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AT ~ (I~I) Memorandum AMEK[CAN TOBACCO COMPANY T~ Mrs. E. M. Ashkin Product Manager II Olorice Mil oughby From Marketing Research Manager n0f LUCKY STRIKE Filter Generic Price and ~'~-N~ T~t~ q~est M~knt An~lv]~ DDt~ 3/13/91 Backaround/Ob j ect ires LUCKY STRIFE Filters is currently being tested at a generic price in Section C2 and with a $3.00 ISC in Michigan, These tests are being conducted to determine which of the two has the better consumer pull. The test period began March I, 1990 and this report period ending February 1991. Conclusions covers data through the After 12 months in test, on a cumulative basis, the conclusion remains the same. When meaningful promotion/advertising is conducted on behalf of LUCKY STRIFE Filters, the brand responds positively. Both the Generic Price and the $3.00 ISC test markets performed better than the remaining U.S. on all data bases, Summary - Shipments LUCKY STRIKE FILTER AVERAGE WEEKLY SALES PERCENT CILANQE VS. PRE--PERIOD $3.00 ISC Remainder Generic Price C2 ~ of U.S. March +340 +102 - 5 - 10 April + 69 + @9 +30 -.29 May 122 6 +22 -.27 June - 20 - 20 -11 - 34 July - 16 - 16 + 4 - 35 August + ] + 1 +13 - 27 September - 20 - 28 +I0 - 39 October 7 - 7 +30 - 26 November + 23 + 23 +16 - 26 December - 22 - 22 - 8 - 38 January + 17 + 17 -53 -61 February + 33 + 33 -32 -53 12 Month Cum. + 45 + 13 + 3 - 29

Mrs. E. M. Ashkin Page 2 3/19/91 Generic Price -- C2 o Cumulatively, LUCKY Filterst Generic Price test market (with or without UPs included) continued to perform at a level well above pre-test AWS and well above the remaining U.S. AMS versus its pre-period. For the month of February 1991, LUCKY Filters' performance was 33% abo~e the pre-period average and significantly higher than the remaining U.S.. (Chart I.) o on a three month rolling basis, C2 indexes well above the remaining U.S. (Chart IA.) LUCKY STRIKE FILTER THREE MONTN RO~ING AVENAGE INDEXED VS. YEAR AGO 3 Months Remainder Ending~ C2 ~f U.S. w u Z~pa w~ March 1990 214 130 72 April 1990 233 153 79 May 19902Hi 139 81 June 1990 139 99 79 July 1990 12B 83 72 August 1990 93 93 70 September 1990 97 97 76 October 1990 95 95 71 November 1999 94 94 67 December 1990 i00 i00 68 January 1991 i18 118 74 February 1991 126 126 72 ~3.00 ISC - M~chiqan On a cumulative basis, LUCKY to perform positively versus the remaining D.S. Filters' in Michigan continued the pre-test period and versus For the past 2 months, Michigan has experienced severe declines, dropping -53% in January and -32% in February. However, these declines were not as severe as those for the remaining U.S. (Chart I.)

• J Mrs. E. M. Ashkin Page 3 3/13/91 Three month rolling indices for the two latest periods remain within the average range. (Chart IB.) LUCK~ STRIKE FILTER THPJ£~ MONTH ROLLING AVERAGE INDEXED VS. YEAR AGO 3 Months Remainder ~.~ ~ ~ u.s. March 1990 86 72 April 1990 102 79 May 1990 107 81 June 1990 93 73 luly 1990 98 72 August 1990 i01 70 September 1990 121 76 October 1990 115 71 November 1990 107 67 December 1990 i05 68 January 1991 98 74 February 1991 96 72 Though shares are small, the trend is directionally similar to AWS data, for both C2 and Michigan. For the period ending 1/25/91, in C2, LUCKY Filters' share is up slightly in C-Stores. Michigan share declined period-to-period in C-Stores, as did AWS. Share in both test areas remains above pre-test shares. (Chart llI.) Nielsen Cumulatively, C2 is below its pre-test level but continues to outperform the remaining U.S. Michigan is well above both its pre-tesh level and the remaining U.S. Since Nielsen coverage skews toward carton outlets and C2 was mainly pack driven, one would expect to see Michigan's sales at a higher level. However, when inventory turns were viewed, Michigan increased for all styles of LUCKY Filters, while C2 declined versus Nove~ber/Deceatber year ago. This indicates a higher sell through in Michigan and higher returns in C2. (Chart IV.)

