I I-W A - M- T industries document for Province of British Columbia 23 April Y**K I n M- T industries document for Province of British Columbia 23 April 7-T'N Millbank's third Brand Development course The thirl in the series of 1'.illbanl~-run Prand Development Courses was he Id i-n February at the Great Fosters Hotel at Egliam, near Tondon- A uniquely attractive venue, this 'hotel provided comfortable modern conference facilities in one separate wing, hut with a charming 16th century main building .here delegates dined and were able to relax. Sixteen Manacers with Srand Management responsibilities from no less than fourteen different inarkets attended and underwent a nroqramme that toole thern throuah all the stages of brand development, whether for a new brand or for the development of an existinq brand. This included sessions on the use of information, concelit rieneration, product design, name and pack selection, communication stratecies, and launch planninq: plus the consumer research and tbe controls necessary througliout any brand development project. Speakers were from B.A.T. Germany, the U.K., International Drand Management, and the final Case Study exercise was prepared and presented by B.A.T (Suisse). In addition there were outside speakers frorn a New Product Development Agency - NJ rresight, and advertising and research agencies. CD NJ C:) BAT Industries document for Province of British Columbia 23 April 1999 A-u-ine Tan Liat presenting the launch of HERIT-E in Malaysia. 7- 7~ 8111:"i K,,b:.Ilt,,"d".l .. *1 t.t .I. C Pr.. pme ON UL i~ V- ... I.. Cll-",*, 1-i Apd1r.1, Oky lrg,*11,. Oscar rvanissevich. rke E~eaqwaii. Pennington Kal- BAT Industries document for Province of British Columbia 23 April 1999 J-i.r Ar- G-g~ ~kib.--- G:r"y V..b.,.gn (9.- p.--) ft.- -T G _y pros ting the launch of KIM in ,,ny. .An aspect of the course which delegates particularly enjoyed and found most useful was the opportunity to listen to six different case Iiistories, presented during the second week of the course by dele,-ates themselves. Of the different Marketing Training prograirtmes that are available, Dick Jones feels that this is probably the one which is most closely joln-related and which, apart from offering the Brand Manaclers themselves the opportunity to improve their skills and knowledge, almost certainly contributes in the relatively sbort-term to a biaher success rate with new brand launches, and a better performance of existing brands, as a consequence of Managers responsible for these brands putting into practice some of the ideas and disciplines they learn on this course. Delegates who attended the course were:- Oscar Ivanissevich, Arqentina. Jim Brennan, Australia. Ivan Gonzalez, Chile. Oky Arguello, Guatemala. Antony Leung, Fiona, Kong. Augustin,- Liat, Malaysia. Penninoton Kalua, Malawi. Ike E~reagwali, Nir .1 eria. Javier Arce, Panama. Ravi Appadurai, Sri Lanka. George 70-,ibo-Setts, Sierra Leone. Daniele Michel. Switzerland. Renjamin Kemball, Venezuela. Manuel Villarnayor, Venezuela. Russell Clenence, BATTJKE. r1o Paul Hattliews, 12ATUKE. Observer: Andrew George-Perutz. CD NJ NJ BAT Industries document for Province of British Columbia 23 April 1999 Antony T-9- Jim Drennar). 0..i.l. 4 The launch of PLAZA in Brazil- Souz Cruz responds to a sudden reversal of market trends The Brazilian market (as at July 1981) The Brazilian market is characterized by its size - about 11-000 million per month - and its dominance by BAT sub sidiary Souza Cruz, which holds about 80% of the market. It is largely homogeneous - all cigarettes being of domestic manufacture and using effectively only Brazilian leaf. All cigarettes are sold in 20's packings, by law, and although there are currently 114 brands on the market, the 4 biggest brand 5 (all from Souza Cruz) hold over 69% of the market. One unusual feature is the wide range of prices. The most expensive cigarettes on the market cost CR$ 340-00 (84p) while the cheapest cost CR$ 105.00 (26p) per pack. Prices are arranged in 11 'categories' named alphabetically A (cheapest) to K (dearest). The average price is about 50p per pack, and the market leader is HOLLYWOOD at 55p (category H), with 29% of the market. Souza Cruz's main competitors are R.J. Reynolds, Philip Morris, and a small group of Brazilian companies. The problem Durinq the 1970's, the Brazilian market had enjoyed steady growth, averaging 7% p.a. This