Always Under
Construction
Always Under
Construction
Click here: For Information on the Growth of Menthol Cigarettes, In General..
From its initial introduction in 1957, as a fledgling cigarette in a market dominated by 40-year old brands, to its crowning achievement in 1993 of reaching #1 menthol status, Newport has waged one of the most successful battles in the tobacco industry. As a result of today's long-standing, highly successful "Alive With Pleasure" (1st used in 1972) campaign, Newport has carved out one of the strongest and most popular brand images ever.
As seen in the Figure below, P. Lorillard's Newport brand enjoyed the most significant growth of any premium brand from 3.7% of the market in 1985 to 10.3% in 2000. Marlboro, for sure still ruled the roost in 2000, with 51.3% or five times greater than its closes competitor #2 Newport. (Tobacco Industry Report released by Credit Suisse First Boston in 2001)
Quick Intralinks:
In the Beginning - A Hint of Menthol
Continual Growth - "Alive With Pleasure"
Strategic Focus - the Marketing Plan for the Next Generation
Let's look back at the growth of Newport since its inception early in 1957. Manny Yellen, then VP for Sales and Advertising at P. Lorillard (1967 became President, 1970 President and Chairman of the Board) had been involved with Newport since its inception and was responsible for its marketing philosophy.
A the time Newport was ready to go in early 1957 with an advertising budget of approximately
\\$900,000, the Liggett & Myers brand Oasis
was brought out with a six month advertising budget
of six and one-half million dollars. At this time the Menthol Category consisted of Kool
cigarettes that had a therapeutic image. Salem cigarettes brought out in 1956 with a substantial
budget was already on its way with a new menthol image of "refreshing taste."
It was realized that Newport would not stand a chance with all the menthol brands going down the same road. Yellen indicated they had to sell a certain type of person on the Newport brand until such a time Lorillard could establish a sufficient volume to make the brand profitable and then gradually change the image to obtain other types of smokers. Newport with its hint of mint was marked as a "fun cigarette" - it was advertised as such and obtained a youthful group as well as an immature group of smokers.
Newport probably got its name from the Newport Jazz Festival that has been held annually since 1954. This is one one of the oldest jazz festivals organized in Newport, RI by Louis Lorillard and Elaine Lorillard who administered it through a non-proft corporation. The original cigarette pack introduced in 1957, probably reflects the original pitch: the elegant, by-the-sea life of leisure is conjured up by the abstracted, wind-filled sail and the easy marine blue of the package. The upside down Nike swoosh was probably just a portion of a wind wind-filled sail. The Nike swoosh was designed by graphic artist, Carolyn Davidson in 1971 and is the trademark that adorns Nike products.
The plan was to reach a sales volume of five billion cigarettes annually and then gradually change the advertising philosophy to secure additional types of smokers. In 1963 they were able to start the change in advertising but before sufficient penetration they were hit with the 1964 Surgeon General's report. By the end of 1964 sales of Newport were down 22.5% . Though the new campaign "Newport Tastes Fresher, Tastes Better Too, Than Any Other Menthol Cigarettes" had started it did not have sufficient penetration to notice any favorable sales effect.
With the expanded menthol market, it can be seen from the Table below that for the four established brands from 1957 through 1960, Salem and Newport made the most significant gains. The other two brands - Kool and Oasis - did not contribute much to the growth of the general menthol market. The recent rise of the "all other" group is due to the introduction of the new brands that had not established a foothold yet.
| Total Menthols | Salem | Newport | Oasis | Kool | All Others | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Year | Sales | % Change | Sales | % Change | Sales | % Change | Sales | % Change | Sales | % Change | Sales | % Change |
| 1957 | 26.6 | - | 11.9 | - | 0.9 | - | 0.9 | - | 12.6 | - | 0.3 | - |
| 1958 | 37.2 | +39.8 | 19.1 | +60.5 | 2.7 | +200.0 | 1.4 | +55.6 | 13.7 | +8.7 | 0.3 | 0 |
| 1959 | 51.0 | +37.1 | 28.2 | +47.6 | 4.6 | +70.4 | 1.8 | +28.9 | 13.7 | 0 | 2.7 | +800.0 |
| 1960 | 61.8 | +21.2 | 35.1 | +24.5 | 5.8 | +26.1 | 1.6 | -11.1 | 14.9 | +8.8 | 4.4 | +63.0 |
As indicated in the Table below Newport had very little market share from 1964 through 1971. In 1964, there were nine menthol brands and in 1971 there were 23 (9 exclusively menthol, 6 brands were line extensions of filter brands and 8 brands were introduced concurrently with filter brands). Menthols accounted for 24% of the cigarette market; 83% of this volume was from exclusively menthol brands and line extensions accounted for 5% of the volume. The Table directly below shows trends in cigarette market share 1964 - 1971 for menthols..
