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BROWN & WILLIAMSON TOBACCO CORPORATION RESEARCH, DEVELOPMENT & ENGINEERING INTERNAL CORRESPONDENCE TO: I.D. Macdonald CC: T.E. Whitehair E. E. Kohnhorst M. L. Reynolds T. F. Riehl FROM: D.V. Cantrell DATE: February 17, 1987 SUBJECT: KOOL ISN'T GETTING THE STARTERS/236 J. Hendricks J. Tharaldson R. Stowe C. N. Kounnas This memo addresses the fact that KOOL is no longer attracting new smokers (further referred to as "starters"), a product-related reason which possibly explains this position, and suggestions to correct this problem. Switching data (waves 32-40, attached) clearly show that KOOL KS and i00 are not attracting their fair share of starters. Newport, on the other hand, is performing above its fair share. Besides the differences in packaging and marketing between KOOL and Newport, one basic product difference exists which can possibly explain part of the reason for KOOL's disparity among starters. Basically, it is that KOOL's menthol level is too high for starters. For a more in-depth discussion about this fact, see Appendix A. The dilemma is that KOOL can't satisfy the needs of both starters and current franchise. Franchise smokers prefer a product providing greater menthol taste than do starters. This paradox isn't easily corrected by just changing KOOL's menthol level, due to the significant risk of losing franchise smokers. Thus, a more logical approach is to: i. promote KOOL MILDS as the starter brand, 2. line extend the KOOL family with a product having -12-14 mg tar with a lower menthol loading, eg., -0.32% menthol, specifically to attract new smokers, or . introduce a free standing new product having the same product description as in (2) above.

In sulmnary, we can't reduce the menthol level of KOOL KS/100 to an acceptable level for starters without risking a catastrophic loss among our franchise. Thus, to regain starters, we must establish another product source. DVC/vr 0509h Attachments - 2 - G20307N2G L

APPENDIX A PRODUCT REASON FOR KOOL'S DECLINE IN ATTRACTING STARTERS From a product recipe standpoint, I can understand why possibly KOOL KS and 100s are no longer considered to be acceptable starter products. First, let's consider which smoking attributes are important to a beginning smoker. Based on my own initial smoking experiences and comments from other smokers about their early smoking experiences, the attributes are: 2. low tobacco taste (this is an acquired taste with use), low impact and irritation (a strong smoke is intolerable), . low tobacco aftertaste (heavy, dirty taste is intolerable), and 4. if it's a menthol product, it should have a low amount. Menthol brands have been said to be good starter products because new smokers appear to know that menthol covers up some of the tobacco taste and they already know what menthol tastes like, vis-a-vis candy. The level of menthol in the product is, however, critical. A product having a moderate to high menthol taste will usually be rejected by starters, while the same level will be quite acceptable to established menthol smokers. Indeed, this is the dilemma which KOOL KS and 100s face today. $ In August 1985, we inadvertently made the situation even worse for starters by increasing the menthol level of KOOL KS and 100s, see chart below. This change was adopted based upon CPT results showing a superior preference for the current recipe (having 0.40 and 0.45% menthol for KS and 100's, respectively). Newport, having a lower menthol level, 0.32%, is better positioned for starters than is current KOOL. Table I % Menthol Loading Year KOOL KS KOOL i00 77 .36 78 .36 79 .36 80 .36 81 .36 82 .34 83 .34 84 .34 85 .34, .40 (8185) 86 .40 .38 .38, .45 (8185) .45 In '82, the filter plasticizer on KOOL KS was changed to one which allowed a greater menthol delivery. To maintain previous deliveries, the loading was decreased by 0.02%. 6 0307 2'? 0509h

STARTER OESIGNATION BY 8RANO FAMILY/STYLE i ~wltchlnq Study WaYes (32-33) Total Smokers 28,474 Total Starters 1,051 (M/F, 2l+ years of age) KOOL Family - Total Starters % of Total Starters KOOL Kinq - Total Starters % of Total Starters KDOL 100s - Total Starters % of Total Starters (FAIR (FAIR (FAIR SHARE SHARE SHARE (34-35) (36-37) 28,206 27,189 1,001 933 51 37 34 4.B5% (80) 3.70% (63) 3,64% 26 16 16 2.47% (76) 1.60% (56) 1.72% 8 5 6 • 76% (80) .50% (47) .64% Newport Family - Total Starters 46 % of Total Starters 4.38% 3g 36 (223) 3,90% (189) 3.86% 93 86 (IZ7) 9,29% (102) 9.23% - Total Starters 126 % of Total Starters 11,99% (68) (68) (56) (167) (104) t (38-39) 26,755 911 41 4.50% 15 1.65% 2 ,22% 43 4.92% 77 8.45% (FAIR SHARE INDEX) (88) (68) (25) (196) (92) (40) 12,680 324 5 I. 54% 3 .93% 2 .62% 9 2.78% 37 11.42% (FAIR SHARE INOEX} (32) (42) (67) (124) (123) ~g .} 9D IFalr Share Index of > I00 : Growth, attractlng more than brand's share of smokers. Fair Share Index of I00 = Parity, attractlng equal to brand's share of smokers. Fair Share Index of < I00 : Loss, attracting less than brand's share of smokers. 0509h

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