was largely because the prices for cigarettes had remained fairly static. Besides volume growth, the market showed healthy signs of uptrading the mix improved on average 1% p-a- In 1976 Philip Morris launched GALAXY KS in the low tar segment, with advertising comparing its deliveries with those of the established Souza Cruz brands. This appeared as a major threat to Souza Cruz's market share as GALAXY, in category 1, seemed ideally placed to benefit from (a) a trend to white tip, lower delivery brands and (b) the trend to up trading. Souza Cruz responded with a series of counter launches:- LUIZ XV (1977), ADVANCE (1979), CARLTON LIGHTS (1980), CD COLUMBIA (1981) and MINISTER LIGHTS (1961). C) BAT Industries document for Province of British Columbia 23 April 1999 5 Suddenly, in July 1981, the simultaneous effects of real cigarette price increases, rising inflation, and a worsening economic situation began to reverse existing market trends, and downtradina began, accompanied by volume losses. Souza Cruz had begun 1981 with the assumption of continued low real prices, which had an effect of reducing profitability on cheaper brands to almost zero. Rising real prices invalidated this assumption. Whereas Souza Cruz had ceased to advertise its cheap brands and concentrated all efforts on future growth segments, competition was now well placed in lower categories to benefit from downtrading. Specific problems and opportunities Although Souza Cruz had a fairly monolithic 80% of the market nationally, it had specific weaknesses, For example in the Southern State of Rio Grande do Sul (8% of national sales), Souza Cruz had in July 1981 only about 52% market share. Also ' in low price categories Souza Cruz was weak. Further, Souza Cruz had no mild brand beneath price category I (well above average price). These weaknesses were being exploited by two competitive brands, PM's MONTEREY (3.2% market share, + 8% growth) and RJR's VILA RICA (2.3% market share, no growth). Both these brands were in category E, were perceived by consumers as mild, and had strength in the South (where they held 151., share). Both used TV advertising. Addition.ally, they showed success in attacking sophisticated and trend setting urban areas, outside the traditional stronghold of the competition in the South. Brand switching data showed that both brands were taking smokers from HOLLYWOOD, and indeed takina more smokers than any other brand. Souza Cruz's counter attack Souza Cruz decided to counter launch into this sector. The planned counter-attack product was to be mild (perceivedly milder than MONTEREY and VILA RICA), with a white tip, in the same price category (E), and with a 100rnm version in category G (as with competition). The target consumers (broadly identical with the profile of the competitive brands) were of both sexes, urban dwellers, in the medium-to-low socio-economic class and over 25 years old. Typically they would be office workers or shop assistants. and would consequently be in day to day contact with people higher up the social/economic scale. So status - in dress and so on - was important to them, though constrained by economic considerations. C r\ BAT Industries document for Province of British Columbia 23 April 1999 6 The brand name chosen - PLAZA EXTRA SUAVE The Souza Cruz marketing team had initially chosen CAPRI, a Souza Cruz traditional brand name as the preferred contender. Research however, had indicated that this brand 'residual' was of a short, strong cigarette. PLAZA was chosen instead, and the 'Extra Suave' conveyed the milder aspect. Product It was decided to develop 2 versions:- a KS in category E and a 100mm version in category G. This followed competition, but the extra touch was that the 100mm, was 'slims'. This was perceived as a value for money innovation since all 'slims' brands up to this point had been in a very high price category. The idea was to reinforce the elements of elegance, luxury in the brand positioning. In terms of blend, the cigarette would be milder than competition. Pack Label design would be a decisive element in the product's performance, as the pack would function as an 'indicator of status' for the lower social economic classes. PLAZA would have to have a label seen as traditional but at the same time distinctive and with status. Heraldic symbols and wordina are considered important by the target group, and so pack design