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FraserSmith ETHNFC MAAKETIWd.STAATEGIC PLM/NING & PROMOTION PHILIP MORRIS USA ASIAN-AMERICAN MARKET DEVELOPMENT MAY 25, 1988 475 t01h AVENUE •SUITE 000 . NEW YORlC N.v. 10018 9 (Y12) 564{68~

PHILIP MORRIS USA ASIAN-AMERIA ELOPMENT IN I. INTRODUCTION II. SITUATION ANALYSIS SUMMARY A. PROBLEMS B. OPPORTUNITIES C. SPECIAL PLANNING CONSIDERATIONS III. RECOMMENDED STRATEGIC AREAS OF DEVELOPMENT A. STRATEGIC AREA I 1. TRADE RELATIONS AND BUSINESS DEVELOPMENT B. STRATEGIC AREA II 1. CONSUMER DEVELOPMENT C. STRATEGIC AREA III 1. COMMUNITY LEADER AND CONSTITUENCY DEVELOPMENT IV. STRATEGIC ACTION PLAN V. AGENCY MANAGEMENT OF ASIAN BUSINESS DEVELOPMENT

FRASERSMITH PHILIP MORRIS USA ASIAN-AMERICAN MARKET DEVELOPMENT INTRODUCTION ASIAN-AMERICAN MARKET IS EXTREMELY VIABLE TO EXPLORE FOR BUSINESS DEVELOPMENT DUE TO SELECT MARKETING FACTORS: - GROWTH RATE - EMERGING SCALE - SUBGROUP COMPOSITION - SMOKER AND BUYER BEHAVIOR - TRADE IMPACT FRASERSMITH'S PROJECT STARTED APRIL, 1988.

FRASERSMITH PHILIP MORRIS USA ASIAN-AMERICAN MARKET DEVELOPMENT INTRODUCTION (CONT.) PROJECT OBJECTIVES 1. PROVIDE PHILIP MORRIS WITH A STRATEGIC REVIEW OF ACM FROM A CONSUMER AND TRADE PERSPECTIVE. 2. IDENTIFY PROBLEMS, OPPORTUNITIES AND DEVELOPMENT STRATEGIES. BUSINESS 3. DEVELOP PROMOTIONAL CAMPAIGN AND PHILIP MORRIS TO ACHIEVE BUSINESS ASIAN-AMERICAN MARKET. STRATEGIC DOMINANCE PLAN IN FOR THE

FRASERSMITH PHILIP MORRIS USA ASIAN-AMERICAN MARKET DEVELOPMENT POPULATION GROWTH 0 DUE TO IMMIGRATION, ASIAN-AMERICANS ARE THE FASTEST GROWING MINORITY GROUP AND WILL TRIPLE BY THE YEAR 2000. 1980 EST. - 3.5 MILLION 1990 EST. - 6.5 MILLION 2000 EST. - 10.0 MILLION 1980 CENSUS PROJECTED Y A % GROWTH Pop•_ vs. 1980 TOTAL MARKET 3,466 9,850 100% +285 CHINESE 812 1,683 17.1 +207 FILIPINO 782 2,070 21.0 +265 VIETNAMESE 245 1,574 16.0 +642 KOREAN 357 1,320 13.4 +370 ASIAN INDIAN 387 1,006 10.2 +260 JAPANESE 716 857 8.7 +120 OTHER ASIAN 166 1,340 13.6 +806

FRASERSMITH PHILIP MORRIS USA ASIAN-AMERICAN MARKET DEVELOPMENT GEOGRAPHIC IMPORTANCE 0 73% OF THE TOTAL ASIAN-AMERICAN POPULATION RESIDE IN 7 STATES. 0 CALIFORNIA POSSESSES 36% OF TOTAL. - ALL MAJOR ASIAN SUBGROUPS ARE REPRESENTED IN CALIFORNIA. - REMIGRATION TREND TO CALIFORNIA FROM TEXAS AND COLD WEATHER STATES. 0 IN CALIFORNIA, BY THE YEAR 2000, ASIAN-AMERICANS WILL EQUAL THE PRESENT HISPANIC POPULATION.

