SECRET NO COPIES MAYBE MADE A Tobacco Marketing, Stritegy meeting was lield on Tuesday 100i ind Wednesday 1 Ith May 1994. Present: Mr U G V Herter, Ivir NI F Broughton (Itenis I to 7), %ir P Adains. Nlr D P Allvey, Mir F Andrade, N-Ir R Bexon, Mr B D Braniley (Wednesday oniv), Mr R D Brown, Nfr A IM Castro. i*vfr N Davis. N4r G Doinizlaff, IN& K Dunt. Nfr E E Ettedgui, N-Ir A Johnston. NIr I Rembiszewski, Mr T E Sandefur. Dr B Schweitzer, Mr H-A Tomat. Mr J Winebrenner, Nliss H C Barron (Secretarv) International Brinds Liickv Strike: The fnllo~ving pack desiun changes --%e~-e auree,_; the bulls e,,e %\-III be eriiaru~d. the L:,-,:its buils eN e be chaiiLed From to red- the parem -.%;i*l 'n bilz-~ the iouo will be trade more readFmie T::irez versions of the L!uhas Pick (whIce on uoid. .,hiie oil re,_- and black on red) wid be tested within the whole family ringe in Japan agalnsz the black on red parent. Black on red ,,-ill be chosen unless thereare verY stroni-, indications that white is preferred If -the American Tobacco acsLuisition ,ne--ahead, Bzo%~ri &__Wiflianls~- %vlil supl~crt the black on red Liahts-in-- :;Ie US. Either the Stiveriiiadits or (11e SI.Ioerniilds name wiiI be chosen. For the 15mg, product to be introduced in Japan. The pricing for Lucky Strike should be considered market by inarket. The objective for new or currently small markets is to be at parity with Marlboro or to be one price point below, providing this is still high priced. In existint., inarkers. the current price will be retained where the volume is substantial or progressive. The previous commitment to close any pricing gap with caution over time is removed. but neither Is it forbidden The implication of th s pricl nu position is that Lucky Strike will not contest the position of leading US premium priced full flavour cigarette with Marlboro. Hence Philip Morris' profit per mille will continue to be higher (han that ofBAT. Lri C:) N) U_ __J CXD ON CD U1 _BATC0 CONFTI)ENTIAL - CATEGORY 1:.MTNNESOT.-k TORACCO VITMATMNI BATCO document for Province of BritiSh Columbia 25 October 1999 6 None of the three new campaigns is believed to be ob,-ious!, a winning world-wide campaign. The Lucky/Unlucky campaign, which looks to lia%e a %vorkable concept, will be tested in tile US and the main markets. Enou0i time will be ake-1 to ensure that the richt world-wide campaign is developed. but it is [loped that -,his will be bv the end of 1994. 7. In the interim period, while the new campaign is being de%e!cped. momeniurn will be maintained bv use of the new biker films and the Team Lick". Strike Suzuki Films and SLIpportilig, print advert I Sill u. S. The best blends currently available will be use! rather than ~%aiiinu or World-Wide Best. In developing new blends, consurner profiling, will be used as -.,-e!1 as reverse engineering in order to achleve overall preference 9 Kook In the US the objective is to reaMire the curr~!:i[ firanchl~d For intemational use, Newporr was considered to be the stronger inenThoi ofTei. tile "besz seiling US" menthol brands ciaim. 10. It was mureed that a SUbstancial menthol marke! :;s bei:~.- 'idd,:~z;e,; a s-,and-alone menthoi brand. Hov.-eveT this does not RIIC 01.11 tile (aC:;C5i Use C."iine ons. poizibi,, in the same marke., as a stand-alone brand. I Kent: 5t-,". oi' the voiume '.s in Japan and 757~ :r, thc Far E.