Tobacco Documents Online

1631 1097 i0 15 2O 25 Am Qq Where are you now, sir? Number thirty-six (36). Hm, hm. Which shows competitive advertising... Right. ... dollars. That source of information, it's a public service that estimates advertising of various companies and it is -- it in no way relates to what we can figure as actual. Okay, so it's -- these are estimates. The reason it's used is to try to show trends, My Lord. Okay. Now -- okay, that's.., ga va. Thirty-eight (38), C.P.I., what is this? Consumer Price Index. With the reference here eighty-one ('81). Correct. Okay. T.P.I.? That's Tobacco Price Index, My Lord. And the tobacco price index, where does it come from? It's the price of what? That is from price information that we have from surveys across the country. I'm not sure if that's done by outside surveys as well, but it's a reference that we use on the average price of tobacco products. Of tobacco products? AUDIOTRANSCRIPT, oi,,i,loo ,~ Pie~e Vilaire & Associ6s Lt4e

1632 1098 i0 15 20 25 Am Am Om Am Tobacco products. And it's an indexed figure as well. Okay. At number forty (40), you have, if I read well, "Mlns", it's millions? Millions, correct. Tailor-made -- are those a type of cigarettes... Yes, My Lord. ... tailor-made? Fine cut, what is a fine cut? That's cut tobacco, cut cigarette tobacco, My Lord, that's used for roll-your-own cigarettes. Okay. Rollers, okay. You have the duty free. Okay, the exported cigarette volumes in millions, is that millions of cigarettes? Millions of cigarettes, My Lord. Are these Canadian cigarettes which are import -- exported? They're Canadian cigarettes which are exported. Yes, sir. Okay. At forty-eight (48), I assume this is the total trademark duty free cigarettes plus fine cut volumes? That is total of tailor-made, My Lord. Tailor-made. What did I say? Trademark. Ah, tailor-made, I'm sorry. It's tailor-made duty free fine cut volumes, My Lord. And fine cut volumes, fine cut is sold by weight, My AUDIOTRANSCRIPT, Division de Pierre Viloire & Associ~s Lt~e

1633 1099 i0 15 2O 25 5 Lord, and it is estimated, it's generally accepted that one (1) gram of fine cut would make one (i) cigarette. So that's translated into cigarette volumes. Okay. Okay, now I'm not sure what you're saying at fifty-two (52) to fifty-five (55). Well, in fifty-two (52), the percentage contribution... Tailor-made? ... of tailor-made cigarettes within industry as at number fifty (50). What do you mean by that, as at number fifty (50)? It'll take me a second. Is that the percentage of the volume? Just please bear with me a moment. It would be... Probably... It's the percentage -- it's a percentage contribution, the representation of tailor-made cigarettes within that, although it seems to me that that's low. Oh, I'm sorry. Total industry: eighty-nine percent (89%), so that's probably it. Yes, okay. That is correct. Yes. In other words, in nineteen eighty-nine (1989), Imperial Tobacco's tailor-made cigarettes would represent forty-seven point eight one percent (47.81%) of total AUDIOTRANSCRIPT, Divi,ion 4e Pierre Viloire & Associ6s Lt~e

1634 ii00 i0 15 20 25 cigarettes sold. Q- Okay. Now, let's move back to -- to page one (i). If I take the two (2) highest switching years, seven (7), switching rate, okay... A- Yes. Q- ... the two (2) highest switching years would be seventy-seven ('77) and seventy-eight ('78). A- Correct, My Lord. Q- Hm, hm. Me POTTER: And nineteen eighty-six (1986), My Lord. A- And nineteen eighty-six (1986), My Lord. THE COURT: Q- It's fourteen (14). Now I'm looking at... Me BAKER: I think you're at the wrong one, My Lord, because seventy-eight ('78) and seventy-nine ('79) appear higher. Me POTTER: No, we're in number seven (7), Mr. Baker, switching rate. Me BAKER: So am I in number seven (7) as well, Mr. Potter. seven (7) for seventy-seven ('77) is eighteen point two (18.2). Seventy-seven ('77) is fourteen point one Number AUDIOTRANSCRIPT, Division de Pierre V;Ioire & Associ~s L~'~e

1635 ii01 I0 15 20 25 (14.1). THE COURT: Seventy-eight ('78) is eighteen (18). Me BAKER: Yes. THE COURT: Seventy-seven ('77) is eighteen point two (18.2). Me BAKER: Oh, I'm sorry. I guess my glasses need to be... A- And eighty-six ('86), My Lord, is eighteen point seven (18.7). THE COURT: Q- Eighty-six ('86)? A- Eighty-six ('86). Q- Is eighteen point seven (18.7), okay. Now, I'm going back to seventy-seven ('77), seventy-eight ('78). Okay? A- Yes, sir. Q- You have an increase in the switching rate from seventy-six ('76) of four point one percent (4.1%). A- Correct, My Lord. Q- That was the year of the -- where you launched Player's Light... A- Correct. Q- ... seventy-six ('76), seventy-seven ('77). A- That was the effect of the launch of Player's Light. AUDIOTRANSCRIPT, Division de Pierre Vilaire & Associ@s Lt@e

