Tobacco Documents Online

I. What does the =onsumer expect ~rOm the toh~cco mombanies in Overall, the consumer, both smokers/non smokers, are not particul~rly satisfied with th~ t~bacco industry's respons~ to the smoking and health issue. In general, this dissatisfaction has increase~ from 1970 to 198D. . In 1970~ 42~ of the public held an unfavorable attitude towards the tobacco industry's reaction to the controversy on smoking and health• This has increased to 54% in 19@0. • Additionally, the public ccntinues to believe that the cigarette industry is mot working very hard £o find an answer to the health problems associated with smoking []8~ reported working hard in 1970, 8~ in 1980). Relativ= to other industries, consumers do not believe the tobacco industry is very interested in th~ safety and welfare of their customers. • In General, the tobacco industry is tied wlth the liquor industry for having the ]east interest in their consumers (7~ and 6~ "very interested" respectively), • For comparative purposes, the drug and food processing industries were belleved to be the most interesued in the safety and welfare of their customers (26% and 25~ respectively). 1980 Roper Study on "Public Attitudes Towards Cigarette Smoking and the TObacco Industry' sponsored by the Eobacco [nstitute~ 0D

2. Is thcre an incroasinq awareness of the consumer ~s to health COnSlderatlODS for the Qassive S~oker? Overall, consumers are becoming in~re~singly aware of the potential impact smoking may have on the passive smokers. This enhanced awareness is manifested in a gre~ter n%~mber of non-smokers r~portirlg that it is ~nnoyiD~ to be around others wh£1e s~oklnq Even smokers themselves h~ve been impacted by the increased aw@reness ~nd ~re more likely to ask c%hers if they mind before lighting up indoors• • In 1974, 46% of all adults felt that it was "probably hazardous" to be aronnd others who are smoking. In 1900, 58~ of all adul£s held tb~s same bel&ef. • In addition, the proportion of non-smokers who feel it is annoying to be around smokers has increased from 53% In 1970 to 61% in 1980. • Smokers ~av~ become much mGre conscious Of others and are more willing to ask first before li~ht~nQ up a cigarette (igx in 1974 vs. 29Z in 1980). ~ou~ce~ 1980 Roper Study on "Public Attitudes Towards Ciga~@tSe Smokino and the Tobacco Industry" sponsored by the ToPacco Institute. g ~j

3. What are the most critical factors in a consumer'~ brahe 9 = eive de r~ s taste? • ~nere are many factors which individuals consider -n chooSlng a brand. These factors include: Filter/Non-Filter Menthol/Non-Menthol Tar Level Length Taste Image of the Brand Personal Identiflc~tlon Male/Female P~esti~e Familiarity Fashionability Age of Smoker Availability Price Pdper ~n~ Filter Paper Color S~oothness Satisfaction package constructlon-Box/Soft Pack Package Appearance C~gar~t~ Thickness F~iter Co~position Ease of D~w Burn Rate A~tertast~ Arom~ Tobacco Quality Loyalty t~ Brand Redeemable Coupons DisCount Coupons Different individuals place different ii~ortance on these factors a~d ~ay maMe trade-offs between attributes. A major strategic study is now being condu=ted to obtain the relative importance of these f~ctors. The results Of this study are scheduled be be available mid-August, 1982. ConSumers believe that they are able to perceive degrees of taste and that they can differentiate brands based on taste differences. ConSu~ers can differentiate major product d-ff~rences s~ch as full flavor and low tar. For example, i~ a blind fe~t Of Marlb~r~ ve~ua Merit, th~ ~ull-taste ~okers will prefer Marlboro while the lights smok~r~ will prefer Merit. More subtle dlffe~e~ees can be discerned by a smaller pecentage of So~rce: ~UMM pretest, ~W product test~ \

