Smokers go from outcasts to in crowd

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The image of cigarette smokers has fallen a long way from the days of Bogie, Bacall and the smoking jacket. In many cities they've been tossed out of offices and bars and can be seen huddling in doorways on cold days, nicotine-stained masses bumming lights, taking drags and tossing their butts into the street.

Now, in a controversial bid to revive the romance of a habit that's costly, potentially deadly and increasingly on the social fringes, R.J. Reynolds is openly celebrating cigarette smoking. Its new Chicago smoking lounge, critics fear, could set a brazen tone for a new phase in the marketing of a product that once plastered magazines, billboards and sporting events with iconic images and bright logos.

While the focus seems to be on the core customers who drive revenue-existing smokers-there are fears that RJR's plan could make its products appealing to teens, setting up a new generation of consumers.

In the eight years since a landmark settlement agreement put severe restrictions on the $87 billion industry's ability to market its wares, tobacco sellers have relied heavily on discounts to move merchandise.

But RJR is introducing a new premium-priced line of smokes called Marshall McGearty, complete with an upscale smoking lounge in a trendy Chicago neighborhood. The lounge has fresh tobacco leaves and a tobacconist who will hand-roll a pack of cigarettes in any of nine flavors.

The $8-a-pack price and the exclusivity of the brand-it can only be purchased at the lounge-is creating a buzz. And, perhaps, a new way of bringing a much-maligned product to market.

Being different

"They're trying something completely different. They're openly trying to create an allure," said one industry analyst who asked not to be identified. "If it works, I can see the other companies lining up to try something like it."

For now, none of RJR's rivals, which include Philip Morris and Lorillard, have opened smoking lounges or employed a glamour strategy.

"No one has done this before," said Larry McGearty, creative director at RJR's Philadelphia-based ad agency, Gyro Worldwide, and co-creator of the brand that carries his name. "Nobody has