CIGARETTES : Makers Aim at Special Niches to Boost Sales
The sultry lady in a pink satin dress, her slender cigarette held almost indifferently, gently leans against a life-size green package of cigarettes. The suggestion “Dare to Be More” is whispered across the top of the page in print as thin and shapely as the leg that’s bared by the pose.
The product is More Menthol, a 120-millimeter-long cigarette made by R. J. Reynolds. The ad is on the back cover of September’s issue of Ebony, a nationally circulated magazine whose primary focus and audience are blacks. And, not surprising, the model is black.
As simple as it is, the advertisement speaks volumes about the cigarette industry today: Cigarette makers are tailoring their products to ever more carefully defined groups of smokers. Such as women--they like the longer, skinny cigarettes. Or blacks--they prefer mentholated cigarettes to regular flavor ones. The cigarette companies seem so certain of that last tidbit of marketing intelligence, in fact, that of the seven cigarette ads in the same issue of Ebony, six were for menthols.
The concerted effort to reach even the most particular smoker has grown more intense as cigarette sales have declined--at a rate averaging 1.5% a year since 1981. Advertising and promotion budgets have soared: In a report issued last July, the Federal Trade Commission estimated that the nation’s six major companies spent $2.7 billion marketing cigarettes in 1983.
Becky Barfield, tobacco analyst for the New York securities firm of First Boston, said, “the overall 1% decline in cigarette consumption--anticipated to continue through the next five years--makes it important (for the companies) to maintain and gain market share. So, they’redeveloping strategies to discover new niches.”
Those niches get more and more refined. Pitches are geared to women, sports enthusiasts, adventure seekers, discount shoppers and spendthrifts--smokers of every stripe, and now, color. Lately, the cigarette makers are focusing especially on blacks and Latinos, two groups in which cigarette smoking has either increased or at least remained flat in recent years. Beyond that, there can be a dozen varieties, extending one brand from one niche into an even smaller one.
In fact, there are 220 different “styles” of cigarettes on the market--all competing in an environment that has grown increasingly hostile.
The anti-smoking campaign that began two decades ago, with the first Surgeon General’s warnings on cigarette packs and the prohibition on radio and television ads, has escalated. Now, a variety of harsher warnings must be printed on all packages and advertisements; legal and social pressure on the smoker has intensified as more municipalities and workplaces are regulating where smoking is permitted--if at all.
“There’s not a single thing that we do--advertising, promotion, sampling--that we are not under fire for,” said Thomas Keim, director of marketing communications for Philip Morris, the company that leads sales with a third of the U.S. cigarette market. “It’s nothing but high hurdles.. . . It’s an industry under fire. Those are just the conditions we have to operate under. It makes marketing cigarettes one of the most supremely difficult jobs today.”
The cigarette makers, long noted for sophisticated lobbying and marketing strategies, seem to be hunkering down even further in defensive positions. Some analysts say that the diversification of the tobacco companies--facilitated by the sheer profit margins inherent in the cigarette business--has become even more vigorous as a growing number of product liability suits threaten their financial stability.
Even so, some critics contend that the vast expenditures by the cigarette makers overwhelm the opposition. Alan Blum, editor of the New York State Journal of Medicine, deplores the cigarette companies’ sponsorship of sporting events and of ads that present smoking in peaceful, pastoral settings or enviably adventuresome activities.
In an editorial in the July issue of the journal--all devoted to smoking concerns--Blum wrote: “In spite of the belief that there is a powerful ‘anti-smoking’ effort, the fact remains that cigarette manufacturers control virtually all of the contemporary imagery and terminology of smoking and continue to be successful in staving off major legislative measures that will adversely affect profits.”
Sales Declined
There are signs, though, that the anti-smoking campaign is making inroads. After years of steady, if slight, decline in per-capita consumption, total sales of cigarettes fell in 1982, the first since 1969, according to the FTC. In 1982, 634 billion cigarettes were sold, down from from the 640 billion it said were sold in 1981, according to Agriculture Department figures.
In 1983, the doubling of the federal excise tax took a big bite out of sales, which declined to 600 billion cigarettes. Sales rose fractionally to 600.4 billion in 1984, but analysts’ estimates indicate that in the first half of 1985, retail sales of cigarettes were 1% to 1.5% below sales in the year-ago period.
“Consumption will be off modestly for the foreseeable future,” said John C. Maxwell, an analyst with the New York securities firm of Furman Selz Mager Dietz & Birney. “At best, it will be flat--more probably in my estimation, a decline,” said Maxwell, whose quarterly reports are considered the best gauge of the industry.
Maxwell’s ranking of industry shares and the sales figures are watched nervously by the cigarette makers. R. J. Reynolds, whose Winston, Salem, Camel and Vantage brands are all on the top 10 best-seller list, saw its market share slip slowly over a 20-year period and now is the second largest seller, behind Philip Morris.