-.;i S.-des in Japar.. where the --oduc- biemded For a charcoal filter. are z~:-. ;2s where thc Droduct uses oid zoic-.- biend. are nor In['-'r' .111a Ke7it's pc-;tIoning. is Liuhis I[ is pei ce!% ed 3S tC I o Lu;ics Hov. ever [!,,e pa r -z nz, c--:7rentiv has : lmL -,ar %,hic:l does no- is a n mar-. As -!-,e :.'It i~!' eI AILIS: ;)-, re' :~:2 . _ZLV a-- Ign:S tar CP F resi~;:s !roi-.1 japar, 111dica(e 'a I Produc: e- e, i it-. F; A se--)nd CPT is sciie"~. e,,: a r versions arz! ii je,eiopineili bv B&W. to p re - L, t a P MI I c - ch. G-,T'.; deve:opmen: in A51a -1i ni, 2 the F-,jrnnenn Lights - I e !C, - , - I .- ) ,Iil Focus on-sarc!'l, uVer r I n- nc"2 ! iiarke,; ~--,e -,o be!o,., J;e:e Ilia% be room For boili products In ~he sai-ne :-.iar12: -,I: jliTer~-!~c pos;iioning. 16 Kont has dIfTerent age profiles in different niarke!s It hzis a -rofile ir. Jaran and China, a more prof'ile in Honu Kom-,. and did not test t~ell aun;,l = , Z, - - - sz L&M. which has a young, profile, in Brazli Major prouress has been niade in developim.7 tile positioning of tile brand, but more work is ne-eded on tile rest ofthe package it -,,III take to make the age profile younger It is likely that Kent will retain a more traditionai caml-liurl n Japan. awhile a more contemporarv clinpaign is adopted else%~hcie Gicy are f`in,1h5s;i,_, :ire storboard and B&W and BATCo %,I11 ai,,ree the fitindinu, Lrl 2 Lrl __4 Cj- C-1 CD U-1 13 ATCO CONMENTIAL - CATEGORY 1: NTINNESOTA TOBACCO LITIGATI ON. BATCO docurnent for Province of BritiSh Colurnbia 25 October 1999 18. Viceroy: Viceroy's volume base is in volatile markets and price competition is increasing in the low price se-girlent. A product is bein-L, tested with 75~,o domestic leaf content. If the best blend is the GPC blend, this would brinQ efficiencx gains. It was a- I - greed that in aeneral the best blend should be Used providing the inargin remains acceptable 19. The packaging Is beinz redesiuned for consistency and a proposal will be made to the September TSG All the communications for 'International value for monev brands must be cons:stent. as they must be advenised and promoted and not just 3old on price io Pill Mall: Pall Mall's volume base is also in volatile niarkC!5. bLI1 It is priced at mid rather than low price to compete with Chesterfield and L&M. 21. It was aureed that the plain, filter lights and menthol packs would be unchanged in Germany. In new marke!s the "Finnish" ranae- x%lil be used. Tile "Finn'sh" rpn!,e will be zesled aizainst L&,NI in Brazli for the youn prol'ile. bLI1 I( it does not test ikeil the w1l;:e edge will be . !=1 - retained. The USA Superlongs pack- will not ~e changed. State Express 555: A Lights proc~oct be!nv. : Onig :,it- is be:nu de.. eioped SE~55 IS CUrre!it1v a Far East bian" It -mll E! zeszed In a abider ueourapliv. an- ATCo must prod-,;ce a plan ofwhen it is to be :ested ir -.% ~,Ich markets. BJ~~% ave aireac-. agreed to rest it I r, ,apan. The weakness Is pe!c:~:-.ed to L-e :he pack %,hich 6 oIL-; :1-ishioned SE:fz :IRS. LIM11 recenilv. beer ::~e basis oF is i2-::n and ".M-zf :n Enuiand", tllOUQ~' dle C1.1irenz ad%eizi5ML., 'Is c'.ianumIz :~1:s It' it ~S IOILIIIC~~ad n -nirkets -,%;:ere it has lot had ::-.e benefit oFthe ne%, adverziz;nu aiic~ ank- l it need sz.