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1984 KOOL OPERATIONAL PLAN TABLE of CONTENTS PAGES N I. EXECUTIVE SUMMARY II. MARKETING OBJECTIVES and STRATEGIES A. Advertising B. Target Audience/Media Music Sponsorship D. Promotion - National - Test E, Product F. Packaging G, Tan'a Deluxe Research J. Spending Principles K. Rec~mnended Budget 5 I0 14 16 17 22 33 34 35 41 48 51 54 III. SALES and SHARE FORECAST 55 IV. SITUATION APPRAISAL 57 V. EXHIBITS

1984 KOOL OPERATIONAL PLAN 6 EXECUTIVE SUMMARY Overall Narketi~ - Achieve 7.23% SOM, 43.4 billion unite in 1984 - Stop XOOL share decllne by 1986 Markotin Strata ins Continue the revitalization strategy begun in December, IDR2, with numerous strategic and executionel improve- ments discussed later. Reduce spending to minimum amount necessary to sustain reference trend until these improvements are developed and validated. The thrust continues to be use of the music campaign, music sponsorship, and ancillary pro- motion to revitalize KeeL product and mmoker images thereby increasing inflow from historical sources. We are not attempting to repositlon KOOL, but rather to ra-eetablleh its relevance to smoker groups historically most receptive to the brand. As Convince smokers that, at any tar level, KOOL is the epitome of smoking satisfaction and will satisfy their need for an attractive, contemporary image. This is possible because Keel provides the most menthol re- freshment for a taste sensation superior to any other cigarette, menthol or non-menthol.

- 2 - Advertising should symbolize both the best cigarette (quality} end a contemporary image of self-assurance, confidence and control (cool). B. Tar et Audience Prime targets are the young adults, males and females, in that order. 1984 REV weights are based on KOOLts 1975 demographic profile adjusted for the demographic ahlfts. 1984 XOOL Normalized REV Weights* l-Ill ZV-___~V Total Men 9..! 12_3_? 1l.._~5 Under 25 153 208 193 25-34 100 136 124 35+ 69 94 86 .ome____~n 6~2 9_! s_~3 Under 25 149 204 191 25-34 58 78 71 35+ 43 59 53 Total 77 111 100 *Detail of REV weight derivation in Exhibit C. Music S nsorshi Continue wltl. music events during 1984 to extend our advertising property with the objective of mass,trebly increasing KOOL SOM. Music events shall pay for them- salves and their format shall emanate directly from the creative strategy (young, contemporary, etc.). U

! N - 3- D. Promotion Primary role is to generate c~petitlve trial for total EOOL Family and to profitably generate incremental short term volume. Extensive testing will occur during 1984, lnolu~lng a relaunch program with incremental pro- motion support. Product Achieve significant preference over Salem and Newport among the franchise and primary inflow sources. Attmpt to reduce harshness on LIGHTS and ULTRA while retaining the Keel character. F, G. H. Initiate exploratory packaging to co~unlcate the epitr~e of m0oklng satisfaction across all styles, ~onaiatently with XOOLeo young and cont~porary creatlva objective. Changes 8hal~hoaover time as to reduce granchiJe ap- prehenaion~.o~Lrf'product changes. ~Tle Ten'...._8 Launch a 10-unlt pack in areas with no tax penalties for miler than 20-unit packs. Five styles (Parent, KS, and 100's; ~llds KS end LIGHTS KS and 100's). Minimize premium cost to consumer while mainta%nxng variable margin. Deluxe In conjunction with exploratory advertising and BBT-level spending, develop and test market strikingly improved KOOL packaging 1) as a replacement for current packaging, and 2) in box form as a line extension.

- 4 - F~ploretory creative tasting, ten'm packaging and role model mtudiem (1983). Information needs for 1984 fall into creative, promotion and line extension research. J. Remottrce Allocation Grams Media $ 47.6MM Promotion Ongoing 13.2 Testing 1.9 M&P 7.8 Total Advertising and Promotion $ 70.SNM X. S endin Prtnc£ lea Geographical allocation by family BDI! magazine list defined bF RZV weighted CPM; style allocation ts 30t Parent, 30t LIGHTS and 40% Family. S¸

- 5 - II. MARKETING OBJECTIVES - Achieve national MSA share of 7.23 with total volume of 43.4 billion units in 1984. Stop KOOL Family market share decline by 1986 or earlier. Consumption share trend in 1984 should index (94) or better to 1983 (consumption reference trend 94). Regain menthol category leadership long term. MARXETING STRATEGY Continue the revitalization strategy begun in December, 1981, with numerous strategic and eotecutionel improvements dis- cussed later. Reduce spending to minimum amount necessary to sustain reference trend until these improvements are developed and validated. The thrust continues to be use of the music cam- paign, music sponsorship, an~ ancillary promotion to re- vitalize KOOL product and s~oker imagery thereby increasing inflow from historical sources. We are not attempting to reposition KOOL but rather to re- establish its relevance to smoker groups historically most receptive to the brand. A. Adverttsin~ Objective TO creative an image that will motivate the adult target audience to start with or switch to the KOOL Family.

- 6 - s~ateg~ Convince mmokers that, at any tar level, KOOL is the epitome of smoklng satisfaction and will eatlafy their need for an attractive, contemporary image. This is possible beoause KOOL provides the most menthol re- fresh|Bent for a taste aensetlon superior to any other cigarette, menthol or non-menthol. Advertising should symbolize both the beet cigarette (quality) and a contemporary image of self-assurance, confidence, and control (cool). 8trots ic Pro err For the foreseeable future, KO05 will employ pan-racial music sy~boliBm/imagery to co~unicate the strategy. Executional~ In the main, executions to-date have been off-strategy. It is felt we do not have the optlmum combinatlon of visual aMmbollsm, copy, and layout. An exploratory is underway now and should continue to comRunlcate the product and imagery benefits of KeeL stated above in a meaningful and compelling way to the target audience. Specifically addressed will be: - 8moking satisfaction from KOOL'e superior menthol refreshment. Attractive, contemporary image to young adult Whites. Cool The Best

Creative Allocation Strateq~ 1., recommended. Allocation of styles to ads is arbitrary as no data exists on the co~unication effectiveness of "family" versus single style execution. In 1983w the allocation scheme was 20% Family, 30% Parent only, 301 LIGHTS only, and 201 ULTRA only Lv "*~ ~ (based on real dollars). In 1984, it is proposed /~ ,J .F"- that dollars allocate 40% Family, 30~ Parent only, ~1 /~ L./ 30t LIGHTS only and no ULTRA only. Tip-in teat indicated that pack/product notice was greatest st 40% unaided recall with the three pack "bay window" configuration in George d// Tenor Sex. The ad generated 27% more interest ,~/ in buying EOOL. J ~/~i,~! ~.~. v/.~' One camDalgn should be continued for all ethnic "r'~u s w t • ac mu~c~ans on ~k~ "'~-','~+ "~Ia,~ White m~,ic~an, on1 ~n ,net c ~.. To show KOOL am a brand for all people, more emphasis 1 , is needed on interaction of White musicians with EOOL ~,L imagery. - ~,'~ /. Recent TAT wor) indicates that visuals featuring ~'/,v. ~. % White musicians were leas likely to be associete~ ~" ~$ ~ with KOOL by Wh .re respondents than Black musicians V" exhibit. Blacks named KC~ as best brand fit with visuals more frequently ~an Whites did. • /As a creative ex .'ution, Tweed (Black pianist) < is highly interpretive among Blacks, rather than Whites.

- 8 - Rationale ~or• have been •dded to the creative ob)ecttve as they are a historical source of FOOL strength and are being dlsproportion•tely leveraged now by Newport, Salmu, and Marlboro. There is no evidence that swltching in must rise before starting. KOOL h•d ~ •nd erroneously walked away from this key /source of business. Smoking satisfaction and attractive, contwnporary, imagery •re broadly held consumer needs, particularly among young adults. Support for this exi•ts in numerous i~•ge/•ttitude studies done over the years end in the marketplace experience of Marlboro, Camel, and Newport. • i,,,'t~,~ i ' ~'~ /, The KOOL •tr•tegic equity is its image of •trength and heavy menthol delivery supported by its real product character. Implicit in the strategy is a judgment that various coneuunication devices can define these attributes positively leaving a net impression that the most menthol delivery means the belt - taste, satisf•ction •rid refreshment., e '~/~ ,, .I ,~%.~ t:~.~,,r 7, ~,. "" 17/5 J~'~z- ", ~.,,.,,/ ~' ~ - ..... KOOL deviated from this strategic promise between 1972 •nd 3981. Keel sh•re decline began durSng thi• po~Lod along with Newport's •scent. Smok•r inflow erorsion W•S the cause of this ph•no~onon, both switch•rs in and Itarteri. It h•s been concluded that the failure to positively reinforce the KOOL product heritage and legitimize menthol smoking for young •dult m•les caused this inflow decay. The perceived qu•lity of KOOL also decayed during this period. A creative stance which clearly states "the best" is believed necessary to correct this. Being perceived as "cool" is also supported by image rese•rch as an important consumer need. It h•s elements cf control, self-assurance, being a winner, fashionable, and confident. These needs are desirable per ae and poiitlve translations of • Black heritage/ image.

- 9 - J / , ,I: Strata Ch na e Rationale f'" f /(~'~ ~ ....... / The change from "the e~itome of menthol satisfaction" to the broader "eptt~ne of smoking satisfaction" recognizes the conc/~uaion that XOOL'a beat source of incremental share/is through menthol segment expansion. This wee true in/the past and is felt to Me true today given the rugged image of KOOL and the different needs/ attitudes of competitive menthol smokers .... Ex loretor Rationale ~~ ~-' % ~r ..... ~, - The executional exploratory is ~ustified by the following: r Inadequate image change produced by current copy. White smoker share erosion. Continued inflow erosion. Aging franchise. Key negative Image shifts (e.g., less for someone llke me) Weak product benefit copy test playback. -Judgment and TAT feedback that current visuals are too old, Black, intellectual, and not cool. Overall ", relevance to target audience is felt to be lacking in relation to the quick, easy identification with Newport / and Salem. No evidence exists that the cerebral process of understanding, respect, and admiration for the serious, mature Jazz musician happens ~m0ng ou~ target audience. L/ FamilY Advaztisin~_Rationale One campaign for all tar styles and races is desired to avoid image confusion or dilution and to ~aximize synargy. Moreover, this strategy has been producing adequate trial levels for all styles in 1982. The elimination of ULTRA only executions is due to the old- fashioned image of the Ultra segment {1983 image study) which may harm the total brand. Secondarily, this segment is not vibrant and is most contradictory with the KOOL heritage. This style should seek its own level in the marketplace until KOOL prospects feel the need to switch tar categories. Conversely, heavier weight on Lights is valid due to the fashionable,

- 10- popular image of this segment and its greater proximity to the needs of XOOL prospects end the heritage Of the brand. Nedia Tar et Audience Provide advertising support in media vehicles most likely to reach prospects who can affect: - Inflow reatorat~o~among XOOL'e historical source of strength, tha~starter market. - Stabilization of national market share d~el-14te. Strat le~ Tar et Audience Base 1984 target audience REV weights on KOOL'a 1975 demographic p~'oflle adjusted for total smoker de~o- graphic population shifts 1975 to 1984. 1984 Keel Normalized REV Welqhta* I-III XV-__.~V Total Na__~n 9__!1 12__! 11._~S Under 25 153 208 193 25-34 100 136 124 35+ 69 94 86 women s__2 9~ e__~3 Under 25 149 204 191 25-34 58 78 71 35+ 43 59 53 Total 77 iii I00 *Detail of REV weight derivation in Exhibit I.

- Ii - Media Selection Select national books based on cost to reach REV weighted audience. Continue cinema advertising accordin9 to current guidelines. - Use paint with 30 sheet as basic local media for wldescale a~reoess generation. t ~~ • new. of ..pport in major :,rket, with Black media. Spend at fair share level in military specific national and local press. Provide coverage (based on local KOOL Family sales) only after all other media needs have been fulfilled (above five items). Based on reco~ended working media budget ($36.5MM), KOOL style support in 1984 is as follows: t of Dollar Dollars Amount Family of Products 40t $14.60MM Parent 30% 10.95MM Lights 30..._~t 10.95~ Total 100% $36.50MM Priorities dtillze media categories to reflect the following priorities: 4/C National Print Cinema 4/C Out-of-Home ROP if budget permits

- 12 - Media priorities by style should reflect inflow potential of: • ght./ I"2 :'/ in that order. / ~/// Tar at Audience RatAonale / - Continued net negatSve/f~O~ for KeeL results from deteriorating inflow for the brand. Total Total Inflow Outflow Ne_.~t 2980 -26.2 1981 -24.2 1982 -19.7 Source: Switching Study Share of Smokers 6.8 6.3 6.2 Although current male smokers under 25 have slipped draittcally since 1979, young adult malei are an appxopriate target audience for KOOL. • Indexed to menthol, KOOL ia heavily ikl,a4 lale {153) and under 25 {127). Fifty-eight percent of current Keel iuokers are male (with no change from 1981) and 32t are males under 35.

- 13 - \ ~le starters under 25 indexed (95) on a fair ~hare basis in 1982 versus total smokers. I~X)L'a share of Black smokers has slipped from 48~ ~n 1979 to a current 26.3%. KOOL must continue ..... (Source:-B/1~.-k"Smoker Study) Caution: Methodology of studies varied The recommended REV weights are based on KOOL's 1975 demographic profile because: 1975 was KOOL's highest share year (10.18% SOM). This profile represents KOOL's greatest period of strength. The profile has been adjusted for changes in the total ~,//smoker population demography tc reflect the changing ~ ~profile of the cigarette category. The REV weights ~ ,~ provide coverage of all smokers in the cigarette ,/ ( i i~ category, to recognize the potential of the Lights /and Ultra styles to attract females and older smokers ,) /due to the profiles of the categories in which they -3' L compete. Media Rationale - Limited media budget recognizes/emphasizes most cost- effective, efficient reach to target audience. . - Four color in-home continues image revitalization ~>~'" and can be effectively REV weighted. - .~A~ly~gher cinema CPM is offset by extreme young adder skew of movie-9oing audience; ad recall OVer six times better than our next most efficient "~ media; and by its reach to very low readership quintiles. - Four color out-of-~ome is an economical means of reaching nearly any target audience. Paint units, on judgment, overcome clutter. Thirty sheet supports widespread awareness.

- 14 - National/local split provides reasonable local media interaction in major markets where we are developed and thus defending share. K~L Style Allocation Rationale The reconmended style allocation recognizes brand Style needs and strengths in relationship to category growth segments. Ultra only executions are not recommended d~s to the possible image rub off to the Family (old fashioned segment}. Furthermore, the style is contradictory to the Keel heritage and its growth will occur only when KOOL prospects seek a tar category change. CI Music $ nsorshi Ob_~sctives Measurably increase KOOL market share via: Enhancing the awareness and .image of ](OOL by favorable association with popular music, artists, or venues. Reaching low readership quintile with a EOOL message. Publicity acquisition To build/maintsin equity in a long term marketing tool we may need to rely more heavily upon in the future. t

- 15- - Design and execute a sponsorship program that precisely fits the ~OOL creative strategy. Epitome of entertainment • High quality Cool Attractive, Contm~porsry • Relevant to young, adultWhite and Black audiences (engender positive attitudes about KOOL). Construct program such that all operation costs (fees, overhead, free events/donatlon8, stage Identification, and artist relations) are covered by conservative revenue estimates. In other words, no cost of operations hits the brand budget. Media, promotion, publicity and production expenses will be covered as brand marketing costs. Change performer mix from currant old, Black, Jazz skew to younger, White, blend of Jazz, Pop, Rock and Rhythm & Blues. Avoid extremes of Classical or Country. Quality and class are to be maintained. Change name of event from KOOL JAZZ Festival to more accurately reflect contemporary program with pan- racial relevance. Aggressively seek o~t revenue enhancers/message extenders such as sale of broadcast rights, rocording rights, and merchandise rights. Rationale While not measurable to-date, Judgment suggests that s~e positive effect of the music sponsorship program must accrue to KOOL over time.

- 16 - The long term marketing value of such • program can be significant. Given the above, the program should be continued; however, 1983 operations cost Is estimated to be $3,119,000, net of revenue, In addition, $4,343,000 is being spent on media, promotion, publicity and production. Given our declining market share and budget pressure, it is felt to be unacceptable to extend this situation into 1984. All avenues should be explored to eliminate costs fro~ changing pro- moter to more popular entertainers to fewer cities. PrOgram name and content should depart from the rigid Jazz identity to communicate positively with younger, White and Black target audience. There is no com- pelling reason to retain the Jazz-specific identity. Data and Judqment suggest it is considerably off- strategy, and it may be defining our ad campaign imagery in the minds of cons~ers. We see no need to attempt to redefine the term Jazz for people. D, Prc~otlon Overall Objective - Generate competitive trial for all styles. - Profitably generate short term incremental voltnue. Overall Strategies Any incentive on KOOL should be delivered with brand image messages and/or should directly e~nanate from the brand image. Trial incentives whose cost is in excess of variable margin will only be used after successful in-market testing.

- 17 - Short term volume strategies will be used to meet competition and maintain share. As long as the cost of these strategies iS less than variable margin, they need not be tested. Permanent package display and SMP presence will occasionally be used for purposes beyond promotion incentive deliver~ These cannot and should not be rationalized as purely promotional expenses. Duo to budget constraints, 1984 promotions are limited to the following proqrams: NATIONAL PROGRA~4S IO4DP (including City Jams) First Quarter SMP Van Program Military (including Super Nights) Third Quarter SMP/Music Sponsorship ProRotion support a) KOOL Market Develoume~t Program Cost: $5.6MM Payback: 1.4 years National Theoretical $9.0MM Tactics The program will continue in the current 24,000 store universe with incremental call frequency, 90/180 displays, buy 10/Get one free retail offer and package t~pe-on trial incentives. EOOL City Jams will also continue. Rationale The program has proven successful at slowing share erosion for KOOL end all other B&W brands (Exhibits ~

- 18 - Expansion is not proposed due to budget constraints. _ The program currently covers 63t of the total universe. Expansion would force the brand to do nothing but KMDP, destroying thus our strategic need for other promotion testing. ROOL CitJX_~_~_% Cost: $1.71~ Tactics Employ one and two-day free music events as a continuity program in conjunction with com- munity organizations and Black media in ten markets. - Distribute samples as a trial device Opportunity to sample prime target while communicating advertising message in an image consisten~fashlon. Cos___t_s KNDP Retail $3,321.6M Consumer Incentives I, 259.0 l~ateriala & POP 922.0 Con~nunlty Involvement 175.0 Subtotal $5,677.6 RCJ Sampling Subtotal ECJ Operations & Expenses $ 500.0 Total $7,377.6

- 19 - b) ~ter $MP Cost: $1.7MH Payback: ~,,,, U'r 30 Tactics 19 months Delivery of 6.SMM ~F lighters with purchase of two ~cks of KOOL. Offer is supplemented with the three XJF poster self-liquidator on back on blister card. Rationale Lighters provide one of the better trlal incentives 9.SMM lighters were ordered for the fourth perlod i%83 ~P as trial incentives. This promotion was cancelled due to budget cuts in 1983. Due to budgetary reductions for 1984 3.0NM llghters will be used in other programs needing support. Cost_._..~s 6.SMM Lighters $ S|?.2 ($2.5HH paid in 1983) Temporary display payments 675.4 Materials 231.0 Deal Assembly (4.03/deal) 195.0 Total $ 1,688.6 Contract Displays 3,875.0

- 20 - c) KOOL Music on Tour (Van Program) Costz $1.2MM Tactics Continua current KOOL Music on Tour Van Program across U.S. with the three currently existing vans as a sampling devise and as non-traditional media. Vans will operate on regional plan with one van deployed to targeted beach program on East Coast during June, July and August. Program will include sampling, games and branded premium giveaways coordinated by the disc jockey as he plays cont~porary hit music. Rationale Van intercepts target audience at grass roots level with e sound and motion, physical, party/ promotion package which can be tailored (with appropriate music) to the crowd present. Vans create a unique intrusive advertising/ media mileiu with more depth and scope than print and point-of-purchase advertising provide. Van has gained a high rate of acceptance and recognition in a short time end has significant growth potential as part of the music campaign. - Prime prospects will be effectively reached during the sunuuer along the Eastern beaches. cos.....~t (:..,.,, .- 3~3 Overhead $ 259.9 Total Sampling Cost 597.0 Audit 50.0 Depreciation 39.0 Premiums 242.0 $1,187.9

- 21 - d) Militar Pro rams Costg $400M Tactics Implement aggressive pre~nium end incentive tape-on progr~ of branded, perceived high value items for packs, multl-packs and cartons. Rationale Segment is a haven of young adult male starters andls projected to grow in 1984. Share/volume decline for KOOL in the~ilitary was leas than the national decline i/spite of gezlerlc products' growth and resulting heavy competltive proauotiona. Generic market share is increasing steadily, making market more price sensitive and deal conscious than ever before. KOOL Su er Ni hts Cost: $197M Continue to offer • KOOL Super Mighta concert progr~ on a amaller scale due to budgetary constraints (20 shows versus 40 during 1983). Progr~ includes concert specific publicity, P.O.P., on product incentive items, concert advertising and ammpling. Rationale Program reaches an audience that il highly skewed • young adult male and Black, our prime target. Assisted by this program, volume erosion in this market ha• been less severe, with military con- tributing 3.3L of 1982 total KOOL volume versus 3.1a of total volume in 1981.

b Cost___~s Ongoing Incentive Items and POP $ 400.0M XOOL Super Nights Promotion & POP 50.0 Incentive Items 80.0 Publicity 25.0 Sampling 42.0 Sub-total $ 59?.0 0perstlons & Expenses Total Military $ 922.0 e) Music S nSorshi Pro r~m or Third after SMP Cost= $1.4~ These monies will be used for proaotional support of a music program if one can be developed that pays for itself. or Develop • continuity event consistent with brand L~ge to induce s~okers to smoke the KOOL brand styles. 1984 TESTING ELEMENTS A amJor tasting effort will be underway during the ' year to Justify incremental expenditures. a) ~omestle~on-Military - ~ade/dist=ibution programs DOT program Temporary display program

- 23 - e Consumer Trlal/Sampllng Events Direct Mail Vending Continuity programs Merchandlslng/record club tle-in Cross Ruff with major manufacturer Chance game {pending BATF end/or legal resolution) Relaunch Program b) Militarz Store intercepts (product) Store intercepts (premium) 5 pack/mini-carton Merchandising 1984 Testinq Elements a) Domestic~on-Militar_~ Trade, Distribution Programs Objectives Increased volume at trade level.

- 24 - TactiCs 1. TradeDistrlbutor DOT Pro ram Cost: $25.0M DOTS are awarded point values and placed In XOOL cases and on Keel carton. Dots are collected and zedemesd for prizes from s prs-selected catalogues- Distributors collect "dots" In cases, retailers punch out the "dot" from a carton flap. .J Rationale - Provides additional incentive for the trade to increase order base. - Pulls product through the warehouse end into the store. - Offers additional incentive for store Manager/ Distributor to focus on the KOOL brand. 2e Tam rat Dis la Pro ram cost: $~s.~ ~,~P' ~*) National Theoretical~ $3.0Y~ for six months Increase frequency of temporary carton display placement to every eight weeks for six months in ~-C outlets. Ratlonale - B&W does not have its fair share of the carton fixture space due to RJR'S 50t space clause. - Anticipated new B&W brands will force marginal established B&W styles off the shelf, - Distribution is indispensable for share growth.

