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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

Vo YOUNGER k,~LT SMOKERS 50718 1743 ~I~ACT OF YAS P~FORMANCETHEND .-- "THE BOTTOM L~NE" id~NSTOM*S LARGE GAP OElldIEN uNlldS" AND U0UZTS" ZNOZCATES THAT ZTMZLL CONTINUE ZTS L04~ER TEEN DECLZRE. SZNZLARLY, SALI~*S DECLZNEli6 ~ STARTED SHORTLY AFTER ZT LOST XT$ AGZNG ADVANTAGE. C~4FlsS NOD[IATE DECLZNE ZS THE RESULT OF A SHALL GAP. WZNSTOM TOTAL 12.2 11.9 10.6 18-24 7.8 7.0 4.3 S~ 11.5 12.0 12.4 1987 S~RE CUG. ~ _Vs. 198Z (8.1) (1.3) SALEM TOTAL g. 7 9.8 8. S 18-24 10.7 9.4 S. 2 50." 9 ..... CAMEL TOTAL 18-24 50* (3.9) (1.3) ~.~ 11 o 6.9 5.4 *5.0 (2.0) (.2) 3& If l pa3npo. d 87M03844 CX 36-K

V. 111PACT OF YAS PERFORMANCE TREND .-- "THE BOTTOIq LIl~IE" 50718 1744 . NARLJORO AND NEMPORT TOGETI~It ACCOUNT FOR TMO-TN~I~S OF ALL YOUNGER ADULT glOKERS. CASES. FUTUI~ GleOIml ZS ASSUIte~B OOe TO TNE ~ ~ XIICte-4SXlIG GAP |Lrn~eJi 19~7 $~Ate C~. 1982 ~ "A~;~ GAp" ~ TOTAL 15.0 17.0 23.6 18-24 30.6 36.3 54. Z 50÷ 5.5 5.6 7.8 4.46 4.6.6 NEMPOIIT TOTAL 1.7 2.4 4.1 18-24 S.Z 7.8 11.0 4.10 4.1.7 87M03845 CX 36-L

50718 1745 V. ~IIPACT OF YAS PBIFI)MMIICE TREND -- =THE BOTTOH Lille= ~RBS DIS4:REPANCY |LrTI~EN "NEMSm AND WQUXTS" HAS BOTH A NEAR T~NN AND LONGER l~llN XNPACT. PLACES ZNCRF.ASEO PRESSURE OM BOM'BusznESS BUILDING VOU~E DELXVERY TQNAKE UP FOR ANNUAL SHORTFALL (APPROXZNATELY 6-7 NILLZON UMITS/YEAN). THIS IS XN SHARP CONTRAST TO THE VOLQ~IE GRQlfTH EXp~flZENCEO BY P~DUE TO AGING. THE CHART B[I.~OIdOEPICT$ THE ESTINATEI) VOLIN4E IMPACT OUE TO AGING FOR eoTHR3R AND PN. ALSO INCLUDED ZS A IREAKDOUN OF 14A3OR ~R VOLUNE SUPPORT PNOGRANS - LOADING AND SAVINGS VOLUNE GROMTH - THAT MERE NEEDF.O TO ACHIEVE ~ VOLUNE GOALS. LIIP _I pa.+npoad R7M03846 CX 36-M ' ' '

YOUNGER ADULT SHOi(ER$ s07so 1746 114PACT OF YA$ PERFOM(AIRE TREND -- "THE BOTI'OM LlrNE" • L~Iu_TL~q~'~ IIIXLL ULTXNAT|LY REDUCE OVEItALL SON UNLESS ~ SblXTCHXNG GAXN$ ARE GENERATED ANNUALLY |l.E.e 00P.,AL). - TOTAL MARKET SHAItE GAP UETblEEN R3R AND PH b/ILL 5IXOEN TO 21 SHARE POINTS :IN 1995 GIVEN CURRENT TREND AMONG YAS. PROJECTED SHARE TRENDS BASED ON YAS PERFORMANCE 1007 lOOO 1091 1003 87M03847 cx 3 ~;- N

YOUHGER ADb~.T SHOKERS VZ. RECOII4EHOET) ACT~0N C I~ECOI~EliDAT~ON SIAI4ARY RJRT HUST COHNXT TO ACHXEV~NG AGGRESSXVE GROkrI'H AMONG YOUNGER ADULT SMOKERS NObl TO STEN FU|THER EROSZON ~N OUR ABEL~TY TO NEET DOTN SHORT AND LONG TERI4 ~ONPORATE VOLUNEI SHARE ANDPROFXTABZLZTY O~ECTXVE$. - 3-4~ GROSfTN HEEDED ANNUALLY TO OFFSET THE CONPANYOS RAGE GAPu BY |995. ONLY BE ACHIEVED VIA COH|/NATION OF E~TABLZSHED BRAND AND N[~ RESOURCES DEVOTED TO |HPROV|HG R3R's PERFORHAHCE AHOHG YOU#G~# ADULT SHOKERS HUST BE INCREASED SZGN|F|¢ANTLY HZTfl FOCUSED APPLZC&TZON BEfl|ND SAL[H AND CN~[L, BUSENESS BU|LO|NG RESOURCES BEHIND SALEH AND CAMEL SHOULD ~NCREAS[ BY $28HH :N 1989 UETH HONXTORENG OF SUPPORT BECONZNG A ROUTINE PART OF THE BUDGET ANn FLANNZRG PROCESS, THE CR|Tzc~L~F~)~D,~O~IR~"E~-~F~J~ ACTXOPg ANO YA$ D:RECT ~ARKET|N~ I!I

V~. RECONg~eED ACTZON RECOIml~NI)A'IION 5tl~llY A PROCESS FOR OEVELOPXlIG AMI) IqONZTORZNG YAS CONCEPTS/PROGRAI4S NUST f~ ~ TO NAXXNZZ[ ~,JRoS ABZLZTY TO I~EACll YOUNGER ADULT SI4Oi(ERS XN A RELEVANT, ZNPACTFUL NANNIrI~, ESTABLISH YOUNGER ADULT ~qOKEN PANELS TO ASSXST ZN OKVELOPIqEIIT ANt) NONZTOtZNG OF YAS PflOGIIAN~o FOI~I4ALIZEO PROCESS TO FACXLXTATE BOTH THE IOENTZFXCATZON OF N~ YA$ CONCEPTS ANO ZNCREASEO EFFECTXVENESS OF ESTABLZSHEO PII~OGRA~. INI.DNV 3ZHfH Xq paanpoad CX 36-P 87M03849