| 1964 | 1965 | 1966 | 1967 | 1968 | 1969 | 1970 | 1971 | |
|---|---|---|---|---|---|---|---|---|
| Kool | 3.2 | 4.0 | 4.5 | 4.9 | 5.7 | 6.6 | 7.7 | 8.0 |
| Salem | 8.5 | 8.8 | 8.7 | 8.2 | 8.4 | 8.4 | 8.4 | 8.5 |
| All other menthols | 4.5 | 4.6 | 5.5 | 6.9 | 6.7 | 6.7 | 6.9 | 7.4 |
| NEWPORT | 1.6 | 1.7 | 1.7 | 1.5 | 1.4 | 1.0 | 0.8 | 0.8 |
The Maxwell Report for 1970 had Newport sitting in 24th place. Even Brown and Williamson's entry into the menthol market in 1960, Belair was running ahead in 15th position. The Table below is a partial listing taken from page 14 of The Maxwell Report, Preliminary Estimated Domestic Cigarette Consumption By Brand and Type, October 23, 1970, John C. Maxwewll, Jr.
| Rank | Brand | Billons |
|---|---|---|
| 1 | Winston | 81.9 |
| 2 | Pall Mall | 58. |
| 3 | Marlboro | 51.6 |
| 4 | Salem | 43.3 |
| 5 | Kool | 42. |
| 6 | Camel | 32.9 |
| 7 | Kent | 27.7 |
| 8 | Tareyton | 21.8 |
| 9 | Viceroy | 19.7 |
| 10 | L&M | 17.3 |
| 24 | Newport | 4.3 |
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Newport began its present growth trend in 1973 following a six year decline. The decline was primarily caused by the repositioning the product which included changes in its advertising, packaging and product. A 1965 product comparison revealed that Newport was a very light product (lack of tobacco taste) compared with Salem and Kool as it had much less tar and nicotine.
| Tar | Nicotine | |
|---|---|---|
| Salem | 21.5 | 1.19 |
| Kool | 20.5 | 1.22 |
| Newport | 15.8 | 0.73 |
In 1969, in the midst of tha tar controversy, Lorillard increased Newport's tar by 40% taking it from 15.8mg in 1965 to 22.3mg by 1969. It appears they recognized that the brand's low level of strength and tobacco taste were probably holding the brand back. In 1975, Newport seemed to have received the push it needed as Kool made several product changes. Kool changed the character of its product in 1975 and went from the then fastest growing brand to the fastest declining brand.
| Tar | Nicotine | Menthol | |
|---|---|---|---|
| Salem | 18.9 | 1.25 | 0.41 |
| Kool | 17.9 | 1.45 | 0.43 |
| Newport | 17.6 | 1.27 | 0.37 |
Through the late 1970s and 1980s Newport maintained its taste advantage by providing more tobacco taste than Salem and Kool.
Almost all the Newport's growth (90%) had come from younger adult smokers. Switching gains preceded first time smoker growth. The younger adult switchers who lead the rebirth of Newport came from Kool and Marlboro - from 1976-1979 over half of Newport's switching gains came from these two brands - 34% were former non-menthol smokers. It seemed like first time smokers looked to their older peers to determine what brand was most acceptable.
This graph illustrates the increased share of the menthol market Newport had amongst 18 year old African American smokers from 1939 through 1979.
Historically, Lorillard had acknowledged the importance of the urban centers to Newport via the designation of specialized Sales Reps and some unique merchandising approaches on an as need or requested basis.
Much more information on African Americans and the Tobacco Industry with emphasis on smoking mentholated cigarettes - coming soon.
Lorillard wins African Americans for its Newport by stressing black race's pride.
In 1978 a sales manager, T.L. Achey, sent a memo to President of Tobacco Division, Curtis Judge commenting on the fantastic success Newport had in the past few years. Mr. Achey indicated that Newport was being pruchased by black people (all ages), young adults (usually college age), but the base of the business was high school students.
