CIGARETTE MARKET AN OVERVIEW

Transcription

1 CIGARETTE MARKET AN OVERVIEW

2 CONTENTS Scope of the presentation The Market Marketing and Advertising Summary

3 SCOPE OF THIS PRESENTATION This presentation is designed to give an overview of what's been happening in the cigarette and hand rolling tobacco markets over the last three years. It covers trends and movements in terms of advertising and communications, highlights some of the key issues and attempts to make some predictions for the future. It is not intended to be a trawl through individual competitive brand strategies, however, this information is available for more detailed presentations. It's worth bearing in mind that media spends are sourced through MMS and Portland who provide estimates based on Ratecard and can only give a broad indication of spend levels.

4 THE MARKET

5 THE CIGARETTE MARKET OVERVIEW Mature market, in slow decline due to increases on duty Duty increases prompting customers to shift from premium into mid and low price sectors Increasing threat from cheaper illegal imports Increasing awareness of health issues also influencing low tar sector growth Uncertainty over date and nature of ban has made (and continues to make) forward planning difficult Gallaher have maintained number one market position (however Imperial closing in - now only 0.9% behind) L&B has overtaken B&H as No 1 brand (non vending)

6 CIGARETTE MARKET SECTOR PERFORMANCE Premium ( 3.29+) Accounts for 41 % of the total market Sector has declined by 16% since 1995 Mid Accounts for 129% of the total market Sector has declined by 23% since 1995 Low ( 3.10-) Account for 40% of the total market Sector has increased by 54% since 1995

7 CIGARETTE MARKET SEGMENTATION Full Strength B&H Rothmans Embassy Dunhill Kensitas Club Regal Marlboro Camel Raffles Berkeley Superkings B&H Superkings JPS Dorchester SK JPS Lights Superkings Lights Berkeley Mild B&H Superkings Lights Raffles Lights B&H Lights Marlboro Lights Embassy Lights Silk Cut Dunhill Lights Camel Lights Silk Cut E.M. Silk Cut Ultra!ow Strength L&B Dorchester Craven Mayfair Sovereign Royals Cheap Price L&B Lights Sovereign Lights Mayfair Lights Dorchester EM Royals Light L&B Ultra Mayfair Ultra

8 HAND ROLLING TOBACCO MARKET SEGMENTATION Golden Virginia Amber Leaf Samson Golden Virginia Dark Old Holborn Cutters Choice Swan Duma Drum

9 THE ADVERTISING

10 IMPERIAL OUTSPENDS GALLAHER FOR FIRST TIME ('98 TO DATE) 000's Press El Poster (to Aug) Source : MMS/Portland

11 AD SPENDS DECLINING YEAR ON YEAR Prior to ad ban, it would be assumed that spends would increase in order to establish longer-lasting brand equity Decrease in spends possibility due to funds being deployed elsewhere (e.g. Sponsorship, below-the-line activity, gift schemes) Alternatively, to support declining margins due to increased reliance in low price brands

12 SHIFT IN ADVERTISING PRIORITIES REFLECTS SECTOR MOVEMENTS AND COMPETITIVE THREATS Gallaher (to Aug) Number of Brands Advertisied Priorities B&H 39% Sovereign 32% B&H 31 % Ultra 36% (% of ad budget) Silk Cut 32% Silk Cut 19% Ultra 24% Sovereign 33% Berkeley 7% B&H 18% Sovereign 22% Amber Leaf 6% Other 22% Ultra 7% Other 23% Other 25% B&H Lights 5% Other 19% Source : MMS/Portland

13 CLEARER FOCUS ON SPECIFIC (ASKS Imperial Number of Brands Advertisied Priorities Embassy 26% Superking 26% Embassy 26% L&B 43% Superkings 23% Embassy 22% L&B 18% Embassy 25% Regal 13% Regal 13% Superking Regal 13% Superkings Lt 6% Embassy Lt 15% Superking 7% Gold Virginia 5% 11% Regal 14% JPS 6% Other 27% Other 28% Other 27% Embassy Lt 5% Other 1 Source : MMS/Portland

14 SHIFT IN PRIORITIES TO REFLECT CHANGING SECTOR STRENGTHS RJ Reynolds Number of Brands Advertisied Priorities Rothmans Camel Kingsize Camel Lights Camel Lights 93% Camel Kingsize 7% Number of Brands Advertised Prioerities Marlboro 41 Marlboro 35% Marlboro 38% Marlboro 44% Rothmans 15% Dunhill 18% Royals 18% Royals 24 12% Royals 25 13% Royals 13% Marlboro Royals 11 % Royals 9% Roya Is % Lights 10% Marlboro Lights 10% Dunhill 7% Other 23% Marlboro Marlboro Medium 10% Other 15% Medium 9% Other 13% Royals 20 8% Other 17% Source : MMS/Portland

15 IMPERIAL MARKETING STRATEGY OBSERVATIONS Total advertised brands reduced from 20 in 1996 to 12 in 1998 in an effort to focus funds more efficiently Likely to continue to focus advertising investment on further strengthening L&B position and protecting premium brands (Embassy/Regal/Embassy Lights) L&B growing beyond expectations - L&B Ultra Lights launched to capitalise on consumer trend downwards in price and tar - will continue high investment to protect brands position JPS decline in recent years has forced Imperial to hold the price, meaning shift in category from premium to low price - future advertising likely to reinforce price position

