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P~R S~ATE~Y r-~O710 16G8 ~]~: TO AClIZEVE D01~NAItT PRESENCE FOR TARGETED BRAIE) VZA LOCAL I:'ZELD ItARICETZI~ AJI) PROYZDE ]]MCd~RY 111AT Ai)IN~SSES UIGOUE INIIRI~T~. CAMEL/SALEM ~xpecl~o TO AC~ZEVE 40t rm~L aY mo 1990's. enmzc mmCeTS PROVZ~ES 11 POZm OF TOTAL YAS SHARE. A 40% ~ ~N IUR YAS Smu~ ETHHZC GRO@ S~RE ~ Hr:.XZCAnlCunmi CAMEL 40t 5t B~cx/P~ SALEM 40 TOTAL INIDNVI,~o, HEI~0RT's ETHNZC PROGIM44 PRODUCED_8 POZNTS/YF.Xe AMONG BLAcK.YAS. 3 J~II DI. ~q paan po.~d 87M03834 | CX 36-A

50718 IGS~ EXISTI]IG YJ~5 TARGETED PROGRAJ4S HAVE LtNI"TED ABZLI"TY TO CREATE A STRONG ZJ~ACT~t. ~ m0US ,b0St.O YA,5. Lo~ YAS En'zczn~cy ~ o~ VEHZCLF.S INIDNVI III DZHf~I ~q pa3npoad ........... CX 36-B 87M03835

~R STP, ATEGY TARGEITD YAS mmc[~m; pmuum zs NEEDED TO REAal ANGLO YAS z# AN e I • • • PERSONAL ~SAGE • EFFECT'ZVE REACH ~LqKL=T COVERAGE • • DE)e6RA~ZC~ I SPECZAL LrnlNI¢) DLrVELOPE~ ~I SPECZAL 0VERLAPPTNG GROUPS, TAK[N TOGETHER, COVER ALL YAS EACH YAS ZN HULTIPLE GJ~I~ 87M03836 3£HFH pa3np().ld CX 36-C 5O718 1670

50710 1671 P.AMKETXNG PMOGI~J~ DESXGNED TO DEI-TVER D014XNANT PRESENCE AI~ A PERSONAL MESSAGE. IN[ " ~THNXC PI~IGRAMS sp,~c~,, z,n~s [l i DZHfH £q p~3npoad CX 36-D • 87M03837

5O718 ~672 1995 TAm~,eT~ 1995 CAI~L SALJ31 15 ET~I.z¢ 11t ~GNA ~ A.~L~ TOTAL 40t TOTAL 20t INII-DNVIA~ [II 3,L~lf~l £q p~3npoad 87M03838 CX 36-E

XV. ANALYTICAL SIJI~IARY THE CONPOSZTZON OF THE 18. POPULATZON BEGAN TO CHANGE SZGNZFZCANTLY DURZNG THE LATE 1970BS AND ZS EXPECTED TO CONTZNUE CNANGZNG FOR THE SE)UkZNDER OF THE CENTURY. OVERALL 18, POPULATXON HAS SEER GROWING AND VI:LL COIITTNUE TO IX) SO DUR]:NG THE CONXNG YEARS (I:NCflEASXNG 7q; BY 1995). CONVERSELY, THE ]8-24 POPULATXON PEAKED ZN 1980 AND HAS STEAD]ELY DECLXNED EVER SYNCS. HOREOVER, THE 18-24 PQPULATZON |S EXPECTED TO OECLZNE BY AN ADDZTXONAL 9~ BY ).995. THE PORTZON OF THE POPULATZON A~[O ],8-24 ~ZLL DECLXHE TO ]2~ XN ]99S. HZHORZTY XMPONTANCE TO THE 18-24 POPULATXON WZLL CONTZNUE TO GROW. HOWEVER, .q~IGLO$ WXLL CONTXNUE TO BE THE DOMZNANT DENOGRAPHZC FORCE ACCQUNTZNG FOR T'dQ-THZRDS OF ALL 18-24 YEAR OL~S ZN 1995. THESE DEHOGRAPHZ¢ SHZFTS HAVE ZNFLUENCED THE COHPOSZTZON OF THE ¢ZGARETTE ZNDUSTRY. ALSO CONT~|BUT|HG TO THE AGZHG OF THE ¢|GARETTE MARKET. HOWEVER. ZS ~ - THERE ARE APPROX~I~/ELY 30% FEWER 18-24 SMOKERS z. 1988 COMPARED TO 1980 (AN EST~T~ DECLINE OF OVER 3 HILL;ON S~KERS). ~T ~5 87M03839 CX 36-F