majored upon the crest, using 4 colours to give greater richness than competition packs. Communication A brand that was patently a 'downtrader' had to treat the questions of social class and value for money extremely delicately. It was decided to advertise the brand without any consumer imagery at all. The whole campaign was product based, concentrating on label and product (white filter). The pack and cigarettes were the central, and indeed the only subject of films. Thus the campaign transmitted the essential product characteristics of mildness and elegance, while avoiding any overt status symbols. The slims version had prominence. A new media technique was the use of 2 15" films in the same break, to avoid montony. Radio, outdoors and merchandising were heavily used. Pricing was communicated to the consumer only at the point of sale: thus (a) generatincy an agreeable surprise and (b) avoiding labelling the brand as NJ 'cut price' in the eyes of non-consumers. CD C) U-1 BAT Industries document for Province of British Columbia 23 April 1999 r') -:D fl-j CD CZ3 _--j N) r'.) ON BAT Industries document for Province of British Columbia 23 April 1999 8 Result PLAZA was launched in September 1981 in Rio Grande do Sul - Souza Cruz's weakest area - and was an immediate success. A small pilot market simultaneously conducted in the centre of Brazil indicated good prospects for the brand, and consequently from December 1981 to May 1982 a series of launches in Souza Cruz's various branches achieved almost national distribution for the brand. The results of PLAZA in market performance are given below, showing how the brand has contributed to an overall share gain, with 7.2% market share. BRAZILIAN CIGARETTE MARKET BEFORE PLAZA AFTER PLAZA 1981 1982 MAY-JULY MAY-JULY COMPANY SHARES Souza. Cruz 79.4% 81.4% R.J. Reynolds 9.6% 8.52 Philip Morris 8.5% 7.5% National Companies 2.6% 2.71 SEGMENTS Low Tar 4.6 4.7 Perceived Mild (High Price) 10.1 7.8 Perceived Mild (Low Price) 6.6 10.9 Full Flavour 78.7 76.5 KEY PERCEIVED MILD BRANDS MONTEREY Family 3.3% 2.3% VILLA RICA Family 2.4% 1.41 PLAZA Family - 7.2% RIO GRANDE Do SUL Souza Cruz Market Share 52 1 57.5% R.J. Reynolds Market Share 21.3 18.8 P. Morris Market Share 18.2 15.9 Nationals Market Share 8.5 7.8 PLAZA Family - 9.4 MONTEREY Family 9.9 8.0 VILLA RICA Family 5.2 3.8 NJ CD r1 j (1-D C__) __j BAT Industries document for Province of British Columbia 23 April 1999 1. "A 9 Brand switching data since the launch of PLAZA shows that it accounts 46% of all MONTEREY losses, and has taken 15-20% of the target brand's smokers. About 12% of PLAZA's current smokers came from MONTEREY. It is interesting to note that PLAZA also affected GALAXY. It has been the most successful brand in taking GALAXY smokers during 1982, particularly through the slims version. Conclusions There are many conclusions to be drawn from the PLAZA case history: PLAZA clearly indicates the necessity to have brands ready to meet situations, for which the market or company may not have an immediate need. Circumstances can change rapidly, and basic assumptions evaporate, presenting new opportunities to a company that has the right brand ready. The value of a 'family' launch. Although most of the volume is with the king size, the presence of the 100mm slims versions has areatly contributed to the elegance, status and femininity of the brand offer. The value of a comprehensive analysis of the market not only by price categories but also by conceptual segment, and by region, to arrive at the correct offer. The necessity of delicate communication of price to the consumer, in a market affected by economic problems. Downtraders do not like being reminded that they are being forced to cheaper products, and the avoidance of price-sell in mainstream advertising is vital. Note, The launch of PLAZA into the cheaper price category has since been followed by the launch last September of CASSINO backed by heavy advertising and which is reported to have achieved an overall market share of 4.91 (January '83)_ making it Brazil's si xth best selling brand. An account of the launch of CASSINO will feature in a forthcoming issue. N) :,:D r1) CD (ZD -4 00 BAT Industries document for Province of British Columbia 23 April 1999 to JPS and the Grand Prix involvement It is over ten years ago that JOHN PLAYER SPECIAL became the sponsoring brand for the Lotus Formula 1 motor racing