Betsy Annese, manager of general corporate communications for Reynolds, said, “In a situation where consumption is on the decline, you do have to work smarter, certainly smarter than your competitors are working.”
Lately, working smarter seems to equate to being more prolific. Each brand name may appear in half a dozen different “styles.” They are sold in just about any price range, a variety of lengths, packages and tar level, with or without filter, in regular flavor or mentholated.
Philip Morris even is testing a cigarette with an adjustable filter so that the smoker can control the tar level to suit individual tastes.
And Newport, Lorillard’s menthol cigarette that has risen to No. 9 on the smokers’ hit parade, now comes in eight different styles, including hard and soft pack, short and long, regular and ultra low tar, in packs of 20 and now in a 25-cigarette pack.
Newport’s 25-cigarette pack is priced on the same per-unit basis as the standard 20-to-a-pack. But the larger packs initially were introduced as a part of a growing segment, labeled “price-value” by the analysts, that covers a variety of discount styles.
Fine Distinction
That category was almost single-handedly created by Liggett & Myers when it began making generics in 1980. Generic cigarettes are not advertised or promoted, have no brand name, come in a minimum of styles, and are sold--mostly at supermarkets--at a carton discount of usually $1.50 or so below the normal 10-pack carton price.
The segment exploded in 1983 with the excise tax increase, and later that year, R. J. Reynolds introduced Century, the first 25-pack, at the same price as a pack of 20s. Analysts said the generics are intended to appeal to consumers looking to pare actual out-of-pocket spending, whereas the 25-unit packages are aimed at the consumer who wants a better deal for his money.
The distinction between the two types of consumers is a fine one, the analysts admit, but one that nevertheless has been rewarded with its share of customers. Whereas generic cigarettes commanded less than 2% of the total market in the first year they were introduced, they since have had one of the fastest growing sales rates. Last year, 4.9% of all cigarettes purchased were generics; another 1.6% were price-value packages such as Century.
The 6% combined total in the price-value category is a healthy showing; half of the 110 best-selling cigarette brands have a smaller share of the market.
The rising popularity of the generics has incited a riot of new entries. Brown & Williamson is trying to elbow into the generic market now dominated by Liggett & Myers. Liggett & Myers is answering back by stamping a “quality blend” trademark on its previously undistinguished generic packs. And L&M; is now trying to forge a new “mid-price” price range--between the discounted generics and regular-priced cigarettes--with its Stride brand.
And just in case there’s a smoker out there who isn’t quite satisfied by any of those pricing or packaging distinctions, Reynolds has yet another option: Doral. In May, 1984, Reynolds decided to take the numeral off its not very popular low-tar Doral II and make the formerly regularly priced cigarette into a generic. Never mind that with a brand name and identification, it technically isn’t a generic. Reynolds skirts that issue by calling Doral its “branded generic.”
Upscale Cigarettes
Going the opposite direction, two of the companies made attempts to lure “upscale” smokers, Philip Morris with Players, and Reynolds with the Sterling brand. Neither, said analysts, were successful in becoming upper-income habits, and Philip Morris has since scaled back its Players campaign. Reynolds, however, is making another stab.
The Ritz, carrying an Yves St. Laurent monogram emblazoned on a sophisticated package design, is being test-marketed by Reynolds in several areas of the country. In some of those test markets, it also carries a premium price. The Ritz “concept,” said Reynolds’ Annese, is “classy upscale. . . . The imagery really sets a new standard. The packaging is very different.”
American Brands, which makes Pall Mall, Lucky Strike and Tareyton, has an ever-so-polite campaign to sell its Carlton brand. In ads that are starkly simple by today’s flashy advertising standards, the slogan reads: “If you smoke, please try Carlton.” Now American brands is selling a new Carlton Slim Deluxe 100s style, trying to appeal to the upscale female smoker who prefers a low-tar cigarette.
But perhaps the biggest event in cigarette marketing lately has been the attempt to capture the Latino and black smoker.
Although the tobacco companies have not designed and introduced a completely new product for blacks, many have intensified advertising and promotion campaigns in black publications and on billboard and transit ads in predominantly black neighborhoods. Those ads often are the same as ads in general circulation magazines, for instance, with the exchange of black models for white. Brands that are “well received” among black smokers--Kool and Benson & Hedges, for example--are heavily advertised in the five or six major black-oriented magazines.
It is a different story, however, for Latino smokers who are being courted with their brands designed just for them and, in some cases, imported from Mexico by their U.S. parent company.
The dearth of major national publications geared to Latinos has made the strategy more difficult, industry observers said. Cigarette ads in Spanish pepper the billboards in geographic areas of high Latino population. The cigarette companies, like dozens of other companies trying to reach the rapidly expanding Latino population, have concentrated on Los Angeles, Miami, New York, San Antonio, and Chicago.
