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BOTH PHILIP MORRIS AND BROWN & WILLIAF.SOrI, AND PARTICULARLY THEIR FAST GROWING V~JOR BRAI,IDS, MARLBORO AND KOOL, HAVE SHOWN UN~JSUAL STRENGTH AMONG THESE YOUNGER SI'~OKERS. IN THE 14--24 AGE CAIEGORY, PHILIP MORRIS HAS A 38% SHARE AND B&W A 21% SHARE. BOTH COMPANIES HAVE SIGrlIFICANILY LOWER SHARES IN THE REI'LAINING AGE CATEGORIES. WITH STRONG YOUNG ADULT FRANCHISES AND HIGH CIGARETTE BRAND LOYALIIES, THIS SUGGESTS CONTINUED GROV~H FOR PHILIP MORRIS AND B~W AS THEIR SMOKERS F~TURE. IN SHARP CONTRAST, OUR COMPANY LINE SHOWS A PATTERN OF RELATIVELY EVEN STRENGTH ~OiIG ALL AGE GROUPS AND STRENGTH IN THE 25 AND OLDER CATEGORIES, WHERE WE EXCEED BOTH COMPETITORS. OUR TWO MAJOR BRANDS, WINSTON AND SALEM, SHOW COMPARATIVE WEAKNESS AGAINST MARLBORO AND KOOL ~'~ONG THESE YOUNGER SMOKERS. WINSTON IS AT 141 IN THE 14-24 AGE GROUP VERSUS MARLBORO AT 33%. SALEM IS AT 9% VERSUS KOOL AT 17%. AGAIN, OUR BRANDS SHOW COMPETITIVE STREIIGTH IN THE 25 AND OLDER AGE GROUPS. THIS SUGGESTS SLOW MARKET SHARE EROSION FOR US IN THE YEARS TO COME UNLESS THE SITUATION IS CORRECTED, CX 50-C RH0003896

O~ART #7 STRATEGY THUS, OUR STRATEGY BECOMES CLEAR FOR OUR ESTABLISHED BRANDS: i- DIRECT ADVERIISING APP~L TO THE YOUNGER SMOKERS WHILE WINSTON, REFRESH,~ENT FOR SALEM) AND FOR WINSTON, WE VE FOLLOWED THIS STRATEGY IN DEVELOPING THE NEW "CANDID" ADVERTISING CAMPAIGN WHICH BROKE SEPTEMBER 16. IT IS ESPECIALLY DESIGNEI{~i.~. TO APPEAL I0 YOUNG ADULTS WITH: . SIMPLE STRAIGHTFORWARD COPY + BELIEVABLE PEOPLE WITH CHARACTER e STRONG PRODUCT SELL WITH REAL TASTE BIPHASIS RESEARCII HAS SHOWN THAT ~'~ONG YOUNG ADULTS, THE NEW WINSTON ADS GENERATE TWICE AS MUCH RECALL AS ANY PREVIOUS WINSTON C~IPAIGN AN9 ARE 40% MORE PERSUASIVE COMPARED TO THE I:~RLBORO CAMPAIGN. FOR SALEfi, SIGNIFICANI IIIPROVEI'~ENIS HAVE BEEN I ., I~" " ' lG VmDE IN THE ADVERTISING, DESIGN~.D FOR F.ORE YOUh ADULT APPEAL UNDER ITS GREENERYIhEFRESHMEIff T~EI~.E" ": RH0003897 CX 50-D _~.J

ADVER[ISING THESE INCLUDE: MORE TRUE-TO-LIFE YOUNG ADULT SITUATIONS, MORE DOMINANT I"ALE VISUALS, A GREATER SPIRIT OF FUNC GREATER USE OF WATER AS A REFRESHMENT SYXBOL, RESEARCH HAS SHOWN THESE CHANGES HAVE MEASURABLY IMPROVED THE ADS IN TE~.iS OF: m GREATER RECALL m GREATER REFRESHHEUT P~YBACK o MORE YOUNG ADULT APPEAL - TRIAL HAS INCREASED FROM 24X TO 31X IN THE UNDER 35 AGE GROUP FOR THE KING SIZE, EFFORTS TO IDENTIFY A~_EVEN STRONGER CAMPAIGN ARE BEING AGGRESSIVELY PURSU~II BY NO ADVERTISI~G AGENCIES AND ATLEAST ONE NEW C~iPAIGN IS ANTICIPATED TO BE I~RKET TESTED IN ~RLY 1975, FURTHER YOUNG ADULT ~4PHASIS IS BEING PLACED THROUGH THE ~UCCESSFUL SALEM BOX "DENIM" C~'IPAIGN. RESEARCH hAS SHOWN: . ~. SALEM BOX PROFILE IS YOUNGER WITH 57% OF USERS IN THE 18-34 AGE GROUP VERSUS 41% CX 50-E

