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MARKET UVERVIEW I~IDUSIRY 50753 1203 SMOKER/NON-SMOKER DIFFERENCES INCOME AND OCCUPATION ARE RELATED TO EDUCATIONAL ATTAINMENT- ON AVERAGE, SMOKERS HAVE A LOWER LEVEL OF EDUCATION THAN CONSUMERS IN OTHER PRODUCT CATEGORIES. YOUNGER ADULT • FLS.RLBORO • MILLER BEER • KOOL • C~L ATTENDED TUPPERWARE .ZAYR! PA~TY • • SALEM @ GIG. I~S, RKET LOW EDUCATION ~O HOMF PE~IDSI ~ •PHILCO 'IV • WINSTON ~'- • • AOUA VELV~ OWN AVON • PRELL SILsJ~ INSTAMATIC Slb~}vPOO CAMERA • GENERICS OLDER @ V. SLIMS • PONDEROSA STEAK @ IIOUSE HARDEE' S VANTAGE D(~ESTIC 'OO CAR BUDWEISER • MICHELOB BEER MOLSON BEER • • $ HEIHEKEN BEER • II, rPORTED BEER FIARKET VIDAL SASSOON SIJAM~OO • STEAK & • • JACK DANIEL'S ALE • MERIT • ARAMIS • BEER HARKET • LIGIIT BEER HARKET BENSON & • HEDGES ESTEE LAUDER • CIIIVAS REGAL OWN CAR• GREEN FOREIGN GOURMET AHERICAN • SPECIALTY EXPRESS CARD STORE • OWN 35m~ CAMERA • MONTGOMERY WARD CREDIT CARD ! • WINE MARKET OSONY TV EDUCATION • MORE ~DULT • NON -12- • CARLTON

MARKET OVERVIEW INDUSTRY 50753 1204 SMOKERS HAVE MANY QUALITIES THAT SET THEM APART FROM NON-SMOKERS AND PRESENT POTENTIAL POSITIONING OPPORTUNITIES. NON-SMOKERS ARE MORE LIKELY TO HOLD RIGID BELIEFS ABOUT HOW PEOPLE SHOULD LIVE. ON THE OTHER HAND~ SMOKERS TEND TO BELIEVE THERE IS NO RIGHT OR WRONG WAY TO LIVE~ ONLY PERSONAL CHOICES- SMOKING ]NDE.X, VALUE AGREE DISAGREE LIBERAL SEX ATTITUDE SOCIAL PLURALISM SOURCE: YANKELOVI CH, 1979-1987 123 57 216 122 58 210 -13-

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MARKET 0VER~I,E.~ PERFORMANCE FACTORS 50753 1209 ~VER THE PAST FIVE YEARS, THE ONLY GROWTH BRANDS HAVE BEEN: • SAVINGS BRANDS • YOUNGER ADULT SMOKER BRANDS L.EA.D.ERS I N. _S.0M .GROWTH 1987 BRAND 1982 (.ES, T. ) MARLBORO ~[0.23 23 -67 DORAL --- 3 .I[I GENERICS .95 3.85 NEWPORT 2.42 4.00 CAMBRIDGE --- I CENTURY --- • 76 RICHLAND --- VIRGINIA SLIMS 2.(19 3.0~I PLAYERS LTS. -'- SOURCE: MSA DIFF • [I .~4 3.1[I 2.90 1.58 1.20 • 76 .55 .30 -18-

50753 1210 MARKET O,V.ERV IEW FACTORS AFFECTING PERFORMANCE AGING/YOUNGER ADULT SMOKERS SWITCHING/EXTERNAL ISSUES -lq-

MARKET OVERVIEW PERFORMANCE ,FACTORS 50753 1211 STABILITY IN LONGER TERM PERFORMANCE OF SEGMENTS/BRANDS IS DUE TO THE MECHANICS OF HOW SHARES CHANGE- TwO MARKET DYNAMICS CAUSE S0M CHANGE: • ~ IS THE RESULT OF NEW 18 YEAR OLD SMOKERS REPLACING OLDER SMOKERS WHO QUIT. • BRAND SWITCHING OCCURS AS SMOKERS CHANGE UB. EXAMPLES: MARKET DYNAMIC ANNUAL IMPACT ON S0M PALL MALL MARLBORO • AGING (-25) 1-01 I SWITCHING "_~ TOTAL (,36)