FRASERSMITH PHILIP MORRIS USA ASIAN-AMERICAN MARKET DEVELOPMENT Seven States with 100,000 or More Asian Americans in 1980 (Population numbers in thousands) Area Total Asian* Japanese Chinese Filipino Korean Asian Indian Vietnamese United States 3,466 716 812 782 357 387 245 Percent 100.0 100.0 100.0 100.0 100.0 100.0 100.0 California 1,247 269 326 358 103 60 85 Percent 36.0 37.5 40.1 45.8 28.7 15.4 34.8 Hawaii 453 240 56 132 17 1 3 Percent 13.1 33.5 6.9 16.9 4.9 0.2 1.4 New York 328 25 147 36 33 68 6 Percent 9.4 3.5 18.1 4.6 9.3 17.5 2.4 Illinois 171 18 29 44 24 37 6 Percent 4.9 2.6 3.6 5.7 6.8 9.6 2.6 Texas 130 12 27 16 14 23 28 Percent 3.7 1.7 3.3 2.0 3.9 6.0 11.3 New Jersey 108 10 23 24 13 31 3 Percent 3.1 1.4 2.9 3.1 3.7 7.9 1.2 Washington 105 27 18 26 13 4 9 Percent 3.0 3.8 2.2 3.3 3.8 1.1 3.6 . ~ ~ ~ ~ Source: Bureau of the Census, 1980 Census of Population. ~ ~ ~ -6-

FRASERSMITH PHILIP MORRIS USA ASIAN-AMERICAN MARKET DEVELOPMENT CONSUMER RESEARCH 0 A SPECIAL ANALYSIS COMBINING 1986 AND 1987 NATIONAL TRACKING STUDY DATA PROVIDES DIRECTIONAL INFORMATION ON ASIAN CONSUMER CIGARETTE USAGE. 0 THE DATA IS DIRECTIONAL SINCE IT ONLY INCLUDES SELF-DESCRIBED "ORIENTALS". INDICATIONS ARE THAT SMOKING INCIDENCE IS HIGH FOR "BRANDED" PRODUCTS. TOTAL M K R ORIENTALS INDEX TO TOTAL BASE 55,202 418 100 MEN WOMEN 50 32 164 AGE 18-24 132 25-34 28 37 35+ 57 43 75 FLAV R MENTHOL 28 25 89 NON-MENTHOL 72 74 103 TAR . FULL FLAVOR 48 48 100 Low FLAVOR 40 39 98 ULTRA Low 11 10 91

FRASERSMITH PHILIP MORRIS USA ASIAN-AMERICAN MARKET DEVELOPMENT CONSUMER RESEARCH (CONT.) TOTAL M KER ORIENTALS INDEX BRAND SHARES MARLBORO 23.1 34.0 147 BENSON & HEDGES 4.2 9.8 231 WINSTON 11.5 8.9 77 SALEM 8.6 6.2 73 KENT 3.1 5.3 171 PARLIAMENT 1.0 2.6 258 MERIT 4.4 2.6 59 ~ .~ .N _j _41 4~ ca -8- ~

FRASERSMITH PHILIP MORRIS USA ASIAN-AMERICAN MARKET DEVELOPMENT CONSUMER BEHAVIOR FRASERSMITH RESEARCH INDICATES THE FOLLOWING: 0 ASIAN-AMERICANS TEND TO BE VERY IMAGE-CONSCIOUS AND QUALITY IS IMPORTANT. 0 THE MARKET TENDS TO PURCHASE MOST CATEGORIES. PREMIUM/BRANDED PRODUCTS IN 0 SHOWS SIGNS OF HEAVY USAGE OF CIGARETTES, BEER, AND PACKAGED FOOD. 0 NO FORECAST ON MEASUREMENT OF MARKET VOLUME EXISTS, NATIONALLY REGIONALLY OR LOCALLY. ~ rs ~ ~ ~ ~ .~ cz -9- ~