058£0RL8 MANGINI N ~ l" W ~gNnOA 6~Z! 81L0~ "XA

RECO~ENOED ACTION A. YAS S~AIt[ Os:-cTzm ACIIIEVZli~ 3-~J S0S iN)rill ¢Olllq)UTELY IS ~li AG~IE$$IYE GOAL. HObI~rVEll, S:XNCE THE 1-8-24 SI40KXNG POPULATZON ZS EXPECTEO TO CON11:NUE DECLXNZNG DUR.TNG THE CONZNG YEABS, EFFORTS TO ZNCREASE SHARE 14UST |EGZN NOW. ADDZI"ZONALLY, THE BENEFZT$ OF NEALTZZNG THZS GROVTH ZNPACT NOllE THAN THE CJ)I4PANY'S LONGER TEW4 PERFORNANCE. TT REDUCES THE NEAR TERN NEED TO nELlY VOLUHEa FllON A) VOLUNE SUPPORT PROGRANS. |) EXCESSZVE TRADE LOADI:NG, AND C) DEPENDENCE ON 00RAL VOLUNE GROblTH. ACNIEVZNG ESTA|LZSHED OB.TECTZVES WZLL REDUCE ANTZCZPATED VOLtm[ LOSS DUE TO A~Z.G 8Y~J'P~OXZNATEL* 140HH UNZTS ZN 1989 A~O 600114 ZX 1990. ES~T~ i VOLme b~*¢~ |AS~ O*~ YAS Pz~n~uJ¢, lSaJ [I [ -7.ZO/ -7.Ola * l)t ~0 -A.23| -5, Ate * S73 S| • -7.17Z -S.|TS ~)Z -|, 451 -6,412 ~ Z39 ,,...,,,-,:,,,,-- 87M03851 CX 36-R

RECONql~D~ ACT~Qll A. YAS $~ARE O~EC~zv~s YOUNGER Au..,.T SMOKERS SO718 tTSt TNZS ANALYSIS XNOICATES THAT ~ Aim SAU~ ARE RJR'S STRONGEST YAS ENTRIES INOULD tEI4AIN THE PtXORITY SRANOS BASED ON TllE IrOLLO~NG UT~OULE: • DnJOUSTtA~J) ABILITY TO ATTRACT YAS I~Ht, N SUPPOItTEO EN EARLY |980'S. • • CURRENTLY RJR's L~NGEST YA5 SHARE 8RANO. • RELATIVELY STABLE PERFONf4ANCEANONG • YAS. REPOSITIONING BEGINNING TO CHANGE PERCEPTIONS .qJ4ONG TAIh~ET. • STRONG HERITAGE. IqYSTIQUE. RESPECT , . NEARLY 30~ OF YAS RUSZNESS IS HENTHOLo REPRESENTS RJR's BEST OPPORTUNITY WITHIN TWO VITAL YA5 SUBGROUPS: BLACKS AND FEMALES. 87M03852 CX 36-S

YOUNGER ~v.,~LT SNOI(ERS 50718 175Z Ae I ZT zS R,Cm4ZND~ THAT CAHF.L AXO SALEH ACCOUNT fOR Z40~ THe 3-4~ UNU~L ~ ~oxa 18-24 smKus. TH~S br~LL POSXTXON CAHEL FOre LONGER ~HZLE TN%$ TXME FRANE NAY APPEAR LENGTHY, SALD4 NUST REVERSE %TS TREND N4ONG YA$ IdNXLE ~U(E~L NEEDS TO NUXLD NONENTUN. ]~T SHOULD BE NOTED THAT REAL GROtdTH %S DEF%NED AS nNEGATXNG THE ADVERSE EFFECT QF AGINGw ON A BRAND'S AB%LXTY TO EXPERZENCE YEAR-TO-YEAR SHARE OF SNOKEll GAXNS. 0BVXOUSLY, BOTH BRAND'S CAN BE ZN A POSJ:TZON TO EXPENZENCE MSA on NZELSEN sHAnE GROkrTH ~ TO THXS EQUZLTON]:UI4 POXNT VXA VOLUNE EUZLDXNG pItOGItANS. I11 3 J~l 1';1 ~q P ~3n p oj d 87M03853 CX 36-T

RECOlelE)N)ED ACTXON A. YAS S~ AND SALE~°$ ~ OF "0UXTS" ZS NOT EXPECTED TO CHANGE SZGNXlrXCAJITLY DUlLTNG THE ¢QIqXNG YEARS. 0B.1ECTZVES FOIl iOTN BUNDS AU DEPICTU IELOI: SALEM OBJECTIVES CAMEL OBJECTIVES 87M03854 CX 36-U

VZ. REC0~g~D~ ACTZON , A. YAS SHARE CAJ~ ~um SALEM's 1% AHHtML 18-24 SOS SM (2% COeOZNED) XS ~SS TH~ THE 3-4% NEEDED ~ORPORATELY~ AS SUCN~ HEM BRANO ACll[VXTY NUST MAKE UP FOR THE SHORTFALL. NEM 8RANO OPPORTUNZTXES THAT TARGET YOUNGER ADULT NON-HENTHOL MALES Alfl) Irk'MALES APPEAR TO REPRESENT THE GREATEST POTEMTZAL FOR P~ODUCZNG R~R ZHCMENENTAL |8-24 Y~ SHARE. SUCCESSFUL ENTRXES ON BOTH FRONTS MXLL HAVE A OZB[CT~ ADV[BS[ ZNPACT ON MARLBORO. kIHZL[ MARLBORO [XPENZ[NCES SZGNZFZ¢ANT GROMTN AMONG BOTH YAS HALES AND FEMALE$~ ZT$ HOST ZNPRESSZVE PERFORMANCE HAS BEEN AMONG FEMALES. HAItl.~OItO YAS .21.8 PERFORMAHCE I 60.4 .21.1 FEMALE 18-24 25.0 * 47.8 *22.8 87M03855 CX 36-V

