sample="quota" bates="501254820" isource="rjr" decade="1980" class="ni" date="19840509" Put in fact book CONFIDENTIAL Consumer Research Report MDD #83-32101 May 9, 1984 TO: Mr. M. L. Orlowsky Mr. H. J. Lees Mr. D. W. Grout FROM: Ms. R. C. Pastercyzk ANALYSIS OF BLACK SMOKERS Copies To: Mr. G. H. Long Mr. L. W. Hall, Jr. Mr. Y. W. Ford Mr. R. Angiuoli Mr. G. Novak Mr. G. T. Baroody Mr. D. F. Pearson Mr. J. T. Winebrenner Ms. S. A. MacKinnon Mr. G. W. McKenna Mr. J. R. Shostak Mr. E. J. Fackelman Dr. J. L. Gemma Ms. E. N. Monahan Mr. J. R. Moore Mr. A. L. Barnett Mr. R. D. Sherrod Ms. L. P. Mabee MDIC PUBLISHED BY THE MARKETING DEVELOPMENT DEPARTMENT R. J. REYNOLDS TOBACCO COMPANY, WINSTON-SALEM, N.C. 27102 RJRT Form 6755-7/80 - Newport is the primary growth brand among Blacks (11%), having doubled in share since 1980. The brand is especially strong among 18-24 year olds (36%) and 25-34 year old (13%) Blacks, but has virtually no presence among Blacks age 35 and over (2%). Two-thirds of Newport's total share growth since 1980 has been attributable to growth among Blacks. The Virile segment, although declining, is the second largest segment among Blacks (19%). WINSTON (10%), the largest Virile brand, has been declining, while CAMEL (2%) and Marlboro (5%) have been trending flat. Marlboro, however, has experienced a short term increase among 18-24 year old Black males (11%). The Stylish segment's growth among Blacks (17%) was primarily driven by B&H's growth, two-thirds of which was in its menthol styles. Purchase Pattern Findings Seventy-six percent of cigarette purchases made by Blacks are by the pack, more than for any other demographic group. Service stations are the leading retail outlet among Blacks (22%) having surpassed supermarkets (17%) in 1983. Convenience stores (13%) and small groceries (15%) are also growing outlets. Nearly one-fourth of all vending purchases are Black. As a result, vending volume among Blacks is nearly double that of smokers in general (9% vs 5%). IMPLICATIONS In order to ensure its future strength among Blacks, RJR needs to bolster its position among young adult (18-24) Blacks. This group was the key to Kool's growth in the early 1960's and is now the key to Newport's growth. - Since younger adult Blacks overwhelmingly prefer menthol cigarettes, continued emphasis on SALEM within the Black market is recommended. SALEM is already positioned against young adults. With emphasis on the younger adult Black market, SALEM may be able to provide an alternative to Newport and capitalize on Kool's decline. - RJR should also continue Black market support behind menthol styles of its other brands, particularly its Stylish segment brands, MORE and STERLING. RJR needs to maintain its leadership position among Blacks 35 and over. Continuing support of SALEM and WINSTON, the company's largest brands within this demographic group, is needed to meet this goal. As with the general market, RJR should place emphasis on pack promotions to reach Blacks, who purchase three-fourths of their cigarettes by the pack. Promotions aimed at reaching Blacks would be most effective in service stations and convenience stores, the same outlets that are growing among smokers in general. In addition, vending programs on SALEM and menthol styles of other brands would be particularly effective in reaching Blacks, who are nearly twice as likely to make vending purchases as smokers in general. ANALYSIS OF BLACK SMOKERS I. BACKGROUND About 27 million Blacks live in the U.S. comprising 12% of the total population and 10% of adults age 18 and over. Blacks have a younger age profile than the general population (25 versus 31) and a higher fertility rate. Their growing population (expected to reach 15% within 35 years) and slightly higher smoking incidence than the general population (32% vs. 31%) makes them an important target group. II. OVERALL COMPANY PERFORMANCE RJR has average development and continued to dominate the Black smoker market with one-third of the total. SALEM is the company's largest brand (16%) followed by WINSTON (10%). The company's strength is among older adults, with 67% of its Black franchise age 35 and over. Eleven percent of RJR's total smokers are Black. B&W is overdeveloped among Blacks, with a 26% share, but is declining because of Kool's losses. The company's decline was most dramatic among 18-24 year old Blacks, from 36% to 22% in three years. Nevertheless, Blacks have continued to comprise one-fourth of the company's total smoker franchise. Philip Morris is underdeveloped, but is growing (20%) because of B&H's growth among Blacks age 25-49. Philip Morris also exhibited vitality among 18-24 year old Blacks due to Marlboro's growth among the males. However, the company's Black franchise makes up only 6% of its total smokers. Lorillard is overdeveloped and growing (14%) solely because of Newport's strength among 18-34 year old Blacks. Sixteen percent of the company's franchise is Black and more than three-fourths of its Black franchise is age 18-34, indicating a strong dependence on Blacks for future growth. American (7%) and L&M (1%) are underdeveloped, trending flat and have little presence among Blacks. About 90% of both companies' Black franchises are 35 and over. III. CATEGORY PERFORMANCE Black smokers have an overwhelming preference for menthol filter cigarettes (65%). Within all demographic groups, Blacks are much more likely to smoke menthol styles than the general smoking population. Blacks' menthol preference is most pronounced among females (71%), younger adults (89%), and established adults (83%). Blacks age 50 and over, however, prefer non-menthol (46%) over menthol styles (37%) and also smoke non-filter styles (16%) more than smokers in general (12%). IV. SEGMENT PERFORMANCE Coolness, Virile and Stylish brands account for 86% of all Black Smokers. A. Coolness Segment The Coolness segment is highly developed and is by far the largest segment, accounting for half of all Black smokers. Both Black males and females equally prefer Coolness brands. Coolness segment strength is most pronounced among younger (72%) and established (66%) adult Blacks. 1. Brand Performance - Coolness Segment Three Coolness Segment brands -- Kool, SALEM, and Newport -- Account for 49% of the total Black smoker market. All three brands are overdeveloped among Blacks. - Kool remained the leading brand among Black smokers; however, its share has dropped from 27% to 22% in three years. Key losses during this time period were among younger adult Blacks, from 35% to 22%. The brand's greatest share is among 25-34 year old Blacks (33%), particularly males within this group (42%); however, the trend is declining. Thirty-six percent of Kool's franchise is Black. 1. Brand Performance - Coolness Segment (Cont'd.) - SALEM remained the second largest brand among Black smokers (16%). Among 18-24 year old Blacks, SALEM declined three points to 14% in 1983 because of losses among Black females. Among 25-34 year old Blacks, SALEM achieved a short term gain of 3 share points (to 19%) because of increases among females within this group. SALEM's franchise is 18% Black. - Newport is the primary growth brand among Blacks and has surpassed WINSTON to become the third largest brand among Black smokers (11%). Two-thirds of Newport's total share growth since 1980 is attributable to growth among Blacks. Newport now leads all brands among younger adult Blacks due to its growth from 19% to 36% since 1980. The brand is equally strong among males and females within this smoker group. Among 25-34 year old Blacks, Newport grew from 5% to 13% since 1980. Newport's franchise is 43% Black: 39% are ages 18-34 and only 4% are 35 and over. 2. Company Preference - Coolness Segment Among Black smokers in total, B&W holds the leading position within the coolness segment; however, its position has weakened due to Kool's decline over the last few years. B&W has also been threatened by Newport's growth. 2. Company Performance - Coolness Segment (Cont'd.) Lorillard has become the leading company among 18-24 year old Black smokers because Newport's share has doubled within the last three years, while Kool's share has declined by one-third. Newport's growth, in conjunction with SALEM's decline, has resulted in a wider gap between RJR and Lorillard. 2. Company Performance - Coolness Segment (Cont'd.) B&W is still the leading company within the Coolness segment among 25-34 year old Blacks, but its position is being threatened by Lorillard as a result of Newport's growth. RJR's performance has been stable and, in fact, recovered from weak 1982 results on SALEM. B. Stylish Segment The Stylish segment (17%) is overdeveloped and is growing among Blacks age 25 and over. The menthol styles are dominant among Blacks. 