MENTHOL
Starting shortly before we withdrew support from Cameo, the
opposition began introducing a series of new menthol options,
generally attached to non-menthol introductions, generally
in the 4-5 mg tar level.
As of 12 months January 1982, Craven M Special Mild K.S. (4)
and 100's (9), Accord Menthol (3), Viscount Menthol (3), B & H
Lights Menthol 100 I (12), Select Menthol (4), and Vantage
Lights Menthol (5) accounted for 1.14% of the national market
virtually 20% of the menthol segment.
In 19BI, the menthol business cost us a net .28 in English
markets - about .20 nationally:
non-menthol to menthol - we gave up .32 and got .25 (-.07)
menthol to menthol - we gave up .11 and got .02 (-.09)
menthol to non-menthol - we gave up .20 and got .08 (-.12)
The two problems we face are the potential for this net loss to
increase and the overall reduction of relevance of the Cameo
trademark.
NON-MENTHOL TO MENTHOL
This is the most vulnerable movement of smokers from our point of
view - also the largest (. 7-. 8 per year English). We can expect
two things to characterize this group of smokers in the future.
First, as our share of the non-menthol business expands, ITL
will give up relatively more smokers to menthols; second, where
smokers have historically migrated from mid and high brands, they
will begin to move menthols from milder options. Mid and high,
which made up 55% of source smokers in 1979, was down to 33% in 1981.
Very and ultra low switching to menthols which was nonexistent in
1979 but is 101 in 1981.
The Cameo trademark position in menthols must remain relevant and
competitive vs. other menthols to insure that we can continue to
attract this business. Has it? NJ
(71%
CC)
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BAT Industries document for Province of British Columbia 13 April 1999

2-
OF NON-MENTHOL-SWITCH-IN BY BRAND
1979 1980 1981
1979 1980 1981
CAMEO 23 14 23
CAMEO EXTRA MILD 6 5 2 47 30
CRAVEN M 35 32 20
CRAVEN M SP. MILD KS/100 7 9 9
B H M 100 3 4 5 7 14 30
B H M 100 LT. 2 6 - -
ACCORD - 3 15 59 61 60
VOLUME OF BUSINESS .70 1.05 .77
(ENGLISH)
In the past three years 'new light' menthol introductions have
increased from 7% to more than 30% of the locations where switchers
to menthol wind up. This growth has come at the direct expense
of Cameo Extra Mild and Craven M.
The res il of the Cameo parent is probably due to the fact
that it is the upper delivery option.
we know that if -10 mg mildness becomes increasingly important
to menthol switchers, we won't be able to compete at this level -
particularly with those brands whose non-menthol siblings reinforce
their image of mildness (Accord, Select). Cameo Extra Mild could
not move fast enough nor would we want to have the 10 mg slot open.
There is an indication that this type of mildness is more important
than we might have thought. Also of concern is the growth of 100 mm
options. Over the three years listed they have gone from 3% to 14%
of switching. In sales, they have increased from 6% to 10% of segment
volume. Considering the highly female nature of the switching (+70%)
and an assumed propensity of females to look for aesthetic properties
in their products, it is a little unsettling to also notice that
English females rate B.& H menthol 100's and Craven M 100 Is to have
the most attractive packs (as they do all 100 mm). Cameo and Cameo
Extra Mild, on the other hand, have shown a tendency in 19,81 to let
a recessive ugly gene emerge. Their packages are not rated as signi-
ficantly less attractive than those of other menthols (on a dimension
that doesn't discriminate well at the best of times), but in the small
discrimination that does exist, they are tied for last.
The magnitude of Cameo I misalignment with this switching flow is probably
less today than the data suggests, however, there is every reason to
suspect that a degree of imprecision in our positioning does exist and
will increase over time.
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BAT Industries document for Province of British Columbia 13 April 1999

3-
MENTHOL TO MENTHOL SWITCHING
Of all the menthol switching up for grabs, this is about 25-35%
of the total. In 1981 the share of English smokers involved
was .26, down significantly from 1979 and 1981 (.48 and .59).
The slowdown does not appear to be a result of smokers selecting
mild non-menthol options. The movement out of menthols is also
down considerably.
Recent opposition me --nthol introductions, as well as eroding our
ability to get non-menthol switching, have reduced Cameo's
ability to protect itself within the segment:
1979 1980 1981
From Cameo to other Menthols .15 .14 .08
To 004 from Cameo .08 .07
% 50 so
To CXM from all other menthols .17 .12
% 024 of all menthols to menthol
switching 35 20
There are three liabilities:
1. Cameo Extra Mild is showing a decreased ability to protect
an albeit reduced switch-out from Cameo to other menthols - the
plug is coming out of the bucket.
2. Cameo Extra Mild is showing a decreased ability to attract
the menthol switch-out of other menthol brands.
3. As opposition entries develop Cameo will itself b:e-come a
target for increasing switch-out to milder menthol options.
USER IMAGES 1981
LOW T/N FLAVOUR
ACCORD
CR. SP. MILD
CXM
CR. M 4.3 5.9
CAMEO 4.2 5.9
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Versus Craven M, Cameo Extra Mild users see themselves to have C)N
more flavour at a milder smoking level. Accord and Craven M __@j
Special Mild smokers seem to know they have traded flavour for -MA.
lightness, however, it appears the lightness gained exceeds the
flavour lost.
BAT Industries document for Province of British Columbia 13 April 1999

