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( t D - . 'S W ~~ t,w PHILIP MORRIS ASIA INCORPORATED INTER-OFFICE CORRESPONDENCE 25/F, UNITED CENTRE, HONG KONG To: Distribution From: Peter Schmidt Subject: Alpine Projec anao °ete' April 24, 1987. We are currently planning/developing a new product introduction for the Alpine brand in Singapore. Thus, the purpose of this meeting is to review the Singapore market and provide a brief for the development of Alpine packaging. Ov viw o th Alpine Proiect As you are aware, we cannot advertise cigarettes via traditional media vehicles in Singapore. Due to this government restriction, we will be using a brand diversification strategy to create awareness and visibility for the Alpine brand name. We plan to accomplish this objective by introducing a wine cooler called Alpine. Our target date for the wine cooler is August 1, 1987. With aide of Lindeman's, our winery in Australia, the EAC, our distributor in Singapore, and Leo Burnett, we will be introducing the Alpine Wine Cooler using a strong, innovative advertising/promotional campaign targeted to reach potential Alpine smokers. The wine cooler campaign will run approximately four to six weeks prior to our cigarette introduction which is planned for October 1, 1987. According to the Richmond manufacturing people we will to make a packaging commitment by early June, thereby providing four weeks to finalize Alpine packaging. Sinqa_pore Market Overview 0 Most Recent Development need During early March the tobacco industry was hit with a 30 cents ($ Singapore) per pack tax increase which Philip clorris decided to absorb. Our competitors, on the other hand, raised their prices to cover the tax increase. As a result of our newly established price advantage, PM brands have had a major surge in sales while eating into competitive volume. Regardless of whether or not we raise our prices in the future, Alpine will be introduced at a price advantage of $2.50 to $2.60 S or $0.20 to $0.30 less than Salem, our target. Salem is currently selling at $2.80. 0 ~

i 2 o Advertising Environment Media: Total ban on print/electronic media. Promotion: Total ban. Sponsorship: Total ban. P.O.S.M.: Restricted - no messages/pictorial to induce smoking. - not more than 3 sq. ft. - one sign per brand per cigarette outlet. Give-aways/Incentives: Some "souvenirs" allowed. o Industry Volume Since 1983 the total industry has been declining due to poor overall economic conditions -- price increases far above the inflation rate -- and the deportation of thousands of alien workers who were young smokers. 1983 1984 1985 1986 - 4.3 billion units - 4.2 - 4.0 - 3.8 0 1986 S.O.M. By Comggnv Trend C.ompanv SOM '83 - '86 Rothmans 38% S.T.C. (BAT) 22 RJR 22 --~ PM 17 Others 1

t 3 0 1986 S.O.M. For ToTp 10 Brands (87% Total Market) Trend Bran ,SO '$3- 186 Brand Profile Dunhill Marlboro 23% 16 y --> Premium/Virginia/Old Premium/Young & Old Salem 14 ~ Menthol/Young/Male-Female Consolate 7 y Menthol/Female/Old ~ Camel 7 ---*N D1on-f ilter/Old P. Stuyvesant 5 --,1 Low Price 555 4 -~ Low Price/Virginia/Old L. Strike 4 a Low Price/Younger/Filters B & H 4 ~ High Price/Old/Upper Class Kent 3 ~ Premium/Middle Age/Upper Class 0 1986 S.O.M. By Product Style Style j 0 Filter Menthol Pdon-filter am 66% 25 9 Trend '83 - '86 ~ ~ y o Q Q Pric~* Premium $2.80+ High $2.49-2.30 Medium $2.29-2.10 Low below $2.10 Trend N '84 - '86 44% 28 10 18 * Before 30 cent tax increase W

