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507Z0 ~540 SMOKER DYNAMICS • MarkeL Overview • Perspective on Issues Ul D£Hr~= Xa oo3npoad CX 37-A

50720 0t541 MARKET OVERVIEW Ob~ectlve The purpose of the presentation ts to summarize research results that relate to Market Dynamics. The focus is.on: • Longer term strategic forces • How the market works • What issues are important INIgNVI , Ill ' _ CX 37-B _ ,.

5072'O 154Z HARKET OVERVIEN Outline Industry performance Factors affecting brand performance - AgtnglYAS - SwtLchinglExLernal Forces YAS Research/Programs External Forces Savings Segment Socia] Unacceptabl]Ity IN~IgNVI~ 3ZHf8 ~q pa3npoad CX 37-C

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50720~|545 HARKET OVERVIEW Industry Population Oygamtcs The growth of industry volume in the past was a direct dynamics. result of population The adult population Increased significantly as the baby bubble turned 18. The increases in populatlon were large enough to offset decllnes in smoklng incidence. • As lighter smokers left the market, average consumption rose. These dynamics produced a stable base of smokers and growth of Industry volume. INI DNVIA , tll CX 37-F

MARKET OVERVIEW Population Oynamic~ Industry Ave. 1965 1970 1975 1980 AdulL PopulakJon (NH) 124.6 135.3 148.8 164.0 + Smoking Incidence (~) 42.6 36.2 33.9 33.1 - 7.9 No. of Smokers (MM) 53.0 49.0 50.4 54.3 + 1.0 Rate Per Day 25.6 27,7 31.1 30.4 + 6.1 Industry Volume 495.7 495.5 572.5 601.9 + 6.9 INIgNVIN [II DZH.fH £q poanpoad CX 37-G

HARKET OVERVIE~ Industry Population Oynamtcs In the future, Indust.ry volume and the number of smokers w~11 decline. • Populatton growth w111 be slower because the youngest members of the baby bubble are now 18 or older. • Smoking Incidence wtll conttnue to decltne. • Rate per day ts expected to be stable. NI~)NVI~ 111 ~LHI"H/fq po:~npoad CX 37-H

,I HARKET OVERVIE~ Industry 1548 Popular|on Dynamics Adult Population (HH) Smoking Incidence (g) No. of Smokers (HH) Rate Per Day Industry Volume 1980 1985 1990 164.0 175.8 178.7 33.1 28.9 26.0 54.3 50.7 46.8 30.4 31.2 31.2 601.9 578.7 528.0 Pct Chg. 90 vs. 85 + 1.6 - 10.0 - 7.7 0.0 - 8.8 Nil DNiVIN [II D£HI'H ~fq poanpoad CX 37-I

MARKET OVERVIEW | 507:Z0 1549 Industry Key Trends The baby bubble is currently 27-41. cause the 35-49 age group to grow. During the next 5 years DIST. OF SMOKERS AGE 1980 1985 1987 18-24 18.3 15.3 13.7 25-34 23.6 26.8 27.9 35-49 31.1 29.1 30.0 50 PLUS 27.0 28.8 28.3 they will INIONVI~ DZHI'H Xq poanpoad, CX 37-J