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."

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.

Driving his and other retailers'' decisions are incentives given for top brands like Marlboro, with its dominant 38% market share in the first quarter, per company figures. Those who don''t receive some of the lucrative buydowns and promotions risk seeing consumers flock to participating stores where the brand is cheaper.A similar phenomenon is occurring with RJR''s Everyday Low Pricing program. EDLP stipulates that retailers stock a Reynolds deep discount brand, like Best Value or Monarch, and ensure that no other cigarette in the store will undercut its price. Doing so earns participants an extra dollar buydown on Doral, the branded savings smoke whose market share fell 0.5% to 6.2% last year thanks to cheaper, deep-discount brands, also dubbed "fourth-tier" cigarettes because they rank below private-label, branded savings and full-priced premium smokes.Fourth-tier cigarette producers, particularly foreign manufacturers not subject to huge MSA outlays, are discounted as low as $16 a carton, versus $21 a carton for branded savings cigarettes. While premium brands were able to boost market share slightly to 74.2% last year, branded savings cigarettes--including B&W''s GPC, RJR''s Doral and Philip Morris'' Basic--slid as consumers traded down to the cheaper alternatives.

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