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IOnU°nl SECRET No.-3 -8-1 By- Y& zL 0eclassification i New Brands and Strategic. Research Report MDD 4185-42606 (CT 558-B AND C) __________________August_13, _ 1985 TO: Mr. A. T. Sterling Mr. R. F. McCarthy PROJECT XG FFLTNM 85 SP PROTOTYPE TEST FINAL REPORT COPIES TO: Mr. L. W. Hall, Jr. Mr. E. J. Fackelman Mr. J. D. Weber Ms. M. H. Parhain Mr. H. T. Parks Mr. W. R. Cook Ms. R. S. Turlington XG Fact Book MDIC FROM: Ms. M. A. Albert PUBLISHED BY THE MARKETING DEVELOPMENT DEPARTMENT R.J. REYNOLDS TOBACCO COMPANY, WINSTON-SALEM, N.C. 27102 RJRr Fprm 736Q - ip/g1

PROJECT XG FFLTNM 85 SP PROTOTYPE TEST EXECUTIVE SUMMARY (MDD 85-42606 PURPOSE: To report final results on the performance of two XG FFLTNM 85 SP prototypes (CT 558-B and C) versus Marlboro Lights 85 (and CAMEL Lights 85) among target smokers. BACKGROUND: In recognition of the importance of younger adult smokers to RJR's growth, Project XG will be positioned to compete aggressively with Marlboro. To effectively meet this goal, Project XG must incorporate a super- ior product to Marlboro, while providing comparable strength and tobacco taste. Brand is preparing for test market by developing/testing prototypes in three configurations: FFNM 85 SP, FFLTNM 85 SP, FFNM 80 Box. RESEARCH OBJECTIVES: The objectives of this test were to.: • Provide a quantitative assessment of the two XG FFLTNM 85 SP prototypes (CT 558-B and C) versus Marlboro Lights 85 (and CAMEL Lights 85) among male Marlboro smokers, aged 18-24. • Provide input into further development and refinement of the XG products. KEY CONCLUSIONS/FINDINGS: • Neither prototype (CT 558-B and C) attained action standard of superiority versus Marlboro Lights 85 among male Marlboro Lights 85 smokers, aged 18-24. Both prototypes were rated at parity with Marlboro Lights 85 on overall acceptance. The prototypes performed at parity with each other. Prototypes 558-B and C were directionally superior (.77 and .73 confidence level, respectively) to CAMEL Lights 85. Marlboro Lights 85 was superior to CAMEL Lights 85. Overall Performance Sample % 70+ Among Size Target Smokers lb 85 299 M i h > 61 9 ar oro L g ts . Prototype I (CT 558-B) 300 59.6 J Prototype 2 (CT 558-C) 300 59.1 85 212 CAMEL Li h i 54 2 --J g ts . < Significant difference (80% confidence level) with arrow pointing to superior product. <--- Significant difference (73% confidence level) with arrow pointing to directionally superior product.

• Versus Marlboro Lights 85 The prototypes performed similarly versus Marlboro on most product attributes. - Prototype 1(CT 558-B) which was at parity with Marlboro Lights 85 on overall performance: -- Was atparity on all but two attributes -- Had the disadvantages of less smoothness and less rich taste Prototype 2 (CT 558-C), which was also parity with Marlboro Lights 85 on overall performance: Was at parity on all but four attributes Had two advantages (less harshness/more mildness) -- Had two disadvantages (less smoothness and less rich taste) On key attributes, both prototypes were: Inferior on smoothness, not attaining superior goal Parity on strength (at ideal) Parity on tobacco taste j Achieving Goal • Versus CAMEL Lights 85 Both XG FFLTNM 85 SP prototypes were directionally superior to CAMEL Lights 85 on overall acceptance and were superior on several attributes. - Relative to CAMEL Lights 85, both prototypes had the advantages of: Less strength Less bitterness More natural taste Less long lasting aftertaste Easier to get smoke through filter Versus CAMEL Lights 85, Prototype 2 (CT 558-C) had: -- Two additional advantages--less harshness and more mildness -- Only one disadvantage--less fresh aftertaste Relative to CAMEL Lights 85, Prototype 1(CT 558-B) had: -- The additional advantage of a less drying aftertaste -- No disadvantages The prototypes were at parity with CAMEL on the remaining attributes of smoothness, tobacco taste, rich taste and strong aftertaste.

