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THE ~ AMERICAN TOBACCO I~$1g'~E COMPANY Memorandum A7 ~5(7 AT) Mr. R. E. smith, 0a~ January 7, 1991 To Vice President - Brand Management Fmm J" C. Bogie, Product Manage~i~ k3 ~ef Approval Recommendation - LUCKY STRIK~ Package Desigql Exploratory This document will serve as a recommendation to conduct the initial phases of a package design exploratory for the total LUCKY STRIKE product line. BACKGROUND LUCKY STRIKE Non-Filter was introduced in 1916 with its olassic green package. The green pack was changed to white in 1942 because the chromium needed to produce green ink became a valued war commodity. It wasn't until 1981 that LUCKY STRIKE introduced its Filtered King size Low Tar product. A new package design and modified bull's eye was used. Soon after the Kings were introduced the 100's style was introduced using the same package design. Then, in 1984 LUCKY STRIKE Lights were introduced in King and 100's soft pack styles. The packaging for these styles was again different from Non-Filters and the Low Tar packages. The silver striped packaging with yet still another slightly different treatment of the bull's-eye was used for the Lights product. Attached for your review is a color photo copy of the entire LUCKY STRIKE line of packaging. IhECOMF[ENDATION It is recommended that LUCKY STRIKE conduct the initial phases of a package design exploratory ($30,000). The exploratory will cover design development through preparation of quality silkscreened comprehensives for the Low Tar and Lights King Soft Packs.

Mr. R. E. Smith January 7, 1991 Page Two The following will identify the key rationale in support of this recommendation: i. Consumers mention packaging as one of the four important criteria in selecting their ide~l cigarette. The four key criteria are: Image Taste Package Price Thus, optimal packaging is critical to successfully competing in the cigarette industry. 2. An integrated look across all styles can provide an image of quality. In combination with LUCKY STRIKE's more competitive lower price, this should result in the brand being perceived as a good value. Establishing a desirable and compelling quality image along with an acceptable price will give consumers the sense that LUCKY STRIKE is a good value. This packaging and pricing strategy has been most recently accomplished by Montclair and was undoubtable important to its current success. 3. We need to conduct LUCKY's packaging design exploratory while we're still resolving the brand's pricing strategy. This will put the brand in an ever stronger marketing position to be relaunched in the near future. Thus, the brand's optimal packaging design should be resolved prior to the completion of the sub-generic price test. 4. Dramatic or significant changes are needed to reverse LUCKY Filter's -2~% annual sales decline. An integrated quality package design alone may not reverse the decline, but can be one impertant contribution in slowing or reversing the decline. 5. Introducing a new line of packages for LUCKY STRIKE proyides some news value to the trade and consumer. Introducing packages that appeal to a young adult male target (21-29) may provide an additional motivation for them to try the brand. If supported with media, this can help our selling efforts as it provides a new reason for the trade to display the brand and could even be tied into the 75th anniversary of the brand.

Mr. R. E. Smith January 7, 1991 Page Three 6. 7. Our major competitors, Marlboro and Camel, both offer an integrated and totally consistent package design and brand name/logo treatment across all their package styles. These brands have successfully attracted the young adult male audience and can be our role model in how to create one image or one badge in a package line. An integrated package design look can provide for greater in-store presence. One p~ckage or carton color with integrated bull's-eye design can better compete as a "family" in today's cluttered in-store environment. PACKAGE DESIGN DEVELOPMENT Peterson and Blyth will develop the new integrated packaging line for LUCKY. This approval recommendation is for the initial phases of a package design exploratory. This will provide us key insights into whether an improved package design can be developed and will help the selling appeal of the brand. Once we've made this determination, additional funds will be required to complete the design development for the other styles and cartons. The objective of the design work is to heighten the quality image and provide a closely integrated look to the LUCKY STRIKE package line. Due to the importance of the King size to LUCKY's target audience the package design exploratory should focus on that size. This would help economize on the development costs and translating the final King size designs to 100's size should be relatively easy. Once the optimal package design has been determined, as previously mentioned additional design work will be required. Specifically what will be needed are side and end panel design work, design work for the remaining three styles, carton designs and reproduction artwork. It was estimated this phase of the package design exploratory would cost an incremental $32,000.

Mr. R. E. Smith January 7, 1991 Page Four SIrg~MARY Providing consumers with a package they are proud to display is unquestionably a critical asset to successfully marketing a cigarette. LUCKY STRIKE can benefit from a higher quality image and more integrated family design. A package design exploratory will enable us to optimize LUCKY'S package and provide some real news value for our target. A new package can hopefully provide added motivation for consumers to try the brand. Your approval of this recommendation is requested. JCB/fso Package2/l-4

Approval Recommendatioh - LUCKY STRDK~ Paok~ge Design Exploratory J° M. Ockers e T.A. Albert Date J. E. Vyse Date / D~te R. Leisure Mellett i D~te G~'T. Touter ~ I Date D. S~ohnston / ~ate T, P. Kriz ~ I / ate W.J. Moore Date R. E. Smith C. ~. Mul~e~ " Date • . / ~ate