-Z~u ad~eri5ing sur~7,7,7 zo Re'15~11 S' 1IN12CS: R&H -,-I- the i:.ii t: !;-e ;imir CC be 0 P 1:: 7~ T I i e - m- L, e t 1 e s -.i c,: - f LiC I Pl;i, ers: 5. \ T a re 1 1 n, P JPS -1s a braiij. and PGL n the The oilier o' :'ie House of pla%e- fliniliv ar~- the Mavers brail,-'~ ir. C:~,--1-1-1.'-, The !,.ue of Packs I'Or PGL has 0-- -- -7--:! 't)r Pall N Tile P, Ice is 711e 111,1'e: e!w ,I ~~Cni are be:ng tested z In BTL, if the head cannot be retained. Hie :'iFebeit will be used ',kidloi.lt the !lead and the wave .bill be Ill[I-OCILICC(f Mr IlCrter ,-ns cmcerned about this. as the head and hat are the core of the biand, which is kno,,n III sonle places is "Salior". He also questioned ho%v close;,.- the sailor's head was linked ,iih irar;tiine adventure in some of the tarizet markets. such as BariLladesh. the sea is seen as ihreiteninL. Since this Is a grotvinu brand. the execirion must be deve!oped catinowsk It :s betnu tested at mid-.price in SOLith Africa and China Lrl C:) N.) U7 __11 CO BATCO CONFIDENTIAL- CATEGORY 1:,MINNESOTA TOBACCO LITIGAT'.ON. BATCO document for Province of BritiSh Columbia 25 October 1999 29. Players in Canada has been losing sonic of its tari,,et mile, under 25 seument because of the worseninQ fibreuliss filter runiour. One third of the switches from Players are to du Maurier which is smoother. The "smooth" line extension is also doinu well Players Rac;,-.Q L;mlted features on te;evision Tile pack has been redesigned for the new health warniniz. ~ut even restrictions create compe-itive oppoi tunil les. The name of the brand can contain the 'imagery ifit is loaded o,-er the ye-irs. but as restrictions increase this cannot last rorever. P'ayers will last lonver -han its com.ne-ircirs, but eventually competition will be on price. 30. Kim: K'in has a feinale !-,ias but is smoked bv sonle males In Ital., It Is an Americ_~-,. 61erld. in slims and Llitraslijns, 7m,, Lights and 41 I- ng, UltralLights. An international ad-.-e:7ising campaign is bemg de,.e;c,-)ef to be ready late summer. BATCF is currently evalumlm: it in Korea 3 1. Hollv,vocid: I- Is no: :possible to modernise I brand throuuh hile extensions. Hollvwocci L:,-,;its SIICLI;'_-' ~,-e consistent -ith the parent e%en Ifit is less niodern. 32. In expor: mar-l-e-s. Floii-.,ood is peiceived as a US brand. This is possible on]-. ne~~ he pack does no! to 5-z7.7e a COUntry oforigin. It is better not to Lise Holly,,ooci :7. t.,kes ,vlle-L _t 0.7 has zo Le sho-ii Altcrnati~e:~ I cou'j be made in 4s. 'out this %,-ou; _~ en-- 2 !ittle n [or Alpj)011 3-, It was ,e nee,; another low priced L"SiB ~11 addificr, ~ir Andi-nde Holk-ood's ad,antauc is its "bil ;Lr;,( Philip is and RJR hoili line e e nets; .Dc7 7 and In niar~eis such as Russia 11-2 Vast. Uri.-.'7-,,~ -mro .4 Foilv\vcc cell:~ a pack In 1_:7hekisran Tiiis ,az --ione to cz~i-F.-_: <7 cck :5 lcilL, :1.s j -,Vill ',,e t-. Ji..-,1C,,Jz :0 -.-,e or 'le . olume n Uzibekis"ll". B nrcln.,: a!ld te~Z5 .11-2 :-!~,nu Kor.,, 1.- Jie L~)L!s .11lend clle!-e ,,lil be ill o%eriap L-et,.%etn lri~ Cariron. -11LIC:' SILnificint In the Middle East Since .,e have to iia%--~ ind Luck,.- S:7:.- :!~e \1:.;,~ e Eas;. ~hcre is milikely to be tocin 'or bGt'i Barclay arc :C.n 36 The pa6: P3.-.-: NO biLle Tfle "one is zuccest;fi L;, as le,.~ers in S %vilere [lie till-ItIree "I" otild be pre-~'.-r.