VI. RECONqENDEI) ACTION .J YOUNGER ~..~.T 5~0KERS 50718 1755 Ao YAS SNAE[ 0s][cTzves SLrVERAL PELrVZous AI"I~qPTS TO SEG/4ENT NARI.BORO*S MEAKNESSES NAVE 14IT MZTH LZI4ZTED SUCCESS. HOMEVER, ~RLBORO*S SIZE AND E~TABLZSNED POSZTZON|~G~DOES NOT ENABLE ZT TO CG¢4PETE ON ~ KEY DZHENSZONS: PRICE ANO SOCIAL ACCEPTA6ZLZTY (SMOKING AS NOTED EARLIER, YOUNGEE ADULT SNOKENS NAVE A HIGHER THAN AVERAGE SENSITIVITY TO PRICE. THIS ZS BEST DENONSTRATED BY BOTH THE CORRELAT][ON BETWEEN PRXCE INCREASES AND REDUCTION ZN YA~ ZNCXDENCE AND STRONG ]8-24 SNARE OF SHOKER GROIdTN ON ESTABLISHED SAVINGS BRANDS, INCLUDING DORAL. THE DECISION TO REGIONALLY INTRODUCE ~A~AT A GENERIC PRICE ZS XN RECOGNITION OFT HIS OPPORTUNITY. I~(A ADDRESSES A KEY DEFXCIENCY WITHIN THE SAVINGS S[GNENT TODAY BY PROVIDING BOTH PRICE AND YOUNGER ADULT INEVITABLE. CONSEGUENTLY, I(AGNAes CAN BE VIEtdED AS ROLL THAT DORAL CANNOT FULFZLL. 87M03856 CX 36-W

YOUNGER ._3LT SHOKE]IS $07~e ~7s6 Ae YAS StuN[_ SOCIAL ACCEIrrAIILITY |SHOI(ZK "~SSI/[S'): TN[ VAST ItUOl111' OF IECENT lrENALE-ORXENTED BRAND ZNTRODUCTXONS NAVE EXCLUSXVELY 19qPLOYED ZNAGE USED POSZTZONZNGS. ~HZLE i4ARLEQItO DOES NOT SPEAK DZRECTLY TO THESE I[NAG[ NEEDS, THE SltAND DOES PBO3ECT UNZVERSAt.LY ACCEPTED MANTS AND A1T[TUOES. NEM BlUmO PROOECTS LTKE TF REPRESENT POTENTZAL OPPORTUNXTZES TO PROVXOE A TANGZBLE. HEANZNGFUL ~ THAT ADDRESSES THE SOCZAL ACCEPTABZLXTY OF S/40K3NG AND ZS SUPPORTED klTTH STRONG FENZNXNE ZKAGERY. Tff| TF CONCEPT SHOULD ALSO WE EVALUATED ON SALSq eASED ON THE IrOLLOHXNG: SAL[]4OS OVERALL Ir[IqZllXR[ APPEAL AND IrSTABLZSHED XNTERACTZON IdZTH STYLZSH BRANDS, - T~eS POTENTZAL TO ATTUCT ~LACK FENALES, - TF's ABZLZTY TO CONPLENENT SALEm'S =REFRESHESTN POSZT~[0NXNG. EXPECTED TO NAVE FUNDAI4E ,. PEAL AJ4ONG YOUNGER ADULTS AS k/ELL. 87M03857 CX 36-X

1~. RECOIIIENDED ACT'tON YAS SH~Ri OI,liCT~S 0TNER LXNE-EXTiNSXON CONCEPTS TNAT CAN NiZGNTEN APPEAL ANONG YAS (NALis) XIK:LUOE: LEVERAGES STRONG GROMTH OF BOX CATEGORY ANO ENABLES ALTERNATIVE PRODUCT DELIVERY (STRONGERI NORE TOBACCO TASTE). - YAS BI.liclis BUILDS ON NASCULXNE PRODUCT Xl4AGERY VIA TANGZBLE DIFFERENCE. I N I,..qNI VIAI ill 87M03858 CX 3~-Y

VX. RE£OIIIENOED ACTION RESOURCE ALLOCATION I. INCR~ASLq) YAS SUPPORT BUSINESS BUILDING SUPPORT IN ]987 AND |9~8 IHCRUSED SZGNIFXCANTLY OVER PREVXOUS Y~RS REFLECTING EEN~ED ¢O~Z~ENT TO XNVESTXNG XN ~NGER T[~ GRO~. TO ~RE T~ DOUBLE RBR's SHARE OF YAS xN ~E C~NG Y~RS CALLS FOR FURTHER STBENGTHENZNG OF T~T A TARGET LEVEL FOR YAS BUSINESS BUXLDXNG SUPPORT AGAINST SALEHAND CAMEL IN 1989 xs $10014H. THIS REPRES[NTS A $28194 ZHCR~ASE OVER 1988'S L[V~L OF SUPPORT. GUSt I~Z i|.i l|.t 2S.4 25.4 20.2 ,I 21.0 Z.4 16.8 11.4 21.1 |l 5.4 4.4 14.8 ,7 ILl ..:, 18., 1,., li (Isv.| il.4 Lli i1.1 20.1 16.1 64.4 J; lfl l p 3npo. d 87M03859 CX 36-Z-I

"~111 YOUNGER ~v,~LT SNOKERS noTl • s ~ VZ. RECOIOIBg~ ACI~0N |, RESOURCE ALLOCA'I'~OH 1. IHCRF.ASm YAS 5up~n'r PRODUCT 0EVELOPI~NT RESOURCES NUST DECOI4E FOCUSED AND CONCENTRATED AGAINST /DENTZF~NG PROOUCTS THAT NAXINIZE APPEAL APOQNG ]8°24 S~QKER~, THESE PRODUCT FORKS SHOULD PROVIDI~ A OEHQNSTRARLE OIFFEREHCE VERSUS ESTABLISHED ~ (I.E., N~ldtDIFFERENT TASTES, AR(N4A, FEEL, APPEARANCE, ETC.). DEVELOPP~NT CAN DE CATEGORIZED AS FOLLOUS: • FFIFFLT I~ • NEWI'~OL • HEM OENEITITS IN I-DN VIAt CX 36-Z-2 87M03860

YIXJNGER ,~dL.T SHOKERS 507 ~e ~ 760 t/2. RECOIIIENDED ACTION RESOUm:[ ALLOCAlION FOCUSED SuePolrr BEHXIm CAHEL AND SALEN As mE nn, sx~aATn~ YAS 8p~aos, SNEATEn LqqPHASZS SHOULD |E PLACED On ENSURZN~ ~0AT CAHEL Am) SALDI U~CEZVE THE VAST 14A3ORZTY OF YAS RESOURCES A#D Y.r,,tl/~.LS. THE FOO.LOVX~ CHANGES ARE RECOtm[#D[O: PACK ACTXON SUPPORT HUST REFLECT R3R's COtmZTHEHT TO GROI~NG~UqEL AND SALDI mqOHG YAS. THE PACK ACTXOH fl[TAZL ENVZRONHENT PROVZD[S AN EXCELLENT VEHZCLE TO REACH TARGET YAS SPOOKERS WZTH HZGH FNEOU[NCY, RESOURCES CURRENTLY ALLOCATED ToW TNSTOH SHOULD BE R[OZR[CT[D TO CAMEL AHD SALEM. PLACES GREATER ENPHASXS AGAZNST BRANDS HZTH GREATEST CONVERSION POlaR. AS A RESULT OF FEVER RETAZL TURNS. 87M03861 CX 36-Z-3 n~