MDD RECOMMENDATIONS/NEXT STEPS: Of the four Project XG FFLTNM 85 SP prototypes tested, (the previously tested) Prototypes CT 443-A and B appear to be better candidates than CT 558-B and C for further development. CT 443-B appears to be the best candidate, as it had the advantage of less harshness than Marlboro Lights 85 and was parity on all remaining product attributes. For XG FFLTNM 85 to achieve the desired goal of superiority versus Marlboro Lights 85 among target smokers, refinement opportunities (for both CT 443 prototypes) are to: • Further reduce harshness • Increase smoothness • Increase tobacco taste • While maintaining ideal levels of strength and mildness An update (to be issued week of August 12) on the performance of Prototypes 443-A and B will compare the prototypes versus CAMEL Lights 85 and Marlboro Lights 85 (used in this current analysis for Prototypes CT 558-B and C) as follows: • CAMEL Lights 85: Most recent and consistent product manufactured in Whitaker Park (Wave 4/1985 plus supplement) ( • Marlboro Lights 85: Omitting Wave 2/1985 with the high X70+ rating (Waves 5, 6/1984 and Waves 1, 3, 4/1985) */Jwi 6. ar&~- M. A. Albert Marketing Development Department

PROJECT XG FFLTNM 85 SP PROTOTYPE TEST (MDD 5- 2 0 BACKGROUND: In recognition of the importance of younger adult smokers to RJR's growth, Project XG will be positioned to compete aggressively with Marlboro. To effectively meet this goal, Project XG must incorporate a superior product to Marlboro, while providing comparable strength and tobacco taste. Brand is preparing for test market by developing/testing prototypes in three configurations: FFNM 85 SP, FFLTNM 85 SP, FFNM 80 Box. • XG FFNM 80 Box Recent testing on WINSTON Box resulted in a superior prototype (CT 446-D), without B-9 in filter, to Marlboro Box (and in-market WINSTON Box) among WINSTON's target smoker group. As a result, this product was put into Phase II manufacturing and a post-production test on WINSTON Box (CT 581-A/606-A) was fielded. The WINSTON Box Post-Production prototype did not attain action standard of superiority versus Marlboro Box among male Marlboro Full Flavor 85 smokers, aged 18-24, as it was inferior to Marlboro on overall acceptance. Three additional XG/CAMEL FFNM 80 Box prototypes are tentatively scheduled for NFO mailout week of November 4, 1985. • XG FFNM 85 SP In recent testing (CT 444-A and C/MDD #85-42602; CT 552-A and B/ MDD #85-42606), none of the prototypes achieved standard of superiority versus Marlboro. As a result, further development/testing is being pursued as outlined in Attachment 6. • XG FFLTNM 85 SP In recent testing (MDD #85-42602), neither prototype (CT 443-A and B) achieved action standard of superiority versus Marlboro Lights 85 among target smokers, as both prototypes were parity with Marlboro on overall acceptance. Further development/testing is being pursued. R&D developed two prototypes for testing to primarily address smoothness as follows: Prototype 1 (CT 558-B) Prototype 2 (CT 558-C) Designed To New blend suggested by STERLING Blend and Improve overall acceptance Blend Screening Study configuration 33/44,000 Filter tow 33/44,000 Filter tow Increase smoothness (Denser) White tipping White tipping Increase smoothness/ mildness/reduce harshess No filter flavor Improve aftertaste No top dressing Improve aftertaste -1-

ACTION STANDARD: Full Flavor Low Tar XG Soft Pack 85 prototypes should achieve overall superiority versus Marlboro Lights 85 among male Marlboro Lights 85 smokers, aged 18-24. METHODOLOGY: The standard NFO two-pack monadic design with telephone callback was used in this study. The two XG FFLTNM 85 prototypes (CT 558-B and C) were each tested among approximately 300 male Marlboro Lights 85 (SP, Box, and 25's) smokers, aged 18-24. Products were mailed out the week of May 13, 1985. Results are compared to Marlboro Lights 85 (Waves 5-6/1984 combined with Waves 1, 3, 4/1985 of the Competitive Product Series--omitting Wave 2 with extremely high Marlboro X 70+) and the most recent and consistent CAMEL Lights 85 product manfactured in Whitaker Park (Waves 4/1985 plus a supplement from the Competitive Series). This current study used a new product testing questionnaire containing the following new attributes: Hard To Get Smoke Through The Filter (replacing "draw"), Fresh aftertaste, Strong aftertaste, Drying aftertaste, Long Lasting aftertaste. Sample sizes for these attributes are relatively small (about 150) for Marlboro Lights 85. DETAILED FINDINGS: A. Overall Performance 1. Neither prototype (CT 558-B and C) attained action standard of superiority versus Marlboro Lights 85 among male Marlboro Lights 85 smokers, aged 18-24. • Both prototypes were rated at parity with Marlboro Lights 85 on overall acceptance. • The prototypes performed at parity with each other. • Prototypes 558-B and C were directionally superior (.77 and .73 confidence level, respectively) to CAMEL Lights 85. • Marlboro Lights 85 was superior to CAMEL Lights 85. Overall Performance Sample % 70+ Among Size Target Smokers Marlboro Li hts 85 229 > 61 9 g . Prototype 1 (CT 558-B) 300 59.6 , _ Prototype 2 (CT 558-C) 300 59.1 ~ CAMEL Li hts 85 212 54 2 -~ g . < Significant difference (80% confidence level) with arrow pointing to superior product. <--- Significant difference (73% confidence level) with arrow pointing to directionally superior product. -2-