4. HOW would most consumers describe the difference between full taste low tar and ultra low t~r cigarettes in terms of ta~ numbers? Two studies are currently in field, which in part addresses this question . . . one for KOOL and the other for VICEROY. Data will be available July 27. Two studies conducted in the last few years provide some insight into this question : - full-taste and hi-fi smokers associate (based on ~ set of attribute ratings) higher tar with greater harshness, strehgth and tobacco taste. - A s1~hstant~ml p~rc~nt (45%) of consumers do not know Qr pay ~h=ention to actu~l t~r numbers. C~nsum~r~ in a blind tar level perception study either incorrectly recalled (16~) %he actual tar level on the pack or hadn't even noticed [29~) the tar level. - Consumers perceive low tar cigarettes as being less satlsfylng and harder to draw relative to full-taste cigarettes. Sources: 1976 Tar Level Dif£eren=e Study 1982 BARCLAY West Coast Qualitative Study ~D

5. If smokina incidence has in 9act declined sharply, what h~ causea the decline and wher~ laqe, sex, etc.) is ~he chanue occu~rinq? What about per capita consumption? Since 1970, the n~mber of adult s1~ers has actually increased, but not at the sa~e rate of po~ulatio~ growth. Therefore, incidence is down ~pproximately 4-8~ from 1970, depending on ~hich source~ are examined. Dat~ from the Roper Study and Switching Study are in agreement as to where the decline is occurring. ~ncidence ~mcng youn~ smokers (under 85~ h~s decreased slnce 1970. Hcwever~ incidence ~monq other age ~ro~ps ha~ re~ained relaeively constant. ~otal male and female smoking incidence do~s not ~how ~ decline. Rope~ Studies show rel~tivQly ~onsistent cigarette consumption over a i0 year period when ~i~l~kers w~r~ asked to report their average daily ciqarette cons~ption. Yet industry seles dat~ ~h~w that per capita ~on~umption has increased since 1980, when c~iculated by both industry sales~ U°S. Population and industry sales "--- smoking population. Reported Daily Cic~rette Consumption Number of Respondents 1-9 Cigarettes I~-19 Cigarettes 20-39 Cigarettes 40 or more Don~t Mnow/No Answer Total Smokers 9~ 1978 1976 1974 1972 1970 91~ 920 937 1001 969 969 I00~ 10O~ i00~ i00~ i00~ i00~ i0 12 ii 12 12 14 25 25 23 22 22 26 51 51 50 47 53 48 12 Ii 12 13 i0 8 2 1 3 5 3 3 1970 1980 Per capita Cons uiuptio~l (Cigarettes Per Year) 3,582 Smoker Per Capita COnsumption (Cigarettes Per Year) 9~185 3,684 I0~067 Source: &a 1980 Roper Study on "Public Attitudes Towards Cigarette Smoking and the Tobacco Industry" sponsored by the Tobacco Institute, MSA, U.S. Census.

6. DO we know what motivates smokers to quit? Start after The best data available on quitting behavior is from the Tobacco Institute studies conducted by The Roper Organization. In 1980, 31% of smokers responded that they wished to continue smoking, while 68~ expressed some degree of desire to quit. Ex-smckers were asked why thsy had quit smoking. The most £raqu~ntly cited reason was "heaifh problems" with "doctors a~vlsing against smoking" second. These two reasons have been cited as the primary motivations slnce 197g. The most increasingly persuasive ~rgument since 1970 is "government reports on the effects of smoklng on health" which was ranked third in 1980. Amonq current smokers, 39% re~or~ having stopped smoking for an extended period of time, that is, at least three months. S&xty-twc perce~t of smokers said that they had tried to quit smokinq and had qi%'e~ ~t ~p for as lo~g as a week. There is ~o spe~iflc data on ~hy smokers restart after h~ving quit. A related question from the Roper studies askec s~okers why they continued to smoke desptts health warnings. Smokers responded to o~e or more of the following items: "~ enjoy smokin~ and don't ~ant to qive it up' (38%~, "I'd like to quit, but I don~t hav~ the willpower" [37%), "I don't think s~okin~ is the only cause of the d~seases they warn you about" (30~), 'These d~y~, they say everything ~s bad for you so I might as well smoke" (Z2~), "If I quit smoking, I'd gain a let of weight, and that would be worse for my h~alth than smoking" {19%), "I just don't believe smokin~ is all that dangerous" (15~], and 'only heev~_ s~eking is dangerous and I don't smoke that much" (14~). 19B0 Roper Study un 'Public Attitudes Towards cigarette Smoking and the Tobacco IndUstry" sponsored by the Tobacco I~stitute. B&W Awareness and Usage Monitor, April 19~2 O O