YO~IGI~ ._.~L.T S~OOC~S 50710 ~. RE~ ~ B. ~~e ALLiSOn F~sn SuP~n B~ ~ ~ SAL~ ~ULL PACK ~ON $~RT FOR ~ XN ~9~ ~LL BE S~ T[s~ ounz~ ~ Foun~ ~n~n pnZon TO ~SZOn ZN 1989 S~RT, ~989. F~s ~~ FOR ~NST~ PAcK Ac~oN Sup~ S~ULO TO P~VXDE SX~ULAR F~US BEHXND ~EL ANO SAL~. As A FZRST ~TENTXAL VOL~E T~E~FFS ~D R~TAZL~R RUCTXON ~ST BE DETE~XNE THE XNP~T OF ~ZS ¢~l (E.G. ~ GE~UPH~C SCOPE, PRXORZTXES, ETC.). HI CAMEL 21.0 3 L If P paa oad CX 36-Z-4 87M03862

VZ. RECOIIqEIB)ED ACT'ZON RESOUI~:E ALLOCA'rZON 2. Focusso SUPPORT BENZNO CAHEL A~ SALEM . YAS DzllE¢l' J~,ARKET'~NG RESOURCES SHOULD ALSO BE II[DEPLOYED TO PROVZDE |NCllEASEO. SXNGULAR FOCUS |EHZND CA.qEL AND SALEH. Szl4ZLAll TO THE PACK ACTZON PROGRAN, II~ST0~ ZS CUllllENTLY THE PRXNAllY NENEFXCZARY OF YAS DH SUPPOllT ($6.DI4 X. 1988). TNZS I~ZLL PROVZDE NZGHLY TARGETED NEANS TO GENERATE RATZONAL • XPOSURE A.O TllZAL ON GU4EL AHO,G YAS ZN NO~-PnZOllZTV ~AR~ETS (Z. E., SASA, NCSA A~O NCSA) Um[llE BHANU HAS llECEZV[U LZNZT[D HZSTORZCAL SUPPORT. ESTZNATED 1988 YAS DZR[CT NARKETXNG SUPPORT SPENDING SALEH 25 PlY 102.4 88.9 6S.7 ,VANTAGE TARGETS IqODERATZON SEGMENT SMOKERS. 87M03863 CX 36-Z-5

YOUNGER o.,tJLT SMOKERS ~.~ 50718 1763 YZ. RE~I~IgEI~ AI~TION CREATZV~r OLrVELOPIqENT AN~ Jlk)NXTORXNG THE FOLLO~NG SECTXON XS DESZGNED TO PROVZDE XNSXGHT ZNTO THE CREATZVE DEVELOIqqF.~ PROCESS AS XT RELATES TO YOUNGER ~DULT SMOKERS. SPECZFZCALLY~ THE FOLLOkrXNG TOPZCS klXLL BE REVXEMED: SUIqqAR¥ OF LF.ARNZNGFRONTHE YAS ~OEAGENERATXNG PltO,IECT¢ONOUCTEgZN FEBRUARYo 1988 AND ZNPLZCAT|ONS FOR FUTURE CREATZVE DEVELOPMENT. O A RECOIg4ENDED PROCESS DESXGNED TO XNCREASE RJR's ABXLXTY TO XDENTXFY NLrH~ MORE EFFECTZVE YA~ PROGRAMS AND CREATXVE. DEVELOPMENT OF YOUNGER ADULT SIqOKER PANELS TO BE USE• XN THE CREATZVE DEVELOPMENT PROCESS AND TO GAUGE XNPACT AH• EFFECTZVENESS OF YA$ PROGRAIq.So INI-DNVI/~ HI ~ :LH fH ~ q Po a n po.~ (I CX 36-Z-6 87M03864

YOUNGER A,,,,,LT SNC)KERS V~. REDED ACTZ0N 1764 C. CREAI"ZVE DEVELOImEI~ ANO HOMZTORZNG 1. CRe.AT~VEIPRO~IUmD[VELOPSSENT A. YAS ZOEA GENEIIAT~NG PROaECT (FEmU~URV,'M) FZVE CREATZVE RESOURCES b'~Re E~IPLOYEO ZN FEERAURY TO OEVELOP YAS PR~M/CONCEPTS ON I~NSTON, SALEM AND VANTAGE. A~ENCZES PARTZCXPATZNG ]N THE PRO, SECT ZNCLUDED THREE XNTERNAL AGENCZES (Mc~JUIN, AND LONG, HAYHES AND ~JkRR) ZN ADDZTZON TO TMO EXTERNAL RESOURCES (TROXEAo, INC. AND COTN[ GROUP), THE AGENCZ[S MERE CHALLENGED TO DEVELOP YAS PROGIUUqS AGAZNST DESZGNATED BRANDS AND PRESENT CREATZVE CONCEPTS TO A REVZEW BOARD ¢ONSZSTXNG OF NANAGERS FRON BRAND MANAGENENT, MEDZA AND PROHOTZON. LHC: W~NSTON VANTAGE V, E TRON~ AO ZNC: SMq'AG~ UCP: 3ZHfH paan SALEM VANTAGE XINSTOX MINSTON 87M03865 CX 36-Z-7

