BATCo document for Province of British Columbia 23
April 1999
C~
rIj
C:)
rIj
0182 6 065520 >
Awi PAIrOMMIft


1995 K" ARrA PAPER: MARKrTTNG STRATEGTES
Objective:
"To develop a long term worldwide marketing plan
which makes BATCo gain
market leadership on the back of one dominant
brand. Long term no more than
two international brands per region should be
supported continuously".
Strategy-
The worldwide a-end to international brands is
relentless and their global market
penetration has doubled over the last ten years to
more than 120/s. A=rdingly,
marketing resources will be concentrated behind
the following key international brands
with particular emphasis on the designated
regions:
SE555 Far East and, longer-term, worldwide.
Benson & Hedges Far East, Africa and Thdian Sub-Co
* ent-
JPGL Tr-i;-n Sub-Zontinent, Africa and the Far
East
Lucky Strike Worldwide
Kent Worldwide
Barclay Europe
General and market-specific brand guidelines will
be issued to all operating es
as part ofthe Company Plan process. Operating
Companies should demonstrate how
they intend to achieve market leadership for their
key international brand over the
longer term in accordance with overall brand
plans. It is aq)=ed that no company
will support more thin two international drive
brands long tam
National brands currently account for 70% ofBATCo
sales and are likely to continue
to account fbr the majority of sales in the
foreseeable fizture. However, resources
allocated to these brands should be on the basis
oflocal heritage which cannot be
covered by international brand promises, and where
sustainable long-term significant
consumer fiwwSses can be achieved. In order to
move towards the longer-term
objective afbuilding market leadership with one or
two dorainant brands per region, it
is eq)ected that no company will have more than
three brands in its drive brand
portfolio in the medium term.
Objective:
"To improve BATCo's profitability by building
brands with critical mass
allowing for spending synergies, manufacturing
scale, research concentration,
speed of innov2tion and management synergies".
Strategy:
Philip Morris' international profitability per
mille is currently 1206/. higher than BAT.
This is a fiLnction of a limited brand range (less
than 40 active trademarks versus 240
for BATCo), concentration on the premium end of
the markets consistent global or
regional brand strategies, emphasis on marketing
efficiency and productmty, and
larger average manuficniring plant size. (-n
Qr,
BATCO CONFIDENTIAL - CATEGORY 1: MINNESOTA TOBACCO
LITIGATION.
BATCo document for Province of BritiSh Columbia 23
April 1999


The attainment of these same virtues forms an
integral part of BATCo's marketing
strategy. The importan e ofconsistent support ofa
focused drive-brand portfbUo has
been descriibed above but there are other issues
which need to be addressed by
Operating Companies in their planning which are
critical to the attainment of this
objective.
bf2rketLag Productivity
All companies should seek to achieve reductions of
at lew 5% p.a. in real per mile
trade and consimer marketing costs (excluding
brand >-n-i-tions expenditure).
Methods to assess the efficacy ofmarketing
activity must be developed fbr aH aspects
ofthe marketing mix and particularly the
effectiveness ofadvatising spend in tertas of
its impact upon awareness and image. There is no
reason why marketing cannot be
subject to the same quantitative measurt:ment
disciplines that apply to, for example,
production. Operating Companies wM be required to
justi~ their marketing plans on
quantified, research based cmena, rather than
JudgemeaL Meastrement systems
should be focused on the consumer and evaluated
against key competitor brands.
NEUbank Markenng will actively seek to establish
and communicate appropriate
me&wrement systems but. in their absence, the onus
remains on the Operating
Companies to ensure that appropriate tools are in
place.
Oper-ating Companies should use whatever cnacal
mass is at thew disposal to ensure
that they derive the best value for money from
their Marketing budgets. Concentrating
advertising cqxncfi=e in one or two agencies to
reduce commission is encouraged
(subject to the global agency alignment for
International Brands which will be
contr Iled by MMank). Concentrating below-tlwfine
cqxnditurc into the Same
agency as ATL in order to reduce overall fees
payable is also encouraged, both from a
productivity and commonality oftnessage and look
point ofview. Managing
advertising production costs, research and
development costs and other elements of
the marketing budget to ensure optimum value for
money is achieved is essential ifwe
are to mwdmise the proportion oftbe overZ
marketing budget spent through ATL and
BTL communication to the consumer.
Traditional ATL media still represents the most
cost cffective means of reaching the
consumer. Wherever regulations and market cir-----
allow, brand budgets
should reflect this reality. Significant
investment in less efficient means of reaching the
consumer should only be considered if they have a
r-H c potential of not being
subject to anticipated future restrictions on
tobacco advertising and marketing.
All consumer and trade promotions should be
implemented only ifthey are justified by
higher sales. Post-promotional evaluations must
become the norm in order to build up
a data bank ofknc)wledge on what promotions work
in practice and to avoid expensive
emrs.
Sponsorships are a key element within the
marketing mix, particuMy for international
brands. Their role is to provide incremental me&
exposure to enhance awareness and
brand imagery by emphasising the key attributes
ofbmnd character. Measurement of
the effectiveness of promotional expenditure is
undertaken for international
sponwrships but all sponsorship activities for
national brands must equally have clear Qn
objectives with regular monitoring oftheir
effectiveriess. C:)
2
NJ
C-n
BATCO, CONFIDENTIAL - CATEGORY I:MINNESOTA TOBACCO
LMGATION.
BATCo document for Province of British Columbia 23
April 1999