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o SIGNIFICAIIT NU>:BERS OF NOR;IAL FLAVOR FILTER S~IOKERS. AU'~OST 50~ OF THE BRA~ID'S NEW BUSINESS CO~iES FRO;I I:OP~IAL FLAVOR FILrER SNOKERS CO~PARED TO ONLY 20% FOR OTHER LOW TAR AND NICOTINE BRANDS. NEW AND YOUNGER SMOKERS. FIELD SALES REPORTS VANTAGE HAS POCKETS OF STRENGTH ON COLLEGE CN'iPUSES (E.G., IN THE BOOK STORE AT HARVARD SQUARE, VANTAGE IS AMONG THE TOP 10 SELLERS, 15TH NATIONALLY). AD SPENDING HAS BEEN INCREASED IN 1975 WITH MORE TARGETED EFFORTS AGAI~ST YOUNG ADULTS TO MORE FULLY EXPLOIT THIS POTENTIAL. WE HAVE ALSO INCREASED OUR MEDIA EFFORTS TOWARD YOUNG ADULTS FOR OUR BRANDS. THESE INCLUDE: ~ INCREASED ADVERTISING INSERTIONS IN TRA31TIONAL YOUNG ADULT MAGAZINES LIKE SPORTS ILLUSIRATED, PLAYBOY AND MS. HAVE Ai)DED NEW YOUNG ADULT SPECIAL INTEREST NAGAZINES LIKE ROAD AND TE~CK AND MOTORCYCLING. EXPANDED OUTDOOR WITH SELECTIVE LOCATIONS FOR NAXI~U~ YOUNG ADULT EXPOSURE -- E.G., POSTERS IN GREENWICH VILLAGE AND IN AREAS WITH LARGE ' ~:"~ "-.~ COLLEGE STUDENT POPULAr I CX 50-G Fd40003900

~. S~PECIAL EVENTS ~#~ WINSTON C FL~:,~C I AL EVENTS ~~EL F I LTER .:~: EACH OF OUR MAJOR SPECIAL EVENTS IS DIRECTED AGAINST YOUNG ADULTS. NASCAR, WITH WINSTON, REACHES 8 MILLION SPECTATORS WITH 63~ OF THESE UNDER 35 YEARS OF AGE. OUR PARTICIPATION TAKES 2 FO~IS: - THE WINSTON CUP/WINSION WEST SERIES WITH 55 RACES PRIFBRILY IN THE SOUTHEAST AND CALIFORNIA. - THE MODIFIED SPORTSMAN WITH 60 RACES IN THE NORTHEAST AND MID-WEST. THUS, NASCAR GIVES WINSTON NATIONAL COVERAGE, IN RODEOS, WE PROMOTE WINSTON IN OVER 600 EVENTS REACHING 12 MILLION SPECTATORS WITH 57% UNDER 35 YEARS OF AGE -- IN THE MID-WEST AND WEST. FOR CAMEL FILTER, WE HAVE DEVELOPED A NEW STRATEGY. WHILE CAMEL CANNOT MATCH THE I~EDIA DOLLARS SPENT BY ~IARLBORO, THE BRAND WILL HAVE PINPOII~.TED EFFORTS?. AGAINST YOUI~G ADULTS THROUGH ITS SPONSORSHI P OF SPORTS CAR RACING AND MOTORCYCLIIIG. SPORTS CAR RACING REACHES 300,000 SPECTATORS -- 85% UNDER 35 YEARS OF AGE -- AND IS PRIMARILY ON THE EAST' ii~ AND WEST COASTS. CX 5 0 - H RI-IO003901