- 25- Cone~r Trial Sam fin Events O_~ectlveJ Gain incremental competitive trial. Tactics Direct Mail Coati $233.0M This promotion targets menthol and non-menthol smok- ers and an unknown-smoker Slat. Consumer receives one of three test offers (free carton, $5.00 off or $3.00 off a carton) for any style KeeL. A subset of free carton responders receive - along with their free car- ton coupon - another bounceback offer for three addi- tional coupons ($3.00, $2.00 and $2.00} for subsequent purchases of KeeL. Acceptance of this offer requires two proofs of carton purchases (UPC codes~ Rationale - Direct mail il a lUCCellfUl tOOl to gain competltive trial. Six month net conversion of 6t was achieved with the Jukebox teat during 1982. - This test attmpts to reduce brand coati for future drops. Colts ($000) Product $150.0 Printing 50.0 Postage/lettershop 33.0

- 26 - o 20 ~Promotion Coat: $50. OM Tactics A pack facsimile is introduced for every 10-20 KOOL packs in the vending =achine. The fmcs4,-lle pack, instead of cigarettes, has a prize (lighter, mini- calculator0 etc.). In order to conform with lottery laws, the cash amount invested by the consumer is re- turned in the promotion pack. C~unicatlon of the prcmotlon is through polnt-of-sale decals which also contain alternative entry without purchase. Rationale - Vending represents 14t of KOOL volume - Vending volu~e has been decreasing over time. - Im~edlate consumer gratification p~alls maok~s to vending machine and offers another reason to pull the KOOL lever. Continult Pr rams - Induce repeat trlal/repurchase aBor~ competltlve smokers. - Increase brand identification. i

- 27 - l, Cross Ruff with Ma~or Manufacturer Costs $75.0 XOOL packages act as a vehicle for coupons of another manufacturer |magazines, beer, adult snack foods (l~anut|)e lighterm~ blank cessette|e etc.) |elected with the aid of the 1981 SPS. For the to|re XOOL will pay coupon handling charges and Joint sponsor will rsdemu coupon. Rationale - Provides e consumer incentive with low cost to the brand. - Stimulates repeat purchase. - The brand benefits £rom the implied endorsement. 2. Chance Game Tactics On pack plecmuent of game of chance with mass appeal. (Pending BAT¥/legal resolutions). Rational____._._~e A successful event in other categories which have maintained their image and quality. - Anticipation of competitive reaction to the Simon project. ~econ~endation - Pursue BATF for position reversal. Proceed with formal discussions end gain resolution.

- 28 - 3. Merchandisin~ Costs: (included In third quarter, 1984 SNP) Tactics Development of KOOL budget items (clothing, towels, /~ etc.) to be sold through retail chains by Licensees / and/or through a cataloque posted at POP or through media. Also attempt to tie-in with a record club. A coupon for a free album with purchase of one would be inserted in FOOL cartons. Rationale - Proliferate brand identification - Intercepts target smokers in their llfeatyles. cw~F - The record club dimenalonallzes~advertlslno property. Relaunch Proqram Objective - Increase volume and share for total Family - Grow BDI and/or CDI in low development markets J Tactics Increase local/regional media in a low BDI market to achieve 100 SOA/SOM. Utllige promotion testing elements in a low development market and evaluate the synergistic effects of: Distribution/retailer incentives (DOT program) Trial incentive (lighter offer during the first quarter SMP) Timing: January-March, 1984 Increase shelf space (temporary display program)

- 29 - Ratlonale Continuity event (free lighter with carton purchase) Timing: May, 1984 Increase shelf space {temporary displays) Continuity event {third quarter $HP) Timing: July, 1984 Low development markets offer a growth opportunity for the brand. Opportunity to expand the menthol segment in low CDI areas Opportunity to gain from menthol competitors Over 50% of KOOL's inflow are from the non- menthol segment Intense push/pull activity in one trading area will provide insight into the growth premise stated above. Incremental national media is not recon, uended due to high cut-in charges. .: Costs ~Recommendation mtands for San Fzanci|co TA #57) Promotion details are provided in the non-military promotion testing section. Costs have~een included in the previous promotion sections. DOT Program $ 25.0 T~uporary Displays 75.6 Free Lighter with 2/packs (cost within --- first quarter SMP) Free lighter with carton (c~;~J~ 117.5 Continuity event {cost within third --- quarter 1984 SMP) $218.1

- 29 - Continuity event (free lighter with carton purchase) Timing: May, 1984 Increase shelf space (temporary displays) Continuity event (third quarter SMP) ° Timing: July, 1984 Rationale - Low development markets offer a growth opportunity for the brand. Opportunity to expand the menthol segment in low CDI areas Opportunity to gain from menthol competitors Over 50% of KOOL's inflow are from the non- menthol segment Intense push/pull activity in one trading area will provide insight into the growth premise stated above. - Incremental national media is not recommended due to high cut-in charges. Costs (Recommendation stands for San Francisco TA #57| Promotion details are provided in the non-military promotion testing section. Costs have been included in the previous promotion sections. DOT Program Temporary Displays Free Lighter with 2/packs (cost within first quarter SMP) Free lighter with carton (~;~i~ 3~) Continuity event (cost within third quarter 1984 SMP) $ 25.0 75.6 117.5 $238 .I

- 30 - b) 1984 Testin~ Elements - Militar~ - Defend EOOL franchise in a price-sensitlve and highly promotion-orlented segment. - Generate competitive trial among starters and competitive smokers. Extend an image message at point of purchase relevant to the young adult male skew of thls market. Testing in 1984 acts as a filter for proven successful programs to be fielded in 1985. Tactics lo Test a store sale intercept offering a fzee carton of KOOL wlth the purchase of two cartons in 5% of the cc~missary universe or approximately 10 stores. Part-time sales help will approach conam~ars as they purchase off the carton rack, muphaslzin9 competitive mnoker8. Cost: $130,000 National Theoretical: $2,154.5 Payback: 1-3 months Timing: January-March Rationale Program has been used on McGuire AFE with an increase from 15.0q to 19.0% SOM. Program rewards franchise, but at lesser levels than couponing and voluntary price reductions. Generates incremental volume in letail outlet(s) which sell the bulk of carton volu~e.

- 31 - 2. Test a store sale intercept offering a branded premium with the purchase of two cartons in four naval exchanges and/or army/elf force commissarles. Part-time sales help st store level will dispense pr~i~s with proof of purchase. P.O.P. material will advertise the offer. Cost: $45,000 National Theoretlcal: $10,098.0 Payback: 1-3 months T/mlng: April-September Rationale Intercept sales are proven volume generators and can be geared to paydays for best results. Rewards franchise and appeals to competitive smokers as items are perceived as having high value. 3. Test a mlni-carton (5-pack) deal in 150 main exchanges and/or troop stores advertised as an ongoing bargain value of Buy 4/Get i Free. Cost: $50,000 National Theoretical: $61,380.0 Payback: 1-3 months Timing: January-December Rationale Manufacturing will have capability to produce mlni-carton January I, 1984. Addresses young adult smokers where most of them buy. - Offers perceived consumer value at no additional cost to the brand.

- 32 - Lessens transaction cost of a full carton between paydays for young adult segment. Military is e captive young adult male starter market and is projected to grow again in 1984. 4. Test a Keel cash program on one major training base. Consumer can collect 10 KeeL packs and redeem them for a $1.00 "coupon" good for 1) base theatre movie admission~ 2) any music related item sold in the base exchange (stereo equipment or records) or 3) a future purchase of. ZOOL in the exchange. Part-time sales help will exchange packs for "coupons" one afternoon approximately a week before payday. Costz $25,000 National Theoretical: $27,515.0 Payback: 1-3 months Timing: September-October Rationale - Should appeal to young,adult audience which is typically strapped for discretionary Incus the week preceding payday. - Image tie with music and entertaiDment r~ins intact. - Will generate trial and serve as a continuity program. Costs Store intercept (product) Store intercept (premiumP Mini-carton/5-pack Merchandising Total $130.0 45.0 50.0 25.0 $250.0 J

- 33 - Z, Product Significant preference win against Salem and Newport among our franchise and pr~ary inflow sources in aggregate. In most cases the latter is the Salem, Newport and B&H Nenthol families. Non-menthol inflow source te|tlng is being evaluated. This objective applies across all K00L styles. Determine if preference objective can be met while reducing harshness attribute to no higher than parity with competitive brand sat. Monitor all XOOL styles except Regular, Box, and Milds lO0's once a year to determine if the objective is met. If not, initiate product improvement. Begin product improvement on LIGHTS and ULTRA immediately to reduce harshness. Test with and without tipping color exposed. Rationale K00L LIGHTS and ULTRA convert trial to regular use at very low levels versus competition. Past blind product tasting suggests harshness attribute as the possible reason. Tipping color could also contribute.

- 34 - Fo Pack~g To communicate the same attributes as the KOOL creative strategy, provide a consistent trade~ark presentation across styles, and clearly distinguish between our Full Taste, Lights and Ultra styles. Initiate a family package redesign project. Program design changes over time so the franchise does not detect. Rationale KOOL packages do not say "epitome of menthol." Newport and Salem packs stronger and richer than KOOL. KOOL packages are not as attractive as cor, petltlon. We are too b~and and lacking in color, style and character. - XOOL trademark varies in character/communication across styles. - Tar distinction across KOOL styles unclear.

G, - 35 - XOOLTENS COst: $1.~ (including non-brand specific). expense is $811M. 1984 KOOL fmnlly incremental volume KOOL family competitive trial • Leaderehipposition in an industry packaging segment Strate~ Launch I0 unit packaging for $ Keel styles - Keel Filter Zings (55S) - Keel Super Longs (15q) - Keel Mllda Zings (151) - KeeL Lights Zings (7.5~) - KeeL Lights 100'8 (7.5q) Price to maintain current variable margins and to a~ minimize/eliminate perceived price premium (50%-55~ of 20's pack price). Target vending purchasers and pack purchasers - Lower income members of Keel target audience Blacks (especially F~IDP markets) Young adults Other low/fixed income smokers - Style motivated/fashionable female - Occasional user (indirectly) Positioned as a less expensive and more convenient way to purchase XOOL, consistent with the Keel creative positioning/strate~ (KeeL, in any packaging, i8 a brand to be proud to smoke). - Conduct preliminary research to help determine most leveragable positioning variable (i.e., image, convenience, transaction cost) /0/ '/

B Tactics Use current lO's packaging (including soft packs, 200-unit cartons, and 6M cases) modified to include ~IPC, name descriptor "tensw and KOOL graphics. Distribute in 20 states with 10'e tax stamp and no tax penalty - 61.22t CSP (See Exhibit 4a and b). - Available (on price list) throughout that area - Vending: concentrate on high volume machines; provide column adaptors at no charge - Use zip coda/census tract data along with FRS data to identify target areas - Explore non-traditlonal outlets, e.g., bars, restaurants - Estimated distribution 40% ACV in market area, 25t ACV all U.S. - Focus first on KMDP areas as well as other pockets of Black population Introductory tens advertising consistent with brand creative strategy. - Local media: ROP, OOH, posters Trade support to include - Standard introductory allowance - Special tax stamping allowance ($4.00 Per emma) - Consider additional trade promotion/contest to encourage participation/support Merchandise in special 60-pack display, self contained for retail back counter and non-traditional outlets. Extensive POP advertising support: posters, stickers/ decals, vending tents, counter cards, plus anything else unique and intrusive we can develop.

- 37 - Use currant 1O's capacity (approximately 1.7 billion units per annum). - No incremental capital investment until consumer response is visible - Initial manufacturing requirements 24~ units load-ln (40M stores x 600 units/store) 40MM units vending lSOM machines x 500 units/nmchines) 100M/4 units reserves (remainder of introductory stock) Cannibalization estimated at 70% - $10;~ units per annum expected from competitive smokers (especially Winston, Marlboro, Salem, Benson & Hedges, Newport) Adjust sales force call coverage/frequency as necessary during launch period, and thereafter as necessary and Justified. Timing (See Exhibit 4c) - Launch week of January 30, 1984 Rationale Rising cigarette prices ere making transaction costa an increasingly important smoking issue, especially to lower lncomo KOOL target audience smokers. Competitors are responding, e.g., Newport 10's, Reynolds ll's. Newport 10's test continuing, after early failures in flawed test (little in-store support, poor trade program, sampling confusion) RJR 12's test continuing, with poor results (high consumer awareness of price premium, i.e., 60t of 20-pack for 70t of the orlce| No competitor has substantial 10's on-line capacity, except perhaps Lorillard. They would be expected to follow as soon as possible (60-120 days) in as many key Black areas as their capacity allows.

- 38 ° R3R is believed to have enough change parts on hand for a major response in 120-180 days. However, their interest to-date has been in 12'8 for vending only. We might expect a major re- sponse in 6 months, either with 10's or 12's. Similarly, PM is believed to have a substantiaI stock of change parts. The nature of their response is uncertain, depending on our success and the state of their battle against 25's. At least a 6-month lag seems likely. A 10's launch would preempt the competition, establishing lO's as the arena (rather than RTR 12's), end attracting the first wave of transaction price defections to XOOL (from KOOL as well as competitive brands). Of smaller pack options - lO's easiest consumer price/value comparison - B&W has substantial 10's capacity on-line Variable margin can be maintained with little or no price prenuium. Lorillard (Newport) may preempt us with 10's; RJR may launch 12's ~B&W has little short term response capacity). lO's can both reduce brand outflow and induce switching from key competitors for economic reasons.

Psakaging Design and Final Art Cylinders Merc~dlsing~ro~tlon Dimplaym (40M @ $3.00) POP Materialm Display Payments {40M @ $3.00) Introductory Allowance (lOi on 84~4 units) Vending Machine Adaptors (OOM x $1.25) Column Payments (80M x $5.00} Media Introductory ROP Total $12.0M $30.0M $120.0M $140.0M $120.0M $231.0M $100.0M $400.0M ,~/. $60.0M~/~ I $I,215.1 z98.__! zse_._~4 tOOL Jrand Spo©Itle 302 411 713 Non-Specific i0_O0 40.,.._00 500 402 811 1,213

- 40 - • Tens'# ~ss=ptlons and Costs Year 1 - 1984 Incremental volume: 510MM units (30t of 1.7 billion total units) %ncruental costs: $1,213~- Year 1 $ 500M- Each year thereafter TWO prices LI} maintain variable margin - $14.50 famlly variable margin t2| maintain price - $14,45 family variable margin Manufacturing implications of expansion: Expansion to 6 billlon units (given canniballzatlon assumptions) would require conversion of 4 current packer modules. Cost would be $502M and time would be approximately 9 months to project completlon. Financial analysis based on these assumptions is in process.

KOOL "DELUXZ= Cost: $5.8MM. - 41 - 1984 expense ks $5.6~M Objectives • Accelerate KOOL image revitalization to increase ~OOL market share by (a) increasing startez and switching inflow, ~ (b) decreasing swiching outflow. Offer KOOL in packaging which is consistent with and eupportlve of the brand creative strategy and positioning. Provide a consistent trademark presentation across styles. Clearly distinguish between full taste, lights and ultra styles. Strategies Develop and teat market a new, strikingly improved KOOL packaging line as a replacement for current packaging, and =deluxe" box packaging as a line extension. There are two test scenarios (See Exhibit 5a for tlmimg). - I. 5 Cells A. Current ad campaign/current packaging B. Current ad campaign/replacement line C. Exploratory ad campaign~current packaging D. Exploratory ad campaign/replacement llne E. Exploratory ad campaign/current packaging/ "deluxe" box line extension - If. 3 Cells (Brand Group Recon~endation ) (Assumes ad campaign decision made prior to in market packaging testing) A. Exploratory ad campaign/current packaging B. Exploratory ad campaign/replacement line C. Exploratory ad campaign/current packaging/ "deluxe" box line extension

- 42- Maintain all other variables constant across the cells. Spend at BBT levels (140 BOA/SaM year 1) to achieve quick and comprehensive communication of the vazioua propositions, Maintain product oonsistsncy across calls. Incorporate any possible product improveunents in all cells as soon as possible. New packaging cells: (Replacement llne) Strikingly improved packaging - Current soft cup and box {I) format - Feature pack change advertising for 90 days - Work current inventory down. Pick up four weeks or less. "Deluxe" box line extension cell: - Inltially 2 styles, 80r~u Parent FOB and 80~ Lights FOB - Additional name descriptor, e.g., "deluxe", "classic", "regency", "Imperlal", "apeclal', "international" - Dramatically different packaging, e.g., dark rich green - Introductory advertising for 90 days, feature line extensions in advertising for test duraEion - Standard introductory allowance (10% for 45 days) Prom~tlon equivalent in all cells for 60-90 days. Use POP and Instore displays. Action Standardsz Evaluate the test on KOOL family share (read every six months for two years). - If share does not decline versus the control cell, launch the program. - If share declines versus the oontgol call but comes back to pre-test comparative levels, launch the program.

- 43 - % If share declines versus the control cell and does not come back to pre-teat comparative levels within two years, abort the teat. If any cell drops precipitously and shows no signs of recovery within six months, abort that cell by reintroducing original advertislng/packaging. If wore than one cell performs well, launch that program whlch performs best. If two or more perform equally well, launch the one which exhibited the least Initial downward variation. Rationale KOOL packaging is not consistent with or supportive of the brand positioning and creative strategy. It is neutral, nor communicating the epitome of smoking satis- faction or an attractive, contemporary image. Research indicates that KeeL is perceived somewhat old- fashioned. KOOL packaging does nothing to dlspell this notion. Keel packaging is lacking in color, style and character. It is not as attractive as the competition. Reel trademark treatment is not consistent across brand styles, Current packaging does not help make clear the tar level distinctions between styles. Packaging more supportive of and consistent with brand positioning and creative strategy can accelerate improve- ment of KeeL'S imagery. Testing is mandated because any significant change to packaging, especially a style as important to corporate profits as XOOL Filter Xings, is a ma~or risk. Direct package replacement with striking new packaging is cleanest, most simply executed pack change option, assuming that test confirms that risks are manageable. - Avoids trade and consumer confusion of having multiple Keel styles at each tar level.

- 44 - Avoids dilemma created by temporary line extensions/ ultimate replacements of either (a) withdrawing a brand with smokers who chose not to switch to re- placement style or {b) leaving more/smaller styles on the market than intended. Avoids dellstlng due to dilution of retall style volume or competition of more styles for existing space; and avoids added corporate/brand investment to malntaln distribution. A permanent "deluxe" box line extension may create incre- ~ntal family share and also contribute toward making overall imagery more contemporary and attractive. - Players box seems to be an initial guccess, Benson & Hedges Deluxe Ultra Lights box has an ongoing share in excess of 0.50 and has led to total Benson & Hedges family growth. - Newport Box has increased share at an average annual rate of 14% since 1976. Marlboro box has grown 12~ since 1980 and now repre- sents 7,32% SOM (Marlboro is KOOL's single greatest source of business).

- 45- Cost_..__s Scenario I Scenario II {Recommended) Current Total MedAa $1,750H $1,050M National 875M 525M w Local 875M .... 525M Teat Media 5~O00M / 3,000M / National 2,000M C 1,200M • Local 3~O00M ~ 1,800M Cut In (400t premium) 4,500M 2,700M Media Production 250M 200M Total lmcremental Media 8,000M ~,~ 4,850M Packaging 188M 188M Diaplaym/POP* 30M 18M Display Payments 18M 10M Introductory Allowance (I cell 0.51 83M 83M share 7 weeks} Product Pickup~Exchange 1,268M 634M (4 weeks, 2 cells An Scenario I; 1 cell in Scenario XI) g33M Total Incremental Promotion/Packaging $9,587M $5,783M *Includes counter displays, no promotion offer Tasting Assumptions $100MM media spending level in test (approximately 140 SOA/SOM). Current $35MM media spending level. Current 50/50 national~local; test 40/60 national/local.

- 46 - "DELUXE" ASSUMPTIONS ASD COSTS mREPLACEMENT" SCENARIOs NATIONAL THEORETICAL PLAN Year I= 1985 SOA/SOM patterned after BBT. Year 1 (140) Year 2 (125} Year 3 [115) Year 4 ~05) Year 5 (100) Assume reference spending [100) Prlmar~ Alternate • $37.8MM $63.4M,M 19.0~ 45.7~ 12.3~4 40.aMM 4.4MM 34.9MM - 32.6~ - Alternate assumes reference and beyond Year 5 at (65). Work product into distribution. Pick Up 350~IM units ($?MM) $I038MM industry spending in 1985 (7% increase over $9?0MM in 1984). Increases ?t per annum. XOOL share declines 3.3% in 1985, 2.5% in 1986, and remains stable thereafter. Incremental consumer promotion in first quarter Year I. POP and displays only, no consumer offer. No other Incre- ~ntal promotion assumed. Family variable margin assumes 7% per annum increase over 1984 estimates. "DELUXE" BOX LINE EXTENSION: NATIONAL THEORETICAL PLAN Spending and timing assumptions same as (A). "Deluxe" box styles achieve I share point - 70% cannibalization - 30% incremental Total XOOL varlable margin 1.6% lower than in (A), because FOB margin is llt lower than family average. Under this scenario, FOB accounts for 18% of KOOL family sales.

- 47 - Manufacturing implications: 6 billion capacity could be met in early 1985 with 3 production modules now on order in the BAT pool. Cost would be $11MM. 251 of volume vould come from existing equipment. Approximately one- third of box capacity will be 100's. (Test capacity for 10O~s is under investigation.) Financial analysis based on these assumvtions is in process.

- 48 - Ii RESEARCH REMAINDER 19S3 CREATIVE EVALUATION: To evaluate several explora- ory a ernst yes. - TAT |I0 executions) $93,900 - Copy communication test 41,250 (5 executions) - Recall testing (5 executions) 87,000 STUDY: KOOL's ROLE MODEL ASPIRATIONI~GE~_~_~__ To assess target~image and perceptions of role models. - To be used as a tool for copy $60,000 exploratory TENS RESEARCH: To evaluate the 10's introductory proposition. - Executlonal copy screen $36,500 (9 executions) - Communication test (3 executions) 24,500 PACKAGING EVALUATION: To assess the impact and imagery communications of new package alternatives. - 3 executions Total 1983 estimated $418,150 Remaining 1983 research budget 2431000 Additional funds needed $175,150

- 49 - NEEDS FOR 1984 • CREATIVE EVALUATION: Consumer evaluation of explora- tory~sa campaign, 10's maintenance and new line extension). - TAT -- 20 executions - Comunication test -- 10 executions - Recall test -- I0 executions $186,300 81,750 172,500 CINEMA EVALUATION: To evaluate alternate product cam- - In-lab diagnostic assessment of $41,500 two alternate poolouts - In-theater test of one commercial 24,250 ALTERNATE BACK-UP CAMPAIGN SCREEN: To evaluate I0 ~rnate concepts ~alopSng several new back-up campaigns for further evaluation in 1985. Total creative PROMOTION EVALUATIONS DIRECT MAIL TESTz To evaluate incentive offers us n9 t • & and outside list sources. $75,000 PROMOTION TEST SCREEN: To screen I0 alternative concepts and-n'd-/o'rtypes of incentives for promotional uae. $43,500

- 50 - VAN PROGRAM EVALUATION: TO evaZuate consumer attl- tu ea an react ons to the van program in two cities. The results are to be used to assess whether van expansion is warranted - pre and post wave. Discussion COUPON THRESHOLD TEST: To evaluate payback and KOOL convers-~po~of 8 types of coupon incentives. Total promotion IN-MARKET TRACKING - New llne replacement/extension: To evaluate pre and 3 post waves of consumer tracking within each market. 1. Line replacement $208,000 2. Deluxe box line extension 208000 Total in market $416,000 Total 1984 research $1,149,800

- 51 - Ji SPENDING PRINCIPLES TOTAL 1984 SPENDING Objective Reduce total spendin9 in 1984 to allow development/ refinement and thorough testing of strateglo/execu- tlonal correction in advertising and promotion. Level Of Spending Beconm~nded spending for KOOL in 1984 is: 1984 19B3 Pr°p°sed Gross Media $61,933 $42,700 Brand Promotion 26~534 14,039 Deluxe/New Campaign 188 5,600 10-pack Test Market 302 411 MaP ~ Total $98,527 $70,500 so^/soN (85) (65) A/P 65/35 75/25 (excluding test mkts.) Spendtnq Rationale Maintains brand awareness, but prohibits full spending on what is judged to be suboptimal creative executions. 1984 A&P ratio exhibits a more competitive stance with the current industry climate which is skewing heavier promotion. • Reflects current forecasted KOOL share of 7.23 in 1984.

- 52 - ,,-c,,(, Y '._LJ \' t t 6 1984 MEDIA SPENDING Reduce spending to pre-revitallzatlon levels to maintain reference trend while the strategy in being improved and tested; allocate monies geo- graphically by BDI. Strategies Support XOOL W~th a media level equal to 65 SOA/ SOM. Given 1984 estimates, this would be $47.6 million in gross media. The 1983 media budget was $81.1 million. Allocate monies geographically in direct propor- tion to XOOL Family sales rather than menthol CDI. Ensure adequat~levels of support in Black media at national and local level. Spend media fair share in both national and local military specific media. Rationale ~EOOL has underspent media given its revitaliza- tion task. We can find no brand that reversed a declining share with less than I00 SOA/SOM spen- ding. However, other problems with the revital- ization strategy and execution must be solved ~. before increased spending is appropriate. The current geographic allocation strategy (cate- gory development) has not demonstrated any trend difference between high CDI and high BDI markets. :1oreover, LIGHTS and ULTRA have been unsuccessful with this allocation scheme. It is felt that LIGHTS end ULTRA are more likely to sell well where Parent KOOL is strong, thus, rsverslon to such a family BDI allocation scheme would be more consistent with revitalization.