B. Attribute Performance 1. Relative To Marlboro Lights 85 The XG FFLTNM 85 SP prototypes performed similarly versus Marlboro Lights 85 on most product attributes (see Attachment 1 for more detail). • Relative to Marlboro Lights 85, both prototypes (CT 558-B and C) were rated at parity on overall performance and ap rity on most attributes, as shown: - Strength - Fresh aftertaste - Tobacco taste - Strong aftertaste - Artificial taste - Drying aftertaste - Bitter taste - Long lasting aftertaste - Ease to get smoke through filter • Both prototypes were inferior to Marlboro Lights 85 on the attributes of less smoothness and less richness. • The prototypes differed from each other in performance relative to Marlboro Lights 85 on only two attributes, as shown: Prototype 1 (558-B) Prototype 2 (558-C) Parity - mildness Superior- mildness Parity - harshness Superior - less harsh • On key attributes, relative to Marlboro both prototypes were: - Inferior on smoothness -- Not attaining superior goal - Parity on tobacco taste -- Achieving goal - Parity on strength • Both prototypes (and Marlboro Lights 85) had ideal levels of strength.

2. Relative To CAMEL Lights 85 The XG FFLTNM 85 SP prototypes performed similarly versus CAMEL Lights 85 on many attributes (see Attachment 2 for more detail). The XG FFLTNM 85 SP prototypes were directionally superior to CAMEL Lights 85 on overall performance and were superior to CAMEL on several attributes. • Relative to CAMEL Lights 85, both prototypes had the following advantages: Less strength (at ideal) Less bitterness More natural taste Less long lasting aftertaste Easier to get smoke through filter Prototype 2 (CT 558-C) had the additional advantages (while Prototype 1, CT 558-B was parity) of less harshness and more mildness than CAMEL Lights 85. Prototype 1 (CT 558-B) had the additional advantage (while Prototype 2, CT 558-C was parity) of a less drying aftertaste versus CAMEL Lights 85. • Relative to CAMEL Lights 85, Prototype 1(CT 558-B) had no disad- vantages and Prototype 2 (CT 558-C) had only one disadvantage--less fresh aftertaste. • The prototypes were at ap rity with CAMEL Lights 85 on the remaining attributes of: Smoothness Tobacco taste Rich taste Strong aftertaste 3. Comparison Of Prototypes The prototypes were at parity with each other on overall performance, and were at parity on all but one product attribute--where Prototype 2 (CT 558-C) had the advantage of being milder than Prototype 1 (CT 558-B).

C. Product Refinement Opportunities If development efforts were to continue on Prototypes CT 558-B and C, key refinement opportunities to attain the desired goal of superiority-versus Marlboro Lights 85 would be as follows: Prototype 1 (CT 558-B) Prototype 2 (CT 558-C) Provide fresher aftertaste Increase smoothness/mildness Reduce harshness Reduce harshness Maintain ideal strength Increase tobacco taste Provide less long tasting aftertaste Maintain-ideal strength - Other less important attributes and ETA ratings, which show correlation between %70+ and product attributes are shown in Attachment 4. ATTACHMENTS: • Attachment 1: Attribute Performance Relative To Marlboro Lights 85 • Attachment 2: Attribute Performance Relative To CAMEL Lights 85 • Attachment 3: Mean Attribute Ratings • Attachment 4: XG FFLTNM 85 SP Development Direction (ETA Ratings) • Attachment 5: Analytical Data for XG FFLTNM 85 Prototypes (CT 558-B and C) • Attachment 6: XG FFNM 85 SP Product Testing Schedule

ATTACHMENT 1 ATTRIBUTE PERFORMANCE RELATIVE TO MARLBORO LIGHTS 85 AMONG MALE MARLBORO LIGHTS 85 SMOKERS, AGED 18-24 Prototype 1 Prototype 2 (CT 558-B) (CT 558-C) Attributes Where Both Prototypes Were Parity With Marlboro Lights 85 Strength Tobacco Taste Artificial Taste Bitter Taste Fresh Aftertaste Strong Aftertaste Drying Aftertaste Long Lasting Aftertaste Ease To Get Smoke Through Filter Attributes Where Both Prototypes Were Inferior To Marlboro Lights 85 P* P* p P P P P P P P P P P P P P P P Less Smooth I I Less Rich I I Attributes Where Prototypes Differed In Performance Relative To Marlboro Lights 85 Milder P S Less Harsh P S KEY: P = Parity I - Inferior * - At Ideal NOTE: Small sample sizes (about 150) for "new" attributes (ease to get smoke through filter, fresh, strong, drying, long lasting aftertaste) for Marlboro Lights 85.