Mrs. E. M. Ashkin Page 4 3/13/91 Other ATCO Brands o Performance of continues well the remaining brands and in least negative. AMERICAN, ~£ALIBU and PALL MALL Red Filters below pre-test levels in C2, Michigan and U.S. C2 is the worst area for all three Michiqan, AMERICAN at -3% versus the pre is (Charts V, vI, VII,) Attachments cc: R. D. Chumney, Jr. W. J. Moore R. E. Smith R. S. Sprinkle, III D. A. Wogerbauer

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GRAPH 1A 25O 200 1c% 5O Feb LUCKY STRIKE FLTS INCLUDING UPs IN TEST AREAS 3 MONTH ROLLING AVERAGES INDEXED VS YEAR AGO Mar Ap" May Jun JL;4 Aug S~p C~t Nov Dec Ja~ Feb 1990 SOURCE:MSA ~C2 MICHIGAN -- REMAINING U.$. 250 150 100 50 Mar C.EW, 3~1

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GRAPH 1B LUCKY STRIKE FLTS ex UPs IN TEST AREAS 3 MONTH ROLLING AVERAGES iNDEXED VS yEAR AGO 25C 2OC 15£ IO0 50 Feb Mal Apr May Jun Jul Aug £e# Oct Nov Deo 1990 SOURCE:MSA 1 Jan ~o-2 • ~. MICHIGAN -- REMAIN/"~G U.S 250 ~00 150 1GO 50 Mar C.E.W. 3/91

PRE TEST PERIOD "fAG CHART II SECTION 0-2 GENERIC TEST MKT. LUCKY STRIKE FLT VOLUME(000) STIGKS TE~T PERIOD MAR 1989 APR 1989 MAY 1 JUNE 196"9 JULY 1£~9 AUG, 1989 SEPT. lg69 OCT 1989 NOV, 1989 DEG 1989 JAN. 1990 FEB. 1990 SUM enrlr~ FEB¸¸ MARCH, 1990 APRIL, 1 ,c~'O MAY, I£90 JUNE,19£0 JULY, I££0 AU~UST, I~, SEPTE MBER,199C~ OCTO~R 1990 NOVE M~D~,1990 DECEMBER,1990 JANUARY,19~3 FEBRUARY,1990 12 Month Cum % of totaJ ~a~ INCLUDES UP'£ Volume 8,186 MAR. 1990 12,744 3,056 APR 1990 4r677 8,398 MAy 19'90 6,735 3,359 JUNE 19'90 2,214 2,295 JULY 1990 2,445 2,663 AUG. 1990 8,071 3,018 SEFT. 1990 2,181 2,860 OCT 1£90 2r812 3,279 NOV. 1990 3,571 2,402 DEC. 1990 2,164 2,159 JAN, 1991 ~,537 2,714 FEB. 1991 3,491 34,337 TOTAL Y Tq3 49,642 Cure % chg vs yag 44,57 % % ef total safes_ TOTAL STIOKS(O00) FACTORY AFFIXED 1Wl '£ SHIPMENTS 0 8,900 10,800 21 76 % EXCLUDES UP'S AWS Volume AWS 2,~96 5,844 1,328 1,114 4,677 1,114 1,464 2,835 616 527 2,214 527 556 2,445 556 668 3,071 668 545 2,181 545 611 2,812 611 812 3,571 812 515 2,164 515 769 3,537 769 873 3,491 873 951 38,842 744 1312 % 7824 % O,E. WILLOUGHBY 3212291