C~PECIAL EVENTS PROMOTIONAL ~ACTIVITIES MOTORCYCLII~G, A NEW SPECIAL EVE~T SUCCESSFULLY TESTED IN 1974, WILL HAVE 26 RACES REACHIIIG 400,000 SPECTATORS WITH AH ESTIMATED 90% UNDER 35 YEARS OF AGE. THIS EVENT WiLL BE IN THE ~JOR POPULATION CENTERS SUCH AS CHICAGO, LOS ANGELES, SAN FRANCISCO' AND HOUSTON. SINCE SPECIAL EVENTS ARE A RELATIVELY NEW AND DIFFERENT TYPE OF ACTIVITY FOR US, I WOULD LIKE TO REVIE~.I IHE NATURE AND EXTENT OF OUR PROiiOTIOIiAL ACIIVITIE~ IN THEM. FIRST, WE HAVE HEAVY INVOLVFJ.iENT AT THE EVENT SITE, PERI,IANENT BILLBOARD.,/~D~P,I,~,S.ING, AI~D BRAND EXCLUSIVITY AT CONCESSION STANDS. WE SELL OUR BRA~IDED, EVENT-RE~TED ITF_MS, SUCH AS WINSTON HATS, SHIRTS, AND JACKETS. WE HAVE TIE-IN BANNERS AND PASTERS WITH STROI~G BRAND IDENTIFICA'iIOI~ AND BRAND COI"#IERCIALS OVER THE PUBLIC ADDRESS SYSTEMS WE HAVE STROI~'G PRESS OUTR~CH THROUGH ~IIRE SERVICES, LOCAL PRESS AND SPECI,AL. INTEREST PUBLICATIONS. FOR EXAF~PLE, AT THE WINSTON |','ESTERS1 500, THE P,~CE WITH HEAVY I"..ENTIONOF wiI'ISTON WAS IN ~IEWSPAPERS HAVING .A. CIRCU~TION OF i0 IIILLION A~ID ON A 2-HOUR. " ~ ~ RADIO PROGRAIi R~(~HI~G 30 ,I'IILLIOR PEOPLE.: ~.~.~. . OUR SALES FO,~CE WORKS RETAIL STORE TIE-In'IS TO EVENI ~IITH PRODUCT DlSP~YS AIID PASTERS." CX 5 0 - I

OUR WINSTON #i AND CAXEL FILTER GT CARS ARE DISPLAYED IN SHOPPING CENTERS IN KAJOR ~ARKETS. THE WINSTON #I CAR HAS RECEIVED OUTSTANDING ACCEPTANCE RECENTLY ON TilE STREEIS OF NEW YORK, LASTLY, WE USE NEWSPAPER AND PROGRAM ADVERTISING FOR If'AGE ASSOCIATION BETWEEN THE BRAND A~ID Tile SPORT . YOU FLIGHT LOGICALLY ASK "~'HAT DOES ALL OF THIS BEAN IN TEPeeS OF SALES?" OUR RES~RCH INDICAIES THAT ~ONG RACING FANS, WINSION'S SHARE OF SNOKERS IS 67~ GRATER THAN ~'IONG NON-RACING FANS. RODEO FANS, WINSTON'S SHARE OF SI~OKERS IS 50% GREATER THAN N4ONG NON-RODEO FANS. WHILE WE DON'T HAVE DIRECTLY COMPARABLE DATA FOR OUR NEWER C~EL FILTER SPECIAL EVENTS, OUR RESEARCH INDICATES A DRAmaTIC INCREASE IN PURCHASE RATE ~'~NG FANS ATTENDING. OTHER PROGRAMS HAVE BEEN DEVELOPF, I) TO REACH YOU::G ADULTS WHERE THEY WORK, PLAY AND WHERE THEY PURCHASE THEIR CIGARETTES, FREE-ON-PACY~AGE TRIAL INDUCEICENT PRO:'iOTIONS ARE BEII~G USED IN HIGH T~FFIC, YOUHG ADULT PACKAGE OUILEIS SUCH AS CONVENIENCE STORES. SEVEN ~ILLION TRIAL UNITS WILL BE SOLDiN 197S. WE WILL HAVE PE~'IANENT COUNTER DISPLAYS IN 35,000 OUTLETS CATERING TO YOUNG ADULT PACKAGE PURCHASES. CX 50-J RH0003903