1636 1102 5 i0 A- Q- A- 15 Q- A- 20 25 Now, if I look at the brands, major brand shares at thirty-five (35), number thirty-five (35), would it be correct for me to look at the increase of the market share from -- let's take Player's Light regular in seventy-seven ('77) from seventy-six ('76), was a one point four (1.4) increase. Would I be correct in saying that that one point four (1.4) increase would be reflected in the switching rates which I find at number seven (7)? It would reflect that. However, the switching rate is an annualized figure, My Lord. Hm, hm. And switching is-defined as switching within the past year, so there's a time lag in the information. Switching within the...? Within the past year. That's how we define it. In fact, the question is not asked about switching. It is: "What is your brand? How long has this been your brand?" and if they say a period less than a year, then: "What was your previous usual brand?" And that's what defines switching. So it could be someone who switched a month ago or it could be someone who switched ten (i0) months ago. So there is a time lag between switching information and actual sales results or share results. But in general, the trending is there. The switching AUDIOTRANSCRIPT, Division de Pierre Vi[oire & Associ~s Lt@e

1637 1103 i0 15 20 25 rate goes up and that's what -- that switching rate in eighty-seven ('87) -- or, sorry, seventy-seven ('77) and seventy-eight ('78) and seventy-nine ('79) generally reflects the switching to milder brands, most of which was started by Player's Light but by then, subsequently others came in. I'm not discussing as much as Light as the actual brand. Like I see here a big increase in the Player's Light. First of all, you start from zero (0) to one point eight (1.8), that's the launching. Correct. And then you have, in seventy-eight ('78), three point two (3.2) of the market. Correct. And then four point eight (4.8) in seventy-nine ('79) -- seventy-eight ('78), I'm sorry. If I look at all of the brands, I see -- and correct me if I'm wrong -- I see that most -- the largest increases of the market share are always with new cigarettes, new brands that are launched. That's correct, My Lord. Is that -- is there a correlation between the switching rate and the share market of those new brands? Yes, My Lord, there is. There is a correlation between the two (2)? AUDIOTRANSCRIPT, O~,,~,~or~ ae ~e~ V~o~,~ ~, A,,o:~, ~e

1638 1104 5 i0 15 20 25 That would -- the entrance of a new brand, such as Player's Light, would cause switching from other brands, as we demonstrated in the switching flow chart, but I point out that the switching rate is total switching. Total, yes. All brands. But we could... But the total will be reflected in specifics at one point... It will come from... ... because the... Yes, we can get switching rates on individual brands, all the people that switched to Player's Light in a given year, and where they came from. But, I mean, the global figure is an addition of all the specific... That is correct. ... switchers. Because I see here, for example, in Rothmans Special King Size introduced in seventy-seven ('77), you have point nine (.9), then one point eight (1.8). These are large increases in the share market. Matinee Extra Mild, point nine (.9) when it is launched. Number seven (7) is a lousy point one (.i). Export's Light regular, one point four (1.4) when it's launched and a year after, one point six (1.6). du Maurier Special, point five (.5). Vantage, point one (i) and AUDIOTRANSCRIPT, Di~i,io~ a~ Pierre Vila~re ~, A,so¢~s h,~e

1639 1105 i0 15 2O 25 one point one (I.i). These are large numbers in terms of share market. A- Yes, My Lord, they are. Q- Share market. A- May I point out -- I would just suggest or submit, on the first year of a market share, it could be that the brand was only in the market for a part of a year and so its volume for a half a year, if it was in the market for half a year, would be annualized. So the growth between the first and second years doesn't necessarily represent a total year to your comparison. But after that, it's year to year. Q- Okay, I see. THE COURT: I'm sorry. You know what they say, instead of keeping it inside, I'd rather ask. Me BAKER: Q- For purposes of clarification, Mr. Brown, when we read in an Imperial Tobacco advertising strategy document that a fifteen (15) year old is included in the target, does that mean that Imperial Tobacco is trying to target that fifteen (15) year old to get that fifteen (15) year old to purchase or not? A- Not specifically. Q- Not specifically. AUDIOTRANSCRIPT, D~,~o~ ,~ Pierre Vil~i,e & A,sod~s

1640 1106 5 I0 15 2O 25 It is the fifteen (15) to nineteen (19) year old reference, as I've explained, sir, is a grouping within the study and it's a reference... Right. ... as the youngest age block in the study. Now, you -- you used as a point of reference in terms of the demographics, Statistics Canada, because you said they grouped them that way, fifteen (15) to nineteen (19) for example, right? Correct. If Statistics Canada gave you the demographics on a year by year basis, then you wouldn't have to do that, would you? You mean individual age years? Yes, because wouldn't that be more significant? I believe they are available. I think the first break -- the first biggest block of -- reference block of Stats Canada is that -- I think you can get individual years. Precisely. So if you can get individual years, like all the fourteen (14) year olds and all the fifteen (15) year olds and all the sixteen (16) year olds and seventeen (17) and so on and so forth, the fact that Statistics Canada may do a little summary after nineteen (19), from fifteen (15) to nineteen (19), what's that AUDIOTRANSCRIPT, Oi~,i,ior, d~ P~,~ W~o~ ~. A,,o~i~, L,~