RECOMMENI)ED ACTTON " 50718 C. CREATZVE DEVELOPHENT AND I~0NETORZNG 1. CREATZVEIPRoGmm OEVELOM~r A. YAS IOEA EEIIERATZN~ PRO3[CT (FERRUARY '88) FEM CREATIVE CONSTRAZIrrs b/ERE PLACED ON TIlE DEVELOPNEIrr PROCESS. AGENCZES MERE DERECTED TO FOCUS ON DEVELOPZNG PROGRAM CONCEPTS I~TH 14AXZMUH RELEVANCE ANO /~PPEAL AMONG YAS I~TH ENPHASZS ON PROHOTZNG CONTZNUZTY OF PURCHASE. PRO3ECT RESULTSILEARNZNG ZNCLUDE'. 1) OVERALL, IDEAS PRESENTEO REFLECT ON UNOERSTAHO|IIG OF THE YA$ ~ ZN TERNS OF CONCEPTUAL APPROACHES HZTH |ROADe RELEVANT APPEAL |Z.E., NUSZC TZE-ZNS, PARTY THEMES, GANES~ ETC.). 2) NOTICEABLY MZSSZNGMAS THE AIZL|TYTO IOENTZFY ~EttAND RELEVANT MEANS TO GENERATE CONTZNUZTY OF PURCHASE. SEVERAL OF THE ZOEAS PRESENTED (PARTZCULARLY BY EXTERNAL SUPPLZERS) HERE WSTAND ALONE= PROHOTZONAL CONCEPTS SZl4ZLAR TO NORKPLAN RELATED EVENTS mPRCI~I& ~ ~Uh~SJI[~NO~,RA~ ~IERE ALSO PRESENTED. :3) THE I,~:ORZTY OF~)~i~;[PTS FR[S[NTED OZO NOT A~r[m'T TO ~PLOY SEVEUL ELEl4ENTS O~E NXX (Z.E., PAC~GXNG, ADVERTXSZNG, ~R~T~k,. F~ELD~F~TZ~T~)m~T~ENCQU~GEMENT TO DO SO. J~okg~EL~TM CONCEP~ AND T:HE CONSTRAZNTS. 87M03866 CX 36-Z-8

S0710 17GG YOUN$~ ~ .LT SNOKEES YZ. REC()~ED ACTION C. CREATIV~ DEVELOmENT AnD J|ONITORING 1. CREATIVEIPROGRAN DEVELOPK~T A. YAS IDEA GEHERATZNO PROBECT (FEBRUARY ~J4PLXCATXONS AND RECIMMENDATXON$: 1) 3-5 MEEK INTENSIVE PROCESS CALLED FOR RESOURCES TO DRAM ON EXISTING KNOMLEOGE OF YAS NXNOSET AND TACTICS MITHOUT THE BENEFIT OF CONSUMER GUIDANCE AND FEEDBACK. THIS INTERACTION MITH YOUNGER ADULT S~)KERS IS ABSOLUTELY NECESSARY PARTICULARLY AS IT RELATES TO SPECIFIC EXECUTIONAL~TACTZCAL CONSIOERATIONS. THE PPOCESS OF IDENTIFYING AHO OEVELOPIHG_~RNCEPTS/PRQQRAN$ WITH TARGETED YAS APPEAL ZS TXHE IHTEHSXVE AHD SHOULD BE ~HofiO|gG (AS OPPOSED TO COHCEHTRATEOrIH A SHORT P~R~00 OF TIME). (~flEATIVE RESOURCES CANNOT APPROACH THE NARKET IN NEW ~*I ~'I '~.,~ '~'~ *': ' ~D][R[~;T~0~)~FFI~N'~OTH I~R X~IO THE ULTa'HATE CONSUNER. PROCESS TH~T~CdlLLS FOR REFINEHENTS AND COURSE CORRECTIONS AS AN INTEGRALePART OF THE PROCESS. 87M03867 CX 36-Z-9

YOUNGER ~..dLT SHOKER$ 50718 1767 (~REAI'XVE DEVELOPI4ENT A| Ik)NXTORIIII 1. Cit~yzvelPnoett~ve I)LrV,,LOP~m' YA$ ]~DU Sn,u'rzN~ Pm)aecr (FEBRUARY '88) ~J~LXCATZON$ AND RECOI~ENDAT]:ONS: (CONT'D) ALL CREATZyE RESOURCES_k'NPLOY[O ON YAS PflO3ECTS (INCLUDZHG EXTERNAL SUPPLZERS) SHOULD RE EXPOSED TO CONSUMER FEEDBACK ON PI~QGRAN CQHCEPTS/XDEAS ON AN ONoGOZMG BASXS. ~OST OF OUR RESOURCES UNDEESTAND THE YAS HZNDSET. blHAT ZS LACKZNG ZS HOM TO APPLY THAT UNOERSTANDZNG ZN A RELEVANT, HOT~VAT~NG ~AY AGAZNST S.qOKERS TO ENCOURAGE TRZAL AND PURCHASE COHTZNUZTY. ~OTN OF THE ABOVE POZNTS HZLL RE OZSCUSSED ZN GREATER DETAZL ZN THE NEXT SECTZON. HI 3ZHfH £q pa3npoJd 87M03868 CX 36-Z-I0

VZ. REC0W4ENDED ACTTON ~4)710 C. CREATIVE I)LrVELOPI4ENT ANt) 1. CnuTzvslPnoe~m OEVELOIq~NT A. YAS IOEA 6HERATZNG Plt0~ECT (FE|nUAR~'88) ~¢PLICATION$ AND REC011qEN~ATZONS: 2) FJ(TER~AL SUPPLZERS |RZNG All ADDED PERSPECTZVE TO YAS ZOEA DEVELOIq4ENT AS THEY ARE LESS BOUND BY PERCEZVED CONSTRAINTS OF ESTANLZS,En C~J4PAZ~.S. ACCOROZ.~LY. RJR S~0ULO CO,TZ,UE TO SEEK OUT OPPORTUHZT|ES TO EMPLOY EXTERHgL RESOURCES. AS APPROPRZATE. O, YAS PROaECTS. GREATEST LZA|ZLZTY OF EXTERNAL SUPPLZERS 'rs LZMZTEO U~D~RSTANOZR~ O~ VOU~ER ~UL~S AS S~O~EeS ANO THE REYAZL [NVZltONHENT Zll ImZCN kre COICP[TE. T.zS UNOERSTANDZNG CAN BE .ars~G~zT, zr.~[,L[z~vr.ci.mYj,~ovzozu~ FREGUENT, ON'GOING - RJR SHOU ~ TO DEVELOP AN EXPAffD[O LZST OF ~TO CALL ON FOR OEVELOPHENT OF YAS PROGRAHS. 3,L ~I f~i £ q P ~ 3n p oJ d 87M03869 CX 36-Z-II

