Report to Headquarters from Robert F. Kohl. Describes marketing conditions for various brands & results on marketing of test brands. Describes competitors' activities: promotions, couponing, etc. Describes goals, volume sales & SOM for Plan A accounts, & notes on other Plans as well. Other programs & actions also mentioned briefly, subdivided by wholesalers, vending, retail grocery, convenience/gas, etc. Some political info too (Governor's race in KY, Indiana Senate Bill 144 & 115); proposed Louisville Sign Ordinance, and info on events for other companies in Indiana: Layoffs at RCA, factory closures for Chrysler & Zenith, new Isuzu plant. Mentions PM's giveaway of Marlboro Country Music Cassette.
Follows format similar to 2043944793/4802 & 2043944259/4271
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Robert F. Kohl
January 20, 1987
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I Marketing Conditions
New Philip Morris Brand - Player Lights 25's 1 x 10
Independent distribution continues to improve as
penetration currently stands at 85.8%. Acceptance continues
to remain at 100% for management accounts. We continue to
find sales movement soft due to our inability to coupon
against on-going Richland and Century on carton coupon
activity. Additionally, moving Players from AG/AV fixtures
to carton fixtures has had an adverse impact on sales.
However, on the positive side, Cambridge inventory has been
expanded resulting in increased sales.
Brand continues to perform exceptionally well in
Section 42 as evidenced by the November share of 1.74 versus
the current three month average of 1.50 Both figures
outpace national shares by significant amounts.
Audits and work-withs continue to reveal excellent
distribution and inventory levels. While we are beginning
to see some brand loyalty, movement remains largely
dependent on couponing. RJR continues to heavily coupon
Recent shipments of Cambridge two for one units aided
brand momentum. We would like to see additional Cambridge
two for one shipments to insure continued brand growth.
December customer analysis report shows that Section 42
achieved a 1986 unit increase of 5.0% year-to-date versus
our +3.5% objective. While Cambridge and Players Lights
played an active role in our increase, Marlboro (+2.7%) and
Virginia Slims (+3.0%) continued to perform well.
December sales figures contributed significantly to our
1986 gains as we were up 9.2% for the month. Obviously,
this increase in large part was due to our price increase.
In anticipation of our price increase, distributors load in
product taking advantage of their 150% allocation.
Additionally, the buy-in period also affected December
All marketing areas experienced good gains with the
exception of Louisville Sub. Breakdown by market is as
follows: Fort Wayne - South Bend (+5.5%), Indianapolis
(+6.3%), Louisville Sub (-5.0%), Evansville Sub (+2.7%), and
Lexington Sub (+4.3%). Obviously, Merit and B & H declines
hindered Louisville Sub sales efforts.
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Through November, our current three month volume gain
versus a year ago was 5.47%. This contrasts with an
industry decline of 1.82%. Both figures outpace national
Due to load-ins and our price increase in December,
distributors are attempting to work out excess inventory to
retail. Currently, distributors are holding approximately
three weeks of inventory which will result in soft January
Unemployment in Kentucky is 7.9% versus 10% a year ago;
Indiana unemployment is 6.2% compared to last years 6.7%.
In Kentucky, Larry Forgy, the Republicans only hope to
capture the Governor's office, has withdrawn from the
Governor's race. As a result, the winner of the Democratic
Primary is almost assured a victory. Current front runners
are former Governor John Y. Brown and Lieutenant Governor
In early January, House Leadership in Kentucky changed
resulting in additional power for Speaker Pro Tem
Worthington. Worthington is an advocate for increased
tobacco taxes and is now considered the swing vote in
In the Indiana General Assembly, Senator Patricia
Miller introduced Senate Bill 144 which would require
designated non-smoking areas in all public places. Senator
Virginia Blankenbaker also sponsored S.B. 115 which would
prohibit people from giving away tobacco in public places as
part of a promotional effort.
RCA of Bloomington, IN is laying off 270 hourly
employees. This will bring their employment to 2,300.
Chrysler Corporation of Indianapolis will decide in
March whether to close their electrical plant which employs
Zenith will close one of its two cabinet making
factories in Evansville that will lead to the loss of 265
Lafayette, IN has convinced Isuzu to build a plant that
will employ 1,700 people by 1989, and an additional 1,500 by
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II Major Competitive Develo ments
.Pall Mall 25's continue to do poorly at all levels.
.Company continues to allocate the majority of their
time to couponing all product.
Brown & Williamson
.Continue to place heavy activity on Richland. Product
is being couponed at $1.00 off across the Section with high
volume package outlets featuring buy one get one free.
Brand performs at its best when featured on "Value Centers".
.Sales force continues to allocate much of their sales
time to working generic products. As a result, full priced
brands visibility has decreased and inventory/distribution
Liggett & Meyers
.Company continues to place $2.00 off coupons on all
product. Movement is extremely slow.