4 0 1986 S.O.M. By Pack Size Trend Pack Size ZQt~ '83 - '86 10's 12's 14's 20's Others 14% 8 15 60 3 -~ 0 1986 S.O.M. By Blend Segments B.lend ZO Trend 183 - ' 86 Virginia Blended 50% 50 o Smoker Profile & Total Industry (F7 denotes profile significance/change) au _$2 '83 '85 Male 94% 90% Female 7 10 F9 Lu. 16-25 24 24 30 26-35 26 24 26 36-45 21 21 18 j 46+ 30 31 26 Household Income $1,000 & below (low) 35 26 18 $1,001 - $2,000 (med) 50 45 52 $2,001+ (high) 15 29 30 0 1986 S.O.M. Menthol Categorv By Brand and S,.o Current Trend Salem 14.2% Consolate 7.4 --~ Newport 2.3 Virginia Slims 0.8

5 0 Total Industry Consolate Salem Newport au ' $2 ' $~2 _'.$.2 LU '82 ' $ 5 5 LU ' $ _ _ _ . f•g a 1 e 94% 91% 71% 65$ 94% 84% NA 74% Female 7 9 29 35 6 16 NA 26 LC.LQ ~ 16-25 24 30 12 18 55 NA 67 26-35 26 26 20 21 30 27 NA 26 36-45 21 18 27 24 12 9 NA 4 46+ 30 26 41 38 3 5 NA 4 o Marlboro Versus Salem: Share of Age Segment Marlboro 8U '_$3 185 '83 16-25 45% 23$ 14% 26-35 22 22 9 36-45 13 14 1 Summary Of Current Industry Trends Salem 185 7 Based on the above research as well as consumer focus groups conducted in Singapore, it seems as though Salem may be gaining some momentum at the expense of the Marlboro franchise. Young smokers (16-25 years), smoking for the first time or switching to a new brand, choosing Salem for a number of reasons: - Peer pressure. RJR's targeted promotion strategy via disco/clubs. Ability to smoke more menthol cigarettes during an extended period of time. (Smokers complain about the harshness of smoking many non-menthol cigarettes in social settings.) Price (before tax increase). ~ ~ L-n

c . 0 6 Opportunities For The Alpine Brand o Through consumer research in Singapore, Salem smokers have indicated that they might be willing to try a new menthol brand if given the opportunity. o Salem's current campaign also lacks image strength and may provide an opportunity for a brand such as Alpine via the strength of the wine cooler imagery. o Introducing Alpine, using the Marlboro Menthol product and a price advantage (targeted at the Salem smoker) in conjunction with the wine cooler advertising will hopefully motivate young menthol smokers to at least try and eventually switch to our new entry. Packaging Assignment Overall, the current USA Alpine package looks good, however, the following changes/options need to be considered: o Color - Shift from aqua blue to slightly more green -- to produce a stronger green menthol cues. o Virge Lines - Similar to the Australian 25's Lights packing, to be incorporated onto the Full Flavor 20's pack. Let's take a look at one comp using the virge lines. o Script "Menthol" - Below the word Alpine should be changed to Menthol Fresh using different type faces -- sides of pack as well. Another option is to look at "Menthol Fresh" above the mountain within the green chevron. Colors for the words Menthol Fresh should either be white or gold. o Gold Border - Around green chevron separated with white area between gold border and green color for a classier/upscale look. o Closure Sticker - Explore green color with white lettering. o PM Crest - Let's look at a raised embossed PM crest for this soft pack.

7 o Packa_aing Foil/Tear Tape Color - Should either be gold or silver. Lettering on pack will obviously affect this choice. o Pack Size Options - Let's look at the 10's/20's/sample 6 sizes and explore the possibility to increase the facing size of 10's/14's packs to the size of a 20's pack. (Richmond can do it, however, timing and retooling packers (costs) may be inhibiting factors.) o Cigarette - 84 mm length, 21 mm filter and 25 mm white tipping with a single gold band around filter (Salem has a green band). The name Alpine in green on the cigarette paper for bolder look and Lights extension option. Let's discuss on any questions or comments you may have. ~ PETER SCHMIDT PS/hl Distribution: D. Devitre, HK T. J. J. L. Keim, HK Feenie, HK Jilla, Singapore Nachtigall, Landor HF: