Silk Cut Extra Mild

To Be Or Not To Be: A Discussion Paper

Introduction

Silk Cut Extra Mild is under threat ofde-listing. This paper briefly discusses some of the issues involved and arrives at a recommendation for further analysis of the problem.

Background Information

" Launched in April 1992 . " Reached 0.6% share in April 1994 and has remained there just about ever since. " Profile closely resembles KS in sex but is younger and more mid-market than either KS or Ultra (see table)

Extra Mild demographic profile, 1997 Market Low Tar King Size Extra Mild Ultra Male 45 34 43 46 36 Female 55 66 57 54 64

18-24 16 16 15 12 9 25-34 25 23 31 41 27 35-44 18 16 18 14 21 45-54 17 17 17 14 18 55-64 10 11 10 8 10 65+ 11 16 8 11 14

AB 13 18 28 27 31 C1 25 32 34 41 33 C2 24 22 18 18 18 DE 38 29 21 14 18

" Extra Mild smokers are more likely to smoke 16-25 a day (34% vs 26% for KS) but less likely to smoke less than 16 or more than 25 a day.

" There is considerable brand switching between Silk Cut variants (see table)

Brand switching between Silk Cut variants, Jan-Jun 97 Losses Gains KS to EM : 12% KS from EM: 11 KS to UL: 6% KS from UL : 2%

EM to KS : 45% EM from KS : 54% EM to UL : 17% EM from UL: 6%

UL to KS : 37% UL from KS: 32% UL to EM : 4% UL from EM: 7%

" There appears to be significant switching from KS into EM and UL and back again, but no evidence of a pattern of switching from KS to EM to UL.

Key Issues

What strategic role does Extra Mild play in the Silk Cut portfolio? Do the reasons for its continuation outweigh the difficulties it creates from a business perspective?

The Business Case

This is not the aspect of the issue on which we are best placed to comment. Issues of production cost / savings, sales force and facing management and distribution must be overlaid onto the strategic case discussed below.

The Strategic Case

Why does Extra Mild exist?

(In no particular order) " Because it makes Silk Cut the only House with three low tar variants " Because it is a neat half way point between Ultra and King Size (in tar and colour) " Because three facings on shelf is good " Because it supports the "low tar sewn up" portfolio thought " Because it acts as a "stepping stone" for some smokers

--> The definitive low tar House

All of the above issues relate EM to one or both of the other SC variants - it has no realproposition of its own, only as part ofa range.

Does this matter?

No - if the strategic case for EM's contribution to the House is strong enough to outweigh its comparatively weak individual business case

Yes - if EM does not contribute to the House in the way described above

Analysing The Strategic Case

The switching data does not appear to support the view that EM acts as a bridge of any sort between UL and KS. The key switching dynamic within the range appears to be between KS and it's two siblings.

The "low tar sewn up" logic behind having three variants is strong and compelling, but: - EM might not be necessary for demonstrating Silk Cut's definitive low tar House credentials - the logic might be compelling in theory but unnoticed by smokers

In addition, the strength of loyalty which Extra Mild smokers feel towards their brand is unknown. While de-listing a product will inevitably upset some of its consumers, the extent to which EM smokers are attached to their product is unknown.

Conclusion

Before making a recommendation on the strategic case for Extra Mild, we believe that a greater understanding of the views of Low Tar consumers on the issues raised is needed.

Recommendation

We believe that qualitative research into the Silk Cut House "low tar sewn up" and the contribution of Extra Mild would be extremely helpful in arriving at a final decision.

Key issues to be addressed include :

the extent to which Silk Cut is recognised as the definitive low tar cigarette House the contribution of each variant towards this overall image the extent to which having three variants is important the strength and relevance of EM as a brand / variant in its own right what does EM add to the House would the House be weakened by EM's de-listing what do EM smokers feel about it what would they smoke instead

We suggest carrying out a minimum of six groups:

" Extra Mild smokers, male and female " Ultra or King Size smokers, male and female " Competitive low tar brand smokers, male and female " All aged 25-40, the core of the low tar and the Silk Cut market

If affordable, splitting these groups by age (eg 21-30 and 31-45) might bring additional insights.

Taken with further analysis of the business issues, this will provide a more certain base from which to assess the potential or otherwise of the brand.

NB Although not a reason in itselffor doing the research, this would also seem to be a good opportunity to assess attitudes to Lambert & Butler Ultra Lights (iflaunched, ifnot thenjust the concept) and Ultra Lights.

Silk Cut Extra Mild

Qualitative Research Proposal

Background

Silk Cut Extra Mild is currently under threat of de-listing due to portfolio management pressures and question marks over its strategic relevance and role .

In order to inform the decision more thoroughly, we would like to conduct qualitative research into two specific issues :

" The strength and salience of Silk Cut Extra Mild as a brand in its own right. " The contribution and importance of SCEM to the Silk Cut House portfolio proposition

In addition we would like to take the opportunity to perform a mini-brand check on Silk Cut House and the Low Tar sector, to update our understanding of the current dynamics driving the growth of Low Tar and assess initial reactions to potential new rival brands (Lambert & Butler Ultra Lights, Marlboro Ultra Lights).

Detailed Research Questions

Low Tar Market " Why do people smoke low tar cigarettes these days? Is it for health, taste or fashion reasons, or something else? " Who is perceived to be low tar cigarettes these days? " How do they decide which low tar brand to smoke? " How do they perceive the market going - is low tar the future? " Is there perceived to be a strong pressure to smoke lower tar / fewer cigarettes? " How are the different brands perceived (brand mapping)? " How do the major low tar brands relate to their parent brands? Are the images indistinguishable or are low tar brands perceived distinctly / differently? " Is Ultra Low a distinguishable market sector from low tar? If so, what are the differences and which brands epitomise / drive these? " How would a Lambert & Butler or Marlboro Ultra Lights be received?

Silk Cut House

" How is Silk Cut viewed these days? How relevant is it? " Where do smokers (SC and competitive) see Silk Cut's current position? " To what extent is it still the definitive low tar cigarette? " What would make / prevent someone who smoked low tar cigarettes from choosing Silk Cut? " How important is it for Silk Cut to have a range of low tar cigarettes? " How does each variant contribute to the House low tar proposition?

SCEM " How well known and understood is Silk Cut Extra Mild? " Does the brand have any strength does the brand have in its own right or is it only salient through reference to KS or Ultra? " How attached to it do its smokers feel and how much would it be missed? " Where would its smokers be likely to go if it disappeared? " What contribution does it make to the House? " In what way would the House be weakened by its loss?

Methodology

Discussion groups.

Location

Sample nationally representative of Low Tar market, ie southern / London biased but not exclusively.

Proposed Group Structure

Group Sex Age Brands smoked 1 Male 20-26 Silk Cut (any variant) m/o 2 Female 20-26 Silk Cut (any variant) m/o 3 Male 20-26 Non-SilkCut low tar brands m/o 4 Female 20-26 Non-Silk Cut low tar brands m/o 5 Male 27-40 Silk Cut (any variant) m/o 6 Female 27-40 Silk Cut (any variant) m/o 7 Male 27-40 Non-Silk Cut low tar brands m/o 8 Female 27-40 Non-Silk Cut low tar brands m/o 9 Male 20-40 Silk Cut ExtraMild m/o 10 Female 20-40 Silk Cut Extra Mild m/o

Please note that this is the ideal - cost may prohibit 10 groups, in which case we could:

" lose the Extra Mild groups by ensuring sufficient EM representation in Silk Cut groups. " concentrate on 25-35, the core target audience, rather than split the ages.

However, if required the project could be expanded further by separating Marlboro Lights smokers into groups of their own, given the importance of the brand in the market.

Social Class should be allowed to fall out of brand preference .

Suggested competitor brands :

Marlboro Lights Camel Lights Lambert & Butler Lights B&H Lights Embassy Lights Rothmans KS Lights Gauloises Legeres

It is important that a variety of brands are represented - it would be very easy for Marlboro Lights smokers to dominate, which would not be as useful.

Duration

Estimated duration of groups : 2 hours