16 IMPERIAL MARKETING STRATEGY OBSERVATIONS will be looking to maintain Golden Virginia market leadership position (possible increased investment) Attempts to attract younger audience via media selection posters in pub/bar washrooms (A1 size) back-lit moving 6-sheets in universities editorial sponsorship of you male titles with Embassy Light May look to extend advertising campaigns into packs post ban in attempt to maintain brand saliency Reduced advertising support behind Superkings suggests desire to treat brand as cash cow (sector leader in declining segment requiring little further investment) Embassy Lights increased support (in excess of share) suggests attempt to establish brand prior to ban

17 PREMIUM SECTOR ADVERTISING

18 EMBASSY ADVERTISING Poster holdings and national press split with Regal in the North Brand advertised on posters and in national press 2 or 3 times a year Embassy positioned as down-to-earth, unpretentious, 'laddish' brand Lack of consistency in advertising approach over last three years : 4 different campaigns in this time, all broadly attempting to capture the personality of the Embassy smoker In 1995, 'Thespian' campaign attempted to epitomise attitude of Embassy smoker, but it was felt to be too old-fashioned Launch of Focus Points gift scheme received heavyweight poster and press support with surreal campaign

19 EMBASSY ADVERTISING (cont.) However, brand values not communicated and campaign was replaced by 'Number 1 in a series of 1' This was designed as a short-term (Pre-ban) series of oneoffs using basic humour (in keeping with the brand personality) 'Looking after Number 1' launched in 1998 to further establish the 'laddish' character of the brand

20 EMBASSY LIGHTS ADVERTISING Embassy lights aimed at younger male smokers, bringing the down-to-earth character of Embassy Number 1 into the context of 'lad-culture' Heavyweight presence in 1998 in broader range of style press titles in 1998 than previously used 5 consecutive pages taken in June followed by 1 page per month for 4 months Change in expression of same execution more recently, with the 'Tar, but No Tar Very Much' stamp Editorial sponsorship throughout this period in tune with strategic thinking, with advertorials in young, brash titles : Loaded and Sky (initially not requiring ASA approval, however this type of activity now does)

21 REGAL ADVERTISING Positioned in the North as the down-to-earth 'smokers' mate' Hugely successful 'Reg' and 'Al' campaign withdrawn due to alleged youth appeal Replaced by 'Something Blue' campaign - an attempt to own a colour a la B&H, Silk Cut and Marlboro The executional style and subjects reflect the down-to-earth positioning

22 MARLBORO ADVERTISING Heavyweight use of press and posters '94 saw the end of the 'Red' campaign, with a move back to more familiar Marlboro territory : American heritage Enforcing authenticity and traditional values of Americana, much like Marlboro Man of yesteryear Strongest executions are those combining a striking visual with a witty and powerful headline Lights variant doubtless benefits from the masculine heritage of the brand, and the recent, more edgier expressions of Marlboro Country would seem to suggest the brand is beginning to acknowledge the dominance of Marlboro Lights amongst the trendier young adult smokers

23 OTHER PREMIUM ADVERTISING Camel No activity so far in 1998 Brand positioning as quirky choice for younger upmarket smokers, with variety of executional styles Use posters and style press Funky packs launched for limited period in 1996 Lucky Strike Niche brand targeted at young urbanites, turning limited availability into a positive : exclusivity likely to appeal to this group Use press and postcards in bars/restaurants Pushing limits of voluntary code (e.g. postcards)

24 MID-PRICE AND CHEAP SECTORS

25 LAMBERT & BUTLER ADVERTISING Brand success could be attributed to a number of factors - e.g. style of advertising, premium heritage, 'stylish' pack, more masculine character - which possibly make the brand more acceptable than other cheap brands Moved away from price-only ads to more image-based, price advertising in 1997, possibly in response to Sovereign Price removed completely from ads in 1998 (possibly because people do not like to reminded that the cigarettes they smoke are cheap) Advertising investment increased yearly - 210k in 1996, 1.8m in 1997 and 2.5m in 1998 (to date) and now accounts for 43% of Imperial ad budget As well as price, more masculine image could be a further factor in the threat L&B Ultra poses to SC and SC Ultra

26 JPS ADVERTISING Relied on Formula One Heritage in the past to support premium positioning, however the brand is now seen as out-dated and past efforts to update it have failed (matt black pack etc) Brand has moved into mid-price sector - if price held further, will drop to low price sector Current advertising focusses on a price message and borrows from the old 'Black' campaign

27 ROYALS ADVERTISING Four different campaigns since 1995 suggest lack of direction The Royals launch campaign (93/94) aimed to communicate key point of difference - 25 in pack Communication focus changes to price/value message in 1995 with 'want something extra' - possibly trying to communicate more cigarettes for same price Number of sticks reduced to 24 in straight forward communication of 24 cigarettes for the same price as 20 20's launched in campaign 1997 with 'Royals give you more' Range advertising introduced in price/value 1998 communicating

28 WINFIELD ADVERTISING Launched as mid-price with press and poster executions in August 1998 Too early to pick up levels of spend Brand firmly positioned as Australian

29 NON-CIGARETTE ACTIVITY

30 NON-CIGARETTE ACTIVITY Marlboro and Campaign both have a range of clothes/shoes/accessories which they advertise Allows them to use images (e.g. Marlboro Cowboy) and media (e.g. 6 sheets/ bus-sides/ postcards) not currently available to cigarette advertisers May be allowed to continue advertising post-ban We don't believe clothing to be an avenue open for Imperial as their brands aren't 'desirable' enough (although other line extensions might be considered)

31 SUMMARY

32 SPEND CONCLUSIONS Counter-intuitive, in that we might expect a last-gasp "big bang" prior to Ad Ban - uncertainty over ban date probably to blame Massive movement of advertising funds to other areas preban sponsorship, gift schemes, point of sale returned to bottom line given decreasing profitability from the growth of cheap brands