By Brian Louis, Winston-Salem Journal, N.C. Knight Ridder/Tribune Business News
Jun. 20--The future of the once wide-ranging sports-marketing department at R.J. Reynolds Tobacco Co. is unclear after yesterday's official announcement that Nextel Communications Inc. will replace Reynolds Tobacco as the sponsor of NASCAR's premier racing series.
The division's future is murky in part because Reynolds Tobacco's parent in Winston-Salem, R.J. Reynolds Tobacco Holdings Inc., has recently embarked on a complete examination of the way it does business to an effort to increase profit.
The company used to have sponsorships in sports such as golf, drag racing, and billiards in addition to NASCAR. But a settlement agreement between the states and tobacco companies in 1998 limited tobacco companies to one sponsorship a year and Reynolds Tobacco decided to keep the Winston Cup.
In its heyday, people who worked in sports marketing were getting paid to go all over the world to attend sporting events, said Jeff Byrd, the president and general manager of Bristol Motor Speedway in Bristol, Tenn.. He worked in sports marketing at Reynolds Tobacco for 23 years.
'It was probably one of the greatest places to work in the world,' Byrd said.
Asked about the future of the sports-marketing group, Ned Leary, the division's president, said that will depend on what comes out of the company's review of its operations.
In February, Reynolds Tobacco said that it was talking to NASCAR about finding a new sponsor because of tough conditions in the cigarette industry.
The major tobacco companies have been engaged in a price war over the past year against each other and small companies that make less-expensive cigarettes. The price and promotions war has cut sharply into profit at Reynolds Holdings and other big cigarette-makers.
The company would not say how much it spends on the sponsorship and other marketing efforts related to the Winston Cup, however, estimates put the total at between $40 million and $50 million.
Leary said that less than 10 people work on the Winston Cup. He declined to say how many people work overall in Sports Marketing Enterprises, as the division is officially called. The department also does other promotional work in addition to the Winston Cup.
Sports-marketing experts said that Nextel should hire Reynolds Tobacco's team when it takes over the racing series next year.
Peter Carpenter, the president and chief executive of Elite Sport Management Group Inc., a sports-management and marketing company based in Winston-Salem, said that if he was a consultant to Nextel, based in Reston, Va., he'd tell it to hire the sports-marketing department.
'They're considered the cream of the crop,' Carpenter said.
It is unclear what Reynolds Tobacco will do with the money it won't be spending on NASCAR. Analysts have said that the company could use the cash to discount and promote its cigarettes.
Reynolds Tobacco said that the sponsorship and exposure has been good for its Winston cigarette.
'It's been a very good investment for the Winston brand,' Leary said. Winston has a market share of about 25 percent to 30 percent of adult race fans who smoke.
But even with all the exposure that the brand got, the sponsorship couldn't stop Winston's decline in the U.S. cigarette market.
Winston's market share, based on shipments, in 1971 was 15.9 percent. By 1986 it had dropped to 11.2 percent and in 1996 it was 5.2 percent. In 2002, it was 4.7 percent.
At the news conference yesterday announcing the sponsorship change, officials from NASCAR and Nextel praised Reynolds Tobacco's work to make NASCAR the fast-growing sport that it is today.
NASCAR put together a short film of moments from the years of Reynolds Tobacco's involvement with NASCAR with singer Natalie Merchant's song 'Kind and Generous,' as the accompanying music. The words 'thank you' are a fre...uent refrain in the song.
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(c) 2003, Winston-Salem Journal. Distributed by Knight Ridder/Tribune Business News.
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