Tobacco Documents Online

~~ that, within the context of this paper, I nave crmsen not to cover. Things like price OnmOs szi zlally less a zesult of what people want to smoke than they are a zlactlon to very specific environmental pressures• It's not that trmy ate not valio, it is simply that Ir~y aEe not truly tiea to tl~e long term evolutl~ of smokers' ne~s. The~fore, l'm going to p~t~ for ~ ,na~t that rJ~ese l)mvezTul c~t~rs ~'t exist• Moreover, I Int~ to be fairly ~tlc ~t tne overall dl~ti~ of new cm~ve1~t. Opportunities clearly exist for oz'anOs ~ich go "against trle flow" of underlying consumer needs. This paper reflects a view on the criteria of new Oevelopmants diz~ctly attached to longer tern consumer neeas. Hew OZ~O 0eveloF~ent r~s the cr~nce to go all wrong for people like us as we struggle in the wake of a major convulsion like ligrrc cigarettes. Thane ate four tempting Out c~ngerous routes: I. To oecome proOuct insteaO of Oz'anO aevelopers - assuming that tecr~oloQy holds some magic key to the future. SmoKers ~ave, ao ancl will always ouy otands. Forcing new Ozan~ development into a pz~mture marriage wit~ ptoc~t tecr~ology will quickly see us selling what we can make instead of what people want to I~Jy. •../2 =,===~ 0 0 o U~ co

2. To say "now the party's over" and in conjunction with a proouct/tecr~iogy oriented mentality aoOicate today's maz~et in favour of some vague notion of designing for the "long term" - as if the future coula oe separated from next wee~. 3. To succuao to the -nat haven't we cried yet" school of orarKJ development, "has anyone tried a 01ue dot on tne filter?" ~. To refuse to see the last convulsion - light cigarettes - as a fact of life insteaa of an opportunity tnereoy draining valuaole time and resources into smaller and increasingly less relevant nicnes on the tar scale. The real c~lenge of new orang development is the next convulsion - or next series of aini convulsions. In Cane0a, and I'm sure in many Oevelo~ mazkets, light brands nave significantly changed the underlying motivations of smokers. ~e must understand these changes. To do so we must understanO ,ny the pnenomenom occurz~,.cl, in what context - ,nat chips are Left on ~ taole and in nat form, and ~nen turn t~is un0erstanding of new needs into relevant, mzKetaole orands. New otan0 development cannot occur in isolation from the past. LIGMTS-NEGATIVE ~ AND THE NEED FOR "LESS" PouiOly mote than in any otheE industry, our mz1<et development is gulcNd 0y negative pz~Jsuzes. ~1~ether it is scientifically vaiia or not, the simple mzqceting tzuth is that saO<ers 0elieve that smO<ing .../3 O o o t.~ Co r~

Jeopar:izes t.~eir personal *ell-Oeing. The proportion of smokers who agz~,cl with the statement "smoKing Is dangerous far anyone" (versus heavy users at people who were unwell) rose steaclily from 48Z in 1971 to 67~ in 1976. They aicl not indict specific 0rancls, products or immoderate use. lndlcted smoking. ~lmost one in two (46g), when asJ<ed now many cic~urettes a clay could be safely smoked, answered - none. They Pre-lights, these concerned consumers had a limited range of options open to them - essential~y Qult or cut down. By the middle of the decade, the majority of Canadians wno smoked wece tz~ing or intending to try these alternatives: 1976 m "S~OKING IS DANGEROUS FOR ANYONE" 6"T~ INTEND TO QUIT 26~ INTEND TO CUT OOWN }3% TOTAL INTEND TO MODIFY 59~ TRIED TO QUIT - PAST YEAR 41~; TRIED TO CUT 0OWN - PAST YEAR 57~ Fortunately for the toOacco industry, nelt~ez of these two appzosches proved very successful for smokers. In 1976, altnougn 41~ had tried to quit and 2~I were ready to give it another go, t~e actual z-ate of quitting "within the past 6 months" was fairly staDle at a little less •../~ LJI m LJ~ C~

