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.

So where is the rest of the money going? A huge portion--more than $3.5 billion--is being pumped into retail outlets through price promotions and merchandising contracts. And that''s where the tobacco giants are turning up the heat with aggressive--and some say bullying--tactics, to squeeze out rivals."The Big Two are more aggressive about dictating what goes on the store shelves," said a Southern operator of a tobacco outlet chain." Honestly we used to joke about the ''Philip Morris police.'' The Philip Morris reps would come around and wreak havoc on anything that was wrong with the store, or if their market share wasn''t what it should be, or if a competing brand had an extra sign or something. They would just have a fit."Now, R.J. Reynolds is trying to flex its muscles in similar fashion. "I took our Reynolds rep outside recently and showed him the sign on our store," the operator said. "I told him when R.J. Reynolds'' name is on that sign, then you can tell me what is and what is not going in here and how much I can sell it for."

"We''re being very careful about not rushing the scientific development," said evp and chief counsel Paul Perito. "We''re looking at the issue of proving that reduced exposure to toxin equals reduced risk. In the meantime, we''re very conservative and are recommending that other companies refrain from making health claims."Brown & Williamson contracted to buy 1.5 million pounds of the Star-cured tobacco, about half the expected harvest from this year''s growing season, ending in October. The No. 3 producer of Kool, Capri, Misty and GPC will have low-nitrosamine cigarettes on the market within a year. Other firms are buying smaller amounts, while R.J. Reynolds is field-testing its own process for reducing tobacco toxins. Separately, Star this month will debut activated charcoal filters on all its brands.The focus on nitrosamines comes amid legislation pending in Canada proposing to add more information on labeling about tobacco''s toxic constituents and specific warnings about nitrosamines being the most active cancer-causing agent in cigarettes. Also, a World Health Organization gathering in May recommended that cigarette brands unable to conform to a standard ceiling of nitrosamine content should be excluded from markets.

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