7. ~%at are the Dossible ramifications to B&W and competitors of the "personality" research data? The Smoker Personality Study divides smokers into nine distinct personality segments. The Smoker Personality Study has shown that the nine segments have different smoking Debavior patterns, type/style and brand preferences. Given this information, it is possibl~ to provide infor]natiQ~ on the present o~ potential user's needs and asperations. This i~formation makes it possible Eor advertising tQ speak more directly to that potential user. Given a personality s~gment (in which ~&W wishes to Lmcrease its market share), it is possible to descrlbe the type/style of products they are pro-disposed toward and the brands which will be B&W'S maser competitors. With this information, it is possible to select the existing or potential new B&W brand which will most likely meet the type~style and personality needs of that segment. Thus, the function of the personality study is to provide information to i~crease the likelihood of positively influencing the consumer. This is done by targeting the product, advertising and brand personality at a parti=ular subgroup o~ ~he total smoker population. An examination of the nine segments shows that 48~ of B&W's smokers are concentrated in three segments which represent 37% ef a]l smokers. Philip Mo-ris' business is overdeveloped in two personality Segments where B&W is underdeveloped. R. J. Reynolds is overdeveloped in two difzerent segments which also represent opportunities for B&W, The personality data should provide insight into how to t~rget strategies against competition while minimizing cannibalization of the current B&W franchise. The cigarette industry is ~ mature market with a large number of brands. Future growth wili depend on B&W's ability to attract subgroups of competitive smokers. The use of the personality segmentation should provide a nnique insicht into the underlying personality feelers that motivate consumers and thus give S&W an advantage over competition. Source: B&W Smoker Personality Study, April 1981 &1

8. W at do we kno ut the "Ultra" smoker? What motivates him to smoke Ultra products? %~nat are the demographics of the segment? Does he want taste? Compared to total smokers~ "Ulzra" smokers tend to he! More ~emale More Married Better Educated More likely to be white collar/professional HiQher income More White Ultra smokers seemed to be motivated by at least four factors: i. COnCern for their 9erson@l health - perceiving that ultra cigarettes are safer. 2. Motivation to quit smoking and see the use o£ ultras as one step towards that coal. 3. Response to the cencer~s of other people about their smoking. 4. Desire to smoke new, more modern cigarettes. There appear to be at least two segments within the group of ultra smokers: i. Those who are satisfied with light delivery products and feel the taste is right for them. For example, 86~ of Carlton smokers identify carlton as e brand with best taste. These smokers recognize that thole are brands with a stronger taste, but %hey do not personally desire the stronger taste. 2. Those who are dissatisfied with light delivery products, Dut feel that they ought ta be s~oking an ultra. They are searching ~o~ the cigarette with strong taste, Dut • ~till ultra low %~r; Some of these u~ers exhibit a high degree of trial of new products and occasional use of ~ull flavor products. Qualitative Research, Brand Switching Behavior July 1982, Future 1982 A&U, Switching Study. Research: Model of Brand Choic~ will quantify the size of these two segments of "ultra" consumers and determine whether other ~egment exist. O C% -j

