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March 25, 1983 TO: J. W. Johnston RE: CAMEL - Share of Market Trend This memo is in response to a recent note from Mr. E. A. Horrigan, regarding CAMEL's share of market trend. Mr. Horrigan mentioned concern relative to the CAMEL trend and requested an update as to the approach being taken to reinvigorate this brand's business. The attached memo from J. R. Shostak provides a fairly in-depth perspective on the brand's performance, key issues/implications, a strategic summary indicating current approaches to the marketing of CAMEL in 1983 and beyond, major action programs underway to address the key issues and execute against the strategies, and next steps to be taken to continue an aggressive effort at main- taining and further enhancing CAMEL growth. I. Performance In viewing the brand's sales performance in terms of: volume; consumer behavior as it relates to share of smoker gains; brand awareness with respect to CAMEL Lights and CAMEL Filters' penetration of various demographic segments; consumer perceptions of CAMEL; product performance vis-a-vis Marlboro; advertising awareness of the CAMEL World campaign; and advertising performance as it impacts communication effectiveness; a pattern emerges which indicates pockets of strength in all areas which should allow one to conclude that while the brand family is not performing at an overwhelmingly positive level, there are strong signs of continued vitality which could lead to a better overall situation for the brand. Upon review of Marlboro's share development, beginning in the mid fifties, when it established repositioned imagery in the market- place, one finds that the initial stages of share gains were to some degree reasonably flat over a fairly long period of time. In 1956, Marlboro's share of market was 3.6%. In 1957, there was a share gain of +1.3 share points, bringing its total brand share to 4.9%. However, from 1957 through 1965, the brand gained one half a share point. Substantial growth on Marlboro did not actually begin to occur until the late 1960's.

Mr. J. W. Johnston March 25, 1983 Page 2 Marlboro Year Share Year Share 1956 - 3.6 1969 8.6 1957 4.9 1970 1-0.1 1958 4.9 1971 11.4 1959 4.7 1972 12.9 1960 4.7 1973 14.1 1961 5.0 1974 14.80 1962 5.1 1975 15.48- 1963 5.0 1976 15.78 1964 5.1 1977 16.12 1965 5.4 1978 16.75 1966 6.1 1979 17.02 1967 6.7 1980 17.76 1968 7.6 1981 18.32 1982 19.23 Given this historical experience of the Marlboro brand, we feel that there is probably a parallel situation in effect relative to CAMEL. However, this is not to suggest that we expect nor is our objective to grow on a minor incremental share basis for the next ten years,but we do feel that the Marlboro experience is a good reflection of the long-term nature of rebuilding a repositioned brand in the virile segment of the market lace. Given the CAMEL strategy, we feel that we are in a much better position to stimulate growth behind this brand in a much shorter time frame. The means by which we will accomplish this increased growth will be reviewed later on in this memo. II. Issues/Implications To invigorate growth on the CAMEL brand, we must singlemindedly attack identified issues which are impeding further growth, and we must continue to build on the current positive performance factors. In terms of consumer perception, there are two key issues which are being addressed. First, the brand continues to have an older user image. Secondly, consumers perceive CAMELS to be a strong, harsh product. The implications of these two perceptions is such that to a large degree, they are primarily responsible for limiting the opportunity for increased share. Consumer behavior measures indicate that we continue to have relatively low awareness level of the CAMEL Lights 85's product against younger adult smokers. Overall, there is low awareness of the CAMEL World campaign among all demographic smoker groups.

