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Marlboro Marketi\g Plan/Original Budget 1988 October 1, 1987 CONFIDEMTIAL 025590

INDEX ~ ) Fxecutive Summary II) 1987 Objectives Update IIS) rrent Status ~G IV) Key ssues V) 1988 rketing Objectives Ce- VI) SpendingNBeview l- ) VII) 1988 Targetkn VIII) Program Area - Produ Pac agi - Creative J- Media - PPP - Consumer Incentives/%tail" - Event Promotion - Permanent P0S - Sampling - Direct Mail - Couponing - Research/Testing - Trade - Militarv - Image Extension IX) 3rd Revised & 1988 Preliminary ForeXast Detail/Contribution Analysis X) Tables 1) National Share and Share Change 2) National Volume and % Change 3) Share and Share Change by packing 1985-\987 4) Volume and % change by packing 1985-198 4A) Volume and Share Trend Charts 5) Marlboro Liqhts annualized growth rates bv NCegion 6) Marlboro SOC bv package 1985-1987 7) Nielsen Market Share 8) Nielsen Share of Inventory 9) Nielsen Share of Visual Inventory 10) Demographic profile 1986-87 11) Smoker Shares 1986-87 12) Competitive Share of Market 13) Competitive Share of Category 14) Competitive Share Trends CONFIDENTIAL 025591

15) Outswitchers 16) Region 5 Marlboro Market Data 17) Market Data by Region 18) Region 3 Marlboro Market Data ) 1988 Key Market List 2 Marlboro Share of Advertising 21) Competitive Share of Advertising 21) Marlboro Media by Vehicle 23) arJ_boro Share of Advertising by Medium A - Marlb B - Mar lho Mc C - Marlbor D - Marlboro E - Product P Menthol Plan Menthol CPC Document Sports Illustrated Calendar edia Plan motion Plan F - Marlboro Ed nt Promotion Plan XII) Budget Summaries 1) 1988 Budget Ov'krview 2-2A) Marlboro Media 3) Temporar_y/Perman t POS 4) Marlboro Belt Buc e Incentive 5) Marlboro Trail Atla In.centive 6) Marlboro Lighter Inc ntive 7) Targeted Retail Promo ons 8) Marlboro Country Music rograms 9) Marlboro Motor Sports P grams 10) Marlboro Hispanic Progra 11) Marlboro Target Marketing 12) Marlboro Ski Challenge 13) Intercept/Sampling And Direc,5%,Mail 14) Testing/Research 15) 1988 Marlboro Menthol Budget 16) 1988 Budget Reserves a) Media b) Event Promotions Subjects CONFIDENTIAL 025592

CONFIDENTIAL 025593

BRAND MARLBORO MARKETING PLAN Volume OCits MM) Marlboro d 69,707 Marlboro 10 's 16,472 Marlboro Lig ts 46,699 Marlboro Ment 1 1,307 Total Marlboro 134,185 3rd Rev. 1988 1988 vs. 1987 1986 1987 O.B. Percent Share Marlboro Red 11 98 Marlboro 100's 2. 3 Marlboro Lights 8.0 Marlboro Menthol .22 Total Marlboro 23.06 Spending - $MM 230.0 $/M units 1.71 EXECUTIVE SUMMARY bd ,yiu bd ,LyL -b/~i - l.u'~ 16,020 15,577 -443 - 2.8% 49,265 51,649 2384 + 4.8% 1,300 3,312 2012 +154.8% 135,555 138,830 3,275 + 2.4% 12.21 12.31 + .16 + 1.3% 2.84 2.82 - .02 - 0.7% 8.72 9.36 + .64 + 7.3% .23 .60 + .37 +61.7% 23.99 25.15 +1.15 + 4.6% 0 2 361.9 +97.9 37.1% ~ 95 2.61 + .66 33.8% Executive Summary 1988 share projection for Marlboro is 25.15, reflecting a +1.15 increase versus 1987. Forecast volume laces the Brand up +4.3 billion units to 138.8. Share gains ar forecast for the Brand each year into the 1990's. A marketing budget of $362MM in 1988, an in rease of $98MM versus 1987, reflects two major increases - investm t spending behind Marlboro Menthol (Q60MM) and significant reta support (payment) increases (+$34MM). Net contribution is also projected to grow $237MM to $2,711MM or $.66 to $2.61 per M. Linked to increased marketin support, 1988 net contribution gain versus 1987 will slow to +9% rsus a +16% change 1987 to 1986. Currently Marlboro is performing ahead of 1986 YTD in b th volume across all key demographic groups across all regions and ross V-t all trade channels. This performance indicates franchise h alth, ~ a valid overall positioning and competitive marketing strate ies. ~~ ~~ The marketplace is changing, however, and Marlboro has shown ~~ vulnerability to increased competitive pressure. In any given -.~ twelve month period, Marlboro gains momentum and loses it. The challenge for Marlboro in 1988 will be to regain the momentum we are likely to lose during the second half of 1987 and sustain it. CONFIDENTIAL 025594 _r_ (+1.0%) and share (+1.0). Share strength is across all ckings, cloe~)

To achieve these forecasts and goals, we will adopt a national plus targeted marketing strategy for Marlboro. National programs will be fielded against the overall objective of sustained share growth. We plan to heavy up key programs geographically to accelerate our growth short term. Key opportunity markets have been identified to deliver maximum short term volume while also building long term share. Media and programs which feature Red, the Brand's foundation, will continue to dominate the plan in 1988. A significant increase in outdoor will provide additional impressions behind Red. Package outlets will receive the bulk of Marlboro support as they contribute over 60% of Marlboro volume. EpNFIQENTIAL 025595

GT=OQ~~If©g 1987 Objetives Update J Q H ~ co zm w to o~n H N LL O z Q U

1987 Marketing Objectives Update Volume: 134.6 billion - will exceed by 1.0 billion units Share: 23.6 - will exceed by 0.4 share points Reverse Red share decline in Regions 5, 6, 7 - currently up in Regions 6, 7 Restore Lights momentum, especially Regions 3-7 - increased growth rate Regions 2-6, slowing slightly in Region 7 Build total and visual inventory nationwide - gaining Increase absolute and share of visual inventories chains - $ 2MM - gaining Increased share of competitive switchers - increased from 12% to 14% in 1986 versus 1985 - 1987 data not yet available Maintain high trial rate - 72% of all smokers have tried Marlboro - special tracking module will measure 1987 performance. Increase share of menthol category - SOC up +.11 to 2.65 for original Marlboro Menthol - Objective anticipated a 1987 Lights launch Assess impact of increased 25's support - 25's sales increase when displayed, but no measurable net to brand Determine effect on Marlboro of perfect retail environment and continuous promotion plan - MIST Phase I yielded following retail gains: +26,000 rows; 15,800 0-0-S eliminated; 4,640 distribution gaps closed; 25,000 incremental displays placed Share trend analysis requires longer term measurement CONFIDENTIAL 025597

Assess best means of reducing temporary outswitching First step financial liability test completed on carton offers Carton continuity offer included in 1988 plan Pack-based programs under development for testing in 1988 Will attempt to measure actual effect on consumer havior

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