1. Brand Performance - Stylish Segment - B&H is overdeveloped among Blacks and its share has grown three points since 1980 (to 10%). Two-thirds of this growth is attributable to gains in menthol styles, primarily among 25-49 year old Blacks. Blacks account for 19% of B&H's franchise, and they account for one-third of the brand's total growth since 1980. - Virginia Slims has average development among Blacks and, although flat overall at 3%, has exhibited slight growth in the menthol styles. The brand is stronger among 18-34 year olds. Blacks account for 10% of the brand's franchise. - MORE is overdeveloped among Blacks, but its share dropped to 2% in 1983 because of losses among 18-34 year olds. MORE is strongest among 35-49 year olds (3%), mostly because of its menthol styles; however, the trend is flat. Within all Black age groups MORE 120's outperformed MORE Lights. Thirteen percent of MORE's franchise is Black. 2. Company Performance - Stylish Segment Among total Black smokers within all age groups, Philip Morris is in the strongest position within the Stylish segment, primarily as a result of B&H's gains. Among 18-24 year old Blacks, seventy percent of Philip Morris' total share is attributable to its Stylish segment brands. 2. Company Performance - Stylish Segment (Cont'd) Among 25-34 year old Black smokers, Philip Morris' lead within the Stylish segment has grown as a result of gains for B&H. RJR has been trending flat. C. Virile Segment The Virile segment, although underdeveloped and declining, is the second largest segment among Black smokers at 19%. 1. Brand Performance - Virile Segment WINSTON and Marlboro together have a 14% share of Black smokers with CAMEL contributing an additional 2%. - WINSTON is somewhat underdeveloped and declining, having sustained its largest loss among 25-34 year old Blacks, from 11% to 5% since 1980. - Marlboro, although severely underdeveloped and trending flat overall, is rising among younger adult Blacks (6%) because of its strength among males (11%). Marlboro surpassed both SALEM and B&H to become the third largest brand among 18-24 year old Black males. - CAMEL is underdeveloped and trending flat. Its strength among Blacks is with smokers 50 and over who prefer the non-filter style. 2. Company Performance - Virile Segment Among total Blacks, RJR has remained the leading company within the Virile segment. The company's strength within this segment is attributable to Black smokers 35 and over. 2. Company Performance - Virile Segment (Cont'd) Although the Virile segment is not strong among younger adult Blacks, Philip Morris has remained the leading company. Growth in this segment has been solely attributable to Marlboro. RJR has remained ahead of Philip Morris in the Virile segment among 25-34 year old Blacks; however, RJR's lead has narrowed due to losses on WINSTON. D. Traditional Segment The Traditional segment (6%) has average development because of the segment's strength among Blacks 50 and over (15%). The segment has virtually no presence among Blacks 18-34 (.2%). E. Moderation and Concerned Segments The Moderation (6%) and Concerned (4%) segments are severely underdeveloped among Blacks and trending flat. Both segments have performed better among Blacks 35 and over. F. Savings Segment Representation of the Savings segment (.1%) is virtually nonexistent among Blacks. V. PURCHASE PATTERNS Blacks lead all demographic groups in their predisposition to pack purchases, (76% vs. 41% for total smokers). This trend has been increasing since 1981. Among Blacks, service stations are highly overdeveloped and lead all retail outlets in purchase volume (22%) as a result of a significant short term gain in 1983. This ranking is a change from earlier years when supermarkets were the leading outlet. Nineteen percent of all service station purchasers are Black. Small groceries and convenience stores are growing outlets among Blacks. Vending machines and liquor stores, although trending flat, are highly developed outlets among Blacks. Nearly one-fourth (23%) of all vending purchasers are Black. -13- APPENDIX I IMPORTANCE OF BLACKS TO BRAND'S FRANCHISE