- 53- Recognizes the importance of Black segment to KOOL sales and share development. Recognizes high skew of young adult males and ltarters in the military segment. 1984 PROMOTION SPENDING Spend grtater percent of total funding for 1984 to generate competitive trial and profitable ahort- ta~ volume. Test trial incentives if their cost is in excess of variable margin ($. 290/pack) Field short-term volume promotions to remain competitive and maintain share if Cost 18 I@81 than variable margin. Rationale Testing justified on high cost of many incentive items and on ~. Volume promotions justified on profitability of such volume and the continued need to remain competitive with Salem and Newport.

- 54 - ~. RECOI~WAENDED BUDGET ($ in thousands) ADVERTISING Working Media 29,203 Production 5,1Q0 Fees c,._'2.,.i~.~ ........ Subtotal 36,47B.0 MuSiC Bponsorship 3,125.0 George Wain 300 Buper Nights 325 City JAms 500 NeW XJP 2,000 New Creative/Deluxe 4,850.0 10'i 60.0 Re|ervem 3,100.0 Total Advertising PROMOTION Battle Kit 500.0 Requtsitionable Materiels 500.0 KMDP 5,652.6 1064 SMP 1,68B.6 Vans 548.5 Military 555.0 Sampling 1,875.6 Cylinders 50.0 1-95, etc. 472.0 3084 SMP 1,372.6 47,613.0 Testlng~ Military Direct Mall Vending Dot Program Crosm Ruff Lighter On Carton Temporary Displays lO's Deluxe Total Promotion A&P Subtotal H&P Total 250.0 233.0 50.0 25.0 75.0 117.5 75.6 351.0 745.0 1,922.1 15,137.0 62,750.0 7,750.0 70,500.0

Ill. - 55 - SALES and SHARE FO~ PII~'IT N~ t,OIS $'f'&Tl~q~'T (UNITS IN IlLLIONS.DOIJ~kR$ IN IqlLLIOMS) IIASED UN PJWRIL FO~gCA~' m ROOL SON I[OOL Psroltt nO8 • ~L NILOS/SL/LTS !;08 ROOL U LTF~q Total KOOL SOS financial Folrecalt Grosm ~ 5ales Variable Nargih Adver tlllnq Promotion A&P Contribution Before I~turnu chaffs Chan~e 1983 csumge 1911 Index 19|~2 I~dJ_~.z mereresCt Index SZJ. I (1011 622.3 (99) 52.8 (97) 5].1 (97) 1.43 I95) 0.21 (971 41.9 (97) 41.2 (901 17.1 (99) 15.1 (08) .... 10.1 29.5 (95) 24.5 (971 991.4 (1071 1060.0 (108) 490.3 (1161 560.9 (IIG) 16.7 (G~) 04.1 (3151 54o0 (1071 3hS (1271 51.5 (01; 115.6 (224) 439.0 (121) 445.6 (1021 577.S t3) 43.2 85) 7.48 911 P).I 95) 13.9 92) 4.1 121 26.5 13) C~,qe 1914 Iudez 000,0 (1041 43,4 (100) 7.23 I 97) 39.2 1100) 13.2 (95) 5.4 (1S) 25.7 (97) 1206.3 (113) 1234.3 (1021 555.1 (90) 6Z9.3 (1131 54.7 (151 47.4 ( 171 29.1 (9Z) 22.9 ( 70) 01.8 (?Z) 70.5 ( 149 471.3 (106) 550.0 (1191 Industry AdvertiuimJ Industry Promotion Industry A&P rinahcisl Ratios SOS t (Inc zU9 Jhn84,vom) SOA/S0~ SOP • (lncludihq M6Pl sop/soM CPN AdvQrtlui~ $ CPM Promotion $ CPN a6P $ A&P 0 Of 8ales 921.9 (119) 935.9 (S01) 395,1 (llq) 401.1 (101) 1117.0 (1191 1337.0 (102) 3.0 (60) 9,0 (300) 36,0 (63) 109.0 (304) 6.] (91| 7.9 (125) 74.0 (96( S6,0 (1291 • 51 (72) 1.64 (323) ,47 (109) ,62 (1311 • 98 ( 06) 2,24 (231) 5.19 ( 709 10.02 (209) 970.4 (104) 994.0 415.9 (104) 426.9 1306.3 (1041 1422.9 5,6 ( 121 4,1 75.o (6~) 64.o 7.0 (|9) 5,4 54.0 ( 9gJ ?S.O 1.27 ( 71) 1,10 • 67 (1091 .5) 1.94 ( 16) 1.61 6.95 ( 14) 5,71 (103) (103) (103) ( 061 ( 49| (77) (79) (16) (79) (04) (12)

* 56 ° 1902 190___~] I~O $1~QGIIT SHARE AND SOS Index 1914 Inde___~B 19 e__.55 Inde..._~x 190_._~ z,~ez 190__27 I=4,= 190___~e x ~....,,,.._,...~ ~'$23 (97) NrT 15.41 15.08 ( 903 14.44 (97) 14.20 ( 973 13.76 (97) 13.32 | 97) 12.88 NLT 10.32 9.96 ( 903 9.91 (1003 9.87 (1003 9.83 (IO0) g.79 (100) 0.75 (1003 mJLY 3.15 3.24 (1043 3.54 (109) 3.00 (110) 4.22 (109) 4.$6 (1083 4.90 (1073 Total Nenthol 28.78 28.24 (98) 28.10 (1003 27.96 (100) 27.82 ( 99} 27.67 (~) 27.53 (99) throuqh '84.1985-1911 reference) 4.54 ( 053 Parent 4.15 S.85 (93) 5.74 ( 973 5.34 (93) S.0? (95) 4.80 (94) tqLlds 1.03 .95 ($3) .92 (97) .86 ( 933 .82 (95) .77 (94) .74 (96) Llqhtm .52 .44 [ 84) .18 ( 873 .48 (126) .47 ( 003 .47 (1O0) .47 (100) Ultra .32 .21 (64) .19 (91) .24 (1263 .23 (98) .24 (102) .24 (100) Total tOOL 8.21 7.40 ( 313 ?.23 (97) 6.92 (96) 6.59 ( 953 6.29 (95) 6,01 (96) XOOL Shire Of Se.Of S_p¢/me___.n.~ 34.0 (98) 35.4 (98) Parent 41.2 39.1 (95) 39.2 (100) 37.6 (96) 34.8 (91) Mslds 1O.l 9.5 (90) 9.3 (98) 8.? (94) 8.3 ( 95J 7.9 (95) 7.6 (96) Ldqhta 5.2 4.4 (I&) 3.8 (86) 4.q (129) 4.1 (91) 4.8 (100) 4.8 (100) Ultra 10.2 6.4 (63) 5.4 ($4) 6.2 (115) 5.5 (89) 5.3 ( 063 4.9 (92) Total iOOL 20.5 26.5 (93) 25.? (9?) 24.? (96) 23.7 (9(,) 22.? (94) 21.8 (96)

- 57 - IT. II~ATZ~ ~rmzs~ -sooL O.N q U) t.N t am)8.m ¢ 1~)1.,1(as) s.mJ{ e~) t.ee | ms1~.*~ L to) 0.w ~#4oe# B.N # N~ b.P)| Iipj IoJ ||1~)e.oJ(i00i 1.6| d O~5 laa~iNt i.li ¢1|)i|.N 4111)i.lm(Ib6)I.li(lllJI.sJ(4iiJ I.ILI (|ll! W Is. 0.ee¢OLII|.e~qsemls.om¢lem~a.gm¢llm]I.D6oem) I.ss d~l~ In 1982 total Y, OOL SOld oontlnusd to dscllne, but at s slove~ rata than prevlous years. ~nile Sale~ enjoyed share grnvth LU lgB! as s reeu/t of Ultra (launched July, 1980) and Sl~m L1$hts (launched January, 1981) Intrcductlons, the brand has remained stable :in 1982. - Nevport and Hanson & Hedges Kenthol increased share; Nevport at 8n accelerated rate. - ROOt 1982 astd--tnd losdln$ 3 billion units, a©tual ¢onsu~ptlon 47.8 bi11Ion, consumption share 7.97 or (95) index to 1981, KOOL and Sslm dtprnstd Ln first quarter, 198) duJ to 1982 2oadln$. Nevport and B&H bans/it In first quarter from lack of 1982 loading.

d (tt I II'( ((I 1 ~l't (N) lV't (It~ I I1" ((It| 11" ~ N" (¢S) 01" K~I tl" (16 I M'I (M I ~'1 IN ) ~('1 (~0 It' (~() ~t" (ll~))((' (16 ~ (~" 1~1 ) ~" (1~1 IC" (14) 01" 116 ) ~ (1411 ~ ((6 1 ~11" (~6) (¢011 (~i) II0"~ (~6) ~('t ('!4,)|t'1 1~4 ) M" (00~1 '1 (/.4) " (44) 19'1 (16) (OOt) ~v'l (~4) 6~'V ((6) (('~ (~6 I, 01"9 "Wr'TnT -TIET"- "~y'lleI ~iiT .,.-~ ~ m'-ITll • e6 mqml tee~N4 .eL m~T " * ($4) H'II (~4 I e|'4 (M) $1"4 J ((0TI 5&'l (Wl) O('l ('411 (1"1 (¢011~" (~1 ((6) (fit) 11' -- (IOt~ 16" (fOr) ll" ((4) rM'L (14) I~'/. (q4) N't ((4 111" (~) • 1~4 ) 416 I8( Ill 1 ll'l (16 1 ll'l Ill I 11"9 Ill ~lJ'lJ W t~ ee.-po ~ e.e01 ~m~l~tn Is &Wgl~l :~', eel,diet 'Ill i'Ai

- 59- hvi¢eltiatton Harket ;hare Analysts IDOL Feet1Z liSA Share - Actual l~unc:h Through |aa._ • June 1983 Index lint/one1 8,&6 7.95 (94) i, eusd Markata9.30 ' 8,79 (95) SXnce revXcallancton ]UbOL abate trend unchanaed. Reference trend maa ~-6Z annual dacl/ne race. - Lead markets slSshtly ouCperforminB national, leay indicate value of C~ue toE OOL. - Th£s bane/launch-to-date trend probably more £ndXcet£ve of real lUlL dynan/c than the 1982 actual/1983 forecast. h|a - National December, 1980 - November, 2981 l~ae - Lead Harketa An&usa, lg80 - July, 1981 Launch-to-Dace - National Decnber, 1981 -H arch, 1983 l~unch-to-DaCe - Lead )/arkecs AusuaC, 1981 - )/arch. 1983 1~3OL Fanll¥ National HSA Share Jan. *83 Feb. '83 liar. *83 Share $.59 6.86 7 .It, 7.84 Indem to (62) (80) (92) (97) P Year ASo 7.80 (98)

- 60 - - I[OOL share trend lnprovtn8 nouth~y in 1983. - lLam|cb-to-datt Jlwre On previous pelt ulst£~el7 Ifflctad by week ftret quarter. 1983. 1982 2983 I(OOL YJnL17 HatAona~ HSA Sh~re Iteference Actutl ~Foracaet Xnde._...~x 7.98 8.2 ~ (! 03) 7.6~ 7.48 (98) Key Yindi~,le - KefereQce errors exceeded :tn 1982 - liovever, due to loed~, forecasted ~983 there Zeee than reference. Leu~h-toodete trend eae es reference. °

- 61- Share Trend b Media S endin £ut41ns (Spend/~S per Thouoand ?OF) let llalf 2nd ]Lull 1at Qcr. July. 1982 1982 1962 1983 )/at. 1983 1. 8~ 11.38 11.80 9.08 11.00 Xnda to Yur Al~o (97) (99) (77) (93) 2. SOH 8.48 8.67 6.98 8.27 lade: to (98) (98) (60) (93) Tear Ago 3. SOt~ ? .7S 7.94 6,41 7.47 Xn4e: to (96) (98) (80) (%) Yet ABe 4. SOX 6.68 6.72 $ • 24 6 • 29 Zndmc co (97) (97) (75) (91) Year AI~o .5. SON 5.48 .5.50 ~.t,3 .5.19 Xndu ~o (98) (96) (77) (90) Tar xSo - First half, 1982, beginning of revitalization strategy, no relatiomship betveen ladle spend£ng and brand share trend, - Second lull, 1982, spending ts related to better share trend - First quarter, 1983, ahare erratic and not related to mponding

- 62 - - KOOL contLnuea to lose share of menthol aaKnsnt. - KOOL Yull Taste stable, perhaps Srnv4n$ In dacltninj 8ninnnt. - LIGHTS and ULTRA daclinin8 £n Stories anjnnnts. Total ICOOL~ste -HSA 1982 Xnd~.~ vs. 19a2Annual Share A~nu81 Share YurARo ~udexnd to Mationsl Northeast 7.30 (98) (89) N~.-West 7.16 (97) (88) Central 11.50 (99) (140) Southeast 7.92 (96) (96) Sourest 9.77 (97) (120) Vast 6.10 (98) { 7~) Totnl U.S. 8.21 (97) - Share tteusd -nat favornble in the Central reAion, least favorable 4w~ tha ~M~utheait. - The Central and Southvost raglans continue to represent I(OOLts 8rauttnst share development, vhlle the Western reslon represents the vozsc share dnveZoi~ent.

° 63 - - lqrenot~n ~ ~tre done betveen 1978 and 1982 to determine corrLtatu of EOOL SO~. lUack population 12 .643 Black ImpUlatLon plus menthol C~I 12 .764 llo correlat/on betveen I~OL SON and any naJor competitor, J~OOL SOA ¢orrellted ,,oat hish/y with 14arlboro SO& R2 .82, S82en 12 .66. Nevporc R2 .27. EOOL Parent Re&tonal Share - 14.5A 1982 Znden vs. 1982 Al~nual Share Annual Shere YeaT Aso ZB_.~d~ed tO Na~ Northenet 5.93 (96) (93) R/d-Meet5.21 (95) (82) Central 8.28 (97) (130) Southenst 6.2B (93) (99) South~et8.05 (96) (127) West 6.54 (95) (71) Totsl U.S. 6.35 (95) .! - Sane as total IWOL. EOOL N12ds~Gg/onJl Share - HSA J982 Annual Share Index vs. 2982 AnnuJl Share ladened • Seen! Northeast ,75 (9¢) (72) Mid-Meet1.00 (96) (97) Centril ].95 (98) (J89) Southenat .90 (94) (87) Southwest .87 (97) (86) Meet ,86 (9?) (83) Total U.S. 1.03 (g6) ---

- 64 - - MUds etrons tn Control restart too but differs eljmThere fro= Parent, SLroneer in the Vest - yanker £n the Horthexst. - Trend -inller to remainder of fully. EOOL LIGHTS Relional Share - HSA 1982 Index vs. 1982 /runnel Share Annual Share ~ Indexed to Hattonal Northeaat .38 (85) (73) Xid-West ,5~ (73) 4106) Central .80 (82) (154) Southuaet .45 (83) (87) Southvest °5? (?6) CII0) Went .45 (81) (87) Total U.S. .52 (80) --- - Li|hte deve]olment sonevhat broade~ |eograpblcally than Parent. - Trend ~t clur yet. EOOL ULTRA t.e~to~el Share - HSA ]982 Index vs. 1902 Annual Share Annual Share ~ Indexed to National Mortheaet .24 ~- (?S) Nld-4feet .61 ~- (128) Central .47 ~- (147) Soutbexpt ,30 -~ (%) |outbwemt .28 --- (88) Vest .25 --- (78) Total U,$, .32 --- - De~elolx~nt s4..llar to H11ds

"- 65 - I~LMI _._..1~1_~ JR J- itllmsl : ,~,- I ~l .m ~,.,. kfl~Wn .,,- I:m I':1 Caw,torte Itl4~W JKtSl~vt t le ( ||1 gl~tLsm414 Livtivttle (1581 ¢t~(t~t~ (12|) ' (137) (Jt~Qv~ (116) (101} rl.,l,~d (ID)) II|sl Io1~o 41~o) 111 Oltrott (i:SI){171) vt 1,*~Lec (~l) 11101 PoovlJ (104) 11Q21 ..+. + I, 1 lie~ Ilotrss ( 611 |teva left| 0m~ I) )t m~¢~tta Ltttlll II0¢k mv~t~ (|Z0) 1)2 |ll|tl~lS 41 Sett L,,, (51~14} 471 haa4~l~ t41 *'+" /+ S~ frj~lsco tv) i~c~ t)) Settt|e 441 8~ Cit~ /14Z) l ~" 0,'4 tep*l~ (l~)) lnSIm to 4.ts (lob) I.to (1o01 ?.31 (1021 ?.lZ I t~) I.S? Iff) 97) ~.1)4 ~ IS) ?.~ 17) 10.78 |.o1 (Is) T.11 I N) 6.S3 171 I0.07 I ~) ll.)4 1171 t).) I.IH, ( 11} l.lo i H) 14.39 IO1) ks) e 11 ( 131 '°+° P~I I?.S? (1051 |.15 6.01 I ~) 8.M I~) 10.71 I N) ?.Zl ~) S.$1 I?) 1~0~1 I.|Z 11.14 I N) .?) 1131 8.85 1191 &,1)l t91 $.,11 ~) 4.t0 I ~1 1).05 ge) ).5Z 51) 4.21 I ~) &.iS ! ~1 rl.l, 11~1 1).)0 Itl S.IH, 1171 I.Z? K~) I,:I 10.)6 1017 LIGI). J41~,* lit 0tr. ~lIMeS to* ~_ ~JrdJex tO 4.S7 (7111 ,.11 (83) s.s) s.~s ( 811 ).14 4.10 5.51 S,l~ l.)5 I I)5) 0.37 ( 161 I.|3 82) 1.16 ( 151 '" I~1 '"' y.?j |,~0 I'i! 1.11) -- 75) °.ao i.t8 S.,3 l.lO II.II 4.?1) 12, 1.00 1.02 I 751 l.)4 1.12 ~ M) lO.li 0.18 ll) 9.10 15) I1 .~ I]L64 ]3.05 13.31 ( 1111 6.35 (1~) 6.8o ( 781 I'S I |.0~ 8.Z8 71)1 7.]s e4) ,.az ~ 871 ~.93 l IO) l.,6 I 83) 12.16 72) 1).35 (71)) l.~4 ~ I0) l.lO (90) ~.2; l~) 7.40 (85) "" l, iS2 ~ 1)~1 ~°": ( ;;~ i.. ,sI 5.2~ 7.33 (011) ?.69 (9~) ,.'r, (,z) o.~ 1 "~I 5'~ ~ii! ,.10 i " 4.Ne 4,41 ?l) 4.$4 4.11 I $~' 5.31 ( 711 S.S1 12) '" /i! + i" 6.40 l'~ t.4t( 5~ l.|6 J.44 J~} 5.51) i.M I?) °.5P 1.1)0 M) 10.44 / I~) 10.115 ( is} 5.1~ ~4) 1.)4 I 11) 6.01 (?o) °.io (~) i.s~ (Iz) 4.04 I I~ 4.3] (IS) 4.43 (I~) 4.(,9 ()t) 4.17 ( II~ ,.11, t~&~! 3.)4 I~) 3,4S 3"I~ 11)) 4.;Z 4.1~ ( I~ S. ~,C S •4~ ?9 ) ).k: 4.1~ 7~1 I.M ~01 ,5,).+5,- !!i! Z.)s 4.62 (64) 10.14 ZO. ll ( 161 I 18) '7.1)) (71) 1.18 651 (I~) 1.51 78) q11r, ~ to l~t~4vctlO~ 01 vrv~ LIG~ e~ss ULTU dvrl~l~ t~e first querter of 1982. G.M. ";/$/I)

( ) ( ) ( ) ( ) ( ) ( ) ( ~OTHER VARIANCE SHEET BROWN & WXLLXANSON - LOUISVILLE AT THE TINE Or REPRODUCTION THE FOLLOWING NOTATIONS WERE NADEz DOCUMENT COPIES ARE IN THE SAME SEOUENCE AS THEY APPEARED IN THE ORIGINAL. DUPLICATE DOCUNENTS APPEARED IN THE ORIGINAL. PAOE NUNRER(S) NISSING IN THE ORIGINAL. POOR OUALITY ORIGINAL. OVERLAY ITEN COULD NOT BE REMOVED WITHOUT DANAGE TO THE ORIGINAL. NO DOCUNENTS WERE FOUND WITHIN THE ORIGINAL: ( ) FILE FOLDER. ( ) REDROPE EXPANDABLE PILE. ( ) HANGING PILE. ( ) ENVELOPE. ( ) OTHER (SPECIFY)

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- 67 - KOOL Jopemt 1902 Dttee*J 41001 41001 1.15 lice ?irk (?~) (?6) 1 aLSs~y ( 411 (H) .~t 0yre~v6* 4 671 ( ?$1 .88 8nf|e|e (|8) 4 |11 |.G6 J~tlade|pkSa 4 I01 (t)) i.21 kfeetos (||) ( 411 .71 ~Jt*~* (71) (87) 1.16 PStsekvrp 4 82) (66) 1.16 It(St sabre (11|) (JlO) 1.$1 ILS¢ Im~d ( 991 41111 1.16 ~Tlee¢~ (81) (05) i.10 Oily|it te 4 8&) 11151 .67 &tlemts (1211 (t)|) 1.8S JKkiUmvl|&e (1ll) 4|~) 1.?) " 1107) 41141 1.55 1m~8 111?) (1)9) 1.62 illebtl* 41|11 4i19) 3.25 |11~t1664m 11611 (1a61 |,|6 O~ t kaad~88 111|) 410S) |.St It~evtlle ( Ill 4 ~6) tO) hokvtl~e (lit) 4 |~) 1.611 II~lml* 41~81 (1141 l,e~ kv 0v 2eJut (225) (2?6) 2.66 LevsevL215 41251 11041 1.2/, CIwcSmtl 11271 (ll?) t.tt Col~v* (1J5) (100) 1.6~ (2ov*2~14 (61) (1102 1.26 Tele6e 110~) (Ill) 2,$0 INI=D2t 11021 4156) = .26 [elrl MoyNI ( JOIb ) 41011 l.t) |~liampe2ts 1115) (65) l.$) (~ltl6© (It2) (12~) 2.0Q .53 lU2vI.M* (61) ~ 61) |*61 pie| is ( 991 5~) $L, ~ll (13e) (1252 1.57 Iw html (16) (tO) 1.17 9U~eepO2$t (60) (el) .77 Si*~ II2Xl (it) (2|) ,72 OBeM (~O) 4 61) 1,12 bnleo ¢1¢7 (lO?) { 6&) 2"~? itchtt* 41041 (81) I.t2 Ok 11~lqm ¢2Iy (l~) (10~) |.6,~ l~lll (Ill) (lOll 1.63 Little 60¢k (123) (1021 1.03 ~IIVI~It (163) (I171 2,0¢ Ibllel (I)!~ (115) 2.2& l~ttss 113l) Ill3) 2.45 14~ adeleOIO ll23) 41161 1.61 l~k~etk 4127l (204) 1.67 ~Vvqvewqv~ I ~') ~ 6~) 1.03 (67) 74) .~b of lt1221~It 4 )II (11) .60 kll L~ke ~lly(22) ( ~l *15 rll~ll I 71) (II) 1.23 be* a~*l~lee t 75l ~ 51) IJO h~ ~q4444111e4 II) 63) 1.21 I~e~l),44kd I el) I 3T) ,67 kelt2O (6]) (17) .~I a~8 M ~) (67) .73 • (l)~) 2.73 ii~• ii (I13) 14) City (I15) (ID~) I,~4 £f•&d ~d~lll I II) I 7~) I.$3 • II II~l~.41 I Ii ii II 161~, k Pllllfl. Isd~ ~t QIt* la~us J~n.-~pt. V*. 2512 V*. 156) lidos To 4 02) l.t2 (67) 4 .I ,:~ 4 ,,~ (14) (69) 4 O;) .32 (64) (66) .79 ( It1 4 87) 2.01 (66) (121) l,ll (101) (83) .?1 (15) (72) l.ll (llO) (77) 1,21 ( 632 4 77) 2.~0 (6~) ( 81) 1.26 ( 60) ( Ill I,I0 ( 511 ( 87) .91 {lOll (17) I.I0 --- (15) 2.73 (66) (I)) i*tS (65) (l&) 1.61 (lOll (I&) 2,62 (85) (Ii) 2.32 4102) (II) 2,76 (1062 (141) 1.07 (|Ol) 4 ?l) 1,52 (05) (86) 3.07 (lO~) (65) 2.53 (96) (?$) 1.20 (67) (00) 1.58 (62) (Ol) 2.52 (I~) (17) I.)~ (5?) (55) 1.3~ (57) (60) ~,25 (lOt) (6~) 2.$0 ( 151 ~ll) l.&4 (I~) I~) ~.06 (IOD (ll) .56 (68) (60) 1,4l --- (73) 2.10 ( 681 (12) 1.21 (10;) (75) ,?$ (57) ( 811 ,il( 63) ( 711 1.~) (56) ( 622 |.~4 (50) (52) 1,67 I 66) (O)) 1.43 (85) (141) 1.57 (5~) (82) 2.01 (lO0) (83) 3.11 (106) (?1) 2.]2 (62) (66) 2.3) (56) ( 161 2.05 (iS) ( Ill I.~ 4 66) (60) l.O~ (5,) (79) .62 ( 53) (61) .~0 ('~t) ($6) .~ (83) 1J5 (66) (I$) I.)) (IO~) (37) I,)0 (5:) (71) .65 (63) (II) .30 (102) (?I) .53 (6-) 4 461 " .$2 ~ IS) (ll) ,3) el) ( 661 2.62 ~ 6~) ( 611 l.S) 5el ( 612 1.6~ (lOll 1.II (58) .69 (95) .63 (56) .67 (~) ,13 (IC~.) ,65 (100) 1.66 (lOl) .71 (67) .12 (lo0) 2.0~ (It) l.l& ( 571 I.ll (1001 ,57 4 I~) .l~ (65) 1,$4 (94) 1.~3 (51) 1.25 4 61) 2.22 (100) 2,1~ 110|) 1.61 I 612 1,61 542 .62 ~611 2.32 (103) 2.$l (11~) 1.72 (65) ,It (5~) 1.)6 (]ol) 1.t5 (55) 1.I) ( 56~ ].65 (109) 1.12 551 2.25 5~) 1,36 ql~) 1.66 (103) .10 (100} 1.21 (1021 1,34 (5~) ,66 (97) ,$9 (67) .tO (5~) .M (56) 1,16 ( 911 I.&0 (55) 1.33 (6~) 2.63 (IOD 1,61 (lOll 2,56 (53) 1.71 1~011 1.67 (6l) 1.62 (61) 3,~ (6&) .61 (57) ,?l ( 521 ,I~ (68) I.D& ( 612 I.II ( 511 l*O0 I 56) .13 151 .1~ (ll) .&l (51) .S8 (10~) 2.61 (lO~) l.Sl (lo)) 2.0© c.s 91 S,'8)