What hoes latest data show en share ~ositlon of qenerics? Where ~re areas of greatest strength? Share in these areas~ Nationally, generic market share continues to expand (.04 3rd quarmer 1980, .69 4bh quarter 1981 and .83 May 1982). Non-menthol accounts for 80% of this volume (menthol was introduced in June, 1981). In general, for both non-menthol and menthol Styles, this generic phenomena began and coat!hUeS to grow in the Northwest and Central areas of the country. Trading Area Share Trading Area Share Portland 2.6 Omaha 2.2 Seattle 2.5 Little Rock 2.0 Leuisville 2.5 Aitoona 1.8 Spokane 2.2 Mobile 1.5 B£111n~s 2.2 These ereas contribuhe 8.7~ of mi! cigarette sales but 24.6~ of ~eneric sales; almost 3 times the share their market contribution would suggest. Currently Marketing Research has fielded 2 studles deslgned to explore the motivations, purchase behavior and smoklng patterns of generic s~.okers. A presentation reporting this znformation is planned fcr mid-August. source: MSA O O

10. What is latest data on lights s~.nt7 What is current segment trend overall? W~at's str~nq/weak? Any GaDS in Seament? The most recent ~rcnds suqgest continued ~rowth i~ the lights segment. Over the pa~t 12 ~.onth period, the lights segment accounts for 31.41 share of market. Current year-to-date sales indicate the lights segment holds a 31.g6~ share. The current da:a and most recent forecasts 1~dicate a greater strengt~ in th@ non-menthol styles versus menthol styles. Additionally, Greater strength is expected among the menthol i00'~ r~lative to kings (a~ this time, the s~llt ~s about even). Longer ter~, both menthol ~nd non-menthol 100's are ~oreca~t to grow at the expense of k±ngs. There are no apparent gaps in the lights segment at thi~ tlme. Source: ~A &7 -J

Ii. ~at recent competitive new product activity do w~ see i~ test markets? In which~ Since January, 1981, 14 brands (4 line extensions) have been introduced in test markets. Of these 14 brands, only Bright (6 mg) and BLH Deluxe Ultra Lights [6 mg) h~ve been in the ultra category. The remalnlng i0 are in the low bar segment, ranging from 8 to 14 mq tar. S&H Deluxe Ultra Lights has been the only successful product introduced into test during this time period. Currently B&H Deluxe has a 1.1~ ~hare of market in the original test markets for the month of May. ~hJlip Morris has begun to roll out B&~ Deluxe Ultra Lights but ~s believed 5o b= h=wing manufacturing problems with the embossed paoka~e. It is interesting to note %hat F, Lorillard w~s responsible for 8 of the 14 prod~cts in tesZ market. Of these 8, two have been withdrawn from test (Maverick ~nd Bistro Lights) and the remaining 6 each hold less than a .3% sha~e in their respective markets. Source: MSA -J

12. What do we know abo~t the BARCLAY smokers? BARCLAY regular ~nd BARCLAY Menthol are comprised of different ~em~g~phic groups. Male Index tc NM/M Ultra S~gment F~male Index to NM/M Ultra Segment Under 34 Index to NM/M ultra seqment 35-55 Index to NM/M Ultra Segment Over 55 Index to NM/M Ultra Segment 52~ 32X 122 110 48% 68% 95 32~ 26% iii 69 45~ 44% 105 1O3 30~ iSS • The BARCLAY franchise appears te be composed of two separate a~d distinct person~ilty types: 1. Assertive, impulsiv~ and self-lndulgent (index 157) Boe~alI? dependent and self of{acing [index 125) • The assertive, impulsive and self-indulgent smokers are individuals who are confident, success oriented, manipulative and attracted to products which have: - strong i~gery - appeal to personal pleasure - deliver on th@ promise . Therefore, BARCLAY's strength in hh~s segment fs probably due to it's distinc%ive image (successful and discriminating) and the smoker's identificatio~ with "The Pleasure is Back." • The socially dependent and self-effaci~g sxokers are low in self-esteem and are: - ultra 10w tar smokers - group dcpcndent • Consequently, BA~CLA¥'s appeal to this seg~n~ is probably due to their identification with "99~ tar free." on. ~D (The Personality Study was conducted prior to BARCLAY Menth~l's launch) Sources: Switching StKdy Smoker ~erso~al~ty Study