As seen below in 1979 Newport (9.8 billion units sold) was sitting at number 18 but still far behind both Kool (56.7 billion units sold) and Salem (53.2 billion units sold).
| Rank | Brand | Billons |
|---|---|---|
| 1 | Marlboro | 103.6 |
| 2 | Winston | 81. |
| 3 | Kool | 56.7 |
| 4 | Salem | 53.2 |
| 5 | Pall Mall | 33.9 |
| 6 | Benson & Hedges | 27.8 |
| 7 | Camel | 26.3 |
| 8 | Merit | 22.4 |
| 9 | Vantage | 20.7 |
| 10 | Kent | 19.3 |
| 18 | NEWPORT | 9.8 |
By 1983, Newport had the youngest franchise of any brand, with 53% of sales to people aged 18 to 24, and had doubled its penetration of young black markets in the Northeast (see below Lorillard's present Strategic Focus marketing scheme. Tier V - gets the lowest level of support. These markets are spread throughout non-menthol areas - the midwest, west and west coast.)
I'm not sure if we agree that the packaging was changed significantly compared with the originally.
Take a look at the many faces of Newport packaging . In a document providing an
overview of Lorillard Marketing and Brand Management it was specified that Newport
packaging must effectively communicate the ability to satisfy the smoker's desire.
Bragging rights belonged to Lorillard as illustrated in the two ads below from tobacco trade journals.
In 1990 Newport was climbing rapidly ranked 5th with 24.1 billion cigarettes sold right on the back of Kool (25.7 billion units sold) and Salem (32. billion units sold)
| Rank | Brand | Billons |
|---|---|---|
| 1 | Marlboro | 134.4 |
| 2 | Winston | 45.8 |
| 3 | Salem | 32. |
| 4 | Kool | 25.7 |
| 5 | NEWPORT | 24.1 |
Of course, Lorillard was letting it be known - below is an ad that appeared in a tobacco trade journal.
Some of the strategies used to gain market share to win over switchers or first time smokers besides radio and TV spots, billboard use and ads in magazines included:
B1G1F (Buy One Get One Free) - the primary purpose of a B1G1F offer was to create new trial and resultant new customers. It was felt that Newport was unique in that its demographics placed it in the young adult category with varying dominance between white and black consumers, also sales were primarily by package rather then carton. Therefore, the goal of increased trials was best served by placing displays in primarily package sale locations frequented by young adults.
Sampling - it was felt the most effective tool for trial generation (to get smoker to switch or try it for the first time) was sampling. One program recommended in 1977 was to send supervised crews to knock on doors/ring doorbells and ask if a smoker over 21 resides at the house/apartment, screen for menthol smoking/menthol proneness and if appropriate leave a Newport sample with brandsell leaflet and 20 cent next purchase pack coupon. Using this sampling approach it was felt the conversion rate was 2.5%.
Richard Kluger's book Ashes to Ashes (pg 700) mentions a time when Lorillard was caught in the act of sampling youngsters with Newports from a van painted green and orange and bearing the brand's slogan, "Alive with Pleasure," in large letters on the streets of the nation's capital. When confronted Lorillard stated, "We do not give cigarettes to children," and blamed the incident on the carelessness of its hired dispensers. Lorilland did have a Sampling Procedure (12/18/90) in place that stated that it was imperative that you (the dispenser) do not give samples to any one who appears to be (under 21 years of age).
Strategic Focus - 1994 began Newport's next generation with a marketing plan designed to solidify its position in the industry. It was felt through 'strategic focus' they would be able to segment the geography according to each market's needs, and to pinpoint their promotion and advertising efforts. It was felt such a marketing plan was needed because total U.S. Sales volume was down 5% in 1993 versus the previous year.
In 1994 Newport cigarettes continued to be an ethnically skewed brand and holds a very sizeable share of market among the black smoker market. Driven by a powerful peer acceptance factor behind the Newport name, the brand was currently riding the crest of ethnic appeal in key urban areas of New York, Chicago, Detroit and other cities.
In 1993 Kool sales decreased by 16% nationally - volume decrease by 15% on the U.S.. For Salem, 1993 showed tremendous volume losses throughout the country, by year's end Salem volume decrease by 23%.
The consideration of Image and Price were the two factors for the new way of marketing Newport in the next generation. The objective was to restore long-term volume stability and to take Newport into the next generation. It was felt that strong brand Image was Newport's biggest asset but the product was vulnerable to the Price because of deep discounts offered by minor players.
The first application of "Strategic Focus" was to Newport's marketing geographies. Each division was re-evaluated against the Image and Price factors and each was classified into one of five, different marketing categories or TIERS.
A brief description of the five TIERS follows.