- 68 - l,Incur UL let Iiu| (1001 (1001 J**sN (64) (?t) k. Tewk ( SIT (13) &Xb*ey (U) (D?) eTl*ev*e (04) (DT) Md 1*1* ( lit (11~) phil ,441;4ij($~) (|~) kv~le* (?)) (1|?) &l lieu I. |6 r|¢~avvw|~ 11211 (1171 kltml* 113~) (J|J) 1.12 IUclll~d (1011 (1111 .91 CbJllestcm (lOI) (10]) ,91 ~r|etLe (U) (L66) .]3 11131 1111) 1.6! Ai~J~t* .?| JlClu~JvL21e (iT) (IS) N~lmS (&~) (82) ,69 TmP* I |ST (JDi) *~ Mile (108) (lOOT 5*11 j | 11 |qll4B{10~) (ST) 1.10 Crete*e-el* (99) (B)) l.Ol llogvil|O (16) { jj) .79 ~I~L* (1011 (SZ) 1.09 ~ml4DRLI (|~| (L2i) 1.1~ li~ O'l|essS 116|) 11|8} 1.)0 Ld~|Ov8118 110~) (lID) |.11 CItIImUlL (||ST (I)i) J*li C*llkv* (L)~) (10IT l.S| CJ.eve *~d 110]) 1121) 1.0~ Tel*de (|&iS (||II) I ,~6 Deztelt (6||) (1?|) ),l(J PeVt Uiylte (||)) 11~31 I*TS SJd |alllpolJs ()&~) (|131 I.)] CbJ¢s|¢ 12|?) 11191 1.16 ~IL Iwlukee { I~) (1391 J.D| ~MIJO (~ki~ (lIST I*&l $~. LILTS s (ISS} (1)IT 1.18 I~* nosN8 (Is) 11021 1.0- lllMtdlpeltl ( 11411 (tO) 1,00 Ile'e~ I,IS* (ll) (IT) .Ill OIdih4 ( 111 (j&) ,J2 18~s* CStt ( lit (1011 .15 WIIkILI (9~) (1161 .I| Ok~ebm (ll~ (81) (It) .OK ~jj l It) (t]) *?~ ~11111 lld~k ($S) (20) .6t ~F~Spelt (il) (OI) .|I hllsl (IS) (T;) .63 ~lteS (f~l) (JOLT .$3 ~te~lo { &l) (|3) .&) ,tj~,e4vlll~l(31) (3S) .&1 I Ill) (i6) .~)~ lllllq* (SO) ( 111 llall Idlkl I;Lly (I1) ~ ~') ,I~ I~el LJ ( 161 IS) .ll &dllllll (1,5) III) .I) ~. 14.I l'lllt411¢ll (II) ~ II) ,l& 861 r lira Is(10) 611 *$3 k~Jllle 06) IS) .liO lp*UN ( 6~1 (6~) .$~ ~*U (l~)) (IT) I.)1 l~*L l 131~) (1S~) L.ll lloy £1t~ (IsO) (1411 1.11 ~.,41d bills (lid| |I111 1.13 11~l| Ill Qtl. 19|3 IU|2 ¥0 1.03 (It) .$? • ll (~) .$0 .IS ( 931 .~ _, ( 891 .$I (I)) .~l .|~ (103) *?? .s~ (t~) .tl .71 (~2) .il (]Of) 1.12 ( lit 1.0~ (IS) .t| (9~) .|1 (I~) .kl (IS) 1.1~ { ~0) .67 ( 111 .43 ( 901 .~4 (~I) I.I) (~6) 1.01 (I~) 1.01 (~L) .13 (9t) .83 (lO~,) 1,~) (I011 1.11 (9S) .It (tO) ,iS (99) 1.12 11061 l.l| { 12) 1.II (IS) 1.11 (If) I.n ( 131 .0~ ( 161 1.:~ (121) 1.06 (I)) .T~ (|~) .$2 (lOS) .it (t~) .Sl (IS) .6S (19) .t3 ( lit .50 (10~) .62 (I~) .31 (l~) .66 (U) .60 (IS) .$] (86) .6~ ( 111 (lOOT ¢ !11 I iS) (8~) ( Ill ( tit | It) 6.u. I/t/I) Ills Islll To (IS) (It) (69) (91) (el) (Ill) (DO) (IS) ( 801 (~1) (~) (U) (13) (t0) (66) (I1) (It) ( SiS (11) (I~) ( ?IT (11) ( 011 ( lO} 4 IS) (II) (ll) (03) ( liT (iS) ( 831 ~I) IS) (t6) (90) (|S) (16) (IS) (IS) ( 161 { ?iT (91) (II) ~21 JO (|L) .1) (I~) .tO (TI) .t0 (I$) .~ (10) .31 (?L) 6.a6 (lZ) 1.61 TO) (tO) (I?) (IS) • S) ( IS} .1~ (91) .61 11|31 • IS I~) 1.17 ( I71 1.10 (8S) .16 (It) • l{ (It) .71 (91) 1.)0 (t2) .61 (9~) • iT (19) 1.10 (I~) 1.10 (IS) l.OS (lOT) (9S) I.SI ( lit 1.30 (t:) • ll (It) I,OI (IT) l.Sl (l?) .II ( 931 l.il ~ 131 1,05 161 1.II (90) l.lO (t6) 1.11 l l:) ,ll ( Ill 1.31 { 9|) I.I~ ~ tO) • (IS) .ll ~ 911 .?i t~) (97) .11 (~1) • 15 (~0) • 67 (~S) .ll (9t) .$~ ( I31 .aS (IS) .39 (69) .IS (8~) ,tO ~ IS) .ll 121 ( 931 ,17 IO~ • ~1 1 $11 ,10 Ill .19 (11) 1.21 (~z) I-)

| !

I I ........................... ,,., ..... ° .......... o .................. N ]dllllll Ii111 II1~1 Illll IIIII I1~11 II1~1 ~11il IIII~ 11~11 IIIll I!111 IIIIi ' ii J

a Aver~*ss end U~ UneAded )rend Avarenosa - J~uar 1983 AlX Smokers) BLH I[OOL |elan ~ Tot*._.~l }/arlharo Winston Cmsl Un*idod 29: 37X 8Z ISZ • 53Z 53X 33X AvarsnesJ 1aria Avers- 3.5 4.2 3.3 3.1 2.8 ~.0 6.8 oela to Share - ICOOL evareneea ranks fourth of top Lour .~.rket share brenda. - In relatlon to market share, avereness 81:12ar across brands vlch omN edventese to le)mo~da. - ll~t2omll comparable u~JSdtd avarenees deem not evel2abXe prior to thXm per~od. I~,r rmoked Ever JonShc rurchaeed meet often Purchased most otter to undlded everenesl earle Kver lloulht to Purchased moat often s-tee ~nds for Nenthol )rands (~4monI Ali Smokers) Reel Selen ~r[ ]~H Tote1 62 ( eg) 65 ( t3) 34 ( 89) ST ( S~) 37 ( 88) &3 ( 90) 18 ( 95) 29 ( %3 7.2 ( 95) 9.1 ( 80) 2.0 ( 91) 5.6 (124) .25 NIA .25 H/A .25 N/A .37 w/^ .2o NIA .2] N/A .11 NIA .19 NIA *Jose period 3/82, un/ortunately at pu~ of KOOL revltelitstlon leunch.

- 72 - ~tJ - A larse proportion o! total soakers have had ozporienca with r.OOL sod Sales. - Conam.er unse of FOOL not iocraae£n8 over t/as period. ILH Wet vital in thls - X~OL, Sale, end Nevport equal in abillty to convert ovaresan to Imr¢hne. B6B etro~joot. - I~00L. Sales, end |&H equal In ability to resale gmohars. ]~evport vaaks8 t. Purchased Host Often Trend b Demo ra hic Grou (Anooj All ~okers) )~OL Sol ,,.~ He~i~or t )I-H Total 1/83 Xndexe 1/83 Index* 1/83 Index* //83 Xndu___.~* Total 7.2 (95) 9.J (80) 2.0 (91) $.6 (124) Males 8.7 (~25) 7.9 (94) 1.9 (8.1) 3.7 (126) Females $.7 (76) 10.4 (75) 2.1 (100) 7.5 (134) White $.1 (78) 8.2 (77) 3.7 (94) 5.4 (223) alack 20.1 (92) 13.7 (86) 6.5 (lOS) 8.1 (104) Under 35 10.3 (96) ll.4 (124) 4.7 (118) 4.7 (147) 3~-$4 6.9 (9)) 8.9 (71) 0.6 (~0) ~.B (94) 5~ 3.2 (94) 6.5 (SO) 0.4 (133) 6.4 ()73) 7011 Taste )0.1 (104) 7.8 (~6) 3,S (97) ~.4 (98) Lllihtn 6.2 (55) 13.2 (82) 0.4 (31) &.5 (98) Ultra 2.6 (lO0) ~.7 (53) 0 0 8.8 (880) - FOOL share number one snook Lales and grey over per/od. - KOOL lost severely imont f~lee and Whites. - I(OOL losses totally on Lisht8 (KSL replac-~ent problem?) hlem vitality non& youn& adults. (nov csapalgn?) - Nm.~ort vite]Ity amen| youns end old. B&H ~itslity due to their nov Ultra. Only brand in this Stoup that srev moonS faults and Tdhites. s3/82 base period

- 73 - Onaided |rend Avsreness - XeY Attrlbutes** ~na A/I bakers) ICOOL Sal.~ H....~r t B&H Total kst Taste 12 (80) 27 (65) 4 (100) 9 (100) Lov Tar 4 (67) 8 (80) 2 (100) 4 033) 1~reasLn8 7 (100) 6 (120) 2 (67) 3 (100) Populstity Appeal/mS to |1 (92) 6 (86) 3 (60) 2 (~00) Fouq Imokers KOOL best taste evereness declined over the pezLod and cont:JJ~ues to be Xover than SEX--. Mevport and JJ&H vete stable on the best taste naasure. )(OOL hes very lov evareness as • 1or ter and it declined gfasce the launch qmtrter. Given our share of ~thols. thin L8 very lov. AJJein. Msvport held awareness on this meure. BLH 8rev due to U~tre. IK)OL has the hijhest awareness o! thls 8roup on populeri&y end eppul to younS; homer, netther n'asur8 8r~ ever tim period, fJ~)m Is levers|in| the populsrLty u--sure. • 3/82 base period • * Attributes ere etded, h:ae.4s are not.

-74 - ~- Aided ) ClsJmed d~l Claimed Slosau Recall Becal! x~ex__...~* ~ xndex.__...~* ZOoL SS (98) 18 (loo) |*2,'m 59 (88) 22 (92) ~evport 47 (100) 19 (100) KH To~al $7 (100) 28 (gO) 14srlboro 77 (|00) 66 (93) M£uston 68 (97) ~ Gusal58 (97) ~ -~ Claimed Visual Recall Index* 36 (120) 80 (103) Key 71nd£nxm - Ad recall stable for moat larae brands, Sale: dovn. - K~L slogan recall lov and not Storing - 7.OOL vLauel recall $rov1~. * 3/82 blsa pared C. M~ or Svttchin n.mLcs - Total Brjnd (Mavis 32 Ind 33, Brand S~i~Z S-~'~udy) X of Fo.-'ner Smokers - 1982 Total Svitch Total Svitch Iuflou In Stmrtin~ Outflov Ooc • 0OL 10.3 7.5 3.0 19.7 ll,O Sslm 15.3 10.7 &.fl 23.0 ll.& mevport 20.& 11,3 9.l 20.2 13.1 J&HNex, 22,4 16.6 5.8 23.4 11.6 Natlboto 12.& 7.~ 6,0 20.~ 9.6 Minstou 12.6 9.5 3.~ 21.2 lO.$ Total Nen. 16.6 12.1 4.$ 22.3 11.8 8.7 - 9.2 11.6 - 7..q 7.1 + 0.2 11.8 - 1.0 10.8 - 8.0 10.7 - S.6 10.5 - S.7

- 75- - KOOLto net nal|at£vo svltchlns position is the vorst alan& its Ju~ compet$tors. Lay 8vltchixtlL-in, amd more st|nificantly lay startLnShsvs caused the brandts atrona neBattve position. - Total KOOL has lover levels of 8vitchLu4L than any of LOs naJor conpetitor s, - Ovtflov from FOOL is ~ot a pruble= In relation to conpetition. i!7t 15.$ ¢ I:) 7.0 ¢ IS) 8.5 (75) 21.5 (~OD) U.$ Qim) 17.0 [1~) 1180 1s.0 fliD) e.$ c~J) 7.5 ( liJ 2t.: ( WJ 12.1 ¢1~! ~.l ( U~ ,I~.~ ¢ )8) 6.~ c T3) (~.1 ¢ Jl~ ~.1 (~) 10.! c R) 13.~ (IS) - Since :|vlttlttstion |vitchinjoiO lsprov~B - StertlnS still erodlns - ~lttinj and SvitchlnS-cut J~provlnS

- 76- ooL 8vx~*nluG uxs~ro~Y ~-~lb-(~ , o, ,orNr snok.r, ~ aoo._k Inf.lo~ outf.lov, 1~ "llsXO IPemale 16-25 • 116-40 4X* 1041 lmXe Irena]Le 16o3| J6-40 41. I0Jl 1O0's llalo ILat rod~oil Female 11035 26-40 Nale female 16-1S |1-40 41" lg?0 ueveo D 6 10 role Female 16-25 16-10 1171 nale Female 16025 |i-40 11" 1111 KOO~ ll| LJD8 Jldl ! II Antredueed Ire~Le 16-|S 5J6-40 41. 1971 lisle leRale 16-26 |S-40 41* ./ 11-3$ H-40 41. 1,7 44 43 $6 10 17 )t 40 4) 41 $7 4S 43 SS 18 16 )8 40 44 44 S6 45 44 SS 17 11 )i 17 47 43 S7 41 43 IS li 14 $6 $8 41 4) SS 44 4S 56 17 17 36 )i SS 65 45 SS 17 17 31 36 46 42 JS 44 4S S6 17 10 31 ,61 46 41 !,4 44 46 86 tO :tl 17 )6 41 40 S4 44 46. 16 17 lO 11 )4 4& 41 S? IS.4 10.~t S.l 42 10.3 8.8 1.5 14 4O 45 60 S4 40 46 60 111.1 1t.4 -).S 66 S? 40 7.0 12.0 -J.8 $4 43 18 S.0 4.3 1.7 |3 14 26 6.8 10.6 -3.1 26 34 40 40 S.lJ 11.5 6 6 12 61 14.0 15.5 -1.5 67 S6 19 6.8 12.3 -S.S 33 44 34 8.0 S.D 2.1 21 19 )4 5-5 |.6 -4.1 20 22 61 14.2 22.2 2.0 65 H 10 1.2 8.4 -1.2 3S 44 ~6 10.0 4.8 S.2 40 21 13 3.1 7.3 -2.2 20 32 35 4.3 ?.8 -3.5 17 34 S8 13.1 11.8 1.8 60 S1 42 |.S 10.8 -1.3 40 48 )1 8.6 6.8 1.8 )S 10 2~ 4.4 20.8 06.4 16 28 13 1.8 6.9 -3.1 15 10 SO 10.1 11., -1.1 54 52 42 8.1 10.8 -1.7 46 41 $4 8.1 ?.1 1.0 1| 10 29 3.0 6.0 -3.0 13 16 38 3.0 6.3 -3.) 13 21 ,O 11.9 11.0 -1.9 S7 SS 40 |.7 11.4 -1.7 43 45 2S 8.S 7.4 1.1 16 28 2D 2.S 8.1 -1.6 IS 2) )0 ).1 6.8 -1.S 14 2? S8 1S.0 8.8 8.2 45 47 41 7.| 10.0 -3.0 15 S2 17 6.6 4.1 1.5 21 18 31 7.4 6.8 .$ 14 11 44 11.1 8.6 |.S |8 40 S| 11.1 8.1 4.8 60 43 41 D.S 11.8 -1.3 40 87 16 5.6 3.0 Z.6 14 14 37 0.1 7.6 .7 36 17 44 0.8 8.$ - .O 11 46

- 77 - • Zqt[ ~ k~,n ~ ZAnM C,U~V, nn ~,~r, Ibis |2 44 S1 ~i.| 1S.6 - .4 61 S6 J~omo]o 41 S| 3~ 10.S I|.D -Z.4 • )J 44 14-)S XO 10 11 11.2 10.3 ).O 46 )S Jt-4O M 42 47 J.S • • ) O |4 )2 41* 46 40 )2 6.] 1.7 -1.4 |) |l IMXo B) 43 t0 13.3 11.0 ,-4.T 60 S4 I~m41~ 41 S? 40 9.0 1S.4 ,.4.4 40 4G ll-JJ ~7 |1 )a •.1 10,4 DI.| 4| )l |1-40 )l |4 )) 4.4 10.D ..4.S )t )] 41~ 41 40 |J 4.D 10.| D.| ) 81 31 srrT k.vtt.XLL.U lUlL N810 S2 4) J9 13.4 16.8 -].4 SS S1 introduced Jl~msXe" 48 i? 41 11.1 16.) 0S.1 4S 4D hi-iS ~O |3 )~ D.J 10,| -1.0 )l 11 16o40 17 26 27 0.2 12.S -4.4 24 2| 41. 45 he 32 s.| 8.5 -3.D |3 |i 1110 I~10 S| 44 JJ 11.8 16.4 04.6 SJ S1 ffesmle 40 JJ 41 0.1 13.1 -1.7 41 4D 16-2S ID 23 31 1.4 10.| -3.4 30 aS 26-40 2| |S 36 4.4 11.3 -4.9 26 )D 41. 43 37 2t 4.8 1.8 -|.0 ID )1 1|I| 8Ulo |1 42 6o ]0.2 12.7 -.S S SO 12 red~le 4D S8 40 7.3 13.1 -.S 8 40 42 14-3| 11 10 37 S.8 D.J - .3 | 39 27 |S-41 he 11 31 1.4 11.S -S.1 42 33 41+ 4S 4D 32 4.1 9.) -4.6 30 26 1P11 0tale I1 41 SD 8.$ 15.4 -4.S SD SS Pmule 44 |J 41 4.3 ~Z.4 ,*4.3 42 4S 16-31 16 2D 24 J.0 1.1 13.1 36 )1 24-40 2P 40 d) 4.3 ]1.0 -4.7 3S )1 41. 4S 34 11 $.7 0.$ -4,6 20 21 M~voe 31 • 32 lit! I163 IUlt 44 3! 54 I.S 11.) -).1 50 53 rmlo 61 tl 42 I.S 10.) 01.6 S0 47 11-~S 17 )1 2) 6.1 S.) 01.0 3P 24 36-40 30 40 47 6.6 8.8 -2.1 3D 41 41~ 45 39 30 4.3 7.5 -3.1 25 )P liil|e |4 )t 50 5.2 10.6 -|.4 S0 54 ;trt~e 5? i| 42 5.3 4.1 -3.8 |0 4~ 11-25 16 14 15 3.0 4.7 -~.7 2t ~4 36-40 )t 41 49 4,7 1.7 -4.0 44 44 4~* 46 40 32 3.D 6.3 -3.4 ~7 32 - SookXa~ populecLoo end menthols St•winK more Less1| - ASs of mnokLns populetLoo and menthols quite stable - KOOL sez |key stable over the 1oo| tern. lncrssstnKly Role versus total sn~a~l - IU)OL franchise a£i~ - Inflov problen yore| amon~ men • • °° i

- "78 - Fair Share of SvitchinK (Vaves 32°33 SvLtchLns Study) SvLtchin8 Total Switch Tots1 Starters Zn Xnflov Quitters Out Outflow XO0~ (79) (53) (59) (88) (77) (82) him (127) (7~) (85) (116) (79) (94) Mevport (221) (72) (103) (66) (84) (76) I~H Menthol (142) (107) (215) (110) (7S) (89) Nsrlboro (158) (44) (68) (107) (67) (83) Viuton (83) (67) (70) (108) (74) (88) cmNx (74) (70) (70) (78) (64) (70) Nerit (125) (148) (143) (114) (79) (93) - Grovin& brands sam to be leveresSns starters - 11001,'8 fair share of inflow is the poorest anonS ma~or competitors. |&H and Nerit are the most popular brands to switch to. ILOOLtI outflow remains It par with competitors.

79 - Inflov anal~- Fair Share lJ.-l& IS.-3~ ~J-44 65.-~ J~ 70T&L Share of Xmflmre 8hers of Starters 1.74 8.19 62 82 88 210 2.33 2.07 J0 75 147 148 1,09 1.17 64 83 0 107 0.69 0.41 84 68 172 0 0.27 0.24 154 152 0 0 2.0$ 1.97 85 103 164 221 Narlboro 16-.24 I~34 15-.64 65-54 I'OT4L 37.28 39.12 69 68 115 112 21.16 20.99 66 39 90 80 12.00 12.81 70 62 116 93 7.61 7.64 92 80 210 172 5.18 4.76 104 78 125 120 15.65 15.71 71 78 1.55 158 KgOL 16-24 1S-54 }5-&4 65-54 SS* tOTAL 8.10 6.41 76 65 96 82 9.S& 9.46 51 67 85 61 4.73 6.83 61 67 94 117 6.19 6.49 69 37 120 23 6.10 6.17 03 78 94 78 6.16 6.07 64 59 105 79 8aln I@-|t 11-54 15-44 65-~ S)+ I~OTAL 0.03 6.$3 8e 91 11| 04 0.69 10.01 76 07 121 157 9.62 9.67 77 79 127 159 8.67 0.92 87 08 116 101 8.71 8.65 03 78 82 109 0.12 9.&1 80 05 114 127 Source: Svitchin8 Study umvss 31, 32, and 33 Share of Xnflovs includes svicchers-ln plus starters but e~clude~ svitcbers- vlth/a s brand fanily. - EOOL inflav vssk across all aSS sroups and setting reeker. - Mevl~r[ and~rlboro leverasing yauaS adult starters and getting stronger. - Salem ltroa| acrass 81] starter age groups except under 25.

