3(
SECRET
I INTRODUCTION
This paper sets out the background to TMD and the
latest
legislative moves affecting it.
It also addresses the specific issue raised by the
TSRT
regarding the initiation of research in respect of
the TMD
activities carried out by Marlboro and Camel.
2. TRAC.,MARK DIVERSIFICATION - BACKGROUND
All the major international tobacco companies
pursue a TMD
strategy in one form or another and all (with the
possible
exception of Dunhill) have the same motivation.
"To maintain cigarette brand namelimagery
communication for as long as possible in the
face of increasingly hostile legislation."
Over the last 3 years the laws around the world
have
become more restrictive both as regards cigarette
advertising and the ability to advertise
non-tobacco goods or
services which bear tobacco trade marks.
Restrictions
currently apply in Singapore, Malaysia, Thailand,
Nigeria and
Australia, with TMD activities banned in New
Zealand and
Canada. In Europe, cigarette advertising is not
permitted in
Italy, Portugal, Finland, Hungary and Norway, and
France is
moving to a ban.
The industry at large has reacted to cigarette
advertising
restrictions by embarking on TMD activities. In
the majority
of cases, such moves have sought to establish TMD
businesses before tobacco advertising restrictions
become
severe. However, a proposed EC Directive in
circulation in
1989t9O prohibited the advertisement of
non-tobacco goods
bearing a trade mark mainly used in connection
with tobacco
products unless the ownership of the undertaking
marketing
the goods was legally and financially distinct
from the
tobacco operation. As a result of these
parameters, and
although the Directive in that form was blocked,
it is
believed that our competitors set up operations
which could,
subject to profitability, be regarded as legally
and financially
distinct from tobacco.
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As a result of this earlier Directive, a number of
principles
have emerged which it is believed are of paramount
importance for the survival, if at all, of TIVID
In the future.
In summary these are:-
to have an established business prior to
legislation
to have a financial, legal and organisational
structure
quite separate from tobacco
to be based on sound commercial criteria and be
profitable.
Appendix 1 spells these out in greater detail.
Last week, the EC proposed a new Directive on
advertising
which, unless blocked by the requisite majority of
the
Council of Ministers who can meet as early as in
the
Autumn this year, is to be adopted by Member
States by
January 1993. These proposals amount to a total
ban on
cigarette (other than point of sale) and TIVID
advertising in
Europe. Sponsorship advertising is also banned.
The
Explanatory Memorandum to the Directive comments
that
the tobacco industry has turned to indirect
advertising e.g.
Marlboro clothes, Camel boots and Barclay matches.
'It is
certainly not by chance that the budget for the
advertising
for these products is disproportionate in relation
with the
emphasis of the relevant market". The Directive
indicates
that *Member states should ensure that brands and
trade
marks whose reputation is normally associated with
the
tobacco product are not used for advertising in
other areas,
if this brand or trade mark is still being used
for the
advertising for the tobacco product". It is
thought Dunhill
will survive because it does have a reputation
other than in
tobacco. Attached as Appendix 2 is an extract from
the
proposed Directive.
Whether or not this Directive survives, it is
clear that the
legislators acknowledge the disproportionate
advertising
behind current TIVID activities. If the
legislators allow TMD
to survive it will only be on the basis of the
principles set
out in this document and in particular that the
operations are
independent from tobacco and are profitable,
having taken
account of the advertising spend which should not
be
disproportionate to the product category used.
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Marlboro (via Marzattol and Camel (via Star
Corporation - a
non tobacco subsidiary of RJR) have sought to
distance their
TMD operations from tobacco, but their
profitability after
advertising costs must be questionable. That they
will both
fight the EC directive is to be expected.
In whatever form the Directive is adopted, it is
likely to be in
months rather than years, and is likely to have an
influence
well beyond European frontiers. There Is thus a
genuine
urgency for tobacco companies to attempt to
maximise the
impact and longevity of TMD while the opportunity
remains.
However, this sense of urgency is balanced to some
extent
by uncertainty over the intrinsic value of TIVID
:)nd its impact
on brand awareness. In BATCo, there has been
little
research on the impact and value of TMD in
relation to the
investment involved.
In order to understand this better, it is proposed
to
commission a research study which will evaluate
consumer
attitudes to TMD activities and the cost
effectiveness of
these activities in maintaining awareness of brand
values
and imagery to the extent that the impact of TMD
can be
separated from that of sponsorship and
advertising. This
research will be directed at competition
activities in order to
avoid the potential constraints and complications
of
commissioning research on BAT products and
activities.
3. MARLBORO SUMMARY
Based on initial desk research, a summary of
Marlboro's
TMD activities is given below.
After many years of experimentation, Classics has
emerged
as the lead activity world-wide. Classics is a
men's clothing
range with a Western theme and is operated through
a large
Italian textile company - Marzotto. Distribution
is
widespread in Europe and the Far East with own
retail
outlets increasingly a feature of the operation.
Advertising is overtly and consistently allied to
the
cowboy/Western cigarette theme and as such is
highly
provocative. Spend levels vary and reliable
published data is
not always available. In Italy in 1990 total TMD
above line
spend was reportedly over E3 million.
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Trademark registration In non-tobacco classes Is
always in
the name of Philip Morris; their relationship with
the
Marzotto company is not known.
