Tobacco Documents Online

766 230 i0 15 2O 25 In the year of Our Lord nineteen hundred and eighty-nine (1989), on this twenty-sixth (26th) day of the month of September, PERSONALLY C.~E AND APPEARED: PETER HOULT, WHO, having been duly sworn on the Holy Bible, doth depose and say as follows: Me COLIN IRVING: My Lord, before continuing with Mr. Hoult, in the crowded room yesterday I omitted to introduce one member who'll be sitting at the table behind me, Mr. Doug Mitchell is a student at my office and is in fact the most important person here. runs our computer. THE COURT: Mr. Mitchell? Me IRVING: Mr. Douglas Mitchell. He runs on our side. He EXAMINED BY Me COLIN IRVING, for RJR-Macdonald Inc.: Q - Now, Mr. Hoult, we were !poking at Tab 3 of the green AUDIOTRANSCRIPT, Divi,lon ~e P~,~re V~loi,¢ & A,,o6~.

767 231 5 A - A - i0 Q- A - 15 Q - 20 A - Q- 25 book of exhibits yesterday at the adjournment. Before we go on with that, I'd like to step back just for a moment and ask you whether that study was prepared within RJR-Macdonald. This is a summary of a study which was written up in something like three hundred and fifty (350) pages, so yes, it's -- it was an in-house summary prepared. Prepared from some other study? From the major study and which, as I say, was some three hundred (300) pages. And was that other study done by your company itself or by an outside company? No. Like all our market research studies, it was commissioned with an outside agency. I want to show you, Mr. Hoult, a document marked "Multi-Brand Tracking, Brand Family and Smokers Segmentation" And on the title page, it's marked: "Prepared for RJR-Macdonald Inc. and prepared by ABM Research Limited". Is that the study from which Tab 3 came? It is. Now, in the document you now have in front of you, the Multi-Brand Tracking, there is an index page, then a section marked "Background and Objectives", then a section marked "Method". AUDIOTRANSCRIPT, DN'i~ion 8e Pierre Vilo;re & .A~,o~i~ Liege

768 232 i0 15 2O 25 THE COURT: Are we in Tab 3? Me IRVING: Not yet, My Lord. THE COURT: Ah, okay. Me IRVING: I'm going to hand in an additional document to go with Tab 3. THE COURT: Okay. Me IRVING: Q - It runs to six (6) pages. Is that an extract from the larger report you were speaking of, which shows the methodology followed? A - Yes, it is. Q - I would like to have the extract marked, please, as RJR-4. Me ROGER E. BAKER, Q.C.: This document, I see, excuse me, 57 marked on a copy of the extract that you've given me. Is that 57 from your original index, Mr. Irving? Me IRVING: Yes. were given is marked on the document. Yes, in each case, the number from the index you I didn't realize AUDIOTRANSCRIPT, Divi,ion de Pierre Vilaire & A,,o¢14, Lt~e

769 233 i0 15 2O 25 that yesterday, but that is true of all the documents. Me BAKER: Thank you. Me IRVING: My Lord, my friends have the complete survey which, as Mr. Hoult said, is three hundred and fifty (350) pages long. I do not intend to put it in and burden the record. If my friends wish it filed, of course, we will be happy to do so. Q -. Does this shorter document now, RJR-4, Mr. Hoult, explain the methodology which was followed in carrying out the larger report? A - Yes, it does. Q - Now, let us come back to Tab 3, Mr. Hoult, which you've now told us is taken from that larger report. And when we adjourned yesterday, I think we were looking at the... THE COURT: Mr. Irving, would you give me just a minute? Me IRVING: Yes, certainly, My Lord. THE COURT: Okay. Me IRVING: Q - I think we were looking at the pie-chart on page 2273 AUDIOTRANSCRIPT, Division de Pierre ViJolre & Associ~s tt~e

770 234 5 i0 15 20 25 Me BAKER : Excuse me, My Lord. which simply shows share of market by segment. Yes. Now, Mr. Hoult, without attempting to go through every page of this document, which is very long, would you just explain to the Court what it represents and the purpose for which it was put together? The total segmentation study was, as I say, a study of an enormous undertaking, something like three thousand (3,000) interviews in total, a study of a sort that we carry out once every couple of years. The objective of these studies, essentially, is to define your smokers, define your competitive smokers and thereby to target your brands more effectively than would otherwise be the case. It's also very important for fleshing out the needs, the beliefs, the wants of your smokers and it provides some creative guidance to the advertising agencies. Now, in doing those interviews you spoke of, Mr. Hoult, do you interview people who don't smoke? No, this is a segmentation study of... I don't know that it's established, when he says: "Do you interview", that it was done by RJR-Macdonald or an outside agency. I don't know whether it's appropriate for Mr. Hoult to be saying how AUDIOTRANSCRIPT, Division de Pierre Vilaire & Associ~s Ltge