- 80 - or Svttch Lcs - Total Brand~ - KOOL dsclinins starter position Is associated vlth chart|in& ssx, s|e, and tar sesaent destination of Sndustry starters. • er S of Tots Zndustr Starters Id-le 58Z $6Z 55~ 46Z 45Z Y,--,,le 42~ 4&Z 45Z ShZ SS~ eta1 Z~str~ Less than 25 52~ 40Z 38Z 33Z 41~ 26 to 40 20~ 26Z 302 35Z 33Z &2+ 282 342 322 32Z 262 sr er 7Jr $ set Destination Z of 7ota_l~ Y~l T&att JSZ 80Z 69Z 52Z ~4~ LLlihtS (15~ ~20Z ~C~1~ ('az (56~ Ultra

p ~I+ - kit - kaltelral btct*r. IN I;lt ji R LT4 IS llix~, IoutCtl Of Qlll! Ind II1! - total B:ind Wlvel 2 add 33 |.0 0.7 *$.1 4.8 11.6.4.| $.~,7.| ",1.4 S.llil.8-6.0 1|*011.]*|*~ |,) J*ll4KJ.$ |+8 ),~ 4~,) ~,) ~r.~, -0.~ 3.0 O,& *J.6 |.6 J,~ q.~ O.t |.| .'0.| 8.| i.) "O.S O.a*t.2 -4D.| 0.6 G.& 4@.1 O.i 1.3 "~.L ID.J D.6 4./* O.) J.O -~.? -- 0.? -- 0.~ B.O -4,6 O,J 0,8 -4.S |.t ),i -0.1 ~t.t),| -0.! 2.1 ),t -~.2 3.0 1.6 e1,3 ;t.~),2 -0,? J.O J.Y -0.7 )+$ 2.7 44),0 2.7 ~.D -l.:l 1.6 2,6 eJ,ll 4,5 Z.; *l,ll l.} |,I -l,) |,1 ~l,i-0.) 1,$ &.6 -).I ),| i.l -I,6 3.I &,2 -0.4 ILl I.B -J,l 1.3 J,Z -I.0 -- l*; -- 0.I J.i -l,l l,Z J,O -I.I llkllth*) 2.I |,3 -i.4 1.0 7,5 -O.S 1.2 30.3 -4~.II+.4 10.0 +~t.6I.~ IP,t -O.L KOOL inf3ov vuk anonl starters and nenzhol anokarm. ItGOL st£21 conpecLtLve in drav fron non-oenthol. EOOL outflov not • proble~ to any destination. ~u relation to ¢ouptt~tLon,

r82 -- 'IOTAL SWZTCItZNG CAZNS/LOSSES X OF FO]~EX SMOV~R5 Okivos 32-33 Svitchins Study) ~lns Fro~: T~OBSS s TO: "" ]~H -~ 1U)OL Salm Ne~rt Henthol KOOL Salem • ODL N. 1.3 0,6 0.3 --- 2.4 S, lem 1.6 -~ O.& 0.4 0.9 N- Iknq~r t 1.6 2.0 --- 0.0 2.0 2.2 Kll Menthol 1,4 3.4 1.2 --- 1.2 2.2 ~rlboro 0.3 O.S 0.2 0.0 0.S 0.6 Viuston 0,6 0.6 0.1 0.0 0.6 0.3 Camel 0.4 0.3 0.1 0.0 0.1 0.2 Hertt 0.8 1,7 0.8 0.2 0.1 1.4 • OOL has net loss to Sslem, Bath from Hevport, loss to )&R Hev~ort Menthol 0.5 0.4 0.4 0.7 1.2 0.0 --- 0.2 0.1 0.2 0.1 0.1 0.2 0.1 0.2 |&H Menthol. Salm Mev~ort B&I! Hemthol Harlboro Mlnston Camel Herlt AS Z 01~" TOTAl. GAZ]~$/LOSSE$ )kH [OOL Salem Nev~ He._nthol I~OOL Salem N. 12.7 .5.5 3,3 --- 12.1 10.1 ~- 2.7 2.7 3.8 N- 7.8 9.7 ~- 0.0 9.6 10,8 6.3 15.2 .5.4 --- 5.1 9.4 2.ll 4.4 1.6 0.0 2.5 2,8 6.1 4.5 0.5 0.0 2.7 1 .t, 3.2 1.9 0.6 0.0 0.5 1.0 2.6 5.7 2.6 0.6 0.3 5.5 ~,,OSSSS BAll 2.& 2.1 1,7 2.8 --- 5.9 0.0 --- 1.1 0.7 0.8 0.3 0.5 1.0 0.3 0.6

- 83- D. Tot I L r h vs. Ka Corn et/tion - TOTAL KOOL DD4OGRAPIPt VS. KEY COHPETITIOK ~g Study Waves 32 and 33) Index to Index to Index to 24 or Total 25- Total Total Less Snokers 34 Smokers 35+ Smokers tool 14X (,108) ~Z U58) 45Z ~ 74) Salem 12 (92) 28 (308) 60 (98) Nevport 54 (415) 27 (I04) 19 (31) J6H Henthol ;4 (108) 26 (100) 61 (100) Harlboro 33 (254) 35 (135) 32 (52) Tot~l Saokera 13 -- 26 -- 6~ -- The greatest percentage of KOOL msokers is in the 35+ age group, although relative to total smokers. It Is strongest in the 25-34 year old category. KOOL's one-t/me strong skew In the undar-2$ year group has been surpassed by Nay- port. Mevport cm;tinues to be the youngest of the mJor ~tbel brenda. Sex (Z of Frsnchiee~ TOTAL I~OL~S. K~ CO~UrlTION (Svitchin| Study ktaves 32 aud~ Index to lodes to lqal._.._ee Totsl Smokers Fmle Total Smokers KDOL 38Z (121) 42Z (81) Sells 40 (83) 60 (115) Mevport 46 (96) 54 (104) B&H Henthol 27 (56) 73 (140) Marlboro 60 (125) 40 (77) Total Smokers 48 --0 52 ---

- 84 - IOOL is the only menthol brand with • ~,le skw, direc- tio~lly similar to l(arlboro. |eMon & liedses Xentho2 Se the ~ost female. Salm and lqmport continue to shmre • f~le ekev. KOOL F~il DIRo rs htc~ of Franchise TOTAL XOOL DD~OGRAPHY VS. KEY CO~fl~ETITIC~ (Switchln& Study) x98___22 Index. ~l..__~m 6_! 58 (95) 16-24 23 7 (3;) 25-34 26 24 (152) 3-~, 22 26 (128) F~,les 39 42 (208) 16-24 11 7 (64) 25-34 14 17 (120) 3~ 14 lB (132) Xey FlndinEs The &OOL franchise his become uore female 81~ce 1975. The sSe composition of KOOL'e franchise hes shifted tovard the 3~ yesr old see Stoup.

- 85- I~OOL Sel-- Mr.port B&H Nenthol )larlboro Total Smokers Income (Zof Franchise) TOTAL KOOL D~4OGRAPHY VS. ~ CONPETITION (8witchins St.dy Waves 32 end 33) IHCOHE Index to Index to Index to Index to Tots1 $10,000- Total $20,000 Total $30,000 Total ~10,000 Smoksr...sm~ Smokers $29999 Smokers & Ove~ Smokers 14.0 (130) 33.5 (117) 24.0 (98) 28.5 (79) 11.3 (105) 28.8 (100) 25.3 (103) 34.6 (96) 11.8 (109) 26.9 (94) 2519 (106) 35.4 (98) 10.7 (99) 28.4 (99) 2S.3 (103) 35.6 (99) 11.1 (103) 28.8 (i00) 26.5 (108) 33.6 (93) 10.8 --- 28.7 --- 24.5 --- 36.0 --- RelstLve to tots1 smokers, KOOL becomes less developed as income increases. Income distribution for Ssle~ end Newport is relatively flat. Benson & HedBes is • more upscale brand.

- 86 - Zo KOOL FmsXl~ Lead Market Ar~l~sfs Y~JorTrends for Total KOOL Bass Period Post Period Index (Ist half T81) (1982) 14Sk Share 9.19 8.79 (96) Share of Snoksra 7.6 7.0 (92) UnlLded Brand 49 53 (110) Awareness SeriousTrtsl 8.6 13.6 (158) /~tLos Avareness to 6.4 7.6 (118) Share Avareness to 17.6 25.7 (146) Trial Key Find/nzs - Overall avereness and triaX up, share do~. Note._.~s: 1) ~nless noted otherwise, data In thLs sectlon Is aswnB all smokers. 2) Lud markets are Little Pock, Atlanta, Htlveukee TA's. 3) Started Ausust, 1981. Pre July, 1981. Post January-February, 1983. 4) Date velghted to reflect national moker proportions.

Vhets Is Share Do~m? - 87 - NI or Trends for Tote2 KOOL h Lead Narket (l~dices to hse Period) d / Atlanta Milwaukee Little bck $h~ra (95) (98) (99) Share ot I~okers (71) (1062 (125) Unaided )rnd (1001 (104) 017) Avarness Serious ~1~1 (1331 (158) (223) latin of ausreness (135) (152) co Trial (200) - l~8inoas proses for KOOL in Atlanta - N$1~uket and L~ttle Rock nore dyn,mtc on a11 mutsures. b~tl~pPened in AtJants? Selected 1maKe Trend Differences AnonK Lead NJrkets (Indices to Base Pared) Atlanta Nllvaukee L~ttle Rock* For Toung People (88) (200) (1292 Yor Y,--lea (327) (82) (200) for 81sclul (200) (87) (92) Sac/aryAnS (82) (2|2) (1031 Lot of Tobacco Taste ( 632 (121) (233) Xsfreshin& Menthol (98) (112) (97) Taste Lot of )hmthoX Taste (94) (92) (123) Jazz 7sstlvsl Present Tes-larje Yos-mll No ROOL BDI 128 78 96 Menthol (:311 228 ~8 8~ eaBT market 150 SeA/ SOH compared to 100 in other markets.

- 88 - - KOOL 4"~.Be in Atlanta trended lama younB, more fensle, relatively mote Black than other ~tkatJ. - KOOL product 4m-Be eroded in Atlanta, inproved tn other markets. -- At~flte has been stron6ast gDOL market. What About Media Lead Narket $ endin 000 Total Year 1982 AJ~ra&eta Gross Agsrasata AsBre~ste Brand _Xed__..~ia BOA BOA/SON I~OL $2,561.7 9.9 106 Sales 2,060.6 8.0 8J Bevport 729,0 2.8 90 UH Tots1 1,720.3 6.7 ]20 )bitlboro 1,925.8 7.5 52 VlmJtoo 1,254.8 4.9 33 Merit 2,028.0 7.9 136 - Total I~OOL outspent e31 ~JJor cooper/tire brands in lad markets. - b'hlle total F~OL BOA yes Steerer than major competitive brands, Merit far emceeded the same brands in SOA/S(M.

- 89 - SOA - ICe Cam etlt/ve Brenda b STA Indexed A airier Natioeml |OA (TotaZ Year 1982) Atlanta Hllveukee Little ILock Nat~o~l STA ST^ $TA |rand $OA SO~ .... Index SO_AA. Znde.x $OA Index ~L 7.9 ~ loa ~ .8 ~ 2B5 s.~.. 7.5 r-~ .4 /~ 8~ r-~ 9l Wwwport 2.1 1.5 7! 4.8 229 I.Z 57 I~H Total 7.3 7.5 103 5.9 81 5.3 73 )Mrlboro 8.4 4.6 55 13.5 137 6.2 50 Mlneton 6.3 5.0 79 3.8 60 9.B 156 Herlt 7.5 8.4 112 6.9 92 9.8 131 - Total Sale~ has a hi|her SOA in Atlmnta than total KOOL. vh/la the situation is reverse in Hilvaukee and Little Eock. KOOL clearly outspent In Atlanta, Even more drmnatlc In relation to IhJre of market. SOA/$C~ in 1982 - Atlanta B~, M~lvaukee J]B, Llttle l~ock 321.

- gO- Na or Trends for Totll EOOL b Sex (Indices to hose Period) Share of ~ohars Ih~lded |rand Awareness Serious Trial ht£o of Aversuess to Trial hma2eo (84) (111) (lO0) (113) (i70) (]43) (i70) (126) - Business probln for T~OL is anon8 men. - Trial amen| len not the problm. Avareasss and zetqmtton after tr4hI are problems. Vhat Ra ened &non Halex? Selected lnase Trend Differences Hales ~ersus F-~,les In LudHarksts (lBdicss to kse Period) Hale.__.~s Fmale8 Yet Tom~,Psople (g6) (105) Yor Sonenns Like Ha (07) (109) |atiefy~ (86) (I|?) Lot of Tob~ca Taste (75) (136) Re|reshiu8 He.the1 Tamte (qJ~) (114) Lot of Menthol Taste (89) (122) Serious, consistent pattern of product 4~.je erosion Inane hales0 8mt fulls. - HaJor difference in trend on "lor ammeone like as" mains to fena)en. - Slijht tendanc7 for fen I:o met brand less "for 7oun| people" than fmM]es. • • , • .... • ., - .

- q] - aad)larkst Anal sis (cant'd) - EOOL has s problenvXth lay tar sty2es. 18 Honth Honltor Rstios Serious Tra-1 to Unaided Brand Share of Shakers Avsreness to Serious Trial £OOL 26 51 Sol,- 22 75 lssrent EOOL 16 6.3 Salem IS 46 KOOL 133 18 Sslm 85 88 Vltr_.__!a BOOL 74 5 Salem 72 26 - All ROOL otyles convert avarsness to serious trial as yell as Sale:. - r~OL Parent converts serious trial to share of s~okers better than |aim. - EOOL LIGHTS and ULTRA very veak versus Sale= in convertLns serious trial to share of mnokers.

- 92 - KOOL Lend Narkst Share of Smok~ Base Period Family 7.6 7.0 (92) Parent 4.7 5.2 (|ll) UL/LIG3fl'S 1.3 0.9 (69) in.13~ 0 0.~ ~/A Nildu 1.4 0.7 (50) ConvtralonAmon8 ~on-Franch/ae Triers 18 Months - Brand F-i/Lea ~0o__~L sal___.._-- ~ Ba_.~. Total Triers -Last 6M On. 403 46B 221 386 (1 stick orwra) Serious Triers - Last 6 Non. 35~ 34Z 33Z 36Z (1 pack or nora) Conversion g of Tots1 0.7 1.5 1.4 6.1 Triers Conversion I of Bariou8 2.1 4.4 4.| 11.5 Triers -KOOL business probl,m is totally smarts low tar styles. - Convers£on clearly • probleB/weaknes8 for KOOL. - KOOL Parent is relatively healthy.

- 93 - of Sources of KOOL Tr4-1 lOMonth LeadHsrket Nonttor IIRtisT iT.tO n.;S IT.IS 14.~ i7.Zl I~SM~I 48.11 S0.3I M.TS M.|S D/.Ol F.?. U.n 4|.|| M.1$ U.~/ |1.3| N~-Wi U.IS 43.|$ ~l.TS ~.IS 46.31 I~ 1|.DO 9.8S M.IS ll.4S N.N ~0L Flint 13 15.1I 4.tO IS.IS |7.4S ~.$S - Parent trail hire from non-menthol| 2Lne atnJLonn drJvJn| mr, froonnthol. - I~W and KOOL 8pecifLc csnn~ballzstton Is Iust for Parent and most for ~ltrs, IU)0L 18)Jo~th Lead34arket]~nltor Smoker ~Ke S~ry Z A realm ) ~8~nthl re lndtces b Se ent Pse~le For AI~ ices107 !1I 101 ll~ 110 107 107 104 Per f~s~les 180 ILl 107 180 I)4 Y~ I~ 11D •/Dr 01d Y) SO 00 I~ iF7 80 80 M hshlm~l Per Nile 82 f? Y8 N Y| ~ 13 iT Fir Sm~tme 83 M N M 180 tl tz J9 LILI k ~r JZ~lwp, !)1 117 82 In I~ TS 8S ~

- 94 - - tOOLS! hljl be ~ot S|lnif|csnt|y chnied see the introduction of the ravXtalisetLon stTateJy. Directio~tlly r~GL evidences an increase across all 8epents for "8 c£&arstte for sll races" and decreases for "a clieretts for oldBfashioned people" and "e ciprctta for males." Sons dfrectJ~mtl erosion of K~L L~tse seen £n measures "tot seasons like tie" end "fOr active, enersetic people." The former is psrticularly troublesone ~nS men, the latter amens Whites. EDOL 18-Neath Lead Nsrkc~ Honltor Product lua • $,~.r Z A retie ) JoSgJf71~l |qmet114 to 4J 'N 06 11J 113 MO| bfrt|h|q Ntnlhol 61 H H t01 118 116 Tasle Norjk C|04rat~ )9 |4 lJ H 104 lZD Lot of 1shoOts Teals )0 tO )6 N Q8 163 Lot of IbRtlml lasts 6; SS 4Z 10~ 191 100 888t Nntkel 8ra~d IS J~D 1S IM IIA IM • I~)OL line extension versus 6 Heaths - Parent Mhiblte little change in product inaSa~. L1GI~S and ULI"~ 4-~je 4,.provin$ versus pre-psrSod; homer, this may be me~nlnalsea as they vere ~on-txistsnt ~n pre-psriad. Chaises OhltrVedNy ~S I~0)r1~1 Or 90~OIe8.I! . - Abmolozs IJmje of LICNTS 8~st oatlslylnj and refrsshin£ of Keel PAnlJ7.

- 95 - Y. Product Performance - (Menitor Results SLamaries) 1, EOOL LIGHTS Klnzs- (vs. Brllht Kinls) Yield Date: 1982 Sapls| Kenthol LIshts/Ultra and r~n-menthol LiJhts/Ultre mnokerS Products: EOOL LIGHTS Kings vith white tipping Brlsht Kin~s with vhits tipping. KOOL LIGr/~ )r~ht Me Preference Preference Smm~ar~ Total Henthol HenthoX Total Non Non-Hen. Non-Ken. ~tnthol LLBhts Ultra - Henthol Lt~htsUltra 53+++ 5~4-~ 51+ 42~-~ h3~e~ 40~-+ 39 38 40 22 23 21 8 8 9 36 34 39 Attribute S-,-utz (Total Smokers) - Significant differences ~ersus Bright: No as strong, less menthol. better Dtnthol taste, ~ore satisfying, more pleasant aftertaste. - )brgiM1 difference: Hore smooth 2, tOOL ~LldsKin~, Field Date: Sample: Products: 1980 ~OOL and ]U~OL Hllds gOOL Ntlds Kings vith white tipping SslenLights Kings

- 96 - at Pref,rence S~l~! Total gOOL Smokers Mlld._._...~J ~oo_...h.L • OOL H~lda 43 41 47+ Salem Lleht8 41 42 39 He Preference 16 17 14 Attribute Sum~|rZ SienifXcant dXfferencc versus Salem Lishte: harsher. Here StrsnJthj ~o - (versus Salem Kinp) FieXd Date: 1980 Sample: I~00L end Salmo Smokers Products: K00L with rhine tippi~j Preference S,,,-,,-ry Total FOOL ILOOL Fd)OL EOOL Keel. ]4al.......~e Female Black Nhite Salem EOOL 43 45 41 43 43 48 him- 43 42 45 41 45 ~4 Me Preference 14 13 14 16 12 8 - me $ienificant differences Attribute S~r7 (Tor.ml Smokers) m m JiJnificent differuceo: KOOL verses Sol-- - None |4ar$iual differencem: StronSer, more u|isfyin~

- 97- es 4. lUlL 100'____~.~8 (versus Salm 100'8) Field I~te: 1982 Sample: tOOL and Salem Smokers Product: EOOL wlth cork tippin& Preference Sugarz Total KOOL KOOL IU)OL FOOL KOOL Hale Ferhale Black White Salad Total Smokers KOOL 48+~ 46+ SO~ 44 524-~ 39- 45 Selma &0 40 40 45 36 47 43 No Preference 12 l& 10 11 12 14 12 +4~/-w Significant Difference 4~/~ )iarginal Difference • +/- DirectSonal Difference Attribute S~arz (Total Smokers) - Sienificent differences: IU)OL versus Salem, more 8tHuetb. Uetar drev, lese glwnth. - )|arjinal differences: )eater menthol taetea more satisfying. - Directional differences: Here menthol taste. EOOL LIGHTS Kings (versus Sele~ Lights, Nerit Nenthol, Hevport Lights) Field Date: 1982 Sample: KOOL end competitive fu)l tJJta jml B~-Fi smokers Product: KOOL vLth cork tipping, rtierdXeas of competitive brand.

Competitive Competitive r~OLTT ~ xSL/~. Ltlbts IKXgL 674-~+ 37- 43 37~ Competitive 37 44 ~5 46 No Preference 16 19 12 27 Total Suokar.._.....~8 42 42 16 ++~/-~ Jl|nLfLcant Different ++/~ )largir~l Difference +/- Dirsct/onal Difference kttrlbute~ (Total Smokers) - SIsnificant differences versus competitive lijhts: More strength, loss smooth, more menthol, leas pleasant aftertaste. - Kari$~al Differences: Vorse menthol taste. 6. J~OL LIGHTS lO0'a (vs. Salm Li&hts lO0's and Harts lOS'a) 7ield Date: 1981 Smsple: tOOL end competitive full taste and hi-fi smokers Product: KOOL vith vhite and T~OOL vith cork tipp/nj iOOL Competitive JSo Preference 0 Preferemce Swmar.~ Total Total Competitive WOOL Competitive Pull Taste 37 38 39 li 14 13 4-b.4t./~ Slgnlflcan: difference ++/-- )hirtin~l Difference ÷/- Dlrectionml difference Competitive Tota.__.~! 40+ ~6~ 37 38 1~ |6

- 99 - ~ttribute S~umarT. (Total Smokers) - Sl&nifLcent differences vs. eonpetitive Lijhts" Here strlmKth, lore meBthol. - )br|LnJl differences: )tore Htiefylns, eas~er to drav~ better aftertaste - Direct/one! differences: Less moth. better nenthol taste. 7. IOOL ULTRA Eints (versus ~entbol Vltra: Salem. Nsrit. Tri~ph. Carlton, Truss Bow) ?Leld D~tet 2982 Smple: I~OL and competitive ~kera - ill tar uKnents Product: KOOL with cork a~d ~OOL withy hire tipplei Total I~OL $O4-~ Compst Lt Lye 33 No 17 ?reference Preference Su~ar~ Totsl Tota~ Total Total Comletitive Full Taste ~ Ultra Total 39- 4~ 484-~ 30- 4~-+ 44 39 37 42 39 17 16 15 28 17 4-~/-~ Siiniflcan~ dLflerence +~/-- )~Jr&inal difference +/- Direction1 difftrence Attribute SumsarZ (Total Smokers) - $18ntficant difference versus competitive Ultrla: More aat/sfyLn$. enst~r to draw. less J~ooth. - Pkr|inal differences: |sorer nenthol, more strength - Directional differences: )tore Msntbel

- 100 - 8e ~(versus Nenchol Ultrss: Sol-m, Trlwtph, C4rlton, Pield Date: 1982 Sdmpls: ROOf sad competitive smokers - 811 tar sepents Product: I[OOL vlth cork tLpp£ni Preference Su=~sr~ Total Total Totsl Total Total KOOL Cou~etit~e Full Taste L~lhts Ultra Total E00L 54+++ 42 51+++ 42 36 4~ CompetStivs 32 42 36 &5 40 40 No ~6 ]6 ~5 13 24 3~ Frsf~emce 4-~/~ Sl|niftcant difleren©e ++/~ 14arsinal difference +/0 Directional difference AttrXbute S-sm-r7 (Total Snokers) - S/sniftcant differences versus competitive Ultras: )fore strength, lore ~ttsYyioK, ~tsier to drav, less smooth. - )JarjinB1 differences: Better Dentbol taste, less aenthol taste.

