Outlines 1990 marketing plan for Cambridge. Includes executive summary, details of current status, objectives, strategies and budget. Provides data for Cambridge's current volume and market share. Details objectives as increasing unit volume sales, increasing volume in military outlets, outgrowing all other price/value brands in market share, preventing any dilution of Cambridge's low price USP by competitors, evolving "long-term value-added brand positioning while reinforcing Cambridge position as pricefighter", building "big brand" popularity through frequent and high profile retail promotions and so on. States that in order to achieve its 1990 objectives Cambridge "must receive strong marketing and salesforce support" since a strong retail presence is deemed critical. Also suggests raising advertising spending, high value couponing, event sponsorships and consumer promotions (bowling). Recommends the use of $3.00 instead of $2.00 coupons currently budgeted for, in order to maintain a competitive price point. Provides data for additional spending requests. Exhibits include: outstanding Cambridge Trading Areas; Cambridge Media Plan; details of Cambridge Bowling Sponsorship; 1990 Promotion Schedule; Coupon Solution Program; Competitor Media Spending by Brand, Cambridge, Doral and Industry Demographics and so on.
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1990 MARKETING PLAN
~ SEPTEMBER 8, 1989 1~
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TABLE OF CONTENTS
EXECUTIVE SUMMARY ................................. P.1
CURRENT STATUS ...................................... 4
- PACKING PERFORMANCE
- REGIONAL PERFORMANCE
- TRADE CLASS PERFORMANCE
o THREATS AND OPPORTUNITIES
OBJECTIVES .......................................... 13
STRATEGIES .......................................... 15
BUDGET .............................................. 20
ADDITIONAL SPENDING ................................. 25
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Change '90 vs. '89
1988 1989 1990 Units Percent
Actual 2RF Plan
Lights 5,962 7,294
Ultra Low 1,486 1,883
TOTAL 9,769 12,244 13,843 1,599 13
Share (%) 1.8 2.3 2.7 0.4 pts 16
Total Direct Marketing
~ This Plan is about maximizing volume and share. That primary
objective as not changed since the writing of the '88 Plan two
years ago. To the degree that Cambridge will continue to focus
single-mindedly on maintaining low price leadership while
pursuing a value-added positioning, core programs recommended for
1990 are simply an extension of the brand's current strategy.
Cambridge's year-to-date volume through July '89 was 27% greater
than it was during the same period last year. According to
Nielsen, Cambridge's 12mm share growth through June was the
fastest of any low price brand, with consumer share rising about
0.8 points to its June level of 2.8%. Cambridge is now the 14th
largest brand in the cigarette industry compared to 16th last
year and 23rd in '87. As a result of the brand's strong
performance ytd '89, full-year volume of 12.2 billion units is
expected to be 150 million units greater than Original Budget and
2.5 billion above '88.
The ambitious 1.6 billion unit increase forecast for 1990 will be
more difficult to achieve than gains during the two previous
years. A maturing price/value category with an accelerating
number of new entries, coupled with the combination of ever
increasing inventory requirements and restrictive merchandising
space, require that the Corporation provide a strong commitment
of financial and PPP resources in '90. This same commitment in
'88 and '89 allowed Cambridge to focus on the formula that has
is been so effective to date, namely frequent promotions made
possible by strong field support.
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The brand must address several key strategic needs during the
~ plan period to_maintain aggressive gains:
o Cambridge-will raise ongoing carton coupon values from 75%
$3.00/25% $2.00 during 1H'90 to 100% $3.00 in July. This
will accelerate overall category growth while limiting the
price positioning options for new competitors including
o In a related issue, the brand must continue to evolve its
"low price plus value" positioning to insure a longer-term
U.S.P., particularly if key competitors follow Cambridge's
lead in aggressive couponing. Three national carton
promotions have been developed to address this issue.
o The brand must redouble its efforts to strengthen in-store
presence and visibility with an emphasis on implementing a
viable alternative to the traditional AV units as the
price/value category increasingly moves to in-line fixtures.
o A top priority will be the aggressive pursuit of share gains
in Regions 3 and 5 where Cambridge remains underdeveloped
and faces the threat of "lock-out" share by Doral in many
There are several specific programs which differ from last year
~ in that they are more focused to increase effectiveness.
Following are some examples:
o Cambridge will introduce the use of an automated coupon
dispensing program at check-out in supermarkets (named the
Coupon Solution) to guarantee ongoing trial among specific
competitors including Winston and Doral in select markets.