771 235 5 i0 15 2O 25 the interviews were conducted, unless it's first established that his company did it or he has direct knowledge himself. Me IRVING: Would you turn... THE COURT: As far as I understand it, that research was conducted by ABM Research Ltd. and not... Me IRVING: Yes, that's right. THE COURT: ... RJR. Me IRVING: That's correct, My Lord. Q - To your knowledge, Mr. Hoult, and I refer you to RJR-4, methodology, are the interviews and are these surveys done on the instructions of RJR-Macdonald? A - Yes, they are. Q - And does RJR-Macdonald give any instructions as to whether non-smokers are to be interviewed? A - Yes, it's part of the overall planned brief, so-called, and this is checked in various ways that that brief has been followed. The most reliable method is that some ten percent (10%) of the samples are called back on by supervisors to insure that those instructions have been AUDIOTRANSCRIPT, Division 4e Pierre Vilaire & Associ~s Lt4e

772 236 i0 15 2O 25 Qu A - Yes, it is. Me IRVING: followed. Do you give instructions concerning interviews of smokers or non-smokers? Yes, as part of the overall brief. The instructions are this is a study of the cigarette smoking market and therefore cigarette smokers only. Is that reflected, Mr. Hoult, in exhibit RJR-4, at pages three (3) and four (4)? Yes, on page three (3). At the top of page four (4) of RJR-4, My Lord. THE COURT: Page four (4)? Me IRVING: You will see the passage to which Mr. Hoult is referring. Q- Does your company ever carry out surveys for purposes of preparing advertisements, Mr. Hoult, which involve non-smokers? A- Absolutely not. Q- Now, I'm sorry, I'd interrupted you. Could you go back to describing, in general terms, the purpose and nature of this report, which is Tab 3? A- Yes. This is a study which in some form or other is conducted at long but regular intervals, one (i) to two AUDIOTRANSCRIPT, Div~,~on de Pierre Viloire & Associ~s Lt~e

773 237 i0 15 2O 25 (2) years. It's a way of monitoring the market and how it evolves. It is a method whereby the market of cigarette smokers is divided into groups or segments and these segments form the basis of our market targeting of our brands versus competitive brands. Now, I see different kinds of segments in this report. If we look at the page immediately following the pie-chart, there is a page entitled, "RJR MI Representations Within Family Segments." Yes. What segments are those? These are segments which result from an analysis of consumer attitudes and beliefs about different brands, where they group the brands together in terms of some form of similarity that they see these brands have. And in this particular study, the brand families, Export family with all its line extensions, for example, were grouped with their competitive brands in the marketplace. Right. So when I see on that page, "Segment One"... Yes. ... is that a reference back to the segment one we looked at yesterday in the -- in tab i, Segment One Cigarettes? Yes.

774 238 i0 15 2O 25 Om Am Om Am Om Am All right. So that's one kind of segment, cigarettes themselves? Yes. And if we go two (2) pages further on, which would be page two two seven six (2276), My Lord. The heading there is "Tobacco Graphics." would you tell the Court what that is, please? Yes, this word is a summary word of people's attitudes towards cigarette smoking as reflected by their responses or answers to a large number of attitudinal statements, and typically the respondent will be asked to say whether he or she agreed or disagreed, strongly agreed, strongly disagreed or had no opinion at all. All right. And are some of those questions shown on the next page which is twenty-two seventy-seven (2277)? Yes. As a result of that particular exercise, their answers were grouped into like responses. In other words, are there any broad attitudinal areas that cluster together that tell us a little bit about how this market is fragmenting. Now, the first page under tobacco graphics shows that five (5) groups of smokers were identified. Are they the groups which begin at page twenty-two seventy-eight (2278)? These were the groups that the agency recognized emerged AUDIOTRANSCRIPT, Division de Pierre Vilolre & Associ6s Lt6e

775 239 l0 15 20 25 and, as such, the agency combined the answers to all those attitude statements to give rise to these five (5) consumer segments; cigarette smoking consumer segments. Q- Now, the first group on page twenty-two seventy-eight (2278) is called experimenters and so on. Whose words are those? A- All these descriptions are the descriptions of the specialists working in the market research agency. Q- Now, we go on to page twenty-two eighty-one (2281). Your Lordship is looking at ostriches, perhaps? THE COURT: Yes. Me IRVING: Q- At page twenty-two eighty-one (2281), there is number three (3) which is called, "Psychographics." And, again, could you just explain in general terms to His Lordship what that represents? A- Yes, in contrast to those attitudes I've just described, which were specifically related to smoking, these are more general attitudes to life and to lifestyle and describe the individuals rather more fully than specific interest in tobacco. Q- And if we go over then to the next page, which is twenty-two eighty-two (2282), do we find the six lifestyle segments which are referred to on the previous AUDIOTRANSCRIPT, Division de Pierre Vilaire & Asso¢i~, Lt~e