- i01 - AIX EOOL •tyles have achieved •t lust preference parity amens total musk•r•. KOGL LIGHTS 100'• and both KOGLULTRA •tylte hay• echLev•d mar|lmal to •tgnificent preference. Each ~OGL •ty2• delivers •g•Ln•t the epitome of menthol taste promise versus it• menthol sap•at competitors. ~1 scy2•e score d/r•ctLon~l to significant differences on note menthol taste and/or hatter man•he1 t&et•. A|I four new styles achieved 8ilnific•nt preference v•r•u• competitive Lights and UZtras amens KOOL Fmtly smok•rs. As•u:£~ smoker• give • hair ova f,.,ily line extensions first consideration vh•n they de•ira • lover tar product0 the performance of maw ityles •hauld contribute tomard reducing ItOOL defections to menthol Zow tar ••Flee. The new styles perform well versus competitors amenI coapettttv• YuZ1 Taste and Lights -~kers - the key lufZov sources for these Jay|as. KOGL LIGHTS Zings achieved significant preference versus Zrisht Eings Rmong menthol Lights/Ultra smokers ms yell as non-usa•he1 Lilhts/Ultre smokers. S~rznarZ of KOOL Harshness RatinRs (Seven point scale, harshness 1 - m~othness 7) Products ILOOL 100'8 vs. Salem 100'• IU)OLXlIds Es vs. Salem Light• ILOOL LIGHTS I~S vs. array Coup. Lilht8 tOOL L~CI~S lOOtS V•, array Camp. Lights "KOOL ULTIAU. vs. errs7 Camp. Ultra KOOLULTI~ lO0'• vs. array Coup. Ultra EOOL Competitive Smokers Score Score I~OL and Salem 3.76see &.07 EOOL and TOOL M41ds4.00**s 4.20 EOOL and temp. full 3.82*st 4.04 taste end low tar Sane as shove &.10s 4.17 ROOL and coup. a21 3.92*as &.22 lesments Same is •hove 3.81s** 6.09

- 102 - VersuJ luJor conpotitLon mni cospcsite sa=pleJ, el| I(~)L sty]el D©mpt Par~t XSrated sLsnLfJcantly harsher, 7his ~cludesK00L frJnchSn. Insult is nort dranntLc anonj 8xcluJtvely conpetit~ve mokers. (TAI~'Sn Ttst- Febr~try ?, 1983 and Apr£1 11, 1983) F.:lecutlons: DeteruLne the KOGL ~tusLc C~mpaLgn'm intrusiveness and establish n benchmark iJlLnlt whLch a11 ~uture K00L executions can be evaluated. S/ntle 1~$e eutecutXons on February 7: - Geor|t Snz - White model - Soprano Sex - White node1 - IhJyne Tuned PLane - Black.de1 Spread execut~ns on AprL] JJ Carlos and Funk - Slick and White u~del To[81 b~ JlsEk Uh~te ra~L~ ible Feel* JU bdet :t3 3.5 • Over NNthol Ile~qq~t he | S - IrOn.' ' k].l. Av|. of 2 k~ym Georte/ So~,6no/ ~it. of 3 u-tlohallr ~n 30.2 36.0 32.2 32.8 3~..! 33 I 36.6 39.g 33.2 33.3 18.3 3$.$ 35.$ 33.1 35.5 30.It----~tS.t ~ 3It.? 3t.t 37.1 32.& t]t.6 3S.6 31 .$ 31.] 31.0 •l,t 32.0 :tt.S St,li ;t9.5 )C,.S *'2.0 ]tO.| 31 .S 38.t3 i)2t.1 ~t.6 3t.2 32.2 33.t w4,.--~ t1.0 ~0.2 $|.t ~.6 llorl e|tob|lJked umutbol ol~tle pete ) 21.| "- -$$~Sf|c6nt|y Itteete! then 2wet score it the |$~ 1~e3 of e~fJde~e (t~o tie) test) eCeoz8• ~/Soprsmo S~t

- 103 - - ¥1sual playback ~s sttonBo~ than copy ployl~ck, conmuntcoCtn8 ocm~e~r more effoctlvoly than ~he ©tge~ettos. Copy Floybsck focuses prLJLstily on the hudlLne, vL~h loss r.ommn/cotLon of producc-beoefLte. Co point 1P al back FebTusT 7 Tt -ln) (Selected NentLons) (kll: let~l lecellers) Refer te im~ Ik44 I~kt~ll¢oell]nte mustclserleus As U|te lieftr te I*ltr~eets ~ree ~tct Tie gect ~ffer~t tIJlm $ ) -,4 ~plflc~mtl/dtffemet lhr,m 1liner ~e~e~ta|e |i (I~Y) (141i) (1is) J_ .L .l- .t~ .B .H 01 N H | 41 12 |I 112 12 141 14 ~ 11 I ° 41 ~4 10 | I~ $7 M _It ~---.11 ~ t~e ~Ss leyel 04 mf41~n~e

f' l' - 104 - PrOVen Recall Scores A TA1 11 Tl -In) Csrloe/ Nationally Funk Run* Tots1 32.4 34. ! |lack 30.3 33.2 White 35,5 35.5 Sex )isle 36.3 34 .! Ymsl• 28.5 31.5 Under 25 36.3 3~.9 35 and Over 28.7 30.8 )isntbol ~ 3/*. 2 Ilion-Hast hal 25, $ 35.6 Nots: Bozsd n~nbsrs :Lndtcete nenthol recall sLSntflcantly Steerer than non-sssnthol score at the 9$Z level of ©ontSdencs. - Carlos and Funk had s recmll score of 32.4~. This Is at par£ty vlth both the nora for established mentbol spreads (36.2X) and vith tha tvoutio~,lly runn~nI ads that have been tested (Gnorse Su and Soprano S~). - Carlos and Funk is •~nific~otly nora £n[rus~vs Inon~ senthol sRoksrs than Jan-menthol, It £s squally incrustve manS all T~SntNL sub-STOUpS.

- 105 - )Susie Form StudZ Januar 1983 Ytnsl Re art - To detazlina the forms of music conveyed by past, currant and exploratory I{OOL IXtcut lona.• - To lanai vhithlr the music fern changes vhen the KOOL name/copy 4- placed on pictures of smsic4-ne. - To determine vhich of five musical forms (Jazz, Rock, ILhythn and Blues. Classical Or Country and Weetetn) ire most apptslLnS to cuns~ers end vhat ima&ery 4. allied.ted vith these forms. Conclusions - |n tota], current ~ecutions tend to convey Jazz to consumers. - TrL, apate end ad~ophonae ace etron£ conveyors of Jaez. - Percuaston and keyboard executtone convey wider forms of music than rind instruments do. Consumers tend to interpret music forms depicted by vocal4-ts sore broadly than those depicted by musicians. - White models tend to be perceived as portrsyinS a rider rinse of m~sic than Blacks, ~ tend to comuntcate Jazz, Soul, end KhTthn and Slues. * (Exploratory uecutions Include stage li&htinS, multiple perforate, vocalists, fmles, depiction of Imoklni.) - The u 1orator vie more dlepersed in music form comuntcation, ae azpected, vlth less Jazz and Classical and more Rock and Country. - • introduce n of h~lt has ~ ai militant effect on th._.._..._~e music form conm~nicstinn of 8 ~lcture. Jazz ~Ja a ~ In that it is perceived smre atronjly th~n other smelt types (mtrept Classical) as "successful people like and the beet musicians play." J~ck Is protest in these srus. Jscc does 8Loear to he re|evsnt CO eole in emirs1 In that 1[ ranks amber o~e or two out of five amens ell ass |roups on the measures "for someone like me and people I knov like.'°

- 106 - Jan| does 8ppeat to have much more re]events to l~lscks than White|. On the me measures as /n point five, it reeks n~ber four 8nor~ Whites aM nunhar one s~n| |]ecks. as1 ends tovsrd a middle- round or Imbi uous 8 • tea • anon 811 s e ~. It ranks ember four out of five oe "for younjer people" but it also ranks, on averele, mmber three out of five Is "for older people." We Interpret this as • ruscn~b]y neutra~ issue for Jazz, neither youns Iwr old. ~r to have a ~. Among all age groups it ranks n~mber four ne 3;~'~-t'e'poople and---'-" =-J n~ber two as "for alack peop2e." ~lications/EnsuLnLActions ~plications Actions Taken - Black|wdela hei&hten communication of Joss music, vhich Is a music fern that appears to have uwre relevance to 31acka than to Whites. - Appul of cmpatsn can be broadened by depicting less Jazz specific eltuatlone. - The nmse, "KOOL JAZZ Feativwl" could be /aprovnd upon to more accurately portray the q~tl/ty of the event and increase appeal smonS youth and Whitee. Use White aodels in jenertc media nnd Slack models In mlsck media for remainder (6 soothe) of 1983. L4-1t use of brass instrvnente. Pursue per- cussion, piano, and guitar lnstru~entation at HAy shoots. Kme exploratory in prosress.

• • . - 107 - ~OL JAZZ I~STlWL STUDY Yebrum 1983 Yinel le rc - To determ|4~e tbe meant to vhlch cone,mere~ Jttttudos/hahav:~r toward EOOL bare chanSed pre vtrlulpolt festive1. - To detarm/~e the atent to ~lch the festive1 itself has broadened K00L clsarette*8 appeal mon$ key mnoker Stoups. - Overall, KOOL ©isarette total brand/ndvertl8~ evertneaa, tr4-1, usaje, nnd SmaSer-7 did not etsnLftcant17 lncruee. - Unaided post-festival awareness increased three times fron pre-levele. Incrusee i~re JlSntflcant stress ell dmoirephlc oepente, particular17 better educated respondents end those under 35 years of sis. Overall opinion of the feet/vel was very positive ~mon8 attndeta. - Attendees tended to be ,-,re smle, under 35m Black, collese educated thane De-attendees end had intones under $15,000 than non-attendees. - Attendees ~re more likely than non-attendees to consider KOOL as a brand for: all rotten someone ltke as, active and enersetLc people, aelf-conf£4Jnot people. Also, tt was more atronjly considered as: one of the best menthol brands, I satLsfyln8 clSerette to make, and havtns a refreshiI8 menthol taste. - USthin the ~ite aspen% EOOL brand awareness yam eLinLficantly |J~creaeed after the festival. Relative to KOOL mmokere, this messene Bilbo tends to be fmale end collese educated ~th incomes of $15,000 or Be ore, - Reepondenta Ln the pre-feettval wave were aljnLfLcJntly more likely than zenpoedente In the pelt-festival wave to consider IU~L • brend for ~nn8 people.

- 106 - am•lye Zm alto•lens ~nsuin Actions . Xs~llcstlon, - Ass~ avaxenass is kly to /.ndoc~ trio1, the festivals offer • viable m.~n8 to ~psnd the ~OOL franchLn, Hoverer, brenL| 8vereneaa Imst a~s~,ba increased. - The I~OL JAZZ Fest~vsls say present • roy to £ncruse positive brand •~reness vtthtn an opportunity segment for F~OL: I~nXte, youtMul end female. - Profile of attendees sujgests KOOL'n revitalized 4-~8s is reflected by the audience vtth the excep:~on of race. Act~Dn8 Link the KOOL brand vXth the festivals in every ray possLble. Th18 Is bein& pursued v~t cXssrette property vistula and pecks • pptsrX~ vherever the festivals ere pronoZsd (except broadcut) sad in- event mplLn$. Schedule festival •dvertXsLn8 ~o efflclencly reach this ssj~ent as yell as tra- ditions! EOOL target. Utlllzatlon of non-traditional s~[le achieves this. Year XI of events vhLch aren't Soul. Ihyt~and Blues oriented (as r.IF had tra- ditionally been) end talent vlth broader appeal is planned to drava loss Slack- shaved audience. Current e.~pZorotory to remma festival (end on- psnd appeal beyond Jazz, vhlch Nusic Form research indicates has relevance to Blacks) should oct to *n- creese relevance to k~tas.

VARIANCE SHEET BROWN & WILLIANSON - LOUISVILLE AT THE TIME or REPRODUCTION THE FOLLOWING NOTATIONS WERE MADE: ( ) DOCUMENT COPIES ARE IN THE SAME SEQUENCE AS THEY APPEARED IN THE ORIGINAL. ( ) DUPLICATE DOCUMENTS APPEARED IN THE ORIGINAL. ( ) /PAGE NUMBER(S) MISSING IN THE ORIGINAL. (~ POOR QUALITY ORIGINAL. ( } OVERLAY ITEM COULD NOT BE REMOVED WITHOUT DAMAGE TO THE ORIGINAL. ( ) NO DOCUMENTS WERE FOUND WITHIN THE ORIGINAL: ( ) FILE FOLDER, ( ) REDROPE EXPANDABLE FILE. ( ) HANGING FILE. ( ) ENVELOPE. ( ) OTHER (SPECZFY) ( ) OTNER

109 - OVLrlWI(il OF T.A.T. ~Y$(S OF mUSiC CMIPAIGN IIMrum~. m ke~. III t~. IIII h~s% ~oll" 0 ¢~ W amn4Sall ~ ol~ is4cmu4 kF wlOI| • sl.~sSls oq plol. auu~omo.-...~. m~lc, iii~ I¢ 14I O Imnwi1wo ~ N~4OQIwl O-I- IIiml g4ml. uofdh~dlO. ~ll~p~ giN¢l¢~ 0 toupee gl~Mm~, W imgnq~Ju O Und~hm~lq ee beo~lee ~, O Irt~8 ee ~m~lis; ~ nd of I pluumtel ell I aI~IF uum~ql~e. • Irit~oesl em Je~t~mmm~ 0 ~oe ~0(~1 moe O I1 mqiem • bleo d,=... ~d p'mp IkN8 O lree'Od Ilgkelq IJ emm Oil N~leu qteu~ '~ul* altlt~ • ~.T~i,...,..,. gn~lon~d o.~. qlete, m /BLISIS

.- ~,ln - |. Pr~tion leeulte $~--JZZ Z. FlratQuertar $I~ - Z g a2 CoBa~1Der: - Juy One Pock/Get One Free on LIGHTS and ULTRA, - Point of purchase displays in oil stores. Tradez Structured lntroduczoz~ allowance $290,000 Cost: I5.g~ Gmnarata competitive tr~l and conversion of c~potltlva smokers. ~Concluelons Achieved ~X level of co~petttive e~oker trial. Conversion rata determined to be 7~. Equal split between LIshts trial end Ultra tr~-l. Equally successful in converting hales and f~lae. Poyout .25 years. 2. I(OOL Direct Hail Test S,m~-rv The overall objective of the KOOL Direct Hall piece was to $ansrate trial ~nS coupatitive Benthal soakers and to con- vert triers to the KOOL franchise° The research objective was Zo deter=los the efficiency/con- version ra~e of one versus two versus three direct ~il coupon offers. Ylrec ~lltnz (Joke box) consle[inl of an offer for n free carton coupon and/or • free blank cassette. Kaspoudeote to the free carton offer receive a second uwlltn~ (pelter). lion| with the coupon they requested. This nailins offers Ihother free carton coupon. Kaapondencs to the second free carton offer receive • third • s-Silos (han~nica case} .elcn$ with [ha second free carton coupon. The third nallin& offer • $2.00 off a carton coupon.

1 S S A~I three prItiOna! pieces relulte4 In Lacreased IU)GL trial and put thole. hip|to aolt Ii/ppaje In EOOL trial and usaje after 4 months, many compet/tlveu~mthol mnokers continue to try end 8Bake XGOL. One ~lll~ offers the shortest ~Tout per~d as sho~n belay: |attila fl ~Z vtoh PaChlt! fl ind 2 10g vtob ?oCkales |1, 2 aul 3 132 t,teka - Althoush the L~o pronoted styles yore Ltsht8 and Ultra0 the direct nail places oleo rexulted Ln additional trLel/usala of Forint and NJ34s. Rtsponders to the first prc~otton dt~ ao~ appear ~o be a~eved beavLTy l~j a~e, sex or race. Hoverer. in the subsequent pro- mot~onal efforts, the pro|ram hid i diep~opor~lonete appes! e~onI IlaCho males, llsht smokers (1/2 pick or less per day), 55 years of ass nr older and thole vtth little ~rlal education.

- 112 - I. OOL ea endfn Yext B)T Assess the upside as)as and share Potent4-1 for KOOL asa~insa otronS leadershXpuMtdia npsndLn& posture. 12.$% XI~ requires ÷.07 share in- crement year ones ÷.18 7tar eva. 1. Spend at $127.5~4 national annual rate in ned~ Ln Year One; and at Sill.NOt notional annual rate in Year Two. - Heaninefully different fro,. on-joins budget. 2. Spend to nch/eve the follovLng SOA/SOH ratios in subsequent years. Yee.__~r SOA/SOH l~tlo 1 ISO 2 125 3 115 105 $ and beyond lO0 3. Started Decesber, )9810 An Little ~ck trading area. ~8sJuYalJont~ St. Louis (TA 36) and Cleveland (TA 28) are being ~nLtored ne controls due to their hi|h abate trend correlation utth Little Rock end thetr simtlsr introductory t L~lns. Baaed on their hiatorlcel rs)ationehip to Little Inch. control larket shares ore used to predict expected test share assLmin| no heav~ spondins. ~OOL Yemf)~ Share Increment Actual Index Year One .07 .15 (21h) Yoor'/'~m .IB (annual) .24 (let (133) 5 moe.)

- 113 - Pre-eoet~ Jes8 Test Period Dec. O81-1qay182 June°82-Hov.'82 Dec.'81-Apr.~83 Test 8.36 8.05 8.43 7.87 Zudez vs. kes m (96.3) (98.2) (94.1) Control 9.89 9.53 9.76 9.26 I"tu vs. Base ~ (96.4) (96.9) (93.6) Difference -0.1 ,1.3 J, ROOL ~rket Develo ent Pro re- - ProsrJm to bu/2d on FOOL 8trerq;th ~n Snner city (Block) ne/jhborhoodJ. - Incrueed c81! frequency to reduce O-O-S, psrzzeesnt d/splay, end t~ede de1. - Tested Apt~3, 1981 tloueton trade, a4| area. |eeuIts ef ~dL lot Jnd Jet hd Jlmuo&mm Z7 8.4;3 goll 8,~O dl. g,7 e.Jt$ O.Zr 8.$| fl.|| |ldel~ re,~ ~ {JO)) (M) (|01) (95) (g,k) { 5i~) (t|) 06oe h8 Jeerer JDo J.$$ j.65 J.6J |.66 ).)~ ~.J~ |.el ),8/4 ~mksi el,.~ ~ (~HI) (ril~)(IXI) (I~) (|J) (t)0) (9J) 8~e

- 114 - - Brand srev y~,r one - Outporforued ~,ttLo~,l year two. Successful text. - Added two wore tilt Nrkete ApFL2, 1982 - V-proved our 88Xes execution - Supported nov by usv music c'..po'~.j, Yur I Y~rXX X of TA let 2rid VoDme h s._.% ]ialf Half Year I ManpbJJ 20 1h.26 33.75 13.9~ 13.83 14.15 Indm vs. kse -- ~ (96) (98) (97) (99) Detroit 22 16.80 16,39 16.90 16.61 16.29 Zlidms vs. IbJet -- -- (98) (101) (~) (I~7) ktLoeal 100 8.44 7.75 Y.87 7.8J 7.84 Xudez vs. Iklee ~ ~ (92) (93) (93) (93) - IQ4DPmarkete outporforn~nj nacio~X. Successful essLn. Is spite of m~ll |~teovexsje - Memphis end Detroit trend 4~provin| with t4~8. - bpondedl~rch 1, 1983 Ln fourteeuu~rket8. Also successful to dete (2nos.). - ConeLuner trial incenttvea end free JoJic con©errs added in expansion Nr~J~S, o , ~r 8Z I~ OJ ~ Aez.~IZ dtz~ IgS] It| ~ mnrbte |.el 1.J) L|I ~.06 meti~,J Z.N ;.J4 ~°J6 ;.Q7

- 115 - E. Wb XBn't The Menthol ~kst Gr~Ln ? toricall very saall until Selm takes it off . Nenthol market his Y " ° -in " "dru$ countez" vlth f:[lter tip (fe~-ale) and rezrssn 8 taste Imasery (19$6).

- 116 - I[OOL ,~.kes kntbol even sore acceptable by: )lore atanthol-+ extra coolness benefLt solving anokere~ probl,ms (1962) 1~2e endorsment ..sk/ng it socLally acceptable for men to mlcke menthol Grob'th £n Black community and the young Black/young ~hlte bond Te- rejection of established =lddle class values Ln late 1960'e end e.Jrly 1970'8. Henthol 8forth flattens after 1975 vhen: Low t~r revo~ution accelerates XOOL turns downward

- 117 - m(iITNOL SNM[ IIISTOaV 195 ~Iqt[SLIT 27.5 Total I;lentml 25 Freestanding 20.7 iqentkol ~0 i 17.E 15 10 peaks 10.3 IODOL decltne 1950 1955 1960 1965 1970 1975 1980 1982

- 118 - Menthol i• no Ion er rowln because: No uenthol is espou•ir~ • cete~ory develolment •tory as KOOL did during the 1960'•. No menthol has effectively drevn men in as KOOL did in the 1960'•. Xt| inplled bulth overtones in the 1960'8 has been upstaged by expllcit low tar stories It• "smoothing" taste characteristics are less relevant since the entire industry has layered its tar delivery and mow non~nenthole irene's as arranS Or harsh. There is • ~mtural physiological "cap" to accepting its taste charecteristLcs. Thepreeent condition - Menthol narket la fmle, 3leek end younger. (s.s.) Z Fmle 62~ 56~ Over 60~ of Blecha smoke nenthol (Black s.•. 1980) Menthol penetration is highest snong younger vonen and young sen. Menthol Share Under of Smokers 2..~9 30-3_._~9 40-'49 50+ Torsi. V~oen [44.0 ~ 34.4 31.' z~ I~ (92) (83) (aoo) Hen ~ 24.h 21.5 23.4 25.2 Inde.x ~ (97) (85) (93) (lOO) Menthol market has been stable (modest growth) since 1975 (MS^ share of volume. a97.__~5 a9s___~2 Share 27,5 28.B Index (100) (105)

- 119 - A Look st Znflov Cou~ Starteze dolm drmst~cllly as source of $nflov for nenthol. starters suffer the ~rst. Henthol Starters ~ o~ To~el Zndustry T.S.) 197_._~o )97.,._~s ]97..,_.~9 198___~2 Total 6.0 7.0 2.0 1,~ Indu (100) (117) (33) (23) Men 3.h 3.9 0.9 0.5 Xudex(100) (115) (26) (15) Wonsn 2.6 3.1 1.1 0,9 lnd,~ (100) (119) (42) (35) Swttcherl doom but I~Ot as dramatically, but men most recent casualties. Net $vttch-;n to Hentl~l (Z of Tote1 1rid. F.S.~._. ~ 97..,._.oo 197.5 197..,.__~9 19e.__,~2 Total 2.9 2.0 1.9 1.2 lndsx (~00) ( 697 (66) (6J) Hen N/A N/A 1.1 0.5 Zndu (J00) (47) Women N/A H/A 0.9 0.7 Index (J00) (78)

- 120 - A Further Look at Menthol Starters - Starters are do~ dra~Jtlcally, but total industry starters are doom ovlmmoxe; aolenthol is still Setting better than its "fair share" D2 atartere. Henthol Share 197_.~0 197._~5 198~0 198.._._22 Starters 23.8 33.1 34.9 36,6 ~wkere 2h.6 30.0 30.6 31.$ 2,~,~ex (97) (II0) (114) (116) M_7.E~theaes StiIl~~ve Herit Ftml the dr-~'t2c decline of 8tatters and non-menthol switchers to mlmthol since 1975, psrticu|stly nan, Lt mppeare tha~ nenthoZ nay not be Stories because ]COOLt specifically, has 2net efficacy a~: Sell,aS s nenthol versus non-uenthol superiority position • And, provLdin~ Inagery/product sell to brln~ men into the category What Is the Effect of Tar Level on Nan~hol? - Does menthol penettat~n decrease as c/sarettee get lover in tar? (e.S. nllder less need to snooth taste?) Io! NSA Menthol Share ] 97___29 ] 98__! Yotal Nentho2 28.82 28.82 /TH 27.9% 27.1% LM 31.32 31.$% TJM 25.82 29.6%

Perhaps, these product essments ere menthol ]~Lamed because of vo~en? leo! 1979 1982 ~ T ~ W T FT 23.3 33.9 27.9 23.4 34.5 28.4 L 30.9 41.3 36.7 28.9 &2.2 36.6 U 23..5 29.9 28.3 26.9 3.5.7 32.7 Total 2.5.4 36.1 30.6 2.5.2 37.4 31.6 i/omen have J hiflhar, not lover, propensity for mantles; in Zov tar versus full taste (men do as well). 17.,pothastn Not A esrtn to have merit Ou the surface, it does not appear that menthol relevance :~ adversely affected b7 the lower tsr/m~ldsr phsoomenoD. In fact, it appears that nentboZ el|he be wrs relevant as 8 toha©co taste surrosete at lover tar leveZs. Vhat is the Effect of Sex? If tee cetslory Ss |stttn8 nors fmle, and there is hi|her menthol penetration anon& yemen, vhy hasn't menthol increased yet? Nenthol penetration of mnohare has increased from 30.6Z *o 1979 to 31.6Z in 2982 (S.S.) But. share of volume has remained constant - 28.6Z in 1979 to end 2982, Women cons[me less, so Lncraases In the meuthol cetasory v112 slow es the catesory sex skev becoues more flmale

I - 122 - ~y IInlt the Nenthol Narket Grovtn&? - We suspect that the key to accelerating nenthol srovth is ftndAnS • noons once more to lejtz~£ze mentho2 tor men, speclflca32y t/hlte ReR, do Imov that other than ]U)OL, (possibly Mevport), there Ss no menthol vhose product chorscterlst£cs and 4mtSery are specifically posltt~nnd agsinst mole smokers. Ut Julpt:t that soothe1 in Sonora1 prohably carries vlth it omte teminSne :lmiery. particularly ~ the White mole co~unity. Effective merketiog to the hYhXte hale wLll have to deal with this. We have no research data on the subject of physioloitcal preferences pro/con uentho2 We beXteve such research could be very tuljhtful nnd conceivably actionable in tryXn8 to understand Xf and how thmenthol market cnn be expanded. Us suspect that co=parable resurch pointed out certaJa desirable and undesirable characteristics of nenthol that lead to Northvind and SrX&ht. de believe SrXght might have Xdentif£ed • legtt~te product gap but currcnt2y is hissing on the creatlve presentation of it. L. Proflt Contribution IU)OL B1STORY Contribution Before Gross Paid Contribution as Returns ($~) Sales ($~) Z Of Sales 1975 190.7 728.9 26.2t 1976 219.3 161.5 |8.8 1977 239.6 806.7 29.? 1978 293.6 e~.3 34,h ]979 334.8 946.1 35.4 1980 362.1 923.5 39.2 1981 439.0 991.4 &4.3 1982 445.6 1.068.0 41.? 1983 Est. 430.3 1.1~5.8 37.2

- 123 - M. 48 Black Ssmksr Share )lack Smoker Share (Source - )lack Smoker Studies) 198_._9o 19s._..~2 Xnd_._~ Total EOOL 28.5 26.9 (94) hr~t 22.$ 22.6 (100) HLlds 3.2 2,4 (75) ILSL/LIGBTS 2.8 1.6 (57) tn.TJ~ -- 0.3 (N/A) Total Sslm 12.3 11.2 (91) Total Nmoport 5.0 8.3 (166) - Total E~L share of smokers declLotn), althoush lees than Sales. - Parent stable, 1or tar styles veak s~n~[~ar to total U.S. - Nevport atron). )lack Smoker Unaided )rend Averaneee (Top 3 Heottons) 198__~0 19s__~2 xnd....._.~ ROOL ~erent 54.8 52.9 (97) Selem Farent 39.5 36.2 (92) Mevport Parent 11.7 17.9 (153) XOOL LI~S -- 2.0 (N/A) EOOL Htlde3.9 2.4 (62) ialmLIshts3.7 h.6 (124) r~oL ULT~ -- 0.3 (N/A) Sales Ultra O.l 0.I (100) - EOOL avereneae flat, as is Sales. - Nev~rt lncrusln$ - Lov tar EOOL not ,allen¢.