team. The decision was made by Players in the U.K. who had preV iously sponsored the team under the GOLD LEAF name. So was born the now familiar black and gold racing livery, ec hoing that of the JPS pack, which has become known around ~he world, even where JPS cigarettes are not marketed. The John Player Specials" as the cars were known, made their first appearance in the Argentine Grand P rix in 1972. Grand Prix motor racing has a worldwide appeal, all the excitement and glamour one could wish for, and its media coverage in BAT Industries document for Province of British Columbia 23 April 1999 11 h* .11dL -y" i. 1~. -pyii-i~- ~h. JPs ~P&iqn a9 f-tured abo,e f i, "k .a.. 1 ~ M-- T industries document for Province of British Columbia 23 April 1:1*1 DateVmeBmzff 1983wi& THE BRAZILIAN GRAND PRIX. Brazil is the first Grand Prix of what promises _7~ St to be the most open and exciting Formula One season for years. The Autodromo cle Cidade do Rio de Janeiro is five kilometres of twists and turns, and its unusual counter-clockwise layout makes it one ofthe most demandi ing 0 n the circuit. Last year, local hero Nelson Piquet took the victory rostrum, and this year the race promises so much that the nearby beaches of Cop3cabana and Ipanema will almost certainly be empty. The atmosphere at the track ~,% thoroughly and ri U iquely Brazilian. Z% THE 1983 SEASOMA combination of new regulations and n an new cars should make for some very interesting racing during d u nng g 1993. The new regulations mean that the cars are faster down w r do n the straights, and slower, but more spectacular round the h corners, with the skill required of the driver becoming I; more important than ever before. Brazil'83 will witness the debut ofthe Renault-powered John Player Special, Jacques.Lafitic back with Williams, Rene Arnoux in 2 Ferrari instead Of 2 Renault, and Americ2s Eddie Cheever in a Renault rather than a Ligier. Z~4~" I~Zzoozo~ BAT Industries document for Province of British Columbia 23 April 1999 vithIffie John Player ElTeaml JOHN PLAYER TEAM LOTUS-John Player Team Lotus embark upon the 1983 season with their morale high, 4, a d a burning desire to win. Following the tragic death last year ofColin Chapman, the founder of Lotus and the driving force behind all ' the team s successes, the John Player Special cars have a great deal to prove. Elio de Angelis, the Italian who drove to victory last year at Zeltweg in Austria,vvill introduce in Rio the exciting John Player Special 93Ta totafly new Renault turboC2r. ' Nigel Mansefl, the team s other driver, will be racing A another new, but totally different John Player Special. This car, the 92, wilI be powered by one of the new uprated Cosworth Ford normally aspirated engines. Ij The team also has a new tyre supplier - Pirelli, but the cars still retain their familiar black and gold John Player Special 7 ONE livery. Team manager Peter Warr, now at the helm ofone of rand Prix r2Cing's most famous and successful teams, is convinced the team will continue winning. Not only is Elio joining'The Turbo Club'at long last, but the cars also have a secret new suspension system, which will help t hem enormously in all sorts of racing ituations. The team is determined that 1983 will be a great tribute to the John Player Special Lotus team's founder, the late Colin Chapman. q:71 John Player Special c:) rQ CD! CZ),; -4 rQ BAT Industries document for Province of British Columbia 23 April 1999 ~-UZOOZO~ M- T industries document for Province of British Columbia 23 April T-TE print and on TV is exceptional. It is also very, very expensive. For inany years BAT were able to gain a certain amount of spin-off benefit from Players' sponsorship of the JPS Lotus team, through on-the-spot promotional activity. But d:3tribution of the JPS brand did not dovetail neatly with the geographical pattern of the Grands Prix race programme. Players in t'~e UK could only benefit in the overseas race appearances in terris of media coverage in the UK. However, events have now moved on, and U%T plans for JPS have been formulated on a widening scale. With tile already established awareness of the JPS/Grand Prix connection, it became a 'natural' to re-examine our position regarding motor sport involvement. In 1981 BAT agreed with Imperial (whose present ownership of the JPS mark is confined to Europe) to make a contribution to team costs and at the same time acquire