This program offers the additional advantage of requiring no
salesforce involvement (compared to CIPs).
o The brand plan for Regions 3 and 5 is much more extensive,
targeted and tactical to guarantee results in 13 key
markets. Important slow growth markets in Region 2 will
also be targeted.
o To reinforce its value positioning, Cambridge will be the
first low price brand to use 3-ply on-carton coupons which
provide consumers with a wide range of manufacturer
rebates/free gifts/free meals in addition to the standard
price-off coupon. This innovative coupon will be introduced
to consumers through a promotion but may also be used on an
ongoing basis as a replacement for the current 2-ply coupon
at little incremental cost.
o The bowling sponsorship test initiated during the 2H'89 will
be expanded at marginal incremental cost to provide for
_ year-round coverage, extensive sampling among a target group
' of 400,000 bowlers, and retail overlays to build volume.
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o Cambridge must maintain a media presence commensurate with
other key_price/value brands. In addition, a new
advertisiag campaign will be implemented during 1Q/2Q.
Accordingly, media spending will increase from $5.6 million
in '89 to $7.7 million in '90.
Cambridge's point-of-sale orientation will require strong
marketing support in 1990. This focus, which features frequent
in-store pack and carton promotions, maximum carton couponing and
targeted media, is reflected in the 1990 marketing mix. Ongoing
carton couponing ($89 million) and retail support ($X million),
both prerequisites for competing effectively in the price/value
category, will collectively account for X% of the total Cambridge
budget. This ongoing "baseline" support must be complemented by
new marketing programs which insure long-term brand growth by
building awareness, providing additional trial opportunities,
reversing geographic weaknesses and broadening Cambridge's
The 1990 Plan calls for a market share increase of 0.4 points to
2.7%. Strong unit gains and improved per thousand profitability
will drive total marginal contribution up X% to $X million. DME
per thousand is budgeted to decline again in '90 from $X to $X,
resulting in net contribution of '$X million or $X per thousand
compared to $X per thousand in '89.
The volume and profit numbers cited above reflect "base" Plan
spending of $124 million. However, as discussed in the Plan,
Brand strongly recommends the use of $3.00 rather than $2.00
coupons in '90 to maintain a competitive price point.
Implementation of the more realistic and aggressive ongoing $3.00
coupon scenario, coupled with its implications for other coupon
related programs, would raise total brand controlled spending by
$50 million to $174 million.
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The following analysis of Cambridge's performance is based
primarily on exhibits contained in the Appendix.
Cambridge continues to demonstrate its ability to maintain
aggressive gains despite increasing competition in the
price/value category. During the 12 months ending June '89,
over 15 brands (22 packings) were introduced or repositioned
in this growing category. Cambridge, however, remained the
single fastest growing low price brand, with consumer share
rising 0.8 share points versus Doral's 0.6 gain.
Cambridge has experienced two periods of strong growth
during the last year which have reconfirmed the brand's
responsiveness to promotional support. In the third quarter
'88, the Summer Blitz Distribution Drive was coupled with
$0.25 off pack/$2.00 off carton consumer offers, a retail
Bonus Reserve Program, key market support on the B-rack and
new front counter BV displays. This first growth period
pushed Cambridge's shipment share from 1.6% to 2.0%.
Focusing on a value-added promotion strategy for '89, the
brand then launched the Value Shopping Network in April
which increased share to its current 3mm running rate of
Cambridge's share of the price/value
by 2.6 share points in the last year
category also increased
and this progress is
(MSA, 12mm thru
Cambridge's Share of
of Total Industry
1989 1988 1987 1989 1988 1987
Full Flavor 4.0 3.0 0.6 0.6 0.3 0.1
Lights 9.4 8.4 6.5 1.2 0.9 0.6
Ultra Low 2.5 1.9 1.1 0.3 0.2 0.1
Total 15.9 13.3 8.2 2.1 1.4 0.8
o Packing Performance
Cambridge Full Flavor continues to provide the brand with
strong growth, representing one-third of family gains for
the 12 months ending June '89 vs. the prior period. Volume,
split evenly between 85's and 100's,.represents one-quarter
of total family volume. Both packings have developed
regionally in line with the total family, with strongest
share growth coming from Regions 5 and 6.
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Cambridge Lights, representing 60% of total brand volume,
continues -its strong growth, up 1.6 billion units or 33%
versus same period last year. Despite the Alpine launch,
the menthol lights packings combined (+28% ytd June) are
growing at about the same rate as the regular lights
Cambridge Ultra Low represents 16% of total family volume,
is the third largest Cambridge packing nationally and ranks
second in Regions 1, 4 and 6 despite low distribution
relative to Full Flavor and Lights in all trade classes.
