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VOL. 129 | NO. 102 | Monday, May 26, 2014

Reynolds Expanding E-Cigarette Production

MICHAEL FELBERBAUM | AP Tobacco Writer

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RICHMOND, Va. (AP) Reynolds American Inc. is expanding its Tobaccoville, North Carolina, manufacturing complex as it plans national distribution of its Vuse brand electronic cigarette this summer, the company said Friday.

The owner of nation's second-biggest tobacco company did not disclose the costs related to the ramp-up, which will include a multi-million dollar investment for high-speed manufacturing equipment, for competitive reasons but said the move would create more than 200 jobs over the next four years.

Reynolds, based in Winston-Salem, North Carolina, launched Vuse in Colorado last June and plans the initial wave of national distribution next month.

Production is currently done at a contractor facility in Kansas, but the company said more production will be needed for the foreseeable future to meet anticipated market demand. The company will carve out about 70,000 square feet of space in its existing 2 million-square-foot Tobaccoville facility. It does not publicly provide the number of employees that work at the plant that also makes its cigarette brands, including Camel and Pall Mall.

The market for e-cigarettes has grown from the thousands of users in 2006 to several million worldwide and reached nearly $2 billion in sales last year. The battery-powered devices that heat a liquid nicotine solution, creating vapor that users inhale. E-cigarette users say the devices address both the addictive and behavioral aspects of smoking without the thousands of chemicals found in regular cigarettes. The Food and Drug Administration last month proposed regulating electronic cigarettes.

Reynolds says the rechargeable Vuse e-cigarette has technology that monitors and adjusts heat and power more than 2,000 times per second to deliver the "perfect puff." It also has a smart light on the tip of to let users know when it's getting low, needs to be replaced or recharged.

"This is all about smokers getting satisfaction from these alternatives and how many smokers find that an acceptable way to enjoy nicotine instead of smoking tobacco products," Reynolds CEO Susan Cameron said at a news conference Friday with North Carolina Gov. Pat McCrory. "I think we'll see this evolve and it's certainly in growth mode, but how big and how fast, we really don't know yet."

The nation's biggest tobacco companies all have entered into the fast-growing electronic cigarette business as part of an industry wide push to diversify beyond the traditional cigarette business, which has become tougher in the face of tax hikes, smoking bans, health concerns and social stigma.

Altria Group Inc., owner of the nation's biggest cigarette maker, Philip Morris USA, plans to expand its MarkTen electronic cigarette brand nationally during the first half of the year. Lorillard Inc., the nation's third-biggest tobacco company, acquired e-cigarette maker Blu Ecigs in April 2012. Blu now accounts for almost half of all e-cigarettes sold.

Michael Felberbaum can be reached at www.twitter.com/MLFelberbaum

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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