than 2Z. Fewer tnan this made it to a year. Despite the vast numOers of smokers t;yin9 anO intending to cut down, the claimea rate of daily usage rose fz~m 20.5 to 21.1 cigarettes a day (1971-76). Our calculated daily" usaoe rose from 21.1 to 23.8 cigarettes per day (1971-76). Very simply put - people who wer_~e ~okers increasingly wished that they weren't, in the face of mounting information on smokin9 and health - Out could not find a means of 0ealin9 ,ith their concern. Lionter oranas were alzeaoy availaole - they ,ere milder things that old women smoKeO - but the proOuct solution wa_~s available for intereste0 SmOkers. Alt~ these 0rancLs snowed moOest development in the early 1970's. was not staggering and 9enezally, was not well unOerstooO Oy the ~tKetets: it 1971 1972 1973 197/~ 1975 HIGH 0ELIVERY - 19rag + 41.2 40.8 39.9 38.9 37.6 MID 0ELIVERY - 14-18 m9 38.2 37.4 J7.8 38.5 39. i 1.0# OF.LIVERY - 10-13 ~J 7.6 7.7 8.3 8.4- 8.8 VERY LOW DELIVERY - 5 ~ .3 .3 .3 .3 .3 NE]~ITHOL. 6.4 6.5 6.8 6.9 7.2 OTHERS 6.3 7.3 6.9 7.0 7.0 SNOKING I5 FOR ANYONE ~1~ 59'X, .5~ 63'~ 6~ .../5 O w (j'i cio j:~

"Lights" in Canaoa was a Oran_.__oo not a product revolution. The industry tried filters, cnarcoai, tooacco olenos, advertising claS~LS attempting, generally unsuccessfully, to solve the health proolem in product terms ~nile virtually ignoring the paradoxical nature of the smokers' dilemma. Aitnougn they wished they weren't, they were and virtually every effort forceo tne~ to give up tne things they continuea to smoke for. Telling smO<ecs that you had a product was not the prooiem. Telling them they coula smoke it with nonour was. In 1974, manufacturers agreed to put tar anO nicotine numoers on the siOes of packages. 5mo~ers who wisned to do so could now rate orands on a scale of "oanger". Ligntness, instead of oeing an a~solute, 0ecame a relative thing. Close on the heels of this key piece of information and the even ~ore important foundation of relative mildness that it created, manufacturers Oegan to introduce lighter Oz-anOs instead of products. =Lighter', was successfully defined in language smokers could understand as "All the experience of Player's in a lighter cigarette - Player's Light." Although we remain comitted to making good products, it would oe incorrect to suggest that corporate success in this naz~ fought Oattle has really had mUCh to do with ~o made the best cigarette at a given level of strength. Winning has been predicated on good 0rand marketing. Co¢~es ,ith strong, clear, well defined trademarks ana the courage to intzockce them in a way that was true to their essential nature won. Companies with less relevant or indistinct trademarks, anO companies who tried to twist the 0asic rationale for the tzac~mazx, lost - and lost Oadly. .... /6 I 0 o 0 Co

The commercial success of light oranOs speaks for itself. New branOs were hilly successful, anO cnere were lots of them: BRANDS LAUNCMED ).974 - 1984 1984 ~ (12 MOS. MAY) ITL - PLAYER'S LIGMT EXTRA LIGHT ROR - EXPORT A MEDIUM LIGHT MILD EXTRA LIGHT ROTH- ROTHM~ SPECIAL MILD EXTRA LIGHT ITL - OU MAURIE~ SPECIAL MILD LIGHT ROTH- CRAVEN SPECIAL MILD ITL - ITL- ROTH- 8~M- ITL- BAH- ULTRA LIGHT MENTHOL SP. MILD MATINEE EXTRA MILD 8ELVEI~ EXTRA MILD & LIGHT PETER OACY~N EXTRA LIGHT NO. 7 LIGHT B & H LIGHT CAMEO EXTRA MILD VISCOUNT #I AND lO0'S R~ -VANTAGE R~ -V~TAGELIGHT I~ - MEDALLI~ B~H - ACC~ R~ - SELECT 11.7 2.7 1.6 2.3 .9 .4 2.8 .6 2.7 2.5 1.4 .} 2.4 1.4 .8 .9 .7 .6 1.1 .5 .9 .6 .S TOTAL EXTENSIONS ~T~N~ mT~ • 41.3 .../7 L;1