-4-
In summary:
1. Switching into menthols is holding at .7-.8 in English Canada
(.5-.6 nationally).
2. The segment is not going to hell in a hand basket. It is
6.51 in the National market declining at about .2t/year.
3. The source of business for the segment should increasingly
be ITL brands (currently 42%) and-should increasingly originate
from brands that have mildness as a part of their credentials.
(There has also, it is worth noting, been an increasing level
of starting activity in the segment - .04-.08-.12 English Canada
1979-1981). Ilk
4. The cameo family position is being chiseled away ate, Cameo
is insulated from this to some extent by its singular position.
Cameo Extra Ki Id, however, has paid a lot of the price for the
expansion of milder options.
5. There is a hint that the influx of new options may be accelerating
the fatigue of our pack design (probably assisted by a reduced
advertising visibility).
6. Switching between menthols accounts for between .3-.5 share of
suckers. Cameo Extra Mild's ability to attract switch-out from
Cameo or other menthols has demonstrated a marked reduction.
7. This appears to be explained largely by the fact that it cannot
accommodate the needs of smokers looking for menthol mildness at
a level below 10 mg.
STRATEGIC CONSIDERATIONS
We cannot take for cash that menthols will:
1. Go away completely or even significantly at this point.
2. Not experience a 'rebirth' at some future point. (why is
the influx of starters increasing?)
We must not allow the Cameo trademark to lose its relevance to
smokers interested in using a mentholated product. c::D
To do so incurs four major liabilities: r\-)
ON
1. We will recover an increasingly small share of the increasingly co
large number of smokers we can expect to put into the segment.
BAT Industries document for Province of British Columbia 13 April 1999

2. The 2.5 share we have invested in menthol brands will become
increasingly vulnerable to losses to opposition entries.
3. We will lose the ability to act as effectively from a known
relevant trademark should the segment stabilize and/or grow
or should our position erode significantly.
4- we will lose the current level of credibility that exists in
cameo for endorsement of a 'Bud' type of taste that is in the
mint (but non-menthol) category.
It would seem that the strategic question is not whether we should
do something but when, where, what and at what cost? The crucial
need is not to generate volume but to ensure the viability of a
trademark.
WHEN AND WHERE
Development options should be considered for markets where menthol
is biggest and Cameo is the most vulnerable - Ontario and the
West. The need is less urgent in the Maritimes today - however, it
would need to be included, ultimately in. any change.
The demographic concentration of the segment should be exploited
to the fullest to reduce launch costs. If media is used at all,
it should be extremely selective. Retail activity can be concentrated
with appropriate innovative merchandising in those accounts frequented
by the pre domi target groups. A test market that
evaluated both the best way to communicate at the lowest possible
cost and product acceptance would be required.
Both the size of the segment and the nature of our strategic weakness
suggests that the timing of the introduction cannot be predicated
on the volume of smokers that are moving. It must be determined
by a change in the dynamics of the movement. Given the changes that
appear to be taking place, the solution to the problem is timely
now. We should plan to act as soon as possible.
CONCEPTS
1. The option must contain a 3-7 mg product level.
2. To increase'the potential for net business improvement, the
option should contain a 100 mm and a king size length.
C:)
3. Because 1. we are not. intercepting major switching movements r_.)
and 2. a primary concern is to protect and consolidate our corporate C7%
position in menthols - the option should derive from the Cameo co
trademark. C71-
co
BAT Industries document for Province of British Columbia 13 April 1999

3. 2. (cont'd) The effect will be to usecannibalization to
establish the product at a reasonable volume level with the
intention of quickly developing a self sustaining franchise
that does not require enormous levels of introductory and on-
going support.
4. The option should update the aesthetic attractiveness of
the Cameo franchise.
5. The primary target will be females 20-45.
These appear to be two approaches to evaluate:
1. Introduce a direct line extension of Cameo Extra Mild between
3 and 6 mg but closer to 6 in both K.S. and 100 mm lengths.
Simultaneously (as in 1976) make adjustments to the packaging
of the parent(s) to improve their relative attractiveness.
2. Introduce a "semi free' extension carrying a freestanding
name with obvious and significant endorsement by Cameo. The
option would appear in two strengths - a 3-6 mg king size and
a 7-10 mg king size and 100. The presentation would be significantly
rare upscale, female and contemporary in image terms than existing
menthol brands without crossing into the terrain of prestige
or specialty products.
The parent would remain untouched or undergo at least minor surgery.
Both options should be evaluated. The difference between the two
lies in the relative importance of upgrading our aesthetics and the
degree of emphasis or likely success against oppo-sil-U.'onff mm
entries.
A B.C. test market and a launch that does not initial@y involve media
but takes extensive advantage of in-market communications is recommended.
The project should be developed for a launch option in the 3rd quarter
of F'82 in the event that Huron does not emerge as viable by that time.
The test should be extensive enough to evaluate the potential of a
low resource level launch.
co
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RB: pc
March/82
BAT Industries document for Province of British Columbia 13 April 1999