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THE BLACK MENTHOL CIGARETTE MARKET February, 1979 WILLIAM ESTY COMPANY, INC. MARKETING INFORMATION CENTER

TABLE OF CONTENTS Item Page No. INTRODUCTION i SUMMARY iv CONCLUSIONS AND RECOMMENDATIONS xiii I. SIZE AND DEMOGRAPHY A. Population Estimates 1 B. Demographic Characteristics 2 C. Geographic Dispersion 14 II. BLACK ATTITUDES AND VALUES A. Black Attitudes And Values In The Early '70's 21 B. The New Values 29 III. SMOKING PATTERNS, ATTITUDES AND BEHAVIOR A. Incidence Of Smoking 32 B. Heaviness Of Smoking 33 C. Demographics Of The Smoker 34 D. Category Preferences By Demographics 37 E. Cigarette Purchasing Habits 39 F. Smoking Enjoyment 40 G. Health Concern 41 H. Concern About The Cost Of Smoking 42 I. Personality Traits Of Black Smokers 43 J. Black Smokers' Sport/Leisure Activities 44 IV. THE BLACK MENTHOL MARKET A. Menthol Cigarette Consumption 46 B. Menthol Cigarette Smoking - Incidence And Frequency 49 C. Attitudes Toward Menthol Cigarettes 51 D. Desired Menthol Level 52 V. MENTHOL BRAND DEVELOPMENT AND USER PROFILE A. Menthol Brand Shares 53 B. Demographics Of Black Users Of SALEM Vs. Kool 56 WILLIAM ESTY COMPANY, INC. MARKETING INFORMATION CENTER

i INTRODUCTION Kool's success in the Black market, starting in the mid-1960's, was largely responsible for the brand eventually catching up with and passing SALEM in volume and share in 1972. With each succeeding year and until 1975, Kool's widening lead traced to its unusually strong performance among Blacks vis-a-vis SALEM. Thus, it was the Black smoker that provided and continues to provide Kool witrh its significantly higher total U.S. share of market. In 1976, for example, Kool outsold SALEM in the non-Black market by only 1.1 billion units, selling 48.6 billion units to SALEM'S 47.5 billion. In contrast, Kool's lead over SALEM in the Black market that year was 7 billion units, outselling SALEM by more than two- to-one. Since 1975, Kool's lead has been shrinking, tracing to SALEM'S rising volume in both the Black and non-Black markets while Kool's sales in both segments have softened. Of particular significance is the fact that SALEM'S Black market growth between 1976 and 1978 came largely from its Lights spin-off, which, so far, has had little impact on Brand's full-flavor entry. In contrast, the more modest growth in Kool Lights/Milds volume over this two year period failed to offset the decline in its full- flavor sales. In Black markets in 1978, SALEM Lights sales were equal to some three-quarters of Kool Lights/Milds volume,.up from about 40% in 1976. WILLIAM ESTY COMPANY, INC. MARKETING INFORMATION CENTER

Volume (Millions) ii Volume Change 1976 1977 1978 '78 Vs. '76 $ Black SALEM FF 4,854 4,887 4,811 - 0.9 SALEM Lights 248 499 802 +223.4 Total 5,102 5,386 5,613 + 10.0 Kool FF 11,442 10,971 10,925 - 4.5 Kool Lights/Milds 644 - 648 1,102 + 71.1 Total 12,086 11,619 12,027 - 0.5 Kools Advantage +6,984 +6,233 +6,414 Non-Black . SALEM FF 40,555 34,253 30,813 - 24.0 SALEM Lights 6,922 13,952 17,312 +150.1 Total 47,477 48,205 48,125 + 1.4 Kool FF 45,104 41,982 37,983 - 15.8 Kool Lights/Milds 3,522 6,573 10,166 +188.6 Total 48,626 48,555 48,149 - - 1.0 Kools Advantage +1,149 -+350 +24 This reversal of SALEM/Kool share of market trends is particularly significant and appears to be signaling an important opportunity for SALEM to finally crack what once seemed to be Kool's almost impregnable hold on the Black market. It is because of this and the fact that Blacks are such an important part of the menthol market - accounting for one in eight menthol cigarette smokers - that this study was undertaken. This document, then, represents an analysis of the Black market within the United States and its potential to SALEM cigarettes in pro- spective sales. WILLIAM ESTY COMPANY, INC. ~ 0 r 0 J ~ 0 w 0 MARKETING INFORMATION CENTER

iii The purpose of this analysis is three-fold: 1. To describe the markets' demographic characteristics, geography, changing attitudes and values, cigarette consumption patterns and growth potential. 2. To determine whether a separate and specific advertising effort in Black media is necessary and, if so, recommend creative executional guidelines. 3. Provide recommendations of those media and combinations of media which are most effective in delivering the message to current and potential SALEM smokers. WILLIAM ESTY COMPANY, INC. MARKETING INFORMATION CENTER