- 3,24 - ~t J Slack Smoker Srend (Colpet/t~Lve Swkers - Top Box) ~oo~L ai__~_N sel___~n 7or You=sPeop18 27.J 18.9 28.9 18o7 )11 ]tacea 53.6 50.5 53.7 67.) Female 21.3 28.1 22.1 19.5 II~le 28.3 15.9 18.6 14.S Old Fish,ned 13.9 12,2 IS.6 11.5 Like He 20.1 1~,1 16.9 1O.O Active 19.S 1~.6 16.0 13.] Successful 18.9 17.4 16.7 12.8 hl-- hiaEe 8syoun4; ex LOOL - Neulmrt /aasenotss yomxlio81COOL and Sel,m J~OL ~le the noet~81e - KOOL less old feshJ~ned than So1m~ but more then I~ and Nev1~rt - Overall, IWOL b~te sJ~Llar to total narke[. ~o aaJor concerns ,~cept for old lash/seed end youn&. N. Hl J~pJn:Lc Smoker Share HlspsnLc Smoker Share (Source - 1982 Hispanic Snoksr Study) Total Puerto Texas Ca1 ifornLa ~rket Z/can Cube._,..~n Mexicans Nzxtcsns KOOL 6.0 14.7 2.1 8.1 3.J Sel-,, 10.8 7.7 12.~ 26.9 7.4 ~J~i~rt t.~ 18.3 ~ u 0.6 I&H Men. ~.4 1.1 5.0 6.2 3.0

- 125 - - |elm larIut H£epant© sonthol - KOOL largo| ~mthol I~ul no sub-~roup - Best IU)OL shire Imon~ Puerto R/cons and Texas Mexicans O. liatlorull Advertte£. S endin Rm =am .~b la/I li~al* I eem ~to Od~edea lUtl~ IIM~tJm, a Um.l~llOLI • o. |radii ~ I~en ~ IINI e ~e~ ¢ed IIdl • • . w. • N • . U.U ~u X~ ~ nNI ~ UIl ~ ...ULL.. 1~6'~ (h) N.) ||it) 1t.9 (~) )i.I (11|) ||.| | ||) | it) ¢.S |lNI l,| | 4t! ~.t |)t~) t,$ | IP) 8~ | HJ Jl |lIB| ~ ( SJ~ (~) 0P b6 ¢ tY) 4| 4119) ¢ N) Ill |N~) ~| ~: ¢1|)I t,N'i |l~) |P.| | 01) ~-0 |1|1) t0,0 |I00) ~ ¢~Q~) tot (L~) 11 (N) 85 tiN) i0,e ¢|i) |~.e tiN) ||.| (II~) 1~.~ (N) I$,0 11~) (.~ | .~ i.* | o.) |.| ((s~ |.n * k) a,* um ( - Total KO0~ ipindi,i nod I~ire of adverc/sL~i (~OA) vIre hlsher than soy other ~JOr lenthol in 1~82, - XOOL SOA ~111 uo~ exceed SON in 1983.

LiT a~ m ~ w.~ TILl ALO ~ UgI~-TM DI;TIIMIII - IN) - Authorized ~ relatively constant - lIED vat Xoet on ill brands 8xcept KOGL 1001s ° Spaclflca),~7 LIGHTS ALd ~t replace I~L dLatributLon - O-(~S perilous across ~at st~)as as NED lns than Ju~|~lOr'llll, nd ~V - Ovara~X. XOOL )lED Is at par v/th Induat~y horns B/van share. N~Ldo KS a|a.~or e~cept~Lon &lkl lal.aL ~1i~ 111 bLUL LNL U LI~ Lit/ m ,uv ~. m~ : ' ~ -" "" -"

- ].27 - - ACI; dletrlSut~n in the $outhust dropped for the mutller mtylex. - I~¢L experienced Ja~creased distribution in the Central area. - Hllds lO0~e lost ~V In the coastal steal (Northeast, Southeast xod West). - HLIde IO0'e and KOOL Regular lost dletrlbutlon across the board - K$~ d~strtbut~on vas ~t rep~enXehed by ~IGlJT$ Jan '£' stores

- .1.28 - Q. 1983 Ins • Stud- Selected Tables AverateXnferredlnPortance Values (All S~okers) tGood Taetln8 19.6 Winner 2.3 *SatiJfyJa~ 18.5 Proper 2.1 eProud to Snake it 14,3 Wishes Not... 2.1 eSnooth TlJtimj 13.1 Pleasant 2.0 Ne 12.3 Enjoyable 1.8 milch Taatin811,7 Ndsculine (1.8) eNaturel Te|tln8 ll.l Old Fashioned (1.4) eFull Flavored 11.0 Slav 1.2 e~sfreahin8 10.6 Dry Wit (l.l) aHarsh TastinB (10.5) Bland (1.0) eBt|h Tar (9.4) Considerate 1.0 aNo Aftertaste B.l Lazy 1.0 Black People (6.0) Secure (.8) emma Brand 5.7 Fashionable (.7) eQ~lity Tobacco 5.3 Elesant .6 Popular 3.2 Leader .5 Delicate 2.6 Chic (.3) Reload 2.6 Bu&$ed (.3) eFir~3y Packed 2.5 Disciplined .2 Older People (2.5) Sexy .1 • Product Attributes ( ) Attributes vith neptfve influence - After the conventional product beoefits0 proud to 8make, for someone like ~t, and popular are 4~porCant attributes omens all ~kers. Barah teatime and for Black people are important too but neptively correlated v/th novment tovard ideal. Fashionable, eleznnt, unculimc, old fashioned, ruBBed and sexy not very important (per ca), 81thou&h it is not knoim hey much they drive the nuaure "for someone like he."

- 129 - CATEGORY TAR LEVELS (FRANCHISE IN YELLOW) - ALL SMOKERS Fashionable Popular Masculine Rugged Reg ular • Regular" • Light • Ultra Light • Light • Ultra Light Elegant Delicate Old Fashioned Older People - LIGHTS mAGE ~ORE FASHIONABLE/POPULAR THAN REGULAR - ULTRA ZMAGF MORE OLD FASHIONED

- 130 - Masculine Rugged CATEGORY STYLE LENGTHS (FRANCHISE IN YELLOW)- ALL SHOKERS Fashionable Pc )ular "100 MM And Longer B5 MM' 85 MM" Elegant "10D MM And Delicate Longer Old Fashioned Older People - 100'S IHAGE MORE FASHZONABLE/POPULAR THAN ~'$

Masculine Rugged - 131 - CATEI~ORY PACKAGING STYLE (FRANCHISE IN YELLOW) - ALL S~RS Fashh mable Po,~ular Box* Soft Pack • ,Box Elegant Delicate "Soft Pack Old Fashioned Older People - BOX IMAGE MORE FASHIONABLE/POPULAR THAN SOFT PACK

IDEAL DENSITY DISTRIBUTION I ,-4 I \ !,;I -1 "1 °4 mE b ,4 K; f" i; ~. 0 1 irq ii .d 2 3 4 5 6 7 ,. TOTAL ~ • . o |NDUSTRY OPPORTUNITY EXISTS AT BOTH £N0$ OF THIS ATTIilUT£- ELEGANT/ DELl.ATE

IDEAL DENSITY DISTRIBUTION t ]r'~ ,,i,-i = • w T -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 OLD FASHJOMED/ OLDER PEOPt.E • m, TOTALSTYI.ES 0 "I1D~D~ • i" TOTAL SHARE ' 8 - AN INJ)USIRY OPPORTUNITY EXISTS AT FASHIONABLE/POPULAR ATTRIaUTE FASHIONABLE/ POPULAR

IDEAL DENSITY DISTRIBUTION (ALL ~0KERS) i i . ./ / / / ./ % \ \ % I( n • al 0 • A & OLD-FA54'ilONED o w • n ~r...MIFMUlA~ C PECNN,,E o u - POPULAR 0 K00L LESS FASHIONARI.E/PGPULAR THAN NENPORT, SALEM, MARLBORO, Bill - i~)0L AT HID-POINT OF' VOLU/'qE POTENTIAL ON THIS ATTRIBUTE

IDEAL DENSITY DISTRIBUTION (~LL / I~\ ,/ \ / / / oZ o~ ,,= o= ~ "-~; "=='=,~== all OLDER pEOPlE v, II "z KOOL LESS FAsHI~EjP°Put'AR T~4AN liEWpORT, SjI4.EH, ~L~RO, ~.H - t(~L AT RID-POINT OF VOLt.IRE POTENTIAL ON IHIS ATTRIBUTE I

IDEAL DENSITY DISTRIBUTION (ALL SMOKERS) i ,,-4 i M K i • • A O E A , o w t * ELEGANT/ MASCUI.INFJ L L • • • o -, # DELICATE RUGGED o R a • o o K00L HOST MASCULINE HENTHOL FOLLONED BY I|EWPORT THEN SALEM K00L NELL POSITIONED FOR INI "'TRY VOLU/IE ON THIS ATTRIBUTE

IDEAL DENSITY DISTRIBUTION (ALL S~E)KERS) ! i [- II II I~ A tll O u w A • FOR BLACK PEOPLE L • pc • o & all li 1' • II •-~ IG00L MOST ~d.ACK OF ALL FOLLONF.D BY ~4LFJ¢, MEWPORT AND BELAIR - K00L RF.JqOVED FROM IDEAL POINT OF HOST INDUSTRY VOI.U~ ON THIS ATTIIlilLJTE -:

IDEAL DENSITY DISTRIBUTION (ALL SMOKERS) I ,-4 ! ./*" .a / .°- A IIm KM • OA &W OI N~ L~ HIGH TAIl I 0 0 - K00L, NENPORT, MARLBORO, WINSTON,, AND ~,H CLUSTER TOGETHF..R AS HIGH TAJ~ PIIDDUCTS AMONG ALL SMOKERS, SALF..M LONER,

- 139 - o f • lelil|~lq | |) Ilillb tO|t|IS ( I| IILLity|lI | J) ~ |tililJ | ~) ~iltq J a} I~|ilfF~ (|) tu|| t~lveled(|) hl$1|y~ | |~ h|te~Ll~ | )) ~ t~;~ (~) GI~ T/IttlJ ()) 11|I tLl~ete4( 3} ti~| tll~tN (&) leftllh|~ (4) Jetrll~[l~ (&) ||Zh til[$1~ (i) lilb T~|t~ | I) e$ck |lllJq | )) J~¢& Tll¢~ (~) ~th Til|~ (~) tel lleti htl|l J|i) |el l|*t~ Flip|* ()]) T*t I]i[J ~ilJi (]]~ ~It I]iCL Fiolil (];} lltek 11eltll (|I) l~rth laill*l(tO) llor~ 7~I~Ii (~0) i~tll tllt~lI(3|I el |uy (|9) II Slay (2~) li Is~ (~I) |e lest (2t) |~ 1~r ( 9} l~|k lit (23) ill~ Yi! ()t) mlSb t~r (13) ki4cace |~} tel~clti iS|) hltclte (20) ~eJls~s~ (~) • ~dlr (I0) • 14~dar (Zt) • Ll~i.~ i)~) ~ l~Ider ()I) • W~ilew |JP) • WtMer (~i) • Wti~e~ (el) • ~IN: [20) leulCt: |el} lille |{~4j i|ll|hl! Jb)l~* Ke ILndin I - PrL~ar Smokers The product ~e equities of ~or mentholl are |enerally s~,~Llsr. ~Jor ~xcaptions are: Smooth elite ~ors salient for Sall~ than K00L or Nevport. Full flavored the opposite. Hiih tar most salient for KOOL. IOOL product :ll~se I|ore sl~i)ir to Htvport Ind Harlboro th~n Salem. lefreshinS major difference to Harlboro. Attribute "Is Sexy" most lillent amonS N~rt franchise; si~IIar across othi~ brands. Attribute "Yet |lack People" lost illtent imonsKOOL franchise, l~m|lar &cross other brands. Attribute "~trih Tsettns" i~ilar across all Shill brands, i]|Shtly ~ore salient for lOOL franchise. fOOL and Pb~rlboro more similar to each other then to Sale~ and Ne~l)ort on attributes "Delicate and lugged." I~OOL, Marlboro. and Newport ~ore similar to each other than to Jalm. on attributes '~faicullne. A Leader. and A Winner."

• peuoTqtf; p'[o q|Tq IXZW "q:'WTll qllTq ..(~,;U,l:'lnoJ~ ..,,oT .o! ~,de~,xo e.,,,Tl"v'lll tztsdd! alVl'l: nit| 'Itl£~0 - • .(zeT pus q~eTt :tenl~ 'au aPq~Z auoemo$ ~O| lsoelt *'~'T 'dno=| el~ql 3o pB=rze[od =sgB[ ~JmT 3zod~l *tT~JoA0 - • oldood q:)eTE =o; ,+o. Im :~d,ox, =,t+,+, ,.s.v~ o,oq:,~ .. "loot 'tt,,,m - ii'I~[ 1111~'~ t+OtlO~ ,1OilI llOI 1~l.Jll ml~Itl'ILl4 'IISlI~ ,,'llUT~St~. qlZell~, lg~T 1oJ usTtS pug 100~IK eto~J luolO/lTP llodAoll - .'oK OqT"T ouoouoS 2ol. lit41 l)us ,,'+(lrl. lint .'.lOpffl'l y. llOl ,++.lt[lldodlN lOOt ,.'P~uoiqs~l PlO,, =vrai ",'oJ :l','ode~all pue "~00] ao~; luoz~J;$p ml~S ,,'~u$~naJwl¢, =oJ ':l~Od."~K p~e u:etgS eo,~| lueao;~$p "1001t ,,'peuol:qeu..¢ PT0,, tree .'pl~Io~+ &T''T+..+IlZ qlTH..~ol +Jqlo qon ol £t'L'Tqg ++od~M pul '10011 +,'eK o~IT'l euooloS,, pus .'0111o$100,+ .',llptlI 'It,,, .,'pluosqll.,! Pro.. ,,',u+tnot,T¢, ,,'po~Io,l t,'~Tl....':11 ql;ll,, ,,'ze~ qgTH. pus ,,'oTdoed ~:18 JLOI,, t,t~tS~ qw~lr~,, 1OJ ~tlq~O q~lll O1 ,ll~l:S tIIs pllS "I00~II .poqo~ll /(lu$l pus ~,1 qSvq ozs tpu,=q po~$ltSp Jtoaos tuo$=doo=ld lutSmTl pue~fi a~Jl:O ~ aT ood - s uSpu~& o] tllllll9 llllqlllll~ llllll lllll (iJ| :OIIS4~ (0I) Wl ml~q +NNq (re) ~1 mllq ~ (1~) ml ~lPI ~ (4~| ell mlVl ml+NII Ill| ~11~ It ) Jll~l 1||) |11~ ((|) ill~ (I1) tII~VT~I (l) t I~1 t141 (lit) II~Vt141 ((I) elell ~41 (1~) ~mrllo~l I41I) ~lwhl~l t01) ~4P+ I! (~qp I.~11 ill) ~ IV (1¢) ~+~ ~ (Of) IOll, W'l V (II) aell~ • toll /+e • (Ill ~e • (9) lll~lel el (VII IIIMId II (I) melqull Pl0 el (I) I~m~qt~l Pl0 IIIll) pouelqeljl 910 II 19 ) PN~q~I Pl el (+) m~Xql II (lit)mln+lq ll 101) llllmuq II fl ) lip:PUll el (q) 1111111 111114 el (1) lleqa.14 1111114 el (I) Pnl~l~ll 111411 el (t) lllllll llllllll III (~I) D|dol& q:~e~'ll zhr (4;|)~d+~e~l q=+l~ll 181 (9 Ito(4ml+l q~Pll led (It) eldeol q~lll 1114 (I) lellee& qe~911 (¢IC)1~11etJL qelq (I) I~I~IL qtlell (I) l~tel ~ell (I) ~t& qll111 (./) ~B& qt|lll (I } aeJ. qlklll (!) .~e& 91~II - TVT -

KOOL I (Mean 1.81 1.26 .71 .68 .67 .62 .61 .61 .46 .43 .42 .38 Ratings After Removing Brand And Attribute "Effects") Franchise Non-Franchise i High Tar 1.40 Black People 1.18 Not New 1.01 Harsh Tasting .90 Not Elegant.64 Refreshing .57 Not For Older People .52 Wishes To Smoke .49 Not Dry Wit.42 Not Considerate .40 Rugged .36 Not Proper Black People High Tar Not New Harsh Tasting Has Aftertaste Not Good Tasting Not Natural Tasting Not For Me Not Satisfying Not Proud To Smoke it Wishes To Smoke - I~00L FRANCHISE |HAGE SALIENCE (EQUITY) STRONG, BLACK, RUGGED, REFRESHING, NOT ELEGANT, SOI~MHAT OF A MAVERICK. ° ~k;~II-FRANCH|S£ IMAGE SIMILAR M ~t EXPECTED UNATTRACTIVE PRODUCT CHARACTEP

1984 KOOL TARGET AUDIENCE REV MEIGHTS Step I1 Develop age/sex profile based on 1975 KOOL skew vs. total smokers. D PROFILE INDICES KOOL VS. T~DEX - 1975 TOTAL SMOKERS .... KOOL SMOKERS DEMOGRAFH]C PROF]LE 1975 1975 INDEX HALES S3.672 61.3gZ 1~t'1~2s ~ ~ (223.27) 25-34 14.17 15.87 (112.00) 35* 29.36 22.68 (77.93) FEMALES 46.33 38.61 1T~OTh-~s ~ 25-34 11.89 8.64 35+ 25.80 13.58 TOTAL 100.00 100.00 (189.70) (72.67) (52.64) Step e2 Factor age/sex proftle by KOOL consumption. A~/Sex X Volumetric HALES 114 ~25 ~ 87 25-34 112 106 35* 78 107 FEMALES 83 O'Nb-[1-'?5 1t"~ 94 25-34 73 95 35+ 53 96 Age/Sex/Volume 183 119 83 179 69 51

s~pe~ D / 1984 KOOL TARGET AUDIENCE REV METGHTS Factor a|le/sex/vol~zm tndtces by KOOL ISP. ~oOc vs~ l-zz.__~l zv-.__~v Tota_._l KOOL 25.1S 74.9I 100~ TOTAL SMOKERS*~, 31.4Z 6e.6~ 100~ INDICES 80 109 X ]SP - KALES ~T~'~'IT2s 183 25-34 139 35+ 83 FEMALES 17g 25-34 69 35+ 51 REV WE]GHTS (NON-NORHAL]ZED) 1-zv____L Iv-._.! ~OTA__._k~ 146 199 183 95 130 119 66 gO 83 143 195 179 $5 75 69 41 S6 S1

Reasons why not necessary to add to 100% are: e) KOOL ISP held constant wherein TOTAL Smoker ISP has minor variation by age/sex. b) KOOL tndices for ege/sex/vol taken from S.S whereas SHRB total smoker dlstrlbutlon Is $11ghtly different. ¢) REV ~Ights are valld because they reflect relatlve values one index vs. 8nother.