L : "~ 50718 1769 YOUNGER ,_JLT SMOKERS VZ. RECON41~I)ED ACTXON C. CR|AllVE OLrVELOIq~IlT A~I) Ik)IIZTOIIXH 1, Cnu~zwlPnoGp~m DeVELOmmuT A. YAS IDeA GEXEHATZ~ PNDnECT (FEenHARY '88) ~PLZCAI~ONS AND RECOIgeENDATXOIIS: FJ(TEIINAL RESOURCES TEND TQ FOCUS ON CflEATZVE EXECUTION OF A PARTXCULAR CO~PQNENT OF A PROGRAM AND XS AN AREA ZN blHZCH THEY EXCEL. THEXR STRENGTH ZS NOT XN nVXSUALXZXNGn AN ENTXRE PROGRAM bIZTN ZNTEGRATED ELF~ENTS. RATHER, XT XS XN D~VELOPZNG CR~ATZVE AND XNPACTFUL APPROACHES TO RE APPLXED ONCE THE PROGRAI4 HAS BEEN XDENTZFZED (CRZTXCAL TO EFFECTXVENESS OF YAS PROGRM4S). RESULT OF THE ROLE THEY HAVE TYPXCALLY ASSUMED IdXTH IL3RT. 1%i~Io~Dtl)J,T~[EX~ERI~L %SOURCES U"T'L THEY At[ TU'HE" TO VZ~ZE P~G~S ~THER T~ FOCUS ON TACTZCAL EXEC~t~[(NOT ACCUSTM TO BEZNG EXPOSED TO ~E "BZ~ER PXCTUme") : 3J:Hf l £q pa3npoJd 87M03870 CX 36-Z-12

REC(IlqqENDED ACT[0N YOUNGER ~.,dI.T SMOKERS ~0718 1770 ¢. ¢I~V..A'rXw I)L"VELOP~NT A~ gOHZTOllZOm |. ~llEA'rlvEIPIIO~RAHDL'VELOP~Irr THE EXPERXERCE ON THE YAS ZDEA GENERATING PllO~IECT XNDXCATE:S THAT THE PROCESS OF DEVELOPIrNG YAS IrON/CONCEPTS NUST RE ON-GOING AND IrNVOLVE NOllE CONSUN~R PAETZCIrPATION. IIIOllEOVEIIo THE OPPORTUNIrTY EXIrSTS TO EXPAND THE LZST OF CREATXVE RESOURCES THAT (:AN ASSXST RJR ZR THE. DEVELOPMENT OF THESE PROGllA/4S. THE STRATEGIrC I~ARKET|ffG PLANNZNG GROUP SHOULD PLAY A,,CRZTXCAL llOLE ZN,TW~$ PROCESS AND CAN BE A VALUABLE RESOUllCE XN ADDRESSXNG: YOUNGER ADULT SNOKER OPPOllTUNXTXES TNAT HAVE 14ULTXRRANO APPLZCATXON, - ]IDENTZFXCATIrON OF YOUNGER ADULT ¢REATIrVE RESOURCES, -.OI~R~p~~~,~O~~NDR ' D Z NCE OF YOUNGER ~ULT ~[X PANELS - 0EVELO~E~.~I PR~TZON/PROG-- CONCEPTS OESXGNEO .XTH TARGETED APPEaLiNG YAS. 87M03871 CX 36-Z-13

VZ. RECOIgqE)iOED ACTION C. ~RUT~VE 0~VELOHIKNT AN~ I~ONZTOIIZI~ Z. ~,nWAnVEIPno~P.An DL'V~L~ A) YovI~|R AOULT SIqOKEE OPIq)R~UlgXTIES THAT HAVE IqULTX|RAND APPLICATION. hY CIIITICAI. IIESOURCES AND OPPORTUNITIES |ITNEII CANNOT OR SHOULD NOT BE ADDRESSED ON A BLAND SPECIFIC BASXS. F.XANPLES INCLUDE HERCHANDXSING, P0]~ ANO HILXTARY ~ARKET PROGUJ4S. THE CURRENT STRUCTURE ANO STUTEGIES ENPLOYED ON PROGRANS SUCH AS THESE NEED TO RE EXAMINED TO DETEIU4ZNE XF CHANGES ARE REQUIEEO TO nEThER ADDRESS YA~ OPPORTUNXTZES. B) XDENT|VXCATION OF YOUNGER ADULT CREATIVE RESOURCES. ~N THE PROCESS OF [VALUATZNG THE YOUNGER ADULTNARKETAND STRATEGIC OPPORTUNITIES, SHP MILL BE EXPOSED TO (AND MILL WORK WI'TH) SEVERAL NEW SUPPLIERS THAT HAY PROVXOE NLrtd CREATXVE INSIGHT CAN '~i~t~:~AL~l~Oi~ ON~BP.~ID~~PECIFZC PRQ3ECTS IdITU TARGETED YOUNGER ADULT ST~Ei APPEAL. 87M03872 3J lf l £q poJnpoJd • CX 36-Z-14 "--

VZ. REC(XGiE)BTD ACTZON C. ~J4Tzv~ I)LrV[LO~LmT Am) IIONZTONZ~ 2. C~'rzwlPmmp.m~ DEVELOPI~NT C) Y~S SNOKEll P~NELS AS THE PIIOCESS OF DEVELOPZNG YAS pnOSU~S AXO CONCEPTS ICUST BE ON-GOXNG~ A HANAGED PANEL OF YOUNGER ADULT SI40KERS SI~)ULD ~ ~ TO HELP ZN THE DEVELOPNENT AND REFZNENENT PROCESS: PROVIOE CONSZSTENT FEEDBACK ON RELEVANCE/XIq~ACT OF PROGRAN CONCEPTS. SANE BESPQNDENTS TO REACT TO DZFFENENT C:REATXVE $TXNULUS THEREBY PROVXDZNG ABXLZTY 1"0 ASSESS ~ STRENGTH OF PROGRANS, OUTA~j,~& ~. ~.,~.,,~ L~EI~)~*~.~/E)I~0~E~)I ~, ~ J~ qi~, TO YAS FEEDBACK AND ATTZTUOES ABOUT PROGRANS/CREATZVE. HI 87M03873 CX 36-Z-15 " ~

50710 t773 - C. CREA'r'zvE OLrVELOP~Wr ANO HONZTOR:I'NG 8, Cnex'rzvt IPno~p.~u4 I)L'VELOP~Wr C) YAS SNOKEn PAleELS • APPImACH EXECUTXOII DR. GENE SHORE VZLL NOOEUT[ THE @ROPOSEO YAS ~NOKER PANEL; HE HAS CONDUCTED SINILAR PANELS FOR GENERAL Fooos Aim PEPSZ. BOTH CONPANXES USED PANELS TO: - F.XPLORE PERCEPTXONS~ ATI~TUOESw flEA~TXONS TO NEId ADVERTXSZNG AND PNONOT~ON CONCEPTS. - STAY XN TOUCH IdXTN klHAT YOUNGER AOULTS ARE TNZNKZNGw OG[NG, FEELXNG, klATCHXNGe AND RESPONDXNG TO. 3Z}lf}i paanpo d CX 36-Z-16 87M03874

• 18-24 MAtS JOg • 18-24 MALl M • 18-24 FmqAL[ NM • 18-24 F~I4ALmr M GROUPS PER YEAR PAN[L ¢OHPOSXTION CX 36-Z-17 87M03875 3~L~r~.~~'~(1 po3npo.nd

