PHILIP MORRIS ON ANOTHER LEVEL

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Incentives, which Philip Morris calls "merchandising benefits," are per-carton cash awards-independent of buy downs (discounts offered to the retailer that are passed on to the consumer). They are given to Retail Leaders participants only.

The Retail Leaders program's three levels, called "category merchandising options," or CMOs, all require that Philip Morris brands get the percentage of shelf space equal to the company's share of sales in that location, determined by averaging share of market and share in that store. The amount of space is the same at each level; only the configuration of the display changes (see graphic below).

The only restriction on competitors contained in Philip Morris' contracts occurs at CMO3-the highest retail merchandising level at which Philip Morris pays the highest incentive, 90 cents per carton, to retailers. This tier prohibits retailers from placing rivals' permanent signs (those up for more than 30 days in a two-month period) inside the store other than on the "retailer choice" portion of the industry fixture, which is the portion not exclusively used for Philip Morris brands. Competitors are also prohibited from placing permanent signs anywhere outside the store.

Rivals are permitted, however, to place temporary signs-those up for less than 30 days in a two-month period-anywhere inside or outside the store, as well as permanent or temporary signs that carry price or promotional offers.

At all levels, competitors are prohibited from placing signage on Philip Morris' portion of the display.

"We're paying for that merchandising space. A competitor could not come in and put their signs on top of Philip Morris," said Brendan McCormick, manager of media affairs at Philip Morris USA, who added, "just the same, we're not putting our signs over [R.J.] Reynolds' or Brown & Williamson's" displays.

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