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PHILIP MORRIS ASIA INCORPORATED INTER-OFFICE CORRESPONDENCE 2 2. APR 87 ~ 25/F, UNITED CENTRE, HONG KONG To: Distribution Date: From: Peter Schmidt cc: T. Keim J. Feen Subject: Alpine Project: Landor Brief (DRAFT) We are currently planning/developing a new product introduction for the Alpine brand in Singapore. Thus, the purposes of this meeting is to review the Singapore market and provide a brief for the Alpine packaging development. Overview of the 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 July 1, 1987. With aide of Lindeman's, our winery in Australia, the EAC, our distributor in Singapore, and Leo Burnett will be introducing the Alpine Wine Cooler using a strong, innovative advertising/promotional campaign targeted to reach our potential Alpine smokers. The wine cooler campaign will run approximately four to six weeks prior to our cigarette introduction which is planned for September 1, 1987. ~ According to the Richmond manufacturing people we will need to make a packaging commitment by mid-riay, thereby providing nearly three weeks to finalize Alpine packaging which needs only minor revisions. Singapore Market Overview 0 Most Recent Develo ment During early March the tobacco industry was hit with a 30 cents ($ Singapore) per pack tax increase which Philip Morris 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 consumer. Salem is currently selling at $2.80. ie

- 2 - o Advertising Environment tiedia: 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 Current Parallel Advertisin Dunhill Shops Cartier Accessories Peter Stuyvesant Travel Kent Leisure Camel Adventure Gear Salem High Country rfarlboro Country 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 - 4.3 billion units 1984 - 4.2 1985 - 4.0 1986 - 3.8 o 1286 S.O.M. By Companv Companv am Trend '83 - '86 Rothmans 38% '---~ S.T.C. (BAT) 22 ~ RJR 22 PM 17 Others 1 '----~

3 0 1986 S.O.M. For Tolp- Ten Brands (87% Total Market) Trend Bratls~ am !83-'$~ Brand Profile Dunhill 23% ~- Premium/Virginia/Old Marlboro 16 -~, Premium/Young & Old Salem 14 ~ T,ienthol/Young/Male-Female Consolate Camel 7 7 -~ Menthol/Female/Old Non-filter/Old P. Stuyvesant 5 ~ Low Price 555 4 ~ Low Price/Virginia/Old L. Strike 4 /7 Low Price/Younger/Filters B & H 4 ~ High Price/Old/Upper Class Kent 3 ~ Premium/Middle Age/Upper Class 0 iIi Prod Trend ~ Sty1e am Filter 66% Plenthol 25 Non-filter 9 183 - 186 0 1986 S.O.M._By Price Categorv Trend Pric ~ * am, '84 - '86 Premium $2.80+ 44% High $2.49-2.30 28 -~ N Medium $2.29-2.10 10 LM a Low below $2.10 18 ~ -~ ~ ~ * Before 30 cent tax increase w

- 4 - 0 1986 S.O.M. By Pack Size Trend Pack Size a.QD '83 - '86 10's 14% 12's 8 14's 20's 60 Others 3 --~ 0 1986 S.O.M. By Blend Segments ~ Trend Blend zo, 183 - '86 Virginia 50% Blended 50 ~ o Smoker Profile & Total Industrv a= iu '83 Lu Male 94% -9.0% 91% Female 7 10 9 A,ag 16-25 24 24 30 26-35 26 24 26 36-45 21 21 18 ~ 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 o 1986 S.O.M. Menthol Category By Brand Brand am Current Trend Salem 14.2% Consolate 7.4 Newport 2.3 Virginia Slims 0.8

5 o Menthol Smoker Profile Total Industrv Consolate Salem I3ewport LU ' $2 $5 ' $2 _'$5 ' 'U ' $5 _' U ' $ z _ _ _ _ . _ Male 94% 91% 71% 65~ 94% 84% NA Female 7 9 29 35 6 16 NA 26 8~U 16-25 24 30 12 18 55 58 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 Mariboro Salem ~ '83 _'U '83 '$5 - 16-25 45% 23% 14% 26-35 22 22 9 36-45 13 14 1 Summary Of Current Industry Trends It is clear after franchise gaining franchise. Young looking moment smokers at the at the (16-25 facts that the Salem expense of our tIarlboro 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 sr:loke 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).

6 Introducing Alpine with a price advantage, targeted at the Salem smoker, in conjunction with a strong promotional program will 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 more green menthol cue. o Script "i4enthol" - 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 green or gold. o Gold Boarder - around green chevron separated with white area between gold boarder and green color for a classier/upscale look. o Closure Sticker - explore green color with white lettering. o Pt-1 Crest - let's look'at a raised embossed PM crest for this soft pack. o gacha_ainc,~ Foil/Tear Tape Color - should either be gold or silver. Lettering on pack will obviously affect this choice. o Pack Size Oj~tions - let's look at the 10's/14's/20's/sample 6's/7's sizes and explore the possibility to increase the facing size of l0'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 Cicrarette - 85 mm length circumference, white tipped with a single gold band around filter (Salem has a green band) and the name Alpine in green on the cigarette paper for bolder look and Lights extension option. Let's discuss on any questions, concerns, or comments you may have.