british american tobacco p.l.c. annual report 2008 - Growth - marketing and our brand portfolio

British American Tobacco p.l.c. Annual Report 2008

Our business is about offering adult consumers high quality brands that they will choose over competitors’ products. It is not about boosting the number of smokers, increasing the amount they smoke or targeting the underage.

Our approach to marketing

Our International Marketing Standards, revised in 2007, detail our commitment to marketing appropriately and only to adult consumers. The Standards apply to all our companies globally and govern our tobacco marketing across all areas including print, billboards, electronic media, promotional events and sponsorship. Visit Opens new window for details.

Our updated Standards were rolled out during a 12 month period and all our companies were expected to confirm their adherence to them by 30 June 2008.

To track implementation, a self-assessment audit of adherence was conducted by all Group companies shortly after this deadline. The assessment reported an overall adherence rate of 97 per cent but it also identified some areas where we were not yet meeting our updated Standards.

Instances of non-adherence were principally related to inconsistencies in interpretation of the Standards at a local level. The self-assessment highlighted the need for clarification of this interpretation around certain promotional activities and for sanctions that may be applied to retailers who sell to the underage.

We have issued additional guidance to our companies to help address these issues.

Action plans are now in place to help us achieve 100 per cent adherence by the end of 2009. Progress against these plans will be monitored through the Regional Audit and CSR Committees and the Board CSR Committee.

Balanced and innovative brand portfolio

Our Global Drive Brands (GDBs) – Kent, Dunhill, Lucky Strike and Pall Mall – cover the premium and value-for-money (VFM) segments and are at the forefront of our successful innovations, our product refinements and our trade marketing strategy. They account for 26 per cent of our global volume sales and our overall brand mix is broadly balanced among premium, mid-price and low-price.

Strategic segment volume in 22 key markets

In geographic terms, our brand contributions are evenly split between developed and developing markets, although some 73 per cent of our volume comes from developing markets.

Our continued focus on strengthening our GDBs is complemented by our investments in local and regional brands where they play a strategic role in a particular market. This gives us the flexibility to respond appropriately to consumer opportunities.

We are confident that the balance of our brand portfolio across price segments and geographies will allow us to navigate through challenging economic times.

Trade marketing and distribution

Managing business-to-business relationships with retailers makes up a large part of our trade marketing and distribution activities. We work with our retail partners to ensure they can offer the products our consumers want to buy, where they want them, when they want them, at the right quality and quantity.

The ‘Win Win Win’ strategy

Forging partnerships with global trade partners, with whom we can become the long-term chosen partner around the world, gives us a significant competitive advantage. To help us achieve these kinds of relationships, we regularly evaluate our customer service performance among retailers.

In 2008, 23 markets were surveyed and we continued to achieve top scores among global FMCG companies. In 12 markets, British American Tobacco was rated as the best overall supplier in the FMCG industry and in 5 further markets we were the best overall tobacco supplier.

Direct Store Sales (DSS)

Where appropriate, we believe that direct and exclusive distribution, or DSS, is the most effective way of serving retail outlets. DSS gives us greater control over the sales and distribution process, helps to improve retailer relationships, and allows us greater direct access to market and consumer information. Around 48 per cent of our volume sales is now distributed through DSS.

Premium organic volume growth in 2008:
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