JJ!l • ~DIENCE BY AGE SEX VOL ISP Norlulltzed to equal 100~ (Raw J's 4 .9563) TOTA.__.~ I-H___L iv-.._.~v .E. 14.94 4s.3e 60.30 1~Ee 2s ~ ~ TTT~ 25-34 4.67 12.94 ~7.61 35+ 6.41 18.34 24.75 WOMEN 9.20 30.50 39.70 25-34 2.43 6.38 8.81 354 3.70 10.56 14.26 TOTAL 24.14 7S.86 100.00

HI 8 34" N

1982 SMR8 TOTAL SMOKERS MEN b'~Ee zs 25-34 35+ WOM(N 1)1~T1~26 25-34 35* TOTAL 1-11___.L 16.50 4.69 9.28 14.90 4.22 8.63 31.40 ]V-.__VV 35.79 9.52 19.50 32.81 8.13 18.03 68.60 TOTA..__~.L 52.29 14.21 26.78 47.71 12.35 26.66 100.00

~j~ 2#c ~P TEST RE5b'LTS ~: Xncreaental ¢ali frequency Ln black inner city mirksts, tO-180 d/splay, set I free carton vLtb purchase of |0 tr#de offer, mad packase tape-on trial ~ncentives. "ilATZONAL F,~A~SZON COSTS: |6.5 million for L~elve Iooths in currently ldenti- IFl-e'duniverse Of 12.800 outlets. kYL~.~...~.~: 1.4 7urs based on results of Houston test. ~* louston (27Z of TA voltme). Ne=phis (20Z of TAvoZ~e). Detroit ) black aelshborhoods. ?rosram expanded to 11 additional cities in Hatch. 1983. STAI~T DATE: Bouston: April. 1981; N-mphls and l)etroit: Apr11, 1982; Boston, Hey York. l'hilsdclphim, Beltinors, ILclmond, ~ev Orleans, Chicago. ~tlles, Los An|ales, San Francisco, RaveS/: North, 1983, ., ~ ~ U~L.UJ dlp~ * ' IQ lf~. eli 0ll.'ll lpl. 'el Jlel.'ll kto'81~I.'116pf.'ll$ llll. ~ll lab. '11 lllr .'I/ IBI.'II lip. 'II Ikw.'ll Blr*'l$ • * lID)} IH) (IDI) /t~,) :t6~ (I,,) 193,) Ibt tONI I~ 100. Ii.6~ ll.lt ll.&l i • ~.~. ?.?5 ~.l) T.ll T.l14 ~leJ ~0. k~. Itl) (l?) Ill) (I)0) (all (tO) (tll) lot' TA ,apr. '|l ~T. '12 ~t. 'J2 AI'~' • '1~ ~T. '83 J~. *03 Is;. 'II~ Ikpp.*lJl lli,.'ll) ilOr.*l} ~r.'ll]l lllm, p~ IS ~ l0 16.1t I}.1S II.I)III.8l II.II ll.ll 1*, km* (H) (1~1) (t1) ItS) (ill) ktlJJl ~ II I11. III ~i.~ il I.. I)0 16.il at. Mr|}.}S Jades De. koe (H) (1el) (aS) (t;) (~I) letl~.sl I~ 1(IO 0.4;, 1.7| ]* *;'?.Ill ~'.1~ 4,8t kdm ~. &tee (tl) It)) (~)) l)3) el:r) mr. 'l:r PN,'I) I,t4 II*~. 'll ~ll~r, 'li) llsr, 'I~) 1111 II W llJ~t*I. ;.el 1.1| t.1¼ I,s, llsse (12) till} ($7) Ik lesS1 1,1~ t.l~ 1.61 ~SSESS~T: Sl|ntficsnt improvement of share trends throuKh tests. of list &ble to /aprov8 shire trend of tote1 TA. 6.~ 6.t~ (~) Snail scope

.i (76) (~) (61) (1"11 l('Tt P't! (~) (IS) (06) P'I1 96"tt 60"II ¢9, "=4T (8,'=~ (ll,']dY (9,'~u14 (re) (a) (75) zz*tt t('fl ZL'fl (ZZ) (Z6) (ZS) L0"Zt ¥~'07 1~'t7 (ZI) (95) (95) 01"L1 ~Z'I! tg'gl (8,'Jdv (g,'=eS4 (9,*uIT (I,*=dY Zg,*~dy II =n~ I =nh (ze) (o6) ((6) (tot) L~'II l('~! ZZ'7l Lg'EI (e~) (ZS) (~5) (TOI) (I'0| 00*ZI Z~*Tt ~('(I (9,'~dV (I,']wH H,'~WH [9,'u.r (9,'=dv H,'=dv tg,'=dv II1 ~eaA ll =toA I =~oA HSVIIS R~I "r/~o~ S.L'tfl 5n %S~1% il*Tt 97"7! [I, "qod 78, *~aq4 april £1"(I 77"7Z (9"5I H,']oN !8,'~dy oeel 57"(! LO*(l 19, *:~4 08, *]dy as~g "q TmaOl",ON omq "OA am~ol nrq.nN dIlil 11 (Illl "IA 5mSOTSON Illl *IAlil~lI 2TO.T2aO am~ * IA s~ur[ TamOT:S~N ;1111 "1A UO:llmql

PROMOTION COSTS AND PAYBACKS 14,000 ltores, 78 assignments lOt display and promotion penetration . /$8.00 wholesale cazton price / Consumer ~~ incentives ($.25 each ~ 11,200 stores x 200 UItitS x 2 tlmes/year} Pep sampling Retail Permanent POP Temporary POP BIOGIF (300 cartons/month/rap) Display payments 1,120.0 139.0 ?97.0 100.0 2,246.4 1,075.2 Conwunltylnvolvement Memberships Festival participation Subtotal XOOL City Jams (lO shows)' ~CJ s~pling Subtotal 75.0 100.0 5,652.6 500.0 1,?00.0 ]~DP Total

!, ~UARTER 1984 SMP Items: 6.5MM lighters Coat__._~m 6.SMM lighters ($2.5R~4 paid in 1983) Poster Offer SMP Payments SNP Nateriala ($344.0M paid in 1983) Deal Assembly Subtotal M&P 1984 Total 1983 Total Promotion Total 30% Misappropriation 40t Franchise Nat Competitive Trials Duplication (l.3/peraon) Net Competitive Triers 2t Conversion One Time Incremental Volume One Time Incremental Variable Margin Net Coat: One Year Incremental Volume One Year Incremental Variable Margin Payback Two Year Breakeven Conversion Gross Cost/~ Units Net Cost/M Units $ 587.2 0 675.4 231.0 195.0 1,950.0 2,600.0 1,950,0 450.0 1,500.0 30.0 ?8NM unit8 $I, 132 • 0M $7,276.6M 306MM unite $4,437.0M 19,4 months $ 107,79 $ 93.29

Overhead DeprecLatlon f;alary DrLver expenses/day ($75 x 3 x 330 days) Gas and maLntenance CMC 39.0 82.5 ?4.9 52.5 • 50.0 $291.5 lncentLves Prem/uma Costumes 242.0 15.0 $25T.0 Sampling Product (600M aamples) Audits Total $82.0 50.0 I632.0 $1,18?.9 J

I J MILITARY ~nsumer lncontives TesttJ~g'Propositions BBGIF carton offer Store set Sale B3G2F v/$2.00 |:~unceback Cont:lLnu£ty/self liquidator $100.0 45.0 80.O 2S.0 I¢OOL Super N£ghta {21 shows) POP, posters, brochures $ S0.0 Zncentlves |0.0 Publicity' 25,0 Sa:pllng (77M packs) 42.0 Coupon :e4empt£on LSt $ 2S¢/pack) 1.6 Promotion Total Sponsorship (Advertising) Total Military $400.0 2S0.0 198.6 32S.0 ~1f173.6 °.

TEMPORARY DISPLAYS 3,650 AA-C outlets, 60t participation $11.50 average payment 4.5 cartons/dlsplay 3 x in 6 months Costss $75,600 Incremental Volume: (45 cartons x 2,200 stores) Variable margin @ $14.50/M (Ig.8MM x $14.50/M Breakeven lg.sMM $287.100 5.2MM units J

DIRECT MAIL TEST Thls analysis assumes that it costs $.75 to mail an offer to one person. That Imt printing, name selection and postage are held fixed et $.75. This is a reallstlc assumption and one which is necessary to calculate the payback. TWo year incremental variable margin is $295.80 (1.4 ppd x 730 days x $.290). For comparability, it is assumed ejch offer is sent to 30,000 people. Coupon redemption in held constant at 80~. Tree Carton Offer 30,000 names ~ $.75 12,000 (4Or) responders B $.35 ~,600 redeemers e $?.75 $ 22,500 4,200 $101,100 4 $257.$4 - 392.6 required converters 392.6 ~ %,600 a 4.1% two-year conversion t S5.00 Off Offer 30,000 names t $.75 6°000 (2Or) reepondsrs f $.35 4,900 redeemers e $5.00 $ 22,500 2,100 24,000 $40,600 ~ $257.54 • 188.? required converters 288.7 % 4,100 - 3.9t two-year conversion t $3.00 Off Offer 30,000 names e $.75 $ 22,500 4,500 (ISt) res~o:,der8 e $.35 1,575 3,600 redeemers e $3.00 $34,875 ~ $257.54 - 135.4 required converters 135.4 t 3,600 - 3.8t two-year conversion t

! ~ree Cert~ Offer with ~ckend 30eO00 n~e e $2.00" 12,000 (408) responders f 8.35 " J,lO0 (lOt) redeemers 0 $7.75 1,440 (15~) respondere 0 $.35 2,252 (|OI) redemption f 83.00 064 (lOt) redemption e $2.00 S76 (408) zedemption t $2.00 $ 30.000 4,200 34,400 490 3,456 2,728 8115,426 ~ $257.54 - 448.2 required converters 448,2 0 ~,600 - 4,?t two-year conversion | *Zn¢lude8 printing of beckend piece

J LIGHTER ON CARTON Items Costs Lighters 0 $.47 each) 30t Misappropriation 30t Franchise Co~etitive Purchases 2t Conversion One Time Incremental Volume One Time Incremental Variable Margin Net Cost One Year Incremental Volume One Year Incremental Variable Margin Payback (in Monthe) Two Year Breakeven Conversion Gross Cost Per M Unite Net Cost Per M Unite Tes___~t 235M $I17.5M 70.5M 70.5M 94.0M I.eSM 18.$MM 272,6M 0 19.2MM $278.1M 0 $6.25 0 National 9.5MH $4465.0M 2850,0M 2850.0M 3800.0M 76.0M 760M ell.OHM 0 775.2MM $II.24MM 0 $$.e8 o

B2GIF CARTON STORE INTERCEPT MILITARY COMMISSARIES [NATIONAL) t'of Deals {380 Coupons x 169 Stores x 6 periods1 ! of Cartons ~ST___!S 385,300 x $5.52 redemption ($5.37 avg. cost + $.15 handllngl Part-Time Sales Hours @ $5.00 P.O.P. Total Misappropriation @ 5t Franchise Use @ 20% Competitive Trial @ 801 Competitive Triers @ 3.0 Conversion @ 5t Incremental Volume Incremental Margin B S2.90 j 2 &~ Net Cost 1 Year Incremental Volume 1 Year Incremental Margin Payback 2 Year Breakeven Conversion t Gross Cost/000 Units Net Cost/000 Units 000's Units In 000's 385.3 1,155.9 $2,126.9 19.8 7.8 nTTrc~ 57.8 219.6 878.5 292.8 14.6 ~ ."1% 3,-3 mom. o

BRANDED PREMIUM WITH 2 CARTON PURCHASE MILITARY COMMISSARIES~EXCHANGES (NATIONAL) | of Deals # of Cartons COST____.SS 5,000,000 Branded Premiums e $2.00 Part-Time Sales Hours P.O.P. Total Misappropriation @ 5% Franchise Use @ 35% Competitive Trial @ 65% Competitive Triers @ 3.0 Conversion @ 5% Incremental Volume Incremental Margin @ $2.90 , i c~_~ . 000's Units 5,000.0 10,000.0 500.0 3,325.0 6,175.0 2,058.0 103.0 Nat Cost 1 Year Incremental Volume 1 Year Incremental Margin 1,091,800.0 Payback 2 Year Breakeven Conversion % Grosm Cost/000 Units Nat Cost/000 Units 1.7% 000's $ 10,000.0 79.2 18.8 $10,098.0 0 $15,831.1 1-3 mos. ~/~/oo 0

MINI-CARTON MILITARY EXCHANGES (NATIONAL) # of Minl-Cartons COST.__.~S Special Carton Configuration @ $.10 Media Costs Display (End Cap @ 3 Months) P.O.P. Total Misappropriation 0 10t Franchise Use @ 70t Competitive Trial @ 30% Competitive Triers @ 3.0 Conversion # 2.5t Incremental Volume Incremental Margin @ $1.45 Net Cost 1 Year Incremental Volume I Year Incremental Margin Payback 2 Year Breakeven Conversion t Gross Cost/000 Units Net Cost/000 Units O00's O00's Units 611,040.0 $61,104.0 182.4 83.6 10.0 $61,380.0 61,104.0 384,955.0 164,981.0 54,994.0 1,374.9 16,498,100.0 $239,222.5 0 .81 1-3 mos. o

KOOL CASH PROGRAM MILITARY TRAINING BASE (NATIONAL) | Packs % Deals 000's Unit.____ss 500,000.0 250,000.0 COSTS Cash Bac]" For KOOL* Handling e $10/$1.00 P.O.P. Total Misappropriation @ 5E Franchise Use @ 40% Competltiva Trial @ 60% One-On-One Slippage @ 2 x ~0¢ ~ Co~ Competitive Triers @ 30.0 Conversion @ 2.5% 12,500.0 95,000.0 142,500.0 285,000.0 9,500.0 237.5 Incremental Volume Incremental Margin @ $.29 5,700,000.0 Net Coat 1 Year Incremental Volume I Year Incremental Margin 2jVZ~2CO.O Payback 2 Year Breakeven Conversion % Gross Cost/000 Units Net Cost/000 Unite .0St *I0 packs - $i.00 in KOOL cash O00'e ._L_ $25,000.0 2,500.0 15.0 $27,515.0 0 1-3 sos. $4.83/000 0

O = KMDP Markets Exniblt 4a I *Includes all KHDP markets except Boston, Memphis and New Orleans

Exhibit 4b TEN'S ROLLOUT AREA STATE North Carolina Virginia South Carolina Maryland Utah Mississippi Oregon Illinois Pennsylvania New York Alaska California Alabama Texas Wisconsin Hawaii New Jersey Rhode Island Florida Michigan Connecticut (Boston, MA) New York/Newark, NJ Philadelphia, PA Washington/Baltimore, ~D Detroit, MI Chicago, IL Richmond, VA (Memphis, TN) (New Orleans, LA) Dallas, TX Houston, TX San Francisco~Oakland, CA Los Angeles, CA Hawaii ( ) Not in 10's rollout area cs_~P 3.59 2.70 1.40 1.90 .36 1.05 1.28 5.12 4.95 7.66 .19 9.32 1.57 6.01 1.90 .28 3.13 .48 4.29 4.30 1.23 62-7T~

Ez~l~Lt 4c J ( te°3 t, --1 t!

... . . llzhib:L~. 4~j(cont'd) |O N l! 38 CI)- (y~--

TENS Exhibit 4d .J A, Market selection Elemen~ 1. Project approval 2. MMDR, if necessary 3. Target audience/geography guidance to P~&A and FRS management 4. Geography (based on demo- graphics} reccomendations to Brand Group 5. Approval by Brand Group Who Blott Finley Finley Lajti/Kopp Doug Johnson Finley Schreiber Duration (Weeks) I 2 I S~art (Week) 0 I I Finish (Week) I 3 2 6. Communicated to Sales Finley I 6 7

Elem~ 1. Project approval 2. Final brief to designer 3. Design work 4. Brand/Marketing approval 5. Final art 6. Materials ready for production B loft Finle~ BeasleF Dosanta¥ Blott Beasley Beasley Duration 1 1 2 1 2 8 ~xhlblt 4e Start 0 1 2 4 S 7 J Finish 1 2 4 5 7 15

O. Manufacturing El~nt/TaBk I. Project approval 2. Guidance to Manufacturing 3. Manufacturing plan to Brand Group - Scheduling - Capacity - Etc. ~It 4f J ~m__~s Who Duration ~ Finish -- {Weeks} (week} {Week} Blott 1 0 1 Finley 1 1 2 Dant 3 2 5

E. Distribution/ Trade Promotion Element/Task 1. Project approval 2. Guidance to Sales 3. Distribution, merchan- dising & trade promotion concepts 4. Brand Management approval 5. Distribution merchandising and trade promotion plan for PPL inclusion 6. Brand Group approval 7. Sales force call coverage/ frequency guidelines 8. Sales work plan/distribu- tion guidelines and proce- dures TENS Who Blott Finley Sharp, Butler Middleton Finley Schrelber Reid Exhibit 4g Duration ~) Finish I 0 I I I 2 I 2 3 I 3 4 Sharp 1 4 5 Finley Schreiber 1 5 6 Butler/ Middleton Sharp 2 6 8 9. Display tray/materials Sharp 16 8 24

F. Consumer Promotion Element/Task 1. Project approval 2. Guidance to promotion staff 3. Promotion concepts to Brand Group 4. Brand Group approval 5. Promotion plan developed/ PPL written 6, PPL approved 7. Preparations made/ materials designed and produced TEN_~S Who Blott Finley Veatch Finley Schreiber Veatch/ Veatch Finley Duration (Weeks) I i 2 i 2 I 15 Exhibit 4h Start Finish 0 1 1 2 2 4 4 5 5 7 7 8 8 23

~Task 1. Project approval 2. Guidance to media 3. Media principles 4. Brand Management approval 5. Media plan developed 6. Brand Management approval 7. Execute plan T~____~S Who Blott Finley Colemen Finley Schreiber Reid Coleman Finley Schreiber Reid Coleman Duration {Weeks} I I i I Zxhlblt 4A 0 1 2 3 3 Finish I 2 3 4

14. Consumer Research v-laent~ 1. Project approval 2. Guidance to HRD 3. Design research to assess positioning alternatives 4. Brand Group approval 5. Execute research plan evaluate • xhibit 4J j TENS Who Duration Finish Blott 1 0 1 Finley1 1 2 Brand 1 2 3 Schreiber 1 3 4 Brand 3 4 7

I. Creative T~ Ele~ent/Task I. Project approval 2. Guidance to agency 3. Creative concepts 4. Materials for testing 5. Brand Management approval 6. ROP tissues prepared 7. ROP tissues approved 8. ROP keylines prepared 9. ROP keylines approved i0. Final proofs approved 11. ROP appears 12. OOH tissues prepared 13. OOH tissues approved Exhibit 4k Who Duration Start Finish (Weeks} (leeek) (Week) Blott 1 0 1 Finley 1 1 2 C&W 2 2 4 C&W 2 4 6 Domantay 1 6 7 C&W 2 7 9 Finley 1 9 10 Schreiber Reid Finley l i0 Ii Schreiber Reid Finley 1 11 12 Schreiber Reid Finley 1 12 13 C&W 2 13 15 C&W 2 7 9 Finley 1 9 I0 Schrleber Reid

I. Creative (Continued) Element/Task 14. OOH keyllnes prepared 15. OOH keyllnes approved 16. OOH printed Who Finley Schrelber Reid Finley Schreiber Reid C&W F. Exhibit 41 J ~ation Sta~rt Finish 13 1 10 11 11 12 12 25

J. Vending Element~Taak 1. Project approval 2. Guidance to special markets 3. Vending plan detail to Brand Group 4. Brand Group approval 5. Preparations made, mater- ials designed and produced 6. Implement plan TENS Who Blott Finley Rozek Finley Schreiber Rozek Veatch Finley Rozek Exhibit J 1 4 5 Duration Start Flniah (Weeks) ~) (Week) 1 0 1 1 1 2 2 2 4

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k. Test Market -~Lection Test Plan DELUXE E 1 e~en t/._T_~k Wh__So (Weeks } I. Project Approval Blott l 2. MMDR, preliminary Finley 2 3. Criteria to MF&A and Finley 1 Sales and Media 4, ~ales input to MF&A TBA I 5. Media input to MF&A Coleman l 6. MF~Amarket recon~endations LaJtl/Brand l 7. Marketing approval Finley I Schreiber 8. Evaluation plan Brand/Lajti 2 9. Contingency plan Finley 2 10. MMDR revised if necessary Finley 2 Duration Exhibit Sb J Start Finish ~1 (Week) 0 1 I 3 i 2 3 2 3 3 4 4 5 S 7 7 9 9 ii

B. Packaging Element/Task I. Project approval 2. Final brief to designer 3. Design Work - I 4. Brand Group guidance 5. Design work II 6. Brand Management approval 7. Materials for consumer research 8. Consumer research 9. Final Marketing Manage- ment approval (and re- finement as necessary) 10. Final art ii° Materials comped for testing 12. Materials printed (includ- ing Quality Control test- ing} DELUXE Who Blott Finley Beasley Finley Schreiber Beasley Domantay Beasley/ Brand Blott Beasley Beasley Beasley Duration 1 1 2 0 2 2 3 2 Exhibit 0 1 2 4 4 6 8 9 12 14 16 16 J Finish 1 2 4 4 6 8 9 12 14 16 19 24

C. Product vz~x_~z E Iemen t/?ask Who Duration 1. Project approval Blott I 2. PDC document on KOOL LIGHTS Finley i 80'" 3. PDC/top management approvaX PDC 1 4. Product developed R&D 6 5. Product tested Gravely 9 6. Manufacturing specs R&D 1 developed 7. Top management approval Top 1 Management 8. Management specs to R&D 1 Manufacturing Exhibit 5d J ~ ) Finlsh 0 I I 2 2 3 3 9 9 18 18 19 19 ~o 20 21

D. Manufacturing Plan ~Task 1. Project approval 2. Guidance to Manufacturing 3. Mdnufacturing plan to Brand Group Capacity - Scheduling - Etc. Exhibit Se J DELUXE Who Duration Start Finish Blott 1 0 1 Finley1 1 2 Dant 3 2 S

DELUXE ~hibit Sf J E. Distribution/ Trade Promotion Element/Task I. Project approval 2. Guidance to Sales 3. Distrlbution/tradeout/ pickup policies 4. Test market selection and parameters to Sales 5. Trade Promotion/Merchan- dising concepts 6. Brand Group approval 7. Trade promotion plan as input to PPL 8. B~nd Group approval 9. 10. Design sales work plan/ distribution procedures Produce selling materials Who Blott Finley TBA Finley Sharp Finley Schreiber Sharp Finley Schreiber Sharp Sharp Duration 1 I 3 I 2 I 1 1 5 6 Start ~) 0 1 2 4 2 4 5 6 5 i0 Finish I 2 5 5 4 5 6 7 10 16

F. Cons tlRter Promotion Element~ I. Project approval 2. Guidance to Promotion Staff 3. Promotion concepts to Brand Group 4. Brand Group approval 5. Promotion plan developed PPL written 6. PPL approved 7. Preparations made/ materials designed and p-oduced Ezh£bit J DELUXE Who Duration Start Finish Blott 1 0 1 Finley 1 1 2 Veatch 2 2 4 Finley I 4 5 Schreiber Veatch/ 2 5 7 Management 1 7 8 Finley 26 8 34 Veatch I

G. Media Plan ]~hLbLt Sh DELUXE Element/Task Wh___q Duration (Weeks) i. Project approval Blott I 2. Guidance to Media Finley 1 3. Media input to marke% coleman 1 selection 4. Media principles for Coleman 1 spending level/national theoretical plan 5. Approval by Brand Manaqement Domantay l 6. Test market medla plan Coleman 2 developed 7. Approval by Brand Management Domantay I 8. Execute plan coleman As required Start 0 1 2 3 4 5 7 J F~Ish i 2 3 4 5 7 8

TOpiC - H. Consumer Research DELUXE Element/~ask wh_oo 1. Project approval Blott 2. Brief MRD Finley 3. Design for package testing Brand to Brand Group 4. Brand Management approval Finley Schreiber 5. Materials for testing (B6) Beasley 6, Execute test and evaluate Brand (BT} Exhibit 51 ./ 1 4 5 1 5 6 3 6 9 ~ration Sta~ Finish 1 0 1 1 1 2 2 2 4

Topic ° I. Creative Element[Task Wh__O0 DELUXE Duration Exhibit 5J Start Finish i. Exploratory visual/ C&W 7 0 7 headline and copy concepts developed 2. Exploratory concept C&W 2 7 9 refinement 3. Shoot preparation C&W 3 9 12 4. Shoot C&W 1 12 13 5. Exploratory executions C&W 2 13 15 comped for testinq 6. Research: TAT Brand 8 15 23 7. Research: Tip in/ Brand 4 23 27 communication test - Including packs ~. Final exploratOry creative C&W 2 27 29 recommendation to Brand Group 9. Approval: Brand Management Schreiber 2 29 31 Reid Domantay Blott 29 C&W i0. Shoot preparation 32 0

TOpiC ". I. Creative (Continued) Element~ II. Shoot 12. Magazine tissues prepared 13. Magazine tissues approved 14. Keyltnes approved 15. Final proofs approved 16. Materials release to monthlies 17. Monthlies appear 18. Materlals release to weeklies 19. Weeklies appear 20. OOH tissues prepared 21. OOH tissues approved 22. OOH keylines aoproved Exhibit 5k DELUXE J Who Duration S~trt Finish CtW 1 32 33 C&W 3 33 36 Finley 1 36 37 Schreiber Reid Finley 1 37 38 Schreiber Reid Finley 4 38 42 C&W 0 42 42 C&W I0 42 52 C&W 0 45 45 C&W 7 45 52 C~W 4 33 37 Herzog 1 37 38 Schreiber Reid Herzoq 1 38 39 Schreiber Reid

DZLUX_____~Z I. Creative (Continued) Element/Task 23. Released to printer 24. OOH posted 25. ROP tissues prepared 26. ROP tissues approved 27. Keylines approved 28. Final proofs approved 29. Materials released to publications 30. ROP appears Who Duration ~Start] Finish C&W 0 39 39 C&W 13 39 52 C&W 5 41 46 Finley 1 46 47 Schreiber Reid Finley 1 47 48 Schreiber Reid Finley 2 48 50 C&W 0 50 50 C&W 2 50 52

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