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Last month, B&W launched Kool Natural, containing 100 percent natural menthol and other natural flavors. "We believe that Kool Natural meets the taste preferences of consumers who are seeking natural flavors in their cigarettes," said Bob Bexon, senior vice president of marketing for the company, which accounts for about 16 percent of the U.S. cigarette market with its GPC, Misty, Capri, Carlton, Lucky Strike and Viceroy brands. Kool Natural will be available in Kings, l00s, Light Kings and Light 100s. B&W controls about 26 percent of the U.S. menthol market, according to company reports. Kool Natural will be supported with magazine, newspaper and billboard advertising, as well as in-store promotions. &W is also planning to re-position its Canton brand, which has 1.2 percent of the market, and up the profile of GPC, the best-selling discount brand with 6 percent of share.Lightening upEven the "microsmokes" are going light, as Santa Fe Natural Tobacco Co. extended its Natural American Spirit line this January with a light cigarette, which has already captured 80 percent of the company''s sales, and in August with a menthol light. An ultra-light is slated for launch next January, according to Ron Tully, vice president for public affairs, who explained, "There is a large segment of consumers who prefer lights, and we will have both."

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.

To be sure, the merchandising contracts are not pushing minor brands out of stores completely. Retailers have found that some deep-discount brands offer attractive margins compared with the big boys. But for the smaller players, getting their products into the store can be an uphill climb."The big manufacturers make the contract requirements difficult for retailers to understand so they don''t know what is allowed," said Keith Grover, marketing manager for Sante Fe Natural Tobacco, maker of Natural American Spirit cigarettes. "We try to understand those programs and explain to retailers that, for instance, temporary price tags on the rack are permissible. But there''s a lot of ignorance about merchandising programs and retailers are unable to make an objective decision about profitability. Many times they don''t believe us."In a more recent development, the big tobacco companies have been pushing their merchandising away from tobacco-only outlets and toward c-stores, where price is secondary to availability for customers already used to paying a premium for other purchases, per a recent Convenience Store News survey.

2003 All rights reserved.


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