CULTIVATING CIGARETTE BRAND IN FERTILE TERRITORY;BAT BUILDS NAME RECOGNITION IN EMERGING MARKETS

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[rio de janeiro] The inexorable growth of the cigarette market outside Western Europe and North America is creating opportunities for new international brands that appeal to heavy smokers in emerging markets.

From Brazil, Flavio de Andrade has spotted international potential in Hollywood, the country's best-selling cigarette with 14% of a $130 billion cigarette market. When Mr. Andrade was marketing director of Rio-based Companhia de Cigarros Souza Cruz, British American Tobacco's largest subsidiary, Hollywood expanded into 25 countries using an image and ad strategy created in Brazil.

$50 MILLION MARKETING PLAN

The company backs Hollywood, now BAT's third largest international brand, with about $50 million a year in marketing support, from print ads to sports sponsorship.

"We always thought we [at Souza Cruz] had the basic elements to enter the international market: well-positioned and successful brands, a relatively important local market share and high rates of production," Mr. Andrade said. His success with Hollywood and other brands led to his promotion to president of Souza Cruz earlier this year.

Souza Cruz has an 80% market share in Brazil. The 60-year-old Hollywood's brand equity is so strong that it rivals Coca-Cola for highest "top of mind" scores in consumer brand awareness research in Brazil.

FAST-GROWING MARKETS

But outside Brazil, Hollywood is up against brands that are household names like Marlboro from Philip Morris International, the largest international cigarette marketer. (BAT is second.)

Mr. Andrade began targeting fast-growing markets such as Poland, Russia and Romania several years ago, hiring local distributors and transferring Brazilians to open offices in Russia, Dubai and Cyprus.

He decided Hollywood had universal brand value based on feeling good through sports, fun and friendship. The Brazilian ad slogan "The Hollywood Way" is used everywhere the brand is exported and print ads are created by SÌo Paulo agency DPZ, which survived based on the strength of its work for Hollywood BAT's decision last year to use only two global agencies, Bates Worldwide and Grey.

EXPORTING STRATEGIES

The Brazilian strategy of sponsoring sports events and rock concerts is also being used in overseas markets, including sponsorship of a winning motorcyle and sidecar team in a world championship in Eastern Europe.

BAT is negotiating joint-ventures to make Hollywood in other markets. Production has already started in the Czech Republic and Germany, and will begin soon in the Ukraine, Russia, Poland and Pakistan.

With its primary focus on the fast-growing Eastern European and Asian markets that are boosting worldwide cigarette sales by about 5% a year despite drops in both North America and Europe, Hollywood has joined BAT's stable of international brands such as Lucky Strike and State Express 555.

"We've been in those markets for about two years now and they are far from being completely consolidated," he said. "Ex-Soviet Union and Central Asia are huge markets, as well as Latin America, and there's still a lot to go."

U.S., EUROPE LONG-TERM GOALS

Through Mr. Andrade's tenacity, Hollywood is BAT's most successful brand in Eastern Europe and the No. 3 brand overall in the region, with local market shares of up to 10%.

To further Hollywood's international growth, the brand's future strategy will be run out of BAT's U.S. subsidiary, Brown & Williamson. Although developing markets are keeping Hollywood's marketers busy for the next two or three years, the long-term goal is to try the brand in the U.S. and European markets, too.

"BAT wants to be like Coca- Cola," Mr. Andrade said. "Globalization is a trend, and a consumer should be able to find BAT's brands wherever he goes."

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