Brown & Williamson, whose cigarette sales are the third largest in the United States, has begun a test marketing campaign geared to Latinos. B&W; is importing the Raleigh Con Filtro and Fiesta, cigarettes made by La Moderno, a Mexico City company also owned by B&W;’s parent company, Batus Industries. Those cigarettes, made from the Mexican leaf, have a stronger flavor than most U.S. brands.
And Liggett & Myers is going to the Southwest with Dorado, a new “full-flavor cigarette with appeals to Latinos and other traditional full-flavor smokers,” said Carol Jova, manager of communications at Liggett. Jova said Dorado is selling well and the test market areas may be expanded.
Disappointing Response
Even Philip Morris, which prides itself on the universality of its Marlboro, has gone into the Latino market place. Marlboro, the top-selling cigarette in the United States, is a good example of the company’s “shotgun approach” to advertising, said Philip Morris’ Keim. Rather than trying to appeal to specific segments of the smoking public with specific products and separate campaigns, Keim said, “we’re gearing our ads to smokers across virtually every demographic section.”
Even so, the company that also makes Virginia Slims--a cigarette marketed almost exclusively to women--has tried to attract Latinos with its Rio brand. Analysts said that although Philip Morris didn’t treat Rio to a full-blown product introduction campaign, the initial consumer response still was disappointing.
Philip Morris is even taking its newest marketing device, its Philip Morris magazine, to the Latino market. The quarterly magazine, a glossy publication focusing on tobacco, smoking and related issues, will be published in Spanish for circulation in heavily Latino areas.
Such attention to minorities has raised ethical questions for some ethnic groups and businesses. For example, Burrell Advertising of Chicago, one of the largest black-owned and operated advertising agencies in the country, refuses any cigarette accounts, on the basis that it does not want to promote an unhealthy habit among blacks.
In general, however, companies that profit from the new attention to the minority smoker--such as public relations firms and market researchers--are pleased to see the attention. For many such firms, the ethical issues are not about their own participation in the selling of cigarettes, but rather the “corporate responsibility” of the tobacco companies. They would like to see better-balanced images of blacks and Latinos used in the promotions. And they want more money spent in the effort to reach minority consumers.
Both of those goals, they believe, can be achieved in part by greater reliance on minority owned or operated companies.
Hispanic Business, a Santa Barbara-based magazine, reported that companies spent a total of $284.5 million in specialty advertisements and promotions aimed at the Latino consumer. Philip Morris, which also owns Miller beer, topped the spending list; its budget for this segment of the market was $6.7 million, less than 2% of its total advertising budget of $527 million.
Felix Burrows, whose Chicago-based Viewpoints Inc. market research firm helps companies target black and Latino consumers, believes companies should be spending more money in the minority communities, either through use of ethnic agencies, publications and other media, or through its costly promotional activities.
And marketing and research firms that specialize in the Latino market say that rather than just running their standard campaign in Spanish, cigarette makers--and other companies trying to reach Latino buyers--need to tailor their promotions more the life style and culture of the Latino. “They think if they show a guitar and a taco, they’ve got us,” said Jesus Chavarria, publisher of Hispanic Business.
Chavarria believes that companies are making a mistake by targeting mostly the newly arrived and unassimilated Latinos. He said, “Philip Morris and R. J. Reynolds are still looking at the (Latino) market as a large undifferentiated mass of consumers, as opposed to a differentiated one that it is, with upscale and blue-collar” components.
Henry Molina, whose public relations agency in San Antonio is among the country’s fastest-growning Latino-owned businesses, said San Antonio’s large Latino population often responds better to English language ads. “It makes us feel proud to see a Hispanic model on TV,” said Molina. “But why should it be on a Spanish TV channel?”
CIGARETTE SALES IN THE U.S. By domestic companies, in billions of cigarettes
1980 631.5 ’81 640.0 ’82 632.0 ’83 600.0 ’84 600.4
Source: Tobacco Institute / U.S. Dept. of Agriculture
CIGARETTE MARKET SHARES Figures for first-half of 1985 for cigarette companies and the top 10 brands
Company/Brand Share PHILIP MORRIS Marlboro 22.3% Benson & Hedges 4.7 Merit 4.1 Others 4.6 Total 35.7 R.J. REYNOLDS Winston 11.4 Salem 8.0 Camel 4.3 Vantage 3.4 Others 4.5 Total 31.6 BROWN & WILLIAMSON Kool 6.7 Others 4.6 Total 11.3 AMERICAN BRANDS Pall Mall 3.5 Others 4.1 Total 7.6 LORILLARD Newport 3.4 Others 5.0 Total 8.4 LIGGETT & MYERS Total 5.4
Source: The Maxwell Report, Furman Selz Mager Dietz & Birney