Trade marketing should also be part ofa constant
review ofhow to become more
competitive and more productive. Better
distribution, POS presence, trade
relationships, etc. are critical to the fimire
ofour brawk
Brand Management
The essence ofBATCo's marketing strategy lies in
disciplined, consistent and
long-term management ofa focused brand portfolio.
All drive brands must have a defined Copy Strategy
which forms the base document on
which all aspects ofthe brand are managed. Once
established these copy strategies
will not be --ended unless there are compelling
market reasons fbr doing so. In the
case of the six key interz%ational brands the Copy
Strategy will be developed by
International Brand Manqpernent in Millbank-
Brand resources should always be directed at the
&U revenue segment of the market in
order to drive value share at a fister rate than
volume sham Similarly key brand share
will become as important a performance indicator
as corporate share is currently.
Tactical new brand lauriclies are to be avoided
wherever possible and in all instances
should be drawn from BATCo's current portfolio
ofactive trademarks-
Brands management must encompass all elemenu ofthe
marketing mix, not simply
advertising and promotion. This implies that
marketing management must have a &U
underst,anding ofsales and distribution, product
forroulation and manufi=xe~ and the
ffimcial implicitions ofthese. Operating Companies
should demonstrate how they
intend to manage brands as in their own right
A long-term focus on developing brand businesses
requires 'milestone' markers to
measure progress against the eventual objective.
All drive brands should hive
measurable short and mediurn term targets to fiffi
this role. These should encompass
not only consumer share and ex-fiictory sales but
distrib~ution levels, brand and
advertising awareness. smoker profiles, Vial
rates, and brand image artnibutes.
Objective:
"To develop a long-term global marketing plan to
dominate the Lights segment".
Strategy-
Lights is one aspect of the r-.or;-I;--t;on
ofsmoking whereby brands and products
become the foundation for maintaining our
long-term business by focusing upon the
pleasures and positives ofsmoking as opposed to
addressing the negatives. Ughts is
concept, not a product delivery position, which
incorporates modernity, freshriess,
innovation, excitement and interest, all of which
are focused upon the young adult
smoker. Although product delivery is one aspect
ofUghts, it is the other aspects
which offer BATCo the greatest opportunity to gain
a competitive edge.
Lights brands currently have an 20% global share
whereas they am growing at around
70% per annum. Their penetration Level is higher
in the more developed markets but
they offer & significant competitive advantage
opportunity in the less developed
markets by minimisizig the opportmity for Philip
Morris to establish their full flavour C:)
international brands across the various price
segments.
3
CD
NJ
C7 \
BATCO CONFIDENTIAL - CATEGORY 1: MINNESOTA TOBACCO
LITIGATIOX.
BATCo, document for Province of BritiSh Columbia
23 April 1999