.Rumor is that L & M will offer a larger value center
fixture later this year to high volume accounts.
.Couponing continues to remove marginal sales product
at retail. Representatives will pull all stock that does
not sell and request order clerk not to reorder. As a
result, return goods have increased as much as 400%.
.Rumored that sales force is paying retail .15 per
carton to coupon product. Sales Rep. takes inventory in the
account, furnishes coupons and retailer stickers.
R. J. Reynolds
.Company is now working new carton payment program
paying per row on incremental volume levels. Program is as
Volume $ Per Row Maximum Rows
100-199 .60 46 Rows
200-299 $2.00 66 Rows
300-499 $2.60 120 Rows
500+ $3.00 120 Rows
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It continues to remain unclear if account is paid for
"equivalent 5 high rows". At this point, activity has been
minimal with no negative impact on PM to report.
.They are placing 90-120 carton floor bins for Camels,
Winstons, and Salems with $2.00 off instant coupons.
.RJR samplers passed out $2.50 off coupons for Salem,
plus $2.00 coupon packets for mail-in coupons in the
Anderson, IN market.
.They are offering a one time $50.00 bonus to gain the
third shelf on the Doral Value Centers. Payment is for 6
.Black and White packings continue to decline due to
the Cambridge and Doral success.
.B & W offering a $1.00 off immediate redemption
program for GPC's.
III Trade Classes
Area Managers standing orders for December were 37.6%.
They had 645 less cases on standing order compared to
November. PM volume in Section 42 was +4.6% for the month
Axton Candy and Tobacco figures for November had PM
with 32.57% of branded 20 packings, 14.88% of 25 packings.
Smith Harris will include a full line of grocery,
health and beauty aids to their operation in March.
Bowling Green Cash & Carry has doubled the size of
their warehouse. They now carry institutional items and
health and beauty aids.
J. Walker (Standard Tobacco) of Hammond, IN has
purchased M. A. Christiansen of Michigan City, IN. They
did not buy the vending portion of the operation. Direct
Distributors are preparing themselves for smaller IDP
checks. The written notice from our New York office is
working to our benefit. We will not shock them during the
CFM Distributors of Louisville have replaced Dale
Koenig with the old cigarette buyer, Terry Smith.
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Distributors inventory levels are very high due to the
recent price increase buy-ins.
D. G. Hayes, M. Livingston, Paducah Cash & Carry,
Bowling Green Cash & Carry, and Murray Cash & Carry, all
part of M. Livingston, have been sold to Miller and Hartman
Wholesalers of Lancaster, PA. They will keep the same
management and operations as in the past.
Vendors continue to complain that sales are down. The
three main reasons are pricing by the vendors, couponing by
manufacturers, and the increase in convenient operations.
Canteen of Anderson, IN is still on strike. They are
strongly considering closing this branch.
Coin Corners of Louisville, KY (60 machines) sold their
operation to Kentuckiana Vending of Louisville, Kentucky.
Bertsch Vending of Warsaw, IN with three branches and
153 total machines is considering our Datavend reporting
Nothing new to report.
We have signed new Plan A contracts with Marsh
increasing PM rows as follows:
3 stores - 84 rows
2 stores - 68 rows
7 stores - 76 rows
36 stores - 66 rows
23 stores - 72 rows
This new agreement will definitely help our inventory
levels with this key chain. We now have an average of 69.7
rows per store with Marsh.
Rogers Markets of Fort Wayne, IN, 11 stores, have a new
buyer. Roy Hill has retired and Dave Rogers, one of the
sons, is the new buyer. This could be an opportunity for PM
carton and package fixtures, or at least more space on their
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The President of Preston-Safeway of Indianapolis, 7
stores, has resigned to join Associated Wholesale Grocers in
Kansas City, Missouri.
The Louisville Kroger Division has hired 100 new
employees due to the reorganization of their Accounting
Department and consolidation of divisions.
Kroger of Louisville has one financial center in a
Lexington, KY store with plans for three additional
operations during 1987. It's called "Capitol Holding
Corporation" and will offer financial services and life
insurance. The Kroger general offices will repurchase
5,000,000 of its common shares with proceeds from the sale
of 662 Hook and Super X stores.
Sureway Foods of Henderson, KY has sold three of their
16 stores. Sureway is owned by Malone & Hyde and the rumors
are that Malone & Hyde are planning to sell all of their
Handy Andy, 8 stores, of Marion, IN has signed our BV
agreement with all stores for self service positioning.
C & C Oil of Huntington, IN, 8 stores, have our M-4
with add-on modules in prime position and BV displays. The
placement of low profile M-4 units in Village Pantry is
almost complete. We are getting very strong support from
Village Pantry's headquarters to make this a successful
Our PM carton fixture test with JR Foods of Bowling
Green, KY, 44 stores, is going very well. We could secure
fixtures with all 44 stores by the end of 1987.