-_-.2 Th e pack des'~-i :unire I" Ill be LISCd ill 111 Ill I M - I arkes with the exception :7-.a, ~;es in Weste- E-,;. -;,e herb! :;ie leticrs only version has already been !aLInChed Ginhal 131-111(1 prioritie, 37. Lucky St;:'- is :he Group's global USIR pilority and %,.,e must theref'ore try to de~-t;.-r t in e,-ery coum,-.. \o oth.-7 'rand is a global priority. 38. The GrOLW dCeS 1101 11,1%e .1 U10bal low tar USIB Kent 'Is stronu, in tile Far East 3.-.d zolne South An-._-r;car. inarkes. Barclay is strong ill Europe There may be low tar mark-,,s in, the future where there %1l1 be 7COin for both with different positioning Lrl CD r\) (J1 4 __4 CD BATCO CONFIDENTIAL - CATEGORY 1: NTINNESOT.-k TOBACCO LITIGAT'ON. BATCo document for Province of BritiSh Columbia 25 October 1999 39. Benson &- Hedges is a priority where it already has a franchise, but it is not a priority outside Europe Duty Free and hence not a global priority. 40. Viceroy is a priority in Asia Pacific and could be a candidate to be our global VFM IB, with Pall Mail at a mid-price point. However, the pricing levels of Viceroy and Pall Mail are riot consistent around the world, and B&W has just decided to let Viceroy find its own level in the US. Viceroy has oppor-unities in every region but not everv countrv. 41. ,'%1r Rembiszeivski proposed that instead of segmenting the market by price we could segment 'it by Customer need, with Pall Nlall as a full flavour, masculine offer and Viceroy as a lial-iter. more feminine of,er. The proposal will be discussed further. 42. To compete ith L&NI. Chesterfield and Bond Street at low price, BAT has Viceroy, Pall Niall and Holl,,-%vood as USiBs and PGL as a UKIB. After the American Tobaczo acquisition 'Ve will have several more includina %lontclair and Misty 43. If we seument Oil COIISL1111e~ need. %~e aiso reClUire a global I-iL'htS1SUpcrLiuhts brand Philip Morris has not yet established a rree-standinu, alobal Ultra 1-1uhts brand, but is trvinu wit :h Next. BAT has a -,ood chance or -;ucceedinu, and this "OUld Llive a competiti,ce advantage. 44 Ir. nienr~-.ol markets it is ')etter to luwe a stand-alone menthol brand than nie-al"ci line -!%zznsions Ho,ever. excznt where Kooi is alreadv established. Newpor-z %voui~~ be pre17 erre ;r, niarke:s %vhe-e beilill Mli'.iiber I in the USA provides a competitive advanttig,2 45. \%:*.:.'n the txc-.ption of L.1c:-,--.' Str['Ke %viiich shouid be develo.ued' in ever., coun*,.-.-. our other [Bz are ~zronu in some and s'-.oulel be developed U1011111v OL11 oi- thic~-~ bu-, in e,. co"MIT". ReZirinifl Priorities -16 -0.1 P- L acific: LL[cky Strike Kc-it G L Hiitoti L o,.- Sz-veral options - Viceroy cne to be selected 47. Japnn: I Kent. 2. Lucky S(rike-3. Kool. 4 Capri. and possibly SE 555 4 S. Koren: I Kent: 2. Finesse 49 Sub-Cotithient: StronL reulonal brands but no 113s. Testim-, Lucky Strike. PGL and SE 555 50. Aribii: USIBs Lucky Strike. Barclay (or Carlton) and Viceroy UK13 PGL. Lri CD r1 J QM 5 -14 co BATCO CONFIDENTL-kL - CATEGORY 1: MINNESOTA TOBACCO LITIGATION. BATCO document for Province of British Columbia 25 October 1999 51. RussialEastern Enrope/Central Asiw`Turkc% - us UK10ther Hich Kent SE 555 Mid Luck".. Strike H13 Pall Mall Low Viceroy Holly,,,ood 51 Western Enrope: P7ZIMLIM to 111LIh LILICK Y Strike-. premium Lights Barclay, mid to low Pall Mail. 53 Levant: Lxk% '-~~Tike. Pai'l %lall, Vicerov. Kent, arid Barclav (or Cariton) (in Lebanon oniv). 