full exploitation rights in our company's JPS markets. Primarily our interest lay in South America. The Brazilian and Argentine Grands Prix open the international season, and both countries have a history of enthusiasm for the sport, and for producinq drivers with flair and skill, like the great Emerson Fittipaldi and Juan Fangio. Also on the programme in South Africa, where the Kyalami circuit is the world-famous venue for the Grand Prix, and where BAT interest in the brand was also important. Now the Far East, hitherto off the main Grand Prix map, is of importance to BAT in the JPS scene. As part of its 1983 season support programme for JPS, the Special events team in cooperation with the International Brand Croup and the advertising agency is developing a series of 4-page full-colour features for tile international media. These identify the brand involvement with the racing team, and project the excitement and glamour of motor sport. Of particular interest is the way in which these colour features can include in such a complex production bana-up-to-the- minute reports on the latest position in the drivers' championship table, toaether with comment on the chances for the next big event. To produce a complex colour print job for publication in a magazine normally means a lead-time of 6 to 8 weeks, and this time scale would effectively prevent highly topical content from being a feasible proposition. The JPS plan to issue colour features with up-to-the-minute detail, reporting on a Grand Prix situation where the big events are spaced roughly two weeks apart, therefore posed quite a problem. From the release of the material to the appearance of the magazine on the news stands is never more than a week. So how could the JPS problem be overcome? It has in fact been overcome, but with only one publication so f-ar - This is "Newsweek" magazine, who have cooperated with the JPS advertising agency and CSS, the organisation CD C:) BAT Industries document for Province of British Columbia 23 April 1999 12 which looks after the entire sponsorship operation on behalf of both BAT and Imperial (UK). This entails oroducing all colour separation work in advance, but holding up final production for the preparation of cory which cannot be prepared until the results of the latest race are known. The plan of publication of the features in "Newsweek" is to run them in the Middle East and Latin America editions in support of the Brazilian, Monaco, German and South African Grands Prix. Other JPS/Grand Prix activities A considerable amount of other supportive activity has been arranged in the promotion of the sponsorship of the JPS Lotus Team. Two identical replica JPS Formula I Lotus racing cars are being built for use by Associated Companies for promotional use in the launch of JPS. A 27 minute film planned for general TV/cinema release and entitled "JPS Lotus goes turbo" has been produced, which descibes the introduction of the Renault engine into the Lotus car from the press announcement of the agreement through the design stages of the new car to final testing. An innovative departure from the usual racing films are a series of short two minute clips which are used through a race commentary. Each clip describes a facit of racing technology, from the Kerlar built bodies to the "grand effect" generated by racing car "skirts". A range of advertising has been designed for display at Grand Prix circuits around the world which can be used by Associated Companies together with a range of JPS clothes. The range is designed to suit every climate and to reflect the image of JPS. A new venture is the development of a prestige BW car in JPS livery. Negotiations are far advanced for BM? to produce a car with special trim and selling at a premium price. Initial reaction from BMJ distribution in the Middle East has been most encouraging and it is boped to extend this arrangement to the Far East and South America. An idea that has not yet fully been exploited is "Radio JPS". The intention is to sell very cheap non returnable headphones to spectators at a Grand Prix and to either use a local radio station or use our own station at the track, to broadcast news, music or advertising throughout the meeting. Behind all this is the JPS racing service. For each race informal comment, together with black and white and colour photographs, is sent to a nominated list of newspapers and specialist