YOUNGER ~..LT SM01CERS 50718 1739 I'V. ANALYTZCAL SIN4ARY 0ECLTNXNG SOCXALACCEPTAEXLXTYOF SOIOI~NG AND XNCREASZNG PRZCES ARE RESPONSZlL[ FOR TN[ OXSPROPORT~ONAll RATE OF |NCIOENCE DECLZNE ANONG YAS. XNCREASXNG CXGARETTE PRZCES. HOHEVER. ZS |ELXLrVED TO BE THE SZNGLE HOST XNFLUENTZAL FACTOR. O O ~OTH THE S~L_I~_ AND C~Q~EL BRANDS ARE BEG|NNXNG TO HAKE PROGRESS ZN POSZTXVELY ALTERZNG YOUNGER ADULT SMOKER ATTZTUDES AND PERCEPTXONS. [EY TO BOTH CAHPAXGNS ARE THEXR ABZLZTY TO ATrRACT ATTENTZON ZN A UNXGUE AND EXCZTXNG 14ANNER. THE YOUNGER ADULT SmKER NARKET XS XNCREASZNGLY |ECONXNG A 1140 BRAND HARKET AS ~IANLUORO AND Nk'~m)ORT NOV CAPTURE TWO-THZRDS" OF ALL YAS (uP F;UX4 44% ZH 1982). R3R HAS EXPERXENCED LOSSES AMONG 18-24 YeAR OLD S;40~[RS ON eACH OF THE CORE BRANDS. THESE LOSSES HAVE ACCELERATED SZNCE 2982. THE =GAP" BETWEEN R3R's A~O PH'S SHARE OF YAS ¢ONTXNUES TO ZNCREASE (OVER S0 SHARE POXNTS ZN 1987 versus 24 SHARE ~OZnTS ZN 1980~.. THX~. Z~PAILItTX~qI~P~.A.L~RIIzlIG AS XT CAN me ¢OIISX|[I[I) AN Hi • ~ J~H fH ~q P a ~ n p o.~ cl 87M03840 CX 36-G

50718 1740 11/. ANALYTICAL SUIglARY RESOUIK:ES ALLOCATED T~ |llOIrlllG THE IUSlHESS AIIIONG YOUNGER ADULT SMOKERS IdEl~ flEOLICED SIGHIIrICANTLY Ill THE IqlO-]980'S. THIS REFLECTED & PRONOUNCED SHIFT TOMARD VOLU~ GEIIERAVING PROGIUIJ4S IrOLLI)qdXNG THE FET 1rNCREASE AND ACCOMPANIED BY TOTAL YAS SUPPOBT OH CORE Bmmns HAS DECLINED iy44~ SINCE 2982. |k)REOVER, THE SHARE OF TOTAL HESOURCES THAT HAVE REACHED YOUNGER ADULT S/4OKERS NA$ DECLINED TO 11% IX 1987, DOV~ FROM OVER 18% IN THE tArtLY 1980'S. THIS DECLINE IN SPENDING HAS OCCURRED ON EACH OF THE CORE BRANDS |UT HAS BEEN PARTICULARLY SHARP ON CAMEL ANo SALE]4 (EFFECTIVE SPENDING DOWN OVER 50% SINCE 1982). J~Ji BEGAN TO SIGNIFICANTLY INCREASE BUSINESS 8UlLDiHt SUPPORT IN 1987. THIS ~ENL~,~D EFrORT COWrZHUED INTO 1988. 3 LI IfH pa,3npoad 87M03841 CX 36-H

YOUNGER ~I.T SI40i(ERS S0718 174t V. XI4PACT OF_ YAS PERFOIOMI~ TREHI) -- "THE BOTTOH LIllE" THE ANALYSIS TO THIS POINT NAS FOCUSED ON SLII~iARIZIIIGKEY CNANGES OCCURRING t/XTHIN THE CIGAIIETTE NARKLrT. SPECXIrZCALLY... OE~OGRAPNIC TRENDS INOXCAT~TNATTHE YOUNGER ADULT POPULATION NAS ANOWZLL CONTINUE TO OECLINE. ~k)R[OVERe SNOI(ING INCXOENCE ANONG YAS ZS OECLINXNG AT AN ORE RAPID HATE THAN THE NARKET IN GENERAL. P.JR's PERFORIqANCE RNONG YA5 HAS DETERIORATED CONSIDERABLY SINCE 1982. FACT, LOSSES ANOffG THZS GROUP HAVE ACCELERAT~p. DESPITE RJR's DECLX.NXNG YAS PERFORI4ANCE. RESOURCES DEVOTED TO REVERSING THIS TREHD HAVE BEEN REDUCED SIGNIFICANTLY. FOLLOHZNG QUANTIFIES THE ~ THAT THESE OYNANXCS HAVE ON R3R's ABILITY TO NEET SHARE AND VOLUNE OBJECTIVES. INI.DNVI/ Ill 87M03842 CX 36-I

YOUHGER ~,.,iLT SI40KEY.S 507~0 1742 Vo 114PACT OF YA$ PERFOMIANCE TREND -- "111E BOTTOH LINE" T~o FACTORS ALONEACCOUNT FOR A 8RANO*$ OR~:MPANY*S OV£RALLPERIrORILANCE: AGZNGAND SblXTCHXNG. XT ZS APPARENT, NOkIEVER, TNAT AGXNG ZS THE PRZNARY XNFLUENCE ZN THE CXGARETTE NARKET DUE TO HZGH DEGREE OF BRAND LOYALTY. APPROXXHATELY 7S% OF ALL SHARE OF SHOK[N CHANGE XS DUE TO NEW SI4QICERS REPLACXNG ONES WHO QUZT. GROklTH gRANDS HAVE HXGHER SHANEANONG nNLCbfSn DECLXNZNG BRAHOS HAVE HXGHER SHARE OF nOUZTS~ THE OTHER 2S% OF XNDUSTRY SHARE CHANGE XS DUE TO SHXTCHXNGB NOSTLY RELATED TO EXTERNAL EVENTS |X.E., PRXCE gRANDS, LQ~/ERED TAR, ETC.). 3J HF},I fiq pa npoad CX 36-J 87M03843