Smokers oegan to experience rea.__~ product change. The sales weighted average tar levels for the market, essentially staoie through the eariy 1970'S, dl'O~N~"d significantly. 1973 74 75 76 77 78 79 80 81 82 83 17.0 16.9 17.0 16.6 15.8 15.0 la.2 13.7 13.~ 12.9 12.7 The rate of switchin9 rose su0stantially to the point ,here, in the late 1970's, almost I in 5 smokers claimed to have changed OranOs in the past year, twice the pre-light norm. Now, r~wever, it would appear that the party is over. Virtually every nook and cranny In the tar spectrum is filled. Although they continue to grow, the rate of expansion of light Drands is reducing. Retailers are Oeglnning to refuse to accept lower potential Or"ands, the rate o? switching is do,n to a much more normal level, every major track,harK is exten~-o to at least two offspring. With Canadian smokers' neeO for "less" apparently sated with options, it is easy to understand marketers' tendency to look nervously at their hands when asked "nat's next?" Already we 0egln to see (a~ yes possioly participate in) "some of the more flae~oyant out less relevant new br~ clevelopment that characterized our industry oefore it emOarKea on marketing predicated on the relentless logic of "Lights" as new orand developers look for novel means or difrerentiatin9 their OrarzLs. .../8 O o tj-I 0

* The CanaOlan market Is not seen oy Canaaians as non-Cark~dian - there are no international oranos that are perceived as such despite their increasing prominence in the rest of the world. C~L - R JR - TEST MARKET - WlTHORAWN. * The Canadian .~az~et is a uni-taste maz1<et. With the exception of mentnols, it is almost entirely flue cured Virginia. Smokers are ooreO. Smokers have compromisea on taste. Smokers try a lot of American cigare t tes-occasionally. PLAYER'S SPECIAL BEND - NATIONAL - FORECAST FORECAST i.2~ ACTUAL 0.5~ • All Canedian cigarettes cost the same anO smokers are increasingly under Oucess due to rising taxes. Fine cut volume is up. Price segzentation wOrKS in a lot of other places. saved in the USA Dy generics - wny not? GEINERIC.~ - 8ASTOS - ESTIMATED SHARE - O.2P~ A company l~as oeen AnO recently a couple of new ones: 0 0 (_m •../9 O (./i oo

* 100mm are growing in Canada - mayoe it's style, mayoe it's value for money, mayoe it's a little of ootn - it mus___~t oe oecause it's 100m: ROTHMANS SPECIAL MILD 10O's ) ROTPI4AN5 EXTRA LIGHT i00's ) ROTHRO~ HENTHOL 100's ) S~lare unknown Financial FCospects ... 0ouotful * .~=ORT~ NATURAL LIC~IT??? ROTI-E4A~ - NOTIYE AND F~r.RF~ - ANYONE'S GUESS. Ano we nave a few of our own on the books waiting patiently to oe further developed: * 5PEARHINT??? * JPS??? Here's an approach capable of keeping prc~tct and pack 0evelopers hopping for a decade. New things, different trdJ1gS, innovative things, new packages, purple cigarette paper, 120mm orarzls, polyvent gas trap, crmzcoai filter, new smoking material - a staggering array of Orands stnJggling to oe different. It ,ould oe foolish to indict these iaeas. Some of these entries will sell - some will make money - some a;e viaole. But there is an important difference oetween these entries and lights. Smokers neeOed llgnt Oz~mds for tangible, practical, undeEstandaDle ¢usons. It is difficult to see Droad needs answered to 0y these intzoOuctions. ...Ii0 G O L.n Co

POST "LIGHTS" If these laeas are not oz~aoiy relevant, then what is? It is possiole even now to see now smokers' reactions have Oeen modified oy one success of lights, and, if not aefine specific ozand options, at least isolate trm characteristics of products that have a gooO chance of success. How have lignts modified sm~(ers' neea for "less"? I. In spite of tneir commercial success, lights nave not moderateO tne oasic force tnat caused them. Smokers continue to oe very concernea with the affe:t of smoking on their health. They continue to indicate tt~t they intena and nave attempted to change their Oenaviour with respect to sm~ing. Lights nave not zeduced this either over time or amon9 smokers .~o nave emo~-~ lionter OranOs. In fact, their concern has increased In spite of the new aiteznative: "SMOKING IS 0At, W,~OUS FOR ANYONE" INTEND TO QUIT INTEND TO CUT 00gN TOTAL ZNTEN.) TO NODLFY TRIED TO QUIT TRIED TO CUT DOWN 198a 1976 1984 MILD OTHER 74% 79~ 72~ 26 45 50 a3 ~3 Z9 19 i9 59 64 69 62 41 43 44 43 57 59 61 58 •../ii (jm xO