13. Do ~e know why smokers b~ve re~ected~RCLAY after serious trlal? Source of Available Data TO determine the reasons for rejection of BARCLAY by former users, screening question~ wer~ added to a n~ber o~ recent l~rq~-scale surveys. From ± 20,000 interviews, 68 ~ormer BARCLAY ~ers were lde~tlfiee. These Were peopl~ who had smoked BARCLAY regularly for two weeks or longer but were now s~okin~ another bxand. These people were contacted by telephnne - yieldinq a s~mple of 54 - and asked why they ~topped smoking B~CLAY. For purposes of comparison, former users of Carlton and Merit Ultr~ were also contacted and asked why they stopped smoking C~r!ton or Merit Ultra. Findincs (See Exhibit 13-1) T~ste-related r~uus were the ones most frequently give~ for brand rejection• However, in a comparative sense, these reasons were less important for BARCLkY Non-Menthol (50z) than for either Carlton (67~) or Merit Ultra (79~). • FOr BA~C~Y Menthol, however, haste-related reasons were all-i~ortant. Seventy-elght percent cited taste as the reason that they stopped smoking this brand styles, with 45~ specifically cl~im2ng th~ product was boo stronq. (C~utiont BARCLAY Menthol sample consists of only 18 people), • About a third of the respondent5 gave physical discomforts (irrLtat~d throat, caused cough, hurt lungs, etc.l as r~asons for br~d rejection. ~ne extent to which this problem WaS ~eDtlo~ed v~rles little from brand to brand (~ARCLAY 37%, Carlton ~4~, Merit Ultra 32~). • Overall, these data do not s~pport the propositio~ that BARZLAY Non-Menthol rejectio~ is disproportionately strongly taste-related, if anything, the opposite seems t~ue. BARCLAY Menthol's rejection, however, does see~ ~Dre clearly t~st@-related. Nevertheless~ it should b~ borne in mind that the BARCLAY N~nthol sub-sample is very small (18) and its taste relBted re~ons for rejection at statistical parity ~ith Zhose for Merit Ultra ~nd C~rlton. Gn G~

14• DO we have a product problem with BARCLAY Menthol7 The consumer satisfaction with the BARCLAY Menthol product depends upon the taste expectations of the target market. Zmokers have evaluated BARCLAY Menthol as a standoff with other ultra low tar b[dnds. S1[~k~rs who currently smoke a mid hi-fi brand prefer Salem Lights over BARCLAY Menthol while full-taste smokers exhibit directional preference for BARCLAY Menthol over Salem Lights. Thus, the azswer to this question depends in part on our view of the potential source of business for BARCLAY Menthol and its key competitive brands. The relevant product tests ere automatized below: B~CLAY Menthol KS • in Original testing (December 1980), BARCLAY exhibitcd a marginal win vs. Salem Lights among full-taste smokers and a standoff among mld hi-fi smokers• • A monitor (May 1981) vs. several ultra products resulted in standoffs among all smoker groups (~ull-taste/mid hi fi/ competitive, etc.). A monitor (March 1982) vs, Salem Lights resulted i~ shandofE a~ong full-taste and a loss among hi-fi s~okers. There have been no product improveiL~ent tests• Menthol loading was inc-eased from 0.65 to 0.70% in November, 1981. • Note that Salem Lights KS has gone down in tar and up in m~nthul. BARCLAY MEnthol 10O • In original testin~ (November 1980) BARCLAY exhihifed a direetzonal win vs. Salem Light~ among full-taste smokers and a dlrecti0nal 10ss among mid hz-fz smokers. • A mon£tor (May 1981) r~sulted in ~ ~t~ndoff relative to several ultra products among all groups except Salem Family smokers (marginal loss). . In a ~ovember 1981 monitor, BARCLAY exhibited a standoff vs. Salem Lights among full-taste smokers and a significant loss among ml~ hi-fi smokers. . There have been no product improv@ment b@sts. • Note that Salem Lights has gone down in tar and up i~ menthol. Seurcel B~W Product Teats