Super America is promoting pride in Kentucky. The
slogan is "Kentucky is my Land".
The Conna Corporation plans a reorganization in
February. This will include the Tobacco Merchandiser.
Emro Marketing has authorized our Marlboro Country
Music A-i. They will participate in the 300 carton unit in
many stores. This results in 45,000 extra cartons of
The new Hook-Super X Company has purchased 662 stores
from Kroger. Kroger has agreed to sell 115 of its remaining
169 stores to Rite Aid Corporation. Rite Aid will also
purchase the Kroger Peyton operation in Melbourne, Florida
as a distribution center. Kroger continues negotiations for
sale of the remaining 24 Super X stores in Alabama and
Georgia as well as 30 in Arizona.
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Kroger will expand its 28 Florida Food Drug combination
stores, renaming them Florida Choice.
We will attend People's District Manager meeting this
month. Our presentation will be to expand our Plan B test
with this 116 store chain.
Judd Drugs of Elkhart, IN has signed an exclusive M-3
or M-4 counter display agreement in prime position in all 8
Financially troubled Danners, Inc. of Indianapolis, IN,
35 stores, is turning over 17 of its 3-D Discount stores in
Indiana to the owners of Big Lots Discount stores of
Val Corporation of New Castle, IN, 12 stores, is
considering PM M-4 displays for all stores.
Rock Island Marketing of Indianapolis have been shipped
our custom made Marlboro Gas signs, and installation should
be completed by the middle of February.
Clark Oil is thinking of replacing our AG fixtures with
our AV fixtures. This would allow them to also place RJR
Value Fixtures and maximize their payment.
United Package Liquors of Indianapolis, IN will open
their tenth store during the next two months.
RGP's and Area Managers continue to monitor return
goods throughout Section 42. The majority of our returns
continue to come from vendors.
IV Key Accounts
Board Of Alderman Meeting
December 16, 1986
In the company of Philip Morris Louisville Manufacturing
Public Relations Manager, Dan Ison, I attended a hearing on
the proposed Louisville City Sign Ordinance. We made
statements to the board voicing our concern on the ordinance
restrictions against outdoor advertising and its potential
negative impact on city retail businesses. While we
anticipate some degree of restrictions, Dan and I do feel
major restrictions effecting our placement of POS can be
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removed from the bill. Both Mr. Ison and myself will
continue to monitor the ordinance activity and will follow
through as necessary.
V Merchandising Programs
Carton Merchandising Programs
We continue to make progress towards building larger
cigarette carton departments as we are averaging 70.0
contracted rows in all extended accounts. We are currently
in the process of establishing 1987 objectives at all
levels. As stated under competitive activity, it is too
early to determine the impact RJR's new contract will have
on our operation. We will closely monitor RJR's activities
and keep all levels advised.
This period, we have increased our fixture rows with
Marsh Supermarkets by 94 rows. We now have an average of
69.7 rows per store. This will have a positive impact in
the Indianapolis trading area.
Eligible High Volume Plan A Accounts (300+ CPW)
30 # of unsigned accounts.
Account Name City/State # Stores Status
J. C. Groub Seymour, IN 24 Will convert select
stores to new fixtures
with PM signed to Area
Of Choice in the 1st
quarter. We are
currently making plans
to move above the buyer
on presentations for
The Marlboro Country Music Cassette A-1 for the January
sales cycle has been well received by both chain and
independent accounts. This promotion appeals to Section 42
consumers and we have received many favorable comments.
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We continue to monitor accounts participating in this
plan closely as they are vulnerable to RJR flex fixtures.
Again, we will continue to evaluate RJR activities in these
accounts using their new January contract.
Pack Counter Merchandising Program
Penetration continues to be at above 30% in all
accounts. Prime position and add-ons continue to be a top
The presentation to expand the B display test with
People's Drugs will be given this month.
The placement of our low profile M-4 units in Village
Pantry, 160 stores, is close to completion.
Judd Drugs of Elkhart, IN, 8 stores, have signed an
exclusive M-3 or M-4 with prime position agreement.
We continue to place units at locations where we will
receive a payout. This unit provides an excellent
opportunity to increase Cambridge package sales in
This display continues to offer effective merchandising
opportunities for Marlboro 25's & Player 25's. However, we
continue to experience some non-compliance situations due to
the units "temporary" appearance. We continue to work-with
accounts to correct all compliance problems.
Due to redeployment, we now have 113 contracted
accounts participating in this agreement. We will continue
to identify opportunities and follow-up on presentations.
Section 42 vending placements by family for year end
1986 are: Marlboro - 1,795, Merit - 907, B & H - 623,
Virginia Slims - 454, and all others 112. Total vending
placements for year end 1986 are 3
As of 12-31-86, we had 35 vendors participating in our
DataVend program, with a total of 2,934 machines. -r~