54 Isrnel: Kent. L~-.-~y S~rlke 5 ; Central Americ:i: '~i~ ke, Be~mom. Konr arid Pail Mail should be in he pom-olio but not as priorties cer,~%' ;s -irrentlv at a hil-1h price due to lis heriiage here and elsewhere in Latin Aine-'ca (e,-~ Chi.!). C -IlSide!-86011 mil be --,Iven zo the :,., o aiternatives clFre0osilicnina Vicero, as :he H3 or Lise ofPiii Nfail 56 South Americ:i: Si- :1e (or K~-:;H. Vicero,, Pal': Nla~;, 57 Rrnzil: e. --ood (.11 I-illt: 1)1.lcc!. Pall %Iail (~i 10- ;-.:ce; Mexico: C-~-'-. Ip~ C"(- tile 71 '.-.1lid.cn;) e iiiarke:ei -1110LIZ isk o incumr-, ~ "duiliping" ;c'! sho-jid be Africn: F s ~Llch a S E: -. 1: a r. L---c Sz.; -e s~-ould n; a 11 C. be :es:ec ad Koo~ or Ne~,porz In lllnr:le:~ lllenlilc---~ ;~-"-'ras 5 cNisis :11 ;1 is ilot I prior W., Rc2ii,mil 6 F:..:7'i: ccjtj;~, and Iji nge:ng pro . lie k veils :~i ~"OnL Kom-, and China arid may ha--e pr-:2-iriii in :'-.e Asia-Pacific region, althOLIU11 gerierail-, gold packs do not do \,e11 in ChMese Z7,T111ILiniries It is not rerillv a reulonal brind. 171.1; tile option wiii be kept open The .:7ositic ~mg :~ irl.ld -.-alue-for-mone.y 61. Newport: Netvp-rt is die number one seHing, menthol brand In the US and there~bre could potenrially ha,,e a --ong posiiion in the other menthol marke-s The airn Is for superioritv to Salem Ne-.%i)ori ;'iouid be tne First choice I'Or ne~v merithol markets 62. 1113: HB is '1't the -onsumer price level In Germany and must be reduced From 13mg to 121ng mthin -' Ve:!-s 11 as Nie Jar-,est C01151.1111121- I)I'IC,-Cl brand firoin its launch In 195-~ to the price %,.ar in 199". flleFe--Ore ~TS conSUIllel'S tend to be price sensitive It has an aLe'niz profile. U1 N-) 6 CD CD RATCO CONFIDENTIAL - CATEGORY 1: MINNESOTA TOBACCO LITIGAT110N. BATCO document for Province of BritiSh ColUMbia 25 October 1999 63. It has been decided to have an HJ3 family with three "personalities" appealing to different gnlents~ "Classic" 13 ing, "Nleclium" 9mg. "Lights" 5nig. These will be launched early in se I I 1995 with a new advertising campaign. 64. "Britisli-American Tobacco" has a good corporate image, and in the eyes of the consumer has associi(ioils with tile two most highiv regarded Urces of ci arettes. A good high so L profile corporate image will aSSi5t in opening up ne%v markets, being seen as a good venture partner. and supportinIz our relaiionships \,171h governments. For all these reasons, BATCF will be renatiled to include "British American Tobacco", and ",Manufactured by British American Tobacco" should be stated on the packs of all key brands. This should be considered for all companies and brands 65 Belmont: BeinionE has a key position thrOLIL111011t tile Andean Pact. particularly with the current ittempts to umin --),~-nership in Colombia and Ecuador It has a lifestyle image of happy people oil the beach %%hich %,.orks better oil TV than in print. This is potentially a stronu rei_,ionil brand. bui there is :ittle consistency In tile packs. and it is at a lower price . 7 point in Brazil It vas diat Brazil ,ii] be an inietzral member of tile already-operating User GrOLIP ind ~%Ill zesz -he ngree-! clmn=5 in tile mix. 66. Derby: Derby has Leen. SUCCeSSi'Lli b% u:--ing, good qualliv at a lo- price (par-ticularly in Arcencina and Drazli) T'Ie nmempi io id,,! mauen has been !e55 SLICCCSSCLII. 11101_11111 tile neW campaip i Pir~~ J Is McIlre . 