Given Ultra Low's increasing contribution to total Cambridge
sales and the packing's big distribution gains during the
last year (20 points vs. 8 for the balance of the family),
Ultra Low remains a key growth opportunity for the
o Regional Performance
Cambridge's share of the price/value category increased in
all Regions during the last year, as shown in the table
below. However, the brand remains underdeveloped throughout
Regions 3 and 7 and in pockets of Region 5. Regions 3 and 5
are particularly critical to Cambridge's future growth since
they are the largest contributors to price/value industry
volume. Region 3 is also the greatest source of competitor
full-price volume including Winston:
Cambridqp's Share of Price/Value Category by Region
12mm thru 1 2 3 4 5 6 7 Nat'1
Full Flavor 3.5
Ultra Low 2.4
Change vs. '88 1.0
% Cambridge Vol. 6
% P/V Ind. Vol. 7
3.7 4.5 5.1
10.6 9.5 10.9
2.8 2.8 3.5
17.1 16.8 19.5
2.6 2.6 3.8
18 19 15
16 18 12
Cambridge's performance in Regions 1, 2 and 7 is
significantly below total national share growth. As a
result, targeted promotions (developed with local sales
management) were launched during the 1Q'89 throughout Region
1 to counter encroachments by Magna and during the 2Q in
Section 24 to guarantee higher ongoing visibility in key
accounts using more effective merchandising displays. It
should be added that Cambridge's share is nearly equal to
that of Doral in Region 1 where price/value is least
developed as a category. In Region 7, a comprehensive
California tax response promotion was executed in Jan./Feb.
to capitalize on potential share gains. Cambridge's share
in California increased 0.6 points to 1.6% as a result of
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Closer analysis of Cambridge's progress within all regions
reveals 8_trading areas (vs. 4 last year) where Cambridge's
share exceeds that of Doral, 29 markets (vs. 13) where share
is at least 3% and 35 (vs. 13) where Cambridge is now the
second or third largest PM brand (see Exhibit I).
o Trade Class Performance
An integral part of Cambridge's mandate is to "catch" Doral.
Therefore, Cambridge's trade class performance is best
measured using the two brands' consumer share gap.
Nationally, this gap is now 1.5 share points. Cambridge's
share is also close to parity with Doral in Regions 1 and 6.
Doral-Cambridge Regional Share Gap by Trade Class
(Nielsen, 6mm P/V Cat.
1 2 3 4 5 6 7 Nat'l Vol Contrib.
June, pts.) (~)
Chains +$2MM 0.6 1.6 2.5 0.6 2.8 1.3 0.9 1.6 42
Indep. +$2MM (0.4) 1.2 3.2 1.6 3.2 (0.5) 1.2 1.5 23
Chains -$2MM 0.4 0.7 2.4 0.3 2.7 (0.5) 1.2 1.4 12
Indep. -$2MM (0
) 1.6 3.2 0.3 3.0 0.3 1.2 1.6 23
1I0.2 1 1.4 2.7 0.9 2.9 1.1 1.5 100
Cambridge's performance in supermarkets, which contribute
about two-thirds of price/value category volume, remains
significantly below the national average in Regions 3 and 5
(chains and independents). This is partly attributable to
the brand's weak/lack of presence in key supermarket chains
including Winn-Dixie and Kroger.
However, Cambridge demonstrated its ability to successfully
focus on 300+ CPW outlets in '89 with the Value Shopping
Network promotion. According to Nielsen, the brand's
largest share gains during the program were in supermarket
chains where the brand gained 0.4 share points compared to
0.2 nationally. The Big Bonus Coupon Book promotion
scheduled for Oct./Nov. '89 also emphasizes higher volume
outlets. Overall, Cambridge must continue to focus its
retail thrust on supermarkets.
Cambridge's performance has improved dramatically in
convenience store chains. Whereas the share gap versus
Doral of 1.7 points last year was significantly higher than
the national average, it is now below the national average.
The Summer Blitz Distribution Drive in 2H'88, coupled with
the implementation of customized programs for key chains
during 2H'88 and '89 (i.e., 7-11, Emro, Coastal Mart,
Sheetz) have provided significant merchandising/distribution
gains. Cambridge's Nielsen distribution rose by 16 points
in convenience chains (12mm thru June) compared to a 10
point gain for all trade classes combined. Convenience
chain out-of-stocks also improved, falling from 6% to 4%
over the same period.