iv SUMMARY A. Market Profile 1. There are 25.2 million Blacks in the U.S., representing 11.6% of the total population. This, the nation's largest minority is expected to continue to grow faster than the general population, reaching 28 million in 1985 or 12% of the nation's total population. 2. Historically, the Black population has been younger than the population at large. The gap, however, has been narrowing and is expected to continue to narrow as both populations continue to grow older. 3. On average, Blacks are not as well educated as the nation's total population. Here again, however, the gap between Blacks and the total population has been and is expected to continue to close. Indeed, the difference in the median level of educational attainment among Black vs. ~total persons under 40 years of age is less than half a school year, while the gap widens to close to four years among some older groups. 4. Despite the rising educational level of Blacks almost half (44%) of the nation's Black adults are reported to be functionally illiterate; i.e., lacking the necessary social and intellectual skills and experience so necessary to successful living. WILLIAM ESTY COMPANY, INC. 01 O r O J MARKETING INFORMATION CENTER

V 5. While Blacks have been making inroads on white collar positions, still only about a third of employed Blacks vs. 52% of all employed persons were white collar workers. 6. The median income of Black households is still only about two-thirds that of all U.S. households, although time is expected to narrow the gap as Blacks move into the main- stream of business. 7. In recent years the proportion of Black households with incomes of $10,000 or more has increased at a greater rate than that of the total population. At the same time, however, Blacks are accounting for an increasing percentage of those households with poverty level incomes of less than $5,000. This has led to a polarization of the Black popula.tion. 8. Disproportionately large numbers of Blacks are found in metropolitan areas,especially in central cities. The top 25 Black metro areas encompass 54% of all Blacks vs. about a third of the nation's total population. 9. Of late, Blacks have joined the rest of the population's flight from the central cities. Further, the long term massive migration of Blacks out of the South has been reversed and recent Black migration patterns have tended -to more closely resemble White migration patterns than in the past. WILLIAM ESTY COMPANY, INC. MARKETING INFORMATION CENTER

vi 10. Blacks, especially younger Blacks, increasingly have come to share many of the same values and aspirations as their White counterparts. Younger Blacks are generally optimistic, materialistic and achievement- oriented. They have experienced far less discrimination than their parents and because of this are more liberal about mixing with Whites. B. Cigarette Smoking Patterns 1. More Blacks (37.8%) than Whites (32.4%) smoke. However, on average, Blacks are lighter smokers than Whites. Thus, while Blacks comprise 10.3% of U.S. adult population, they represent 11.5% of the smoker population but account for only 8.3% of cigarette consumption. 2. Relative to the White smoking population, the Black smoker population is: - slightly more male, - decidedly younger, - substantially more downscale in terms of income, education and occupation, - more heavily concentrated in A counties. 3. Black preference for a menthol cigarette: -'does not vary by sex or income level, - peaks among the 18-24 year olds, - above average among the college educated and sub- stantially below average among the poorly educated. WILLIAM ESTY COMPANY, INC. MARKETING INFORMATION CENTER U 0 r O v

vii 4. Some 70% of Black smokers (vs. only 41% of White smokers) buy cigarettes by the pack. Reflecting this, Blacks are more likely than White smokers to purchase their cigarettes in small groceries, service stations, liquor stores and vending machines. 5. Black smokers reportedly do not enjoy smoking as much as White smokers. And while the enjoyment level has been declining among both races, the differential between the two has been widening. 6. Blacks once claimed more concern about the alleged health hazards of smoking. However, increased concern among Whites in recent years has virtually equalized the level of concern among the two groups. 7. Black smokers are more concerned than Whites about the cost of smoking. However, this concern has been declining faster among Blacks than Whites, reducing the difference between the races. 8. Black smokers are more likely than White smokers to see themselves as "with it", aggressive and confident; although these attitudes may reflect in part the much younger age skew of the Black smoking population. ~ 0 .• 0 v ~. INC. 0 WILLIAM ESTY COMPANY , ~ MARKETING INFORMATION CENTER

9. As previously noted, menthol cigarettes are more popular with Blacks than with the general smoking public. In 1978, 46% of Black market sales was menthol vs. 30% in corresponding divisions. However, while menthol share has expanded in the overall marketplace, its share of Black volume has slipped slightly. 10. Black's much stronger preference for menthols in 1978 traces entirely to the full flavor styles, which had a 39% share of Black sales compared with less than a 23% share among the general smoking public. In contrast, menthol lights share among Blacks in 1978 was 6.5% versus 7.3% in the general marketplace. 11. Full flavor menthol share has been declining somewhat faster in'Black than in general cigarette market. Menthol lights have been growing in both market segments. 12. Although menthol lights have been growing at the expense of full flavor styles, the latter still account for the bulk of Black (86%) and general public's (76%) menthol cigarette consumption. And while lights penetration of the Black menthol market still lags that in the overall market, its relative growth last year kept pace with the general market. WILLIAM ESTY COMPANY, INC. MARXETING 1NFORMATlON CENTER