said Crain, the 50-year-old Millington resident who has worked at American Snuff for 32 years. "This facility will play a major role" for Reynolds.

Reynolds American reported last fall that American Snuff's third-quarter operating income was $90 million.

"American Snuff's moist-snuff shipment volume increased 7 percent from the prior-year quarter, contributing to a gain of 7.7 percent in the nine-month period," the earnings report states. "This compares favorably to moist-snuff category growth of about 5 percent this year."

The new plant has the same output -- 22 million pounds of smokeless tobacco, or 1.6 million units a day -- as the old Keel plant.

However, with its modern equipment, four robots and other efficiencies, the new site can produce it with just one shift compared to the two required at Keel, Crain said. Plus, the Tradeport operation has plenty of room to expand as demand for smokeless tobacco grows.

The tobacco is trucked to Memphis from Reynolds' Clarksville, Tenn., plant, which blends the tobaccos and cuts the leaves tailored to each of the 20 brands American Snuff produces.

American Snuff takes that tobacco, blends it with its recipes of flavors and other ingredients, and packages it.

On a tour of the new plant Wednesday, the appealing aroma of "wintergreen" -- the most popular flavor -- filled the vast space. Other flavors are mint, natural and straight.

American Snuff makes smokeless products in categories comprising loose leaf, plug, moist loose and moist pouch.

In modernizing the plant, Reynolds American could have moved the operation to North Carolina. But the company decided that Memphis remained the best fit in large part because of American Snuff's 112-year history here and because of the expertise of the Memphis employees, Crain said.

Their average seniority is 18 years, and more than half the employees have worked for American Snuff more than 20 years.

One key to staying in Memphis was finally finding a large enough building with high enough ceilings, Crain said. The Keel plant uses two floors and gravity for some of its processes, as in the "kitchen" where the tobacco is cooked and blended.

The Tradeport building met the height requirements with 33-foot-tall ceilings.

From the kitchen, workers park the tobacco in color-coded bins until it is ready for packaging. Black bins hold American Snuff's most popular brand, Grizzly. It's the No. 1-selling moist snuff brand, with 27 percent of the market, Howard said.

Each of about 40 black bins stacked on Wednesday held enough moist snuff to fill 9,000 cans, or 360,000 cans total. Two tall, yellow robots dump empty cans and lids into a hopper for the packaging process, and two other robots stack the finished products.

Reynolds American bought American Snuff -- then known as Conwood Company -- in 2006. Reynolds brought back the old American Snuff name in January 2010.