Proiect CRUISE
THE OBJECTIVE- OF PROJECT CRUISE IS TO
11'MESTI-'GATE TFE POM14TYAL
AND DEVELOPMENT FCR A U.S. BLUENDED FRO?OS71_':ON
FOR SALE 7N
CANADA.
The share of U.S. blended products represent less
thaa 1% of the
Canadian market. A variety of projects, including
SATURN and
PLAYER'S SPEC:AL BL--M, has demonstrated that a
significant
taste barrier exists amongst the mainstream of
Canadian smokers
against non-domestic products. Any short term
activity in
marketing U.S. taste-types will be limited -in
potential.
There is however a bcdy of evidence which suggests
that a small
group of predcminently younger males express a
strong interest
in smoking U.S. cigarettes. Consumer share for
these products
expanded from 1.2% in 1987 to 1.6% in 1988.
SiMilazly, they
represented an increase from 1.3% to 2.0% of the
share of
switchers in the last two years. Additionally,
4.2% of smokers,
that regularly purchase an alternate brand,
nominate a U.S.
option. Clearly, the numbers on an absolute basis
are not
large. Nevertheless, if the trend continues, this
product/market segment will represent a
ccmpetitive op=_ortun_Jt1_,-
in the Icng term.
(-,4
There are other external -inferences that mav
encouraze =he
'_~j
adoption cf U.S. cigarettes. We predict that
gcvernmenz tax
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authorities will increase tobacco tax rates in the
spring and
significantly drive up the cost of cigarettes.
From a price
point of view, U.S. cigarettes purchased across
the border or
via other channels represent a significant
savings. We would
also envisage tha-- future trans-border purchases
may slowly
escalate with free t=ade and inherent smuggling of
U.S.
cigarettes beyond stated maximums will occur. If
this
materializes, it would slowly encourage smoker
acclimatization
to U.S. cigarettes.
Project CRUISE will prepare us for this
eventuality. At this
time, it is difficult to isolate the specific
parameters of the
Project. We have clear legal access to the
:Marlboro name in
Canada. Given the awareness of this mark - in
excess of 70% -
Marlboro will probalDly feature into the
development exercise.
The Came! experlence in Thunder Bay also suggests
that a product
offering claimlLng U.S. credentials should have
all the
character ization of American products.
Accordingly, we would
anticipate the use of soft cup packaging as well
as U.S. tobacco
blending capability as necessary requirements, if
the Project
comes to fruitlLon.
The Project has a medium level of priority and we
envisage a
test market intrcduczian to occur around the
beginning of August
in 1990.
Ac c
'7 ebruary .19-th, 1989
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BATC:o document for Province of BritiSh Columbia 2
November 1999