Brown & Williamson Tobacco Corp.

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Brown & Williamson Tobacco Co. was founded in 1893 in North Carolina by George T. Brown and Robert F. Williamson. The tobacco company initially marketed Red Juice and Red Crown chewing tobacco as well as a granulated smoking tobacco called Golden Grain. In the early years of the 20th century, it moved to Louisville, Ky., and in 1927, the London-based British American Tobacco Co. acquired B&W.

B&W's strategy, rather than trying to compete directly with its industry rivals, was to develop a stable of distinctive specialty brands. Its first, launched in 1927, was Raleigh, which B&W offered to U.S. consumers at 15¢ per pack of 20.

Raleigh quickly became the No. 5 brand in the U.S., but in 1929, when the Great Depression hit the country, Raleigh was seen as overpriced. In response, B&W cut the price and adopted a sales promotion strategy that called for on-pack coupons redeemable for premiums such as playing cards or a card table. As a result of that success, B&W incorporated coupon redemption into its overall marketing plan for Raleigh.

In February 1933, B&W introduced Kool, the first nationally sold menthol-flavored cigarette, which later than year was first paired up with its penguin mascot. "Give your throat a Kool vacation." a typical ad headline, helped position Kool as a milder smoke that its non-menthol rivals.

In 1945, in another in a series of innovations, B&W hired Ted Bates Inc., New York, to create a campaign for Viceroy, a brand it introduced in 1936. Viceroy, which featured a filter made from cellulose acetate, was aimed at Benson & Hedges' premium Parliament filter brand. Bates' legendary copywriter Rosser Reeves, whose agency handled Kool as well, created a campaign for Viceroy with a budget of only $41,000; six years later, B&W was spending $18 million on Kool via Bates.

Health warnings

In the early 1950s, the first studies warning of the health hazards of smoking appeared in the U.S. Bates countered the bad news by developing a "reassurance campaign" for Viceroy cigarettes that promoted the brand with the claim that "the nicotine and tars trapped by the exclusive Viceroy filter cannot reach your nose, throat or lungs." That pitch helped catapult Viceroy to No. 1 in sales in the U.S.

For Kool, Bates introduced the slogan "Break the chain of the hot cigarette habit—with Kools," and consumers responded to the implicit suggestion that by switching to Kool they would eventually be able to quit smoking.

Another Kool campaign targeted weary travelers and families seeking a hot-weather meal in an air-conditioned restaurant. Many a plate-glass restaurant door displayed a decal featuring the Kool penguin, the Kool pack and a notice that said the establishment was air-conditioned. The decal beckoned: "Come in, it's Kool inside."

In 1956, R.J. Reynolds Tobacco Co. introduced Salem, aiming to unseat Kool, the entrenched segment leader. Despite RJR's advertising and promotion onslaught, Kool retained its lead. However, RJR was poised for growth in the 1960s.

In 1957, Keyes, Madden & Jones took on the Raleigh account. In 1963, Keyes Madden merged with Post, Morr & Gardner (both shops were based in Chicago), and B&W moved the remainder of its accounts to Post, Keyes, Gardner. That same year, the marketer began to introduce line extensions to its existing brands, adding fiber-based filters to both Kool and Raleigh.

B&W brands grew more slowly in the 1960s and 1970s than in the heady days of the 1950s. Kool remained the top-selling menthol brand, fueled by strong sales among blacks, which led B&W to sponsor the New York Jazz Festival—renamed the Kool Jazz Festival—into the '80s. Meanwhile, the marketer introduced more brand extensions to compete in new niches, moving into the new "light" category with extensions to the Viceroy, Kool and Raleigh brands.

In 1980, B&W introduced ultralow-tar Barclay, promoted as containing only 1 mg of tar. The headline in introductory Barclay ads stated: "The pleasure is back," implying that the brand offered more flavor than other brands in the category. B&W claimed that Barclay employed a different cigarette "technology" from that of its competitors, thereby producing a keener taste sensation.

B&W set out to capture a quarter of the ultralow-tar market and budgeted $150 million for advertising and sales promotion costs for the Barclay launch. Within nine months, Barclay won a 1.2% market share. However, rivals RJR and Philip Morris Cos. tested Barclay and found that the design of the air tunnels peculiar to its filter caused consumers to close them off when smoking, thereby diluting the filter's effects and raising the actual tar yields well above the 1 mg level.

Bought and sold

In 1995, B&W acquired its rival, American Tobacco Co.—the marketer of Lucky Strike, Pall Mall and Tareyton—and expanded its plant in Macon, Ga., to produce the new brands. As part of a consent decree by the FTC, B&W divested American Tobacco's Montclair, Riviera, Malibu, Bull Durham, Crown and Special Ten cigarette brands but retained Tareyton, Silva Thins and Tall as well as Lucky Strike and Pall Mall.

After the acquisition, Kool—billed as the "classic menthol" cigarette—continued to be the largest-selling B&W brand. Continuing its strategy of extending successful brands, B&W introduced Kool Natural Lights, the first national mainstream cigarette brand positioned as a "natural" product, in a $40 million campaign.

Grey Advertising, New York, which took over the Kool Natural Lights account in the mid-1990s, positioned the brand as "A special blend of tobaccos and natural menthol with other natural flavors for a smooth, fresh taste. We add no artificial flavors to this blend." In January 1999, B&W moved Kool Natural Lights out of Grey and back to Bates USA (previously known as Ted Bates Inc.).

In 2000, Bates introduced a new campaign for Kool—which had slipped to No. 2 in the category after Loews Corp.'s Newport—that was designed to appeal to the 21-to-30-year-old segment of the market. Its slogan was "We built the house of menthol."

In 2001, Kool remained B&W's most profitable cigarette brand, with a 2.8% share of the U.S. market, unchanged from 2000; Newport, by comparison, had a 7.8% share, up 0.2%. B&W spent an estimated $23.3 million in measured media behind Kool in 2001, up 38.4% from the year earlier.

In early 2003, B&W shuffled its agency roster. Grey Global Group's integrated communications unit, G2, was assigned the Lucky Strike brand, taking over for Cordiant Communications Group's 141 Worldwide. WPP Group's OgilvyOne took on Pall Mall, replacing G2. Meanwhile, 141 Worldwide was given Kool and, later in 2003, also picked up the company's new Advanced Lights brand. BAT's travel and retail business, which involves duty-free shop promotions, was handed exclusively to 141.

In fall 2003, R.J. Reynolds Holdings agreed to buy B&W from British American Tobacco for about $3 billion and assumed legal liabilities. RJR and BAT merged their U.S. operations into a new company, Reynolds American, which is 42% owned by RJR.

The merger came as tobacco makers continued to lose ground to discount brands and industry leader Philip Morris USA, which at the time of the RJR deal controlled about half of the U.S. tobacco market. B&W controlled 10.6% of the U.S. tobacco market while RJR reached 23%. Reynolds American became the second largest cigarette maker.

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