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FU6? SECRET No.1-z5_BV- March 31, 1983 TO: Mr. J. W. Johnston FROM: H. J. Lees SUBJECT: Weekly Status Report - New Brands and STP The significant activities for New Brands and STP for the week of 3/28/83 were: New Brands Project VB • Per Sales Management's request, the Brand presented a compre- hensive review of the total VB proposition at the Area Sales Directors' meeting in Florida this week. Key sales force issues and concerns were addressed, and the overall proposition was well received by the Area Sales Directors. • The Marketing Development Department presented its "Future Lifestyles" study to the Management of TLK this week, with the Brand adding its perspective on the implications of the study for Project VB. Agency opinions on the study's implications for the New Brands area and the industry as a whole were alsc discussed. MDD also presented the current status of RJR's advertising research process to key members of TLK. • The Brand met with R&D to sic7n off on Phase II analyticals fc- the VB Lights product. Phase III national production of the Lights product is scheduled to begin April 5. • The Brand met with the Sales Promotion group to discuss methods of incorporating VB's unique quantities and pricing for both pack and carton on the cigarette center sign and overhead canopy POS pieces. Mock-ups of two options which are viable short-term are being prepared and will be presented to Sally MacKinnon next week. Either of these options can be utilized con- sistent with VB's July 5 DTS date upon approval. Also being explored are the options/costs associated with making VB's quantities/price a permanent part of these pieces. • VB's financial statements have recently been revised as follows: Realistic Assumptions 85's 85's & 100's Prior Revised Prior Revised ROI (10 Year) 15.1% 11.7% 21.8% 18.9% Payback (Years) 7.2 8.2 5.7 6.3

Mr. J. W. Johnston March 31, 1983 Page 2 New Brands (Continued) Project VB (Continued) The previous analysis kept consistent VB's discount per thousand vs. regular 85's on each price increase. However, the discount actually remains constant on a carton basis, so that on a $1.50/M price increase, VB's price would go up $1.33/M (5 cartons/M vs. 4.4 cartons/M). These financial revisions have been incorporated into the VB National Marketing Plan/AR that is currently being routed for approval. • The Agency presented final art for VB's national magazine ads this week, which was; approved by the Brand. Also presented was an initial execution of the Sales Brochure that will be prepared in support of VB. Direction was provided for revisions to the Sales Brochure, which will be resubmitted to the Brand early next week. Project PF • Brand forwarded to you a recommendation to maintain the planned 94mm x 24.8mm configuration based on the desire to adhere to an 11/7/83 test market D-T-S and based on the judgmentally broader male/85mm smoker appeal of this configuration versus a 98mm x 24.8mm configuration. It was agreed we will stay with the 94mm length • The Brand, Robert McGee and Lou Cicardo of the Schechter Group attended a proofing of the PF 94mm panel pack at Alford Packaginc in Baltimore. Printing of this pack will be completed next week to be available for our 6/6/83 Assessor test. Project AA • A general discussion about Project AA was held on Wednesday, March 30, in New York with LKP personnel to discuss positionings and understandings about the potential target for AA. Next steps are to form hypotheses and positioning statements which will lead to creative exploration. Project Planning • Flavor qualitative exploratory was completed in Denver last week. Flavor-enhanced non-menthol blends were explored among male and female FFLT smokers. Six flavors (clove, cinnamon, wintergreen, spearmint, coconut, anise) will be further explored in a one-cigarette CLT in late May. Purpose of this research is 1) quantification of acceptability/appeal/ unique benefits delivered by each flavor, 2) exploration of appropriate flavor level, 3) suggestion of demographic smoker groups' interested in each flavor.

Mr. J. W. Johnston March 31, 1983 Page 3 New Brands (Continued) Project Planning (Continued) i-- • Project CM was also explored in Denver Groups last week. While the product has definite appeal, it may not be differentiated enough to market based on unique product benefits alone, requiring marriage of the CM product to an appropriate user image to maximize the project's appeal. To ascertain the viability of a straight product sell or discern an appropriate imagery adjunction to CM, an ad concept/product test is scheduled for early May subsequent to CM imagery screening groups in late April. • PPT completed preparation of lifestyle visual stimuli for use in younger adult smoker "psychology" groups in Paramus, NJ on April 5, 6, and 7. Upon arriving at this learning, cigarette ad concepts re.7lecting appropriate younger adult smoker imagery will be developed and explored. • As agreed today, Project Planning will be developing alternative value propositions to VB. These will take into consideration competitive reaction to VB and new value propositions which we could employ to preempt competition. STP WORK HORSE • The rough-cut version of the "Work Horsin' Around" commercial has been approved by you. The tape of the finished commercial will be available week of April 4 for review with Mr. G. H. Long prior to airing on April 11, per your request. Qualitative research will be conducted as soon as feasible for confirmation of positive consumer response to the finished execution. • The reported increase in the WORK HORSE nicotine level is being investigated by R&D. Upon receipt of information regarding the likely cause and duration of the increase, the Brand team will forward conclusions, implications, and recommended action steps. A meeting regarding findings to date is being held with R&D on Thursday, March 31. WSS/WSC • R&D reviewed the WSS/WSC moist snuff product development program with Brand and MDD. R&D proposed two development paths, a short-range plan similar to previous efforts and a long-range plan based on fundamental fermentation research. The short-term plan may yield candidates suitable for Assessor testing as early as April, 1984, but R&D Management views April, 1984 as highly unlikely to be achieved. The long-term research is expected to take two-to-two and one-half years to assess its potential for success. A meeting has been scheduled for April 26 to allow senior R&D Management to review this prognosis with you.