magazines throughout the world. C) BAT Industries document for Province of British Columbia 23 April 1999 13 Trademark diversification: neither new nor just a cigarette-name phenomenon The February issue of Advertising Age's FOCUS carries an interesting article which examines what the magazine calls ::line extension andcbrand., stretch" - what we tend to call trademark diversifi ation - The article cite s as the earliest example that of fashion designer Coc0 Chanel, when she branched out with Chanel No. 5 perfume in 1923. And ever since, it goes on, "stretching a well-known brand has become a familiar method for companies wanting to squeeze the most benefit out of their marketing investments". Today's lower profit margins and rising media costs have underscored the importance of expanding brand names into new fields and FOCUS states that increasing numbers of companies throughout Western Europe are looking to 'brand stretch' as the most economical means of introducing new products. As Max Wilkins, deputy chairman of Ted Bates in London, is quoted as saying: "companies and agencies h a ve got to recognise that well-known brands represent years of investment. If one takes account of today's media costs, all that money doubles in value. So it must be exploited". Among examples of current activity of extending established brand names in new product areas, FOCUS cites those of the French Charles Jourdan firm which first extended its shoe business into otber leather goods, and then into men's fashion; and the Pior explosion which today ranges from men's fashion to baby clothes, to silver and china ware. Cigarette name examples from Europe The article makes reference to several examples of new-product extensions of cigarette trademarks, most of which have been reported in earlier issues of "Marketing News". These include the MARLBORO and KIM range of clothing marketed in Italy, and the MURATTI name which in Italy has been linked with watches. Also the R.J. Reynolds name - one to add to the travel interests listed in the February 1983 "Harketinq News". of interest is a reference to CAMEL Boots w1 iich have been advertised both in Germany and in Norway. These boots are made under licence by Salamander, Germany's largest shoe manufacturer. The close resemblance between the CAMEL Boots advertisements and the international advertising for CAMEL cigarettes (the same outdoor man is depicted in both, in similar Situations: see "Marketing News". October 1981) has incurred the displeasure of the authorities in Norway where there ha s been a total ban on cigarette advertising since 1975. r%J C:) N) C=) C:) 1 ~i r"i U.1i CN BAT Industries document for Province of British Columbia 23 April 1999 14 o' ".A-~BOAO and KIM range of clothing mar-ted in Italy 1where there is a tot&L ban on _ r,,ing). Reference is also made to publishing ventures incorporating cigarette trademarks: the RB publications which have been described in "Marketing News" of June 1979, and the more o~scure.use of Reemtsma's R6 mark in a magazine called "Lady R in oll and, where (so the report states) it is sold through tobacco kiosks. In Holland too the CABALLERO trademark has been extended from cigarettes to sherry and books. 'Wasting a valuable asset' Spokesmen from all the companies interviewed agree that extension into a new product field must be in keeping with the standinct and image of the original product associated with the trademark. And that includes pricing. C> NO Co NO BAT Industries document for Province of British COlurnbia 23 April 1999 15 Max Wilkins Of Ted Bates comments on the dancers of undermining a 1 the c7ooj work invpsted in a brand trademark by ignoring this see" up by reminding m'"gly Obvious factor "Brands are built PeOPle of the benefits they give. I f the brand name is put on a product which does not provide those benefits, then you are wasting a valuable asset". Few rules, says the FOCUS article, have Yet emerged on the technique of brand stretch, but it identifies as probably the most crucial, the need for a company to he certain about tl-,e consumer attitude to its ow n brands. "It's essential to know exactly where a brand name lies in the public's rrind", said Pierre Dessis who rLins a market researcli organisation in Paris. C:) BAT Industries document for Province of British Columbia 23 April 1999 .... .N_B..h:., -,,d.i to publishing 'I.. ith t i D Y. At Z LIU 'Be 0 ? V