TIER 1 - consumer sales in these divisions are heavily motivated by brand Image and not seriously affected by the Price value factor. This market represents 22% of the U.S. population and 44% of Newport's volume. The majority of this Tier is in the eastern part of the U.S., in big cities like NewYork, New Jersey and Boston. This is consistent with past years, when Newport's highest share where core markets were located mainly along the east coast. The marketing startegy is to continue to leverage Newport's highly popular image to maintain its high share performance.
TIER 2 - consumer sales in market strongly motivated by Image but the Price factor has also become a key player. These divisions total 16% of the U.S. population and 27% of Newport's volume. These markets are very Price sensitive and accounted for the greatest percentage of 1993's losses. The majority of this Tier tend to be big metropolitan areas like Philadelphia, Chicago and Detroit. The marketing plans here require a bigger investment because both the Image and Price factors have to be addressed through promotions and advertising.
TIER 3 - in these divisions, Newport's image is underdeveloped but the menthol category overall is still popular. Savings is still important in this Tier but these markets seem to show response to image building efforts on Newport's part. These divisions account for 16% of the population and 12% of Newport's volume. For the most part, Tier 3's opportunity markets are concentarted in the midwest to the south and southeast area of the U.S. Atlanta, Canton and Charlotte are a few examples. Attention for Tier 3 will focus much more on building the brand through fighting price sensitivity than on establishing its image.
TIER 4 - markets represent the largest part of the U.S. population 29% and 14% of Newport's volume. This Tier has the most scattered group, these are markets that have within them pockets of strength. Divisions such as Gand Rapids, Los Angeles North and Sarasota are some of the members of this geography.
TIER 5 - comprised of 17% of the U.S. population but accounts for only 3% of Newport's volume. This Tier represents the smallest opportunity for Newport, is spread throughout the midwest and west and over to the west coast. Plan here is to provide low levels of support, in order to secure volume base and insure brand distribution.
Advertising and promotion programs have been created to respond to the needs of each Tier individually In general, promotions will emphasize programs that bring the brand's Image to life for consumers - to make them feel that they are actually purchasing the experience of being "Alive With Pleasure" when they buy a Newport. Further - to reinforce the brand's "Pleasure" image among younger adult smokers. For each Tier, as the ratio of Image to Price factors change, so too will the mix and variety of Image- based programs to Price-sensitivity-based programs provided.
Another fear for Lorillard was brought about by the MSA (Master Settlement Agreement) settlement. Steve Watson, VP of external affairs for Lorillard indicated the greatest fear is that minor manufacturers not associated with the MSA settlement have circumvented the payments being made to the states. As a result they can provide deeper discounts than Lorillard can afford to offer retailers. "It's made all the manufacturers susceptible to marketshare loss and we think that's a competitive disadvantage to our brands" says Watson. The proof of that, he says, is that the share of "one of the minor manufacturers - I think it's Commonwealth - is even larger than that of Liggett brands combined and it's growing steadily.".
<References:
Garten, S, Pharmacological Effects of Menthol and its Association with Indicators of Nicotine Dependence, Master's Thesis, May 24, 2001.
Kluger R, Ashes to Ashes, Vintage Books, New York, 1997.
Lorillard and Tobacco 200th Anniversary, P. Lorillard Company 1760-1960, 1960.
Lorillard Tobacco Documents: 03537131/7132 1978, 94272683/2686 1994, 89097493 1970, 04413640 1964, 04414437 1964, 84419221/9226 1959, 87061734 1985, 84175960/5963 1978, 89243135A/3143 1980, 84419231/9258 1960, 84419668/9703 1961, 85282920/2922 1984, 89863176/3188 1961, 82797784/7792 1993, 04332689/2700 1978, 94259455/9485 1994, 84419366/9398 1960, 8764659 1990, 94543569 1998, 01124257/4263 1964, 33286475/6486 1993, 037228833/8834 1982, 87054397/4518 1988, 94272683/2686 1994, 94307905/7925 1994, 85282939/2942, 84419331/9358 1960.
Philip Morris Tobacco Documents: 2040334257/4259 1980.
RJ Reynolds Tobacco Documents 505511939/1954 1986, 503782596 1973, 505656289/6304 1986, 503098909/8918 1987, 505643289 1985, 03308276/8280 1972, 01425752/5753 1971, 505925477 1986, 507180002/0059 1985.
Thibodeau M and J Martin, Smoke Gets in Your Eyes, Abbeviile Press Publishers, 2000.