Our business is operating in a landscape of challenging economic conditions, excise rises above inflation, increasing regulations and changing consumer behaviours. In the face of these challenges it is all the more important that we focus on achieving sustainable growth.
We have a great portfolio of brands, encompassing not only our Global Drive Brands (GDBs) and other international brands, but also strong local brands across a diverse geography. The focus of our strategy is to build our premium brands across our entire portfolio, with a focus on our GDBs, but we also seek growth in our Value-For-Money (VFM) and Low-Price segments.
Our industry-leading brand innovations were highly successful in a wide range of markets in 2010. These innovations deliver consumer value and increased market share, further driving our commercial growth and helping to move us towards attaining our vision of achieving leadership of the global tobacco industry.
Growth through innovation
Exclusive to Dunhill, Reloc re-sealable packs helped drive brand growth in 2010 and it is now in 66 markets worldwide. Key markets to launch the new pack in 2010 included Mexico and Australia.
Our growth in 2010 has been driven by pack and product innovations throughout many markets across our range of GDBs.
Dunhill, our most prestigious brand, continued its strong share growth in key markets in 2010, driven by the success of Reloc, the re-sealable pack exclusive to Dunhill. Good organic growth in key markets and successful brand migrations to Dunhill in Brazil and South Africa continued to confirm the brand's consumer relevance, with overall volume growing in 2010.
Kent, our most innovative brand, achieved market share growth in 2010 with the successful launch of Convertibles in South Korea, Russia, Ukraine and Turkey. Kent Convertibles feature a menthol-flavoured capsule that can be activated by the consumer to release a refreshing taste.
The capsule can be crushed at any time during the smoke, giving consumers the freedom to change their taste experience anytime.
This innovation helped strengthen the pioneering image of the brand, expanded its footprint in new markets and generated stronger momentum with consumers in the Adult Smokers Under 30 (ASU30) segment.
Lucky Strike, a brand particularly successful in the ASU30 market, launched Click & Roll in 2010 using similar technology. It was successfully launched in several markets throughout the year, including launches throughout the Americas region.
Click & Roll performed very strongly, far exceeding our own high expectations and helped to deliver 2 per cent total organic volume growth for Lucky Strike globally. Its share reached record levels in a number of key markets as a result of this innovation.
Pall Mall is our key VFM brand and it delivered total volume growth of 8 per cent in 2010. This took its success to record levels, and including sales from our associates, Pall Mall is now the third largest cigarette brand in the world, excluding China.
This strong performance was achieved through significant growth in Western Europe, Pakistan and Chile, as well as a successful migration in Denmark. Driven by the product innovations of Pocket, Nanokings and Super Slims, the Pall Mall Slims category grew volume by 18 per cent in 2010 and now accounts for 9 per cent of our global Pall Mall volume.
Global Drive Brand volume
Other international brand volume
Trade marketing and distribution
Our Trade Marketing & Distribution (TM&D) is responsible for the development of our brands and delivery of our products to retail customers, as well as engagement with retailers on issues such as youth smoking prevention.
Route to market
Our routes to market are a critical enabler of our growth strategy. They allow us to quickly roll out innovations on a global scale and to fully meet consumer demand at the point of sale. We are constantly reviewing our routes to market to ensure we remain competitive. This includes examining our relationships with wholesalers, distributors and logistics providers.
Where appropriate, we believe that direct to store sales (DSS) are the most effective way of serving retailers and building sustainable business partnerships. DSS gives us visibility and control over the sales and distribution process, allowing us greater access to both the market and consumer information. It also provides a direct commercial link to our most strategic retail accounts. Half of our volume globally is sold to retailers through our own distribution capability in key markets including Canada, Brazil, South Korea, Australia, Russia, Romania, South Africa and Nigeria.
Building relationships with retailers makes up a large part of our trade marketing activities. We work with our retail partners to ensure that at all times they can profitably meet the expectations of adult smokers with regards to availability, pricing and brand quality.
We regularly survey our international customers and benchmark our performance across different trade channels against competitors and other blue-chip Fast Moving Consumer Goods (FMCG) companies.
The 2010 results show that half of the retailers in the 33 markets surveyed rate British American Tobacco as the best consumer goods company to do business with. When evaluating distribution specifically, almost two out of three retailers rate us as the best company they deal with. Markets surveyed included Germany, France, Italy, the UK, Belgium, Poland, Romania, Switzerland, Malaysia, Bangladesh, Vietnam, Pakistan, Canada, Chile, Colombia, South Africa, Egypt and Nigeria.
Global retail customers
We make a special effort to understand and develop joint programmes with global retail partners in order to reach adult smokers in key channels such as global travel retail and convenience.
During 2010, we received several accolades from trade organisations operating in these channels. After being nominated three times for the Frontier Awards – the travel retail industry’s most prestigious awards – in 2010 British American Tobacco won the ‘Star Product of the Year’ category.