Mr. J. W. Johnston March 25, 1983 Page 3 II. Issues/Implications continued Current product performance of CAMEL Filters and CAMEL Lights 85's versus Marlboro is a parity situation. The resumption of the CAMEL Regular declining sales trend is, unfortunately, an uncontrollable factor, which is not allowing for total brand growth and total share gains. The overall implication for all of these issues confronting the brand is such that we can attack and are attacking the need -to build more positive perceptions and response to both the advertising and the image of the brand. The strategic thrust for CAMEL in 1983 specifically addresses each one of the identified weaknesses that confront the brand family. A tighter focus is being taken to drive this brand's presence against the key target smoker group in the form of various advertising and promotion programs. Work is continuing in Research & Development to develop superior products to Marlboro. In the advertising area, more targeted support is being applied to establish CAMEL's awareness levels and b4ld more positive end results. This is being accomplished by virtue of continuous out- of-home advertising in key markets, more intense use of national magazine vehicles and increased use of the CAMEL Scoreboard unit in newspapers and the continuation of developing innovative special units in magazines and newspapers. Advertising_executions are being_refined to_further_enhance_the_ focus of the CAMEL user imagery, the clarity and impact of our out-of-home executions, and to address the low awareness issue particularly on CAMEL Lights, we are utilizing style call-out copy on billboards. In essence, all aspects of the CAMEL strategy for 1983 are being constantly reviewed with an eye toward addressing the weaknesses that have been established and identified. III. New Action Programs There are three key action programs that have been instituted to further accelerate share growth of CAMEL. These programs have been developed in recognition of the fact that the brand must continue to intensify its efforts in light of Marlboro's continued growth.

Mr. J. W. Johnston March 25, 1983 Page 4 III. New Action Programs continued a. CAMEL Attack Plan - The CAMEL Attack Plan is a long-term, aggressive marketing program behind CAMEL that begins in two Sales Regions (8% U.S. pop.) in 1983, and is designed to accelerate CAMEL's growth at the direct expense of Marlboro. The plan places priority emphasis behind CAMEL on a continuous basis at all levels of resource utilization in these markets. Spending in support of CAMEL has been increased dramatically, more than doubling the previously planned spending level in these regions. Total marketing support has been intensified to create an ongoing high level of market presence in local vehicles. The objectives and strategy of all of the programs in the markets are geared to generate high levels of trial and purchase. The CAMEL Attack Plan begins, in full, in April in the Houston and Denver Sales Regions. We will be tracking volume and share and consumer trends to monitor the performance of the program. Expansion of the CAMEL Attack Plan is planned to occur in 1984, pending positive performance in these lead markets. The CAMEL Attack Plan is a fully coordinated and integrated effort between Marketing and Sales in the affected regions. This effort reflects a targeted frontal assault on Marlboro. By dedicating resources on a comprehensive basis behind CAMEL, it is felt that this concentrated approach will allow the brand to build its awareness level and increase its penetration against the key target smoker group. b. Copy Exploratory In recognition of the need to further improve the CAMEL World campaign's appeal and effectiveness, a major creative probe has been initiated. Additionally, a special image study of the CAMEL brand is currently in progress and will offer an increased opportunity to understand the communications both in terms of product benefits and user imagery for the brand. As a result of current knowledge regarding awareness and consumer perceptions of CAMEL,we will be concentrating on strengthening our headline approach and body copy in the current advertising. Pending the results of the image study, additional work will be done to incorporate whatever learning is derived. It is expected that within the next eight weeks, the initial results of the creative exploratory will be available with recommended next steps. Beyond this early work, we will be in a position by the third quarter to amplify as appropriate, the needs of the brand basis the image study.

Mr. J. W. Johnston March 25, 1983 Page 5 III. New Action Programs continued c. CAMEL Militar Plan As.a result of a major reappraisal of our Black, Hispanic and Military strategies, CAMEL will be increasing its marketing efforts against the Military market during the second half of 1983. Increases and improvements in the tactical support directed in media and promotion will be affected. The Military market is an extremely important market segment for this brand. Therefore, CAMEL will play a- leading role and have a high priority in addressing this very important marketing area. In conclusion, there is little question as to the recognition of the importance of the CAMEL brand to the RJR product line. CAMEL's heritage as a masculine cigarette offers a fundamental strength to make inroads against a key younger adult male smoker group. The challenge for the brand is to contemporize this image and provide a level of presence and impact so that greater penetration will lead to increased trial and ultimately, conversion. The basic 1983 strategies and tactical programs for the brand are tightly focused in addressing the needs this brand has, and will lead to a continuation of brand vitality as it relates to share and volume growth. The newly designed action programs in the form of the CAMEL Attack Plan, the copy exploratory, and the Military market effort, are positive additions to the brand's marketing plan. We believe that the overall strategic direction and tactical support being provided to the brand will result in greater upside return. We are closely monitoring this brand's progress and will be constantly modifying the programs to ensure we derive optimal effectiveness. If there are any further questions or comments, please advise. M. L. Orlowsky MLO: jhg Attachment