Proiect MONTY
PROJECT MONTY IS TO TAKE STRATEGIC ADVANTAGE OF
THE PRICENALUE
V;~RIABLE IN THE CANADIAN T013ACCO MARKET.
in recent years, we have witnessed that tobacco
consumers can
react positively to price/value related offerings.
30 for the
price of 25 or $4.00 off per carton are examples
of companies
being able to increase market share in a
decreasing market by
cffering a perceived better value. This better
value, however,
is of a short lived nature as it can be duplicated
by the
competition and, in these cases, this was done at
the expense of
companies' profits.
However, recent history has shown that tactical
discounting for
specific purpose can achieve satisfactory results
wh~ile not
provoking an all-out price war.
Another way of looking at lower price/increased
value actions is
to take advantage of the enormous tax burden that
a smoker must
support. The idea is to devise products which will
have by
their hybrid nature the flexibility of taking
advantage of
current taxing rules. Then, assuming that those
products
present enough value to a smoker, they can be
presented as an
interesting substitute for tailormade cigarettes.
REH Custom
t-14
C:)
,_1`
~X
Z;-
C_
cc
BATCO CONFIDENTIAL- CATEGORY 1: MINNEsoTA TOBAcco
LITIGATION
BATCo document for Province of BritiSh Columbia 2
November 1999


Cut is such an example where the manufacturer has
been able to
use a taxat.-on "loophole" while maintaining gross
margins and
offering to ccnsurners a quasi tailormade
cigarette at half the
cost.
The company can also benefit further if a patent
can be acp-lied
for the innovation.
MCNTY should be directed in the following areas:
la Tactical discounting of specific brands to
achieve
pre-determined marketing objectives.
1 b A short ter-n discounting of specific
tailor-made ciga--az=e
brands as a defensive measure against any
opposition
promotional discounting which would affect our
share.
This form of price competition cannot last as
manufacz----zers
could noz survive on the long run. Heavily taxed
prcduzzs
are such that it takes a lot of profit cut to
bring the
consumer price to a desirable level. However, we
have zo
face the likelihood that this type of competit4lve
acti=n
will re-cccur and we need to be prepared to
retaliate-
2. A form, of lcwez price innovation which will
not penal-i-ze cur
profit margins by taking advantage of the taxation
rules as
they are currently written.
Un
BATCO CONFIDENTIAL- CATEGORY 1: MINNESOTA TOBACco
LITIGATION
BATCo document for Province of BritiSh Columbia 2
November 1999


3. Develop and test different innovations
warranted -4! the tax
rules should change.
The overall objective of maximizing corporate
profitabilizy
should prevail at all stages of development.
AB/jc
Fe;-,ruaz:l,r 21st, 1989
BATCO CONFIDENTIAL- CATEGORY 1: MINNEsoTA TOBACco
Lrnr3A-nON
BATCo document for Province of British Columbia 2
November 1999