YOUNGER ,~.,dLT SMOICEILS 50718 1775 VZ. RECOImENDED ACTZOli C. CREATIVE 0EVELOPIqENT AND 140NITORING 2. CNEATZI~IPNO~NAM DLrVSLOMNY C) ~'~5 SMOKER PANELS AS J~R MILL ME INVESTING SIGNIFICANT RESOURCES BEHIND YAS Bmums Jura PNOGRAIqS, IT IS VXTAL TO REGULARLY GAUGE OUR SUCCESS XN STRENGTHENING THE BRAND*S INAGE AND PERCEPTIONS AHONG YOUNGER ADULT SHOKERS. ~OREOV[R, GIVEN THE URGENCY TO ADDRESS YAS PERFORMANCE IN THE IIg4EDIATE FUTURE, IT IS IMPERATIVE THAT P~R HAS THE ABZI.XTY TO IDENTIFY IF SPEC|FIC PNOGRAJ4S~STHAGEGZES ARE Elrlr[CTXVR AND NENIT FURTHER ZNVESTHENT ON REFINE]4ENT. THE FOLLOWING ACTION IS RECOIqqENDED: SUPPLEMENT THE ANNUAL CORE BRAND PERCEPTION TRACKING STUDY IdZTH A NID-YEAR ASSESSNENT OF CAMEL AND SALEM's BRAND PERCEPTIONS AMONG ....... MONITON CAMEL A~I)~S~LEM's PERFORI(ANC[ AJ4ONG 18-24 YEAIt OLO NON-FRANCHISE SIqOKL~S IN EACH BRAND'S RESPECTIVE EMPHASIS AREAS CX 36-Z-18 87M03876

50710 177G v~. n£comum~n AC~ml C. CREATEVE DLrVELOmENT AND HONXTORXUG 2. Ca~nwlPRO~p.m~ Ocrv~Lop~rr C. yAS 5m~e, P~XELS REco, emm[~ Ac~zoN (¢o~rr'n): Ik)NITOR CArreL AND SAL~'s SHARE AMONG 18-24 YSXn O~ SmK[RS IN EACH BRAND'S RESPECTZYE ENPHASZS AREAS OSING TRACKER. AOOPTING THIS PLAN OF ACTION hrZLL ENSURE THAT THE SALE]4AND 8RAIIOJS ilAY[ A TZHELY ANO CONTINUOUS MEASURE OF ~HEIR ABILZTY TO CHARGE PERCEPTIONS ANO 8[H&VZOR. TOTAL PROGRAM COST ZS ESTZNATED AT $901~ (TO BE EXECUTED BY ESTAnLZSHEO BEANOS). I NII'~)N[ VIA~ Lll DZ~lf)l £(I paanpoad 87M03877 CX 36-Z-19

'~' YOIJN~ER h,,~.T SNIKERS s0710 1777 Co CRIAT~V! 0LrVELOIq~lrr Z. CR~TZvEIPm~m ~VELOIq~IT TNE PROCESS OIr DEVELOPING "DiS IDLES" ~ST DE ON-GOXK A~ BROADENED TO ENSURE CONTXNUQUS PRESSURE AGAINST YOUNGER /U)ULT SMOKERS. THE FOLLO~NG PROCESS XS RECOIq4ENDED: l[C[IVl IOIA|/ t S~XCrr DO[AS te.Jecum I PIIOIITIII It[CliVE ~O SOLICI| lOftS 87M03878 CX 36-Z-20

YOUNGER ~,,dLT SmCERS V~. RECOIIqE)IDB) A£TTON 50718 1778 CREATIVE BEVELOIUIENT AND II~DNIHNXlll Z. (;ItEATZVEIPROGR,m DEVELDm~m' D) CONCEPT/PNOGIUmDEVELOImEIrrPRocEss GZVEII THE LEVEL OF ZNVESTHENTNECESSARY TO GROMSELECTED BRANDS AMONG YOUNGER ADULT $HOKERS, XT ZS Zl4PERATXVE THAT ALL AVAXLABLE MARKETXNG ELEMENTS AND CREATXVE ~ORK TOGETHER TO PROVZDE NAXXNUH PROGRAH EFFECTXYENESS. TWO ~ORPORATE PROGRAHS, PACK ACTZON AND YA~ 0ZRECT MAIUCETXNG, ARE POWERFUL VEHXCLES WHZCH CAN PROVE VXTAL TO RJR's SUCCESS XN REVERSZNG THE DECLXNXNG TREND JU4ONG YJ~. CURRENTLY, CREATZVE/PROGRAN DEVELOPHENT FOR BOTN PACK ACTXON AND YA~ ~ EI4PLOY LIMXTED BRAND I~ANAGENENT XNPUT. A FORMALZZ[O PROCESS SHOULD BE ZMPLEHENTEO TO ENSURE BUND I~ANAGEH[PlT INVOLVEMENT XN THE ENTXRE CREATZVE~4ND PROGRAH D~V~LQPMENT PROCESS FOP BOTH PACK ~q~TXON ~HO YAS OZ~ECT MARVC[TING. THIS ZNVOLV~ENT MUST Ut 87M03879 CX 36-Z-21

50718 1779 C. CRUTZVE DEVELOIqlENT AND HONZTORZRG Z. C:E~VzwlPno~um DLrVELO~qn D) PROGIUtXS ARE "BUSZllESS BUXU)XRG" XR NATURE AND SHOULD REFLECT SPECZFZC STRATEGXES EMPLOYED BY THE DESXGNATEO YA~ BRARD TO GROM LONGER TERN. FORI4ALXZED BIUUID ~ANAGENENT XNVOLVENENT CAN BEST ENSURE THAT APPROPRXATE STflATEGXE$ ARE BEXNG XNTEGflATED. ALL ~IARKETZNG EFFORTS NUST MORK TOGETHER TO REZNFORCE BRAND PRXORZTZES. BPJUID KIkNAGENENT SHOULD RE VZEWED AS THE DJ ).IfH po npoad CX 36-Z-22 87M03880