6-1 Philip Nlor,: ,~' ob,ec- atwclilru in 91iizii --is in de-5iabliise he i7iarke, and increase :Iiarke.. shar,2 63 Free: F-t-~ ',as Miz~! nnd -~ :1~e '1ri-,! n universilles it is j).:c_-_: V.-ii 0.::~. .7.Lu,e L,,~.\; 77-~.-2 ],I ArgziuMa Is o-nec, by PNI. BAT may be able to re,_-iln it bv se:':i;-._r in other- niarkes Other7.Vise horo be a :5 in _-2-iain Anoenn Pac- marke!_- -.,.here BAT C%% ns 6', Crintinctitni aii~: Nlini,ier 11-(-~:~ Use-- -,o ::oi-npere %viEll ~er.- c;ieno Jana!~ese Tiie-. in,e nd,erzi~inu O~ SLII)!)orT and -,viil oni, be used if absolille;.. nezes-nr,. 'Ninjor 'Markets 70. Japan: L'uhts and aCCOL1111 ibi ;'ialfthe inaiket and are growing- Tile two major ling products are PNI's \ex~ and JTI's Frontier There are also line extensions including Kent SUperLights It is I -,en- prolitabie marker deSI)itC 11112111 SLIpport expenditure. It is Bct-%V's top iniernationai prloricv with the f"ocus oil Kent and Luckv Strike (which have the saille blend) Koo[ does :lot ha,-e a charcoai Filter bec.-ILISe it does not work with menthol. Capri is Focused oil the reniale setzmerc 71. Next has a uniqUe coamai i1iter %,IliC!l %VC 5110LIld tes; to see why it has been adopted. The brand Fided In the US The latinch of it ~'rce-standing ling, product in Japan would cost S-10m, theref'ore it Is Impoi innt for Kent to have a I mL Version. U71 7 CN 13 ATCO CONFIDENTtAL - CATEGORY 1: MINNESOTA TOBACCO LITIGATT.ON. BATCO doCUMent for Province of British C01UMbia 25 October 1999 72. JT1 are achieving price ises by switching fi-oni soil cup to box at 20 yen more. Other manufacturers are m Ilike:-.- to ichieve a price rise at least until JTT is privatised. 73. Koren: Tile outlook for B&W in Korea is improving ill spite or anti-Western sentiment. This Is (itic to n&.w,s roc-,sc(i porTfi)l1o JT1 breilks even, ill the othcr importers lose money in tile market. B&W's ficcus is on Kent and Finesse (which has a niale profile-. Virginia Slims outsells Marlboro and is aiso a rnale brand). 74. Tile Outlook for the fast urowth or the Import segment ill Koren is not promising as the retailers are inti-wesiern and the aspiranonal lifestyle is Japanese. Kiin will be tested again, and a Japanese name COL::d be considered. 75. Combined Exports: T;iis market IMS 300 IlliiIi0II C011SUiners. Tile onlv national brand is Hona Ta Shan ."ill _-~ :),--the inarke,. tile other brands are reuional. CINTC has 180 plants, many in competition it". ~ne another. and over-capacity. 76 Vicerov is urowinu Fast is cnnnibalismu Wton. LLickv Strike will be priced just under Kent. The portfolio Is ~::1:-,-,:)ieie ,ith tile possibie exception ofa mid/lo, priced UKIB 77 The main risk 'Is Froin :.7z~ over-lienrinu, econonn%-. and tile highest priority is to achieve the lartzest-ioinc venture PO;z:~-.L. qLIIC.L:I,. 7 S Rnssia,,CIS: The oi' n i!ie :ii,,Ae, has redUCC-i from 3,90 m SF, since adve-tisinu as stai te,-- - The-: is a ii,L:i le, e1 01' COUIllerfeit and 're,,enue re-_~uced 1111ports 1111 , hich Inon~ collip= 79 Tile brands :r, orde- -;7--i!V are Sm:,!. H13. Pall Mall. Hollv,.vood or Vice-ro-, Kim, 5 ails 1-_--~~:. It ;s Z-. :~enr preferre,4 ~v t~ie corsume-s. there.-cre a prigmazic 1-~--,icli is nee~:e,-, The meeiniz %,iil ccn::nue L-nc H C Bar-Lon 01 S N) CID C', r\J BATCo document for Province of l3ritiSh Columbia 26 October 1999