Yet RJR was able to slow Doral''s steady decline in the fourth quarter by grabbing share from GPC through price and merchandising incentives. Popular product changes like packing more tobacco into sticks for a longer burn, as well as the Doral & Co. loyalty program, also helped. Still, some maintain that EDLP protected Doral by nudging cheaper brands off shelves. "A lot of cigarette companies have major problems with EDLP," said one retailer. "Commonwealth is one company made to suffer for it. If [Commonwealth] wanted us to put their Montclairs on deep discount, we''d have to turn them down because we''d go under the Everyday Low Price."The program has prompted fifth-placed Liggett Group to file an antitrust suit against RJR. Reynolds has also been on the plaintiff side of the court room, joining forces with B&W and Lorillard in a 1999 suit accusing Philip Morris of forcing retailers to give its brands choice shelf positions.PM and RJR contend their incentive programs enable retailers to better manage inventories while minimizing out-of-stocks. Neither demands exclusivity or takes away a store owner''s prerogative to carry competing brands.

The Big Two typically negotiate for 55% shelf placement. While the actual percentage varies per contract, Philip Morris requires participants in its Retail Leaders incentive program to give its products top-rack positioning. Similarly, RJR asks for No. 1 or No. 2 shelf position for its Retail Partners and, for certain levels of participation, no less than than 12 linear feet of display space for its core Winston, Camel and Doral brands. Window decals, signs over permanent displays and a dedicated area for flagging promotions are extras in both programs, earning retailers more bonus cash and benefits like coupon mailings to drive traffic to specific stores.One Tennessee operator of tobacco outlets and c-stores, who dropped the Philip Morris contract two years ago because of "unreasonable" demands for compliance and signage, was gently coaxed back into the program by a recalcitrant PM. This year, he''s allocating 35% to PM, 40% to RJR and 10% to B&W. But adding Philip Morris, he said, will force him to shrink his offerings of Lorillard and drop his contract with discounter Commonwealth.

This summer Philip Morris, which supplies about half of America''s cigarettes with its Marlboro, Benson & Hedges, Merit, Virginia Slims, Parliament and Basic brands, introduced the Accord battery-powered cigarette, a pricey gadget that reduces sidestream smoke, ashes and most lingering odor. For $40, consumers get a carton of specially made cigarettes, a battery charger, an instructional video and a "puff-activated" electronic lighter that holds the cigarette and allows smokers to wait hours between puffs. Since Accord burns at a lower temperature than normal cigarettes, it could introduce fewer harmful chemicals to the body, but the packaging currently does not make health claims. The high-tech smoke is not blowing their socks off, spokespeople say, but they plan to keep working on it and expanding awareness through direct-mail of the product, which has been five years and over $200 million in the making.A reduced-smoke cigarette is also in the works for B&W, a company representative said, but additional details were not available at press time.

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