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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 Of these 8, two have been withdrawn from test (Maverick ~nd Bistro Lights) and the remaining 6 each hold less than a .3% sha~e in their respective markets.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