BATCo wiU develop a global strategy to optimise
this smoker segment opportunity.
which will include:
~ a clear definition of the Lights concept and how
to cornmunicate this to smokem
~ an evaluation of the potential for Lights in end
markets with each company
developing a means of monitoring smoker attitudes
and behaviour regarding
Lights.
~ a clear role and brand positioning for free
standing Lights brands vis a vis Lights
line extensions.
~ a clear global, regional and market strategy for
exploiting the Lights segments in
markets where potential to do so is high.
End markets will develop a market strategy for the
long-term optirnisation of their
Lights business which will include brand
prioritisa on and cbannel management. This
strategy should be a key element within their 1996
company plans.
Objective:
"To achieve and maintain product superiority for
our key bmnds by ensuring
that BATCo products meet consumer expectations and
are recognised as being
superior to target competitor products".
Strategy:
Regular and reliable consumer feedback,
complemented with thorough in-house
monitoring of the products, is a fimdamental
requirement for driving the product
development process. Operating Companies should
undertake consumer product
of own key products versus target competitor
products at least once per annum using
the MASQ methodology and implement necessary
product improvements to unintain
superiority.
Monitoring of own and competition products for
visual and tactile. physical and
chemical quality characteristics through PQRS is
now weU established within all
Operating Companies. The initial objective should
be consistently to outperibrin the
competitors products by at least 101/o in PQ
Rating, not only on the overaU bmnd
performance, but also on each of the three
elements - outer, pick and cigz=e.
AdditionaDy, the international brands must also
conform to the quafity standards as
specified by the International Brand Groups.
Therefore, Operating Companies must
maint-in the appropriate level of samprmg for
monitoring ex-market samples but
additionally, introduction of the CARS approach
for mmuing conformance to
standards must be considered.
To meet the product quality objective outlined
above, a high level of technical
=*ility is required within Operating Companies.
This can only be developed
internally, to which end BATCo will develop a
modular training programme,
comprising 'on the job'training supported by BATCo
workshops. Fromthetraining
checklist, Operating Companies should construct
clear training plans to ensure
technical capability in the short and long term-
LrI
4
CZ)
BATCO CONFIDENTIAL -CATEGORY 1: NIINNESOTA TOBACCO
LITIGATION.
BATCo document for Province of BritiSh Columbia 23
April 1999


Objective.
"Develop and test copy, products, packaging and
line extension stmtegies for
SE5554 B&H and JPGL which, once proven to drive
market sham in premium
and high price segments in core markets, wffl be
rolled out globally".
Strategy-
BATCo will only invest centrally behind SE555, B&H
and JPGL amongst its LTK
International Brand portfoiia. Full brand
guidelines will be issued as an integral part of
the Company Plan process.
Agency assignment for these brands is the
respo=Wity of1memational Brand
Management in MiManlL The agency of record fbr
SE555 and B&H is BATES
WORLDWIDE (also Lucky Strike). Whereas it is GREY
for JPM. AU brand
support budgets must be channelled through them
(both ATL and BTL). Any
etceptions; to this require prior approval from
International Brand Management.
Airy end market that wishes to market these braids
will be cq=ted to adhere to the
international brand plans. Local variations in
product fonnulations, advertising
etecution or any other element ofthe marketing mix
will only be permitted on the
basis of quantitative research evidence and with
the prior approval ofInternarional
Brand Maragem=t.
Maintenance of international quality standards is
a fiindamental pre-requisite for the
riglu to rn-A-rt the key international brands.
Operating Companies Tm, indicate
how they i--,i to achieve these standards as
measured by QUAINT and MASQ and
PQRS within a defizied time frame.
BATCo has developed a new uniform package for John
Player Gold Leaf in
conjunction with the African and Sub Continent
Operating Companies. This
encompasses a new copy strategy, standard new
packawng, a standard cigarette new
advertising and new product guidelines. This will
form the basic brand package which
edsting and potential end markets will adopt in
1995/96 or have done so already. End
markets are encouraged to identify new
opportunities for the launch ofJP(H-
Usage ofall other BATCo trademarks remain the
prerogative of0perating Companie&
Brand plans should conforra, however, to the
marketing principles outlined above.
Objective:
"To develop in accordance with the Brand Owners,
best business building
strategies for Lucky Strike, Barclay and Kent".
Strategy-
Intmmational brand strategy will remain the
responsibility ofBrown & WUHamson but
BATCo's marketing of these brands wiH be
co-ordinated and controlled through the
USIB unrt in Millbank- Accordingly, all proposals
affecting strategy for these brands
should be channelled through the USIB unit in
MMbank in the first instance.
Vi
5
CD
r"i
co
BATCO CONFIDEINTIAL - CATEGORY 1:.NIINNESOTA
TOBACCO LITICATIOIN.
BATCo document for Province of BritiSh Columbia 23
April 1999


