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

Our approach to marketing

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 those who are underage.

Our International Marketing Standards detail our commitment to marketing appropriately and only to adult consumers. The Standards apply to our companies globally and govern our tobacco marketing across all areas, including print, billboards, electronic media, promotional events and sponsorship.

A review of adherence to these Standards was conducted by all Group companies in 2008. Although the assessment reported an overall adherence rate of 97 per cent, it also identified some areas where we were not yet meeting our Standards. These were principally related to inconsistencies in interpretation of the Standards at a local level.

During 2009, we focused on action plans to address these issues and progress was monitored by our regional audit and corporate social responsibility (CSR) committees, with updates reported to our Board CSR Committee. Actions taken have included issuing guidance to clarify the sanctions that can be applied to retailers found to have sold tobacco products to those who are underage and training to raise awareness of how our updated Standards cover technological developments, such as electronic and interactive displays in shops.

Full adherence to our International Marketing Standards was achieved in all but 12 companies. A total of 15 instances of non-adherence were reported to have occurred. Action plans were already in place by the end of 2009, with the aim to achieve full adherence in 2010.

We are committed to bringing our recently acquired business in Indonesia into line with our global practices. However, our plans to introduce our International Marketing Standards have been overtaken by proposed regulations from the Ministry of Health.

The market in 2009

2009 has been a difficult year for fast moving consumer goods in general and tobacco products did not escape the challenge. The global economic recession has affected the market to varying degrees in different geographies. Total market volume declined by around 2 per cent in our key markets, with consumer down-trading moving some of this volume into illicit trade.

Despite this, our overall performance has held firm. We continued to invest in marketing programmes and innovation throughout the year. As a result, our overall volume share in key markets was virtually unchanged. Our Global Drive Brands (GDBs) – Dunhill, Kent, Lucky Strike and Pall Mall – have grown by a combined 4 per cent in volume and have gained market share, helped by continued organic volume growth. Our portfolio has proved resilient in difficult times and, as consumers come out of recession, we are in an excellent position.

Balanced and innovative brand portfolio

Our GDBs cover the premium and value-for-money (VFM) segments and are at the forefront of our successful innovations, product refinements and our trade marketing strategy. They account for 27 per cent of the global volume sales of our total portfolio and our overall brand mix is broadly balanced between premium, mid-price and low-price.

In geographic terms, our brand contributions are evenly split between developed and developing markets, although some 74 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 continue to allow us to build strong consumer loyalty through uncertain economic times.