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Cigarette makers also invested in the desires of current smokers. According to the Attitudes and Behaviors Related to Smoking Cessation survey, conducted by SmithKline Beecham Consumer Healthcare, 53 percent of smokers are puffing non-regular cigarettes, hoping these light, low-tar and ultra-light varieties will satisfy their desire to smoke while doing less physical damage.Last year, R.J. Reynolds, which controls about one-quarter of the U.S. cigarette market, with its Winston, Camel, Salem, Doral, Monarch and Best brands, released the Eclipse reduced-smoke cigarette to select markets in Georgia, Nebraska and Tennessee, hoping to generate excitement for an as-yet untapped niche. The product, which took 10 years and about a billion dollars to develop, has not lived up to expectations, though, representatives said. Eclipse features a carbon tip, which produces less-lingering, lower-tar smoke, but consumers have found it difficult to light and puff despite instructions printed on the packaging. In addition, marketers have faced the difficulty of pitching the product without badmouthing its core commodity-regular cigarettes.

If you thought the 1998 Master Settlement Agreement succeeded in putting Big Tobacco in its place, think again. As part of the settlement, tobacco giants Philip Morris, R.J. Reynolds, Brown & Williamson, Liggett Group and Lorillard Tobacco agreed to pay $246 billion to 46 states suing the industry to recoup Medicaid costs. The cigarette companies also promised to adhere to a ban on outdoor advertising and curb youth-oriented marketing programs involving product placement, branded merchandise and multiple sponsor-ships.While heralded as a huge victory by anti-smoking groups, the MSA has not stopped the tobacco industry from getting its message through to consumers. A recent report by the Federal Trade Commission indicated the Big Five tobacco giants spent a record $8.24 billion on advertising in 1999, $1.5 billion more than in 1998. Print advertising, the only remaining mass-media outlet for cigarettes, soared 37.8% to $428.3 million. Still, that was a mere 5% of the total spending in the category.

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.

2003 All rights reserved.

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