The operating principles governing the key TJK
international brands apply equally to
the B&W trademarks. Brand gWdeline3 will be issued
is part ofthe Company Plan
process-
Agency assigrirnent is the responsibility
ofInternational Brand Management in
MMwk The agency of record for Kent ind Barclay is
GREY wherm it is BATES
WORLDWIDE fbr Lucky Strike.
Objective:
'To build and hire the best marketing talent
worldwide".
Stmtegr.
To implement the marketing strategies outlined
above, BATCo needs the highest
quality marketing professionals. Our Policy is to
develop and promote internally
aver the longer term. However, until the quality
of;nt=-l mmiceting managem
has attained the required standard, it wig be
necessaxy to supplement our intertial
resources with some external recruitment
ofmid-career professionals.
BATCo will continue to focus upon'on the job
training' with the line manager
having the prime responsilility for this. The
Brand Excellence modules, which
summarise best practice in brand marketing will
form the basis of this training with
the modules being made available in late 1995. End
markets dtould constiuct clear
on thejob training plans to improve the quality
oftheir marketing staE This wM
be supplemented by subject specift seminars
managed by BATCo.
The new Marketing StaffPlanning system will be
implemented progressively
during 1995 with proactive career planning fbr
managers on Grade 10+- or
equivalent (plus those below Grade 10 but
identified is having potential), whether
international or national staM This new system
will ensure that BATCo is getting
the best value from its staffwhilst developing
individuals to their ma)dmum
potential.
Objective:
"To build a world class trade marketing
organiation so that the trade regard
BATCo as their preferred supplier over our
competitors whilst ensuring that
trade marketing effort and expenditure is
integrated fully with our brand
objectives".
Strategy:
~ To achieve sales and profit targets by secuiing
the active support ofthe wholesale
and retail trade by offining than support in all
Wects ofTrade Marketing and
Distribution in each trade dwmeL BATCo will offer
them advice and support
witich is tailored to their specific needs.
~ To ensure regular trade coverage either directly
or through distributor sales forces
of outlets accounting for at least 75% of all
market volume sales.
6
BATCO CONFIDENTIAL - CATEGORY 1-.,NIINNESOTA
TOBACCO LITIGATION.
BATCo document for Province of BritiSh Columbia 23
April 1999


~ To increase distribution and visibility ofour
brands in each trade channel, to target
sales calls better and to optimise the
effectiveness of &H trade marketing personnel.
~ To restructu the trade marketing orpnisation to
reflect the sophistication and
spe-6r-tion ofthe trade and to ensure changing
patte= of sales are =dcipated
and exploited.
Api IM
7
BATCO, CONFIDENTIAL - CATEGORY 1: MINNESOTA
TOBACCO LITIGATION.
U11
C:)
Ln
C:)
LA
CD
13 ATCo document for Province of British Columbia
23 April 1999


4 ~b
C:O
(.14
BATCo document for Province of British Columbia 23
April 1999