1780 VII. APPENDIX - F.swm~ 19M Stmeo~v Cote 8NuIo PJtON)TION SPENOZNG, 8USZNESS BLDG. VS. VOLUME COWqZlV4ENTS (INCLUOES SPECXAt. EV[#TS) TOTAL PlemOT~ZON BUSZNESS ($1m) (sin) ($1m) ,,L 18-24 PIKqqOTXON BUSZNESS (SI~) (SN4) ($1g4) (q)! 1982 83 84 85 86 87 84.8 132.9 217.7 87.0 107.8 194.8 62.5 147.5 210.0 64.7 290.8 355.5 62.9 255.3 318.2 111.1 274.3 385.4 88 ([ST.) 171.6 21.7 8.0 29.6 14 22.5 6.3 28.8 15, 14.5 8.2 22.7 16.1 16.0 32.2 9 14.3 13.9 28.6 .9 21.7 14.0 35.7 9 I 18-24 PltOUOVlON AS q OF TQ~ItONOTZON D LHfH po3npo. d 50.9 13 CX 36-Z-23 18-2468 AS % OF (~) I0 12 7 5 4 6 I0 87M03881

YOUHGER ~I.T SHOKERS 507t8 1781 V~Z. APPENDIX - Es~,n 1988 Su~,~J~r Es~J~n.1988 TOTAL SP£NOZNG (Sl~) (SN4) ($1~4) 18-24 SPem)z~ ($1~) ($1~) ($1~) Cook 8um)s 378.2 139.5 S17.7 50.9 Z6.0 76.9 HINSTON 155.2 46.8 202.0 SALEN 76.4 39.3 115.7 CAiq£L 91.5 32.4 113.9 VANTAGE 55.Z NOTE: I#CLUOES 19.5 8.5 28.0 10.6 7.3 17.9 16.6 6.0 22.6 4.Z 4.2 8.4 DZHFH pa3npo. d ............... CX 36-Z-24 87M03882

Cou BJu~n S~em)z~ (TOTAL MEDZAIPROIqOTZON. 1982 " EST. TOTAL 1844 18-24 SPUOZ~ SPSm)zu~ ~ AS q OF TOTAL (Slg4) ($1~4) (t) 1982 425.5 75.0 18 83 376.7 68.7 18 84 409.0 65.4 16 85 538.7 72.2 13 86 463.4 59.2 13 87 496.7 56.9 12 88 (EST.) $17.7 76.9 15 INIDNVIN UI DZHfH :¢q pa3npojd CX 36-Z-25 87M03883

1783 Voluem Vs. Bsminemm BXd,. Analwsis (l~cludem SpecLml K~eeut8) 1982 30.4 $3.4 83.8 19.6 32.7 52.3 7.7 83 24.2 37.2 61.4 14.6 32.7 47.3 18.9 84 11.6 51.8 63.6 12.2 67.9 60.1 16.2 83 17.2 130.3 167.5 8.8 82.3 91.L 6.0 86 27.8 104.2 132.0 6.6 72.3 79.1 7.3 87 36.7 135.8 172.5 18.9 72.2 91.1 19.5 88 (,mc.) 52.8 102.6 155.2 28.7 67.7 76.6 20.3 26.1 31.8 27.1 22.7 69.8 20.8 39.8 29.2 17.0 46.3 26.7 61.0 29.5 2L.O 4.5.5 46.0 ~0.0 34.7 32.3 66.9 61.0 68.5 21.0 37.6 58.6 25.6 44.9 35.9 41.0 76.9 34.9 55.2 69.8 21.6 91.5 Tot~l (~) ~)re Brmndm 1982 84.8 133.0 217.7 83 87.0 107.7 194.8 8~65 62.3 1~7.$ 210.0 6~.7 290.8 355.5 62.9 253.3 318.2 • 87 11~ I 274.3 385.4 LSf8 Xq p 3npoad 87M03884 - CX 36-Z-26

YAS $1~HDING ANALYSIS (Torsi Spending) 1982 83.8 $1.5 135.3 52.3 61.0 113.3 31.8 ~.1 75.9 &9.8 51.2 101.0 83 61.6 49.& 110.8 67.3 66.2 93.3 39.8 36.2 76.0 ~6.3 50.1 96.~ 8~ 63.6 5~.~ 117.8 60.1 43.5 103.6 41.0 43.2 8~.2 45.5 57.9 103.4 85 147.5 38.4 205.9 91.1 ~.6 135.7 50.0 36.1 86.1 66.9 ~.1 111.0 86 132.0 65.1 177.1 79.1 62.8 121.9 48.5 29.8 78.3 58.6 27.5 86.1 87 172.5 62.8 215.3 91.1 30.8 121.9 64.9 19.8 64.7 76.9 17.9 94.8 88 (eat.) 155.2 66.8 202.0 76.4 39.3 115.7 55.2 20.9 76.1 91.5 32.4 123.9 Total ToCm| (6) Adj. Core Brands For Inflation 1982 217.7 207.8 625.5 217.7 207.8 425.$ 83 194.8 181.9 376.7 181.2 169.2 350.4 8~ 210.0 199.0 609.0 180.6 171.1 3,1.7 85 355.5 183.2 ,38.7 291.$ 150.2 ,1.7 86 318.2165.2663.6 268.2113.3361.5 87 I 3~I~8'~ .3~ 49 .. 2 2 82.4 367.6 ~I.~ ~.~ K.../~'% yJ' ~ HI 3 LHfH p npoad 87M03885 CX 36-Z-27 - ' ~

1982 83 8~ 87 8e (e~.) YAS SPEHI)IHG AHALY~T$ (18-24 SpondLnS) 9.2 10.6 19.8 7.4 10.8 18.2 5.3 11.3 18.0 12.0 11.5 23.5 11.6 8.6 20.2 15.2 7.9 23.1 19.5 8.5 28.0 6.4 13.5 19.9 3.2 8.8 12.0 6.3 10.8 17.1 5.4 7.1 12.5 5.8 10.3 17.3 4.1 8.1 12.2 8.2 10.8 19.0 3.4 7.3 10.7 6.0 9.5 15.5 3.8 5.7 9.5 7.1 .5.9 13.0 4.0 3.9 7.9 10.6 7.3 17.9 4.2 4.2 8.4 10.8 12..5 23.3 9.7 11.2 20.9 7.5 13.0 20.5 8.7 10.3 19.0 7.2 6.8 14.0 9.4 3.3 12.9 16.6 6.O 22.6 To~l ~ore Brandl Total (4) Fo~ Inflation 1982 83 84 85 86 88 29.6 45.4 75.0 29.6 45.4 75.0 28.8 39.9 68.7 26.8 37.1 63.9 22.7 42.7 65.4 19.5 36.7 56.2 32.3 39.9 72.2 26.5 32.7 59.2 28.4 30.6 59.2 22.3 23.9 46.2 35.7 21.2 56.9 26.4 15.7 42.1 U[ 3 LHfI I *'((I pa, npoad CX 36-Z-28 87M03886