Other TMD activities include a Leisurewear
clothing range,
Holidays and Adventure Store. The geographical
spread is
shown below:
Adventure Store: Germany
Classics: Belgium Denmark
Finland France
Guyana La Reunion
Martinique Greece
Holland Hong Kong
Italy Japan
Luxembourg Norway
Sweden Switzerland
Taiwan UK
Leisurewear: Argentina Belgium
Chile Finland
Germany Holland
Hong Kong Italy
Spain Taiwan
Turkey
Holidays: France Germany
Italy Malaysia
UK
Information from BATCF indicates the following
above line
spend levels for Classics in Europe.
1989 1990
France E 3,300
Greece E 83,000
Holland E 15,000
Italy f900,000 E470,000 Jan-Nov
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3. CAMEL SUMMARY
Camel's TIVID activities are summarised below.
RJR operate their TIVID activities via a licencing
company -
The Star Corporation. The HQ operation is based in
Cologne
with a staff of thirteen and reported sales Of
E65.5 million in
Germany in 1989. There are also Star Corporations
in
France, Holland and Switzerland.
All Camel TIVID activity is geared to exploiting
the success of
the Camel Trophy with licenced manufacturers
distributing
Camel clothing, footwear and watches widely across
Europe. Distribution method varies between mail
order and
retail outlets. Camel's TIVID activities outside
Europe are
limited.
With the notable exception of Italy, advertising
spend levels
appear modest (see below) and are therefore
defensible
relative to the size of the business. Creatively,
the
advertising echoes the cigarette campaign but less
blatantly
than Marlboro
The geographical spread of Camel TIVID activity is
as
follows:
Adventure Shop - Belgium Malaysia
Germany Switzerland
Holland USA
Clothing: Germany Singapore
Holland Switzerland
Hong Kong USA
Boots: Finland
Germany
Greece
Holland
Watches: Finland
France
Greece
Duty Free
Holidays: France
Luxembourg
Norway
Spain
Sweden
Switzerland
Hong Kong
Italy
Spain
Turkey
Italy
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Information from BATCF indicates the following
above line
spend levels for Came] watches in Europe:
1989 1990
France - E 63,000 (Jan-June)
Greece f 33,000 E 3,000
Spain f 1,300 E 62,000
Italy E11,730,000 C930,000 (Jan-Nov)
4. RESFARCH PROPOSAL
Obiective
To examine the activities of two major competitors
in the
field of Trademark Diversification (Marlboro and
Camel) and
assess the effectiveness of their operation in
selected
markets.
Outline Methodoloov
Desk Research should be undertaken initially to
expand on
the desk work already carried out. This will
provide factual
and quantitative data and assist in determining
the markets
to be covered in subsequent stages.
A C)uantitative stage follows via participation in
an omnibus
survey in designated markets. This second phase of
research will be a guide to awareness and
penetration of
TIVID and degree of association with the cigarette
brand. It
will also seek to establish a ranking of the
impact of the
various communications activities to which the
consumer is
exposed, e.g. cigarette advertising, TIVID
advertising,
sponsorships, promotions.
A third stage using C)ualitative arouDs will seek
to expand on
the information gathered in the omnibus stage to
examine
consumer attitudes to TMD activities and the
advertising
which is used to support them.
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MEASURING THE EFFECTIVENESS
Assuming the key objectives of TMD
activity/advertising are:
to maintain visibility and thereby awareness of
the cigarette brand name among target
consumers;
to maintain awareness of the cigarette's brand
valuestimagery among target consumers.
Thus the consumer/respondent must recognise the
cigarette connection and Ideally view the activity
positively as a compatibl:j and logical extension
of the
cigarette brand's inherent values into a separate
business.
However, respondents may take the view that the
TMD activity/advertising is designed to promote
the
cigarette rather than, or in addition to the TMD
product itself. Although less positive this would
still
represent an achievement of the objectives.
Ideally, in addition to the above consumer
responses,
the TMD advertising should generate a favourable
reaction to the TMD product per se with a positive
indication of propensity to purchase. Without
this,
the TMD activity is less likely to flourish and
generate
profit and thus be more vulnerable to legal
assault.
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Aonendix I
PRINCIPLES OF TMD OPFRATIONS.
1 Coroorate Structure,
All TMD operations must have separate legal,
financial and
organisational structures.
To be credible and to withstand external scrutiny,
TMD operations
should be based on sound commercial criteria and
be !-ofitable.
TMD operations must be seen to be entirely
independent of any
tobacco connection. Fund flows must be
confidential.
TMD activities must be seen to be genuine
businesses capable of
supporting their own advertising spend in the long
term.
2. tAdvertisina.
TMD advertising/communications should be handled
by agencies
having no connection with the tobacco brand
business.
Advertising budget levels should be in scale with
the norms of the
TMD product category and appropriate to the level
of product
distribution.
Advertising creative content should be compatible
with the
cigarette brand values and emphasise the brand
name.
Advertising creative content should not be a
blatant and
provocative reflection of the cigarette
advertising.
Media appropriate to the product category must be
used but not
exclusively so.
In order to preserve independence and security,
the application of
Group media discounts to TMD must be sacrificed.
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BATCO document for Province of BritiSh Columbia 26
October 1999