Case 1:20-cv-00393-LMB-WEF Document 1423-1 Filed 09/02/22 Page 1 of 7 PageID# 36601
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`Exhibit 1
`Public Redacted Version
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`Exhibit 1
`Public Redacted Version
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`Case 1:20-cv-00393-LMB-WEF Document 1423-1 Filed 09/02/22 Page 2 of 7 PageID# 36602
`Case 1:20-cv-00393-LMB-WEF Document 1423-1 Filed 09/02/22 Page 2 of 7 PagelD# 36602
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF VIRGINIA
`ALEXANDRIA DIVISION
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`PHILIP MORRIS PRODUCTSS.A.,
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`Plaintiff,
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`Case No. 1:20-cv-00393-LMB-TCB
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`R.J. REYNOLDS VAPOR COMPANY,
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`Defendant.
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`DECLARATION OF CHRISTY CANARY-GARNER
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`I, Christy Canary-Garner, declare:
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`l.
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`Iam the Vice President of Consumer Marketing for Defendant R.J. Reynolds Vapor
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`Company’s (“RJRV”) VUSE Vapor Brand.
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`In that role, | am responsible for the commercial
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`business managementof the VUSEbrand,including portfolio design; promotion strategy; volume
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`and share; and financial P&Ldelivery.
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`2.
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`I makethis declaration in support of RJRV’s Opposition to Philip Morris Product
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`S.A.’s (“PMP’s”) Motion for a PermanentInjunction or, Alternatively, an Ongoing Royalty.
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`3.
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`RJRV is a North Carolina corporation, headquartered in Winston-Salem, North
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`Carolina.
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`4.
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`RJRV does not make, market, or sell combustible cigarettes.
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`Instead, RJRV’s
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`business is directed exclusively to the development and introduction of reduced risk tobacco
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`products that present an alternative for adult smokers of combustible cigarettes.
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`Case 1:20-cv-00393-LMB-WEF Document 1423-1 Filed 09/02/22 Page 3 of 7 PageID# 36603
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`3
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`RJRV’s product line currently consists of four e-cigarette products, which are
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`marketed under the trade name VUSE. The VUSEproducts are the cornerstone of RJRV’s future
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`and akey embodiment of Reynolds’s commitmentto its guiding principles regarding tobacco harm
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`reduction. (https://www.reynoldsamerican.com/about
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`6.
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`The VUSElineupincludes Alto, Solo, Ciro, and Vibe, shownin the below pictures:
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`qh
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`Solo (Generation 1) was RJRV’s first e-cigarette product in the United States.
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`It
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`was launched in 2013, a time when e-cigarettes were relatively new in this country. At that time,
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`it was our beliefthat the best way to encourage smokersto try this this new reducedrisk technology
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`wasto design the product to have a physical form that resembled a combustible cigarette, and was
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`thus familiar to the customers in terms of physical feel. Consistent with this design goal, the Solo
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`productis long and cylindrical, and mimics the dimensions and shapeofa cigarette.
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`8.
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`Solo was successfulin the early years after its launch, and RJRV followed with the
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`launch of the Solo (Generation 2) product in 2015, and the Ciro and Vibe products in 2016. Like
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`the Solo devices, those products also offered a form that approximates a combustible cigarette in
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`Case 1:20-cv-00393-LMB-WEF Document 1423-1 Filed 09/02/22 Page 4 of 7 PagelD# 36604
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`shape and physical feel.
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`9.
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`These products were initially popular with U.S. consumers, and RJRV becamethe
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`market leader for e-cigarettes by 2016, with a market share of approximately 37.0%. The Solo
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`devices were ourbest-selling products at that time.
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`10.
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`Over the years, as adult smokers became more comfortable with vaping as an
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`alternative to smoking combustible cigarettes — which was RJRV’s goal — we noticed that their
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`preferences were shifting. More e-cigarette users no longer wanted their products to resemble
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`combustible cigarettes. To the contrary, as they moved away from smoking to RJRV’s reduced
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`risk products, customers affirmatively did not want to be reminded of, or perceived by others to
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`be using, cigarettes.
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`11.
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`This shift in consumerpreference gaverise to a new category of e-cigarette devices,
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`referred to as “pod-mod,”that have a completely different look, style, and feel from the cylindrical,
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`cigarette-shape and design used in Solo, Ciro, and Vibe. One such device is the JUUL, shown
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`below with the associated JUUL pods:
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`Case 1:20-cv-00393-LMB-WEF Document 1423-1 Filed 09/02/22 Page 5 of 7 PageID# 36605
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`(https://www.juul.com/shop)
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`12.
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`The pod-mod design and style resonated with U.S. consumers who wanted to
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`distance themselves from combustible cigarettes. JUUL launched in 2015, and by 2017,it held
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`23.8% ofthe e-cigarette market, while RJRV’s market share had dropped to 31.0%. Just one year
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`later, JUUL overtook RJRVas the e-cigarette market leader, with a market share of 68.0%, while
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`RJRV’s market share decreased to just 12.5%.
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`13.
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`Partly to respond to that market shift in consumer preferences, RJRV acquired the
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`Alto product, whichit beganselling in August 2018. Alto does not mimic the experience and form
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`factor of a cigarette. To the contrary, Alto has a different, non-cylindrical form factor and a
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`different mouthpiece than Solo, Vibe, and Ciro, and Alto uses a “pod-based” system that is
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`different from the “cartridge-based” system of Solo and Ciro and the “closed-tank” system of Vibe:
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`Case 1:20-cv-00393-LMB-WEF Document 1423-1 Filed 09/02/22 Page 6 of 7 PageID# 36606
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`14.
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`Alto’s features have provento be very popular with consumers. Following RJRV’s
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`nationwide launch of Alto in 2018, its market share has steadily increased, and inthefirst half of
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`2022, RJRV replaced JUUL as the four-week market
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`leader for the first time since 2018.
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`(https://vaporvoice.net/2022/06/02/vuse-continues-to-expand-u-s-market-share-over-juul/.)
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`15.
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`In 2021, total VUSE sales (for all four products combined) were approximately
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`.(Of that, GB was attributable to Alto sales.
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`In the first half of 2022, Alto
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`accounted for {J of all VUSE productsales.
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`16.
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`Alto is the single most popular vaping product among U.S. consumers, recently
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`surpassing JUUL. Alto is currently used by more than U.S. consumers.
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`7, rs
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`18.|RJRV will not be able to avoid or even mitigate the losses that will follow from the
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`exclusion of the Alto product. Although no injunction is being sought against Solo (Generation
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`1), Ciro, or Vibe, there is no reason to believe that Alto users will switch to one of these other
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`Case 1:20-cv-00393-LMB-WEF Document 1423-1 Filed 09/02/22 Page 7 of 7 PageID# 36607
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`products if Alto is barred from the market. As I described in paragraphs 7-13 above, consumer
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`preferences have moved awayfrom the shape and design of products like Solo, Ciro, and Vibe.
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`19.
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`twNobastOo
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`I declare underpenalty of perjury that the foregoing is true and correct.
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`af
`Executed this 3} day of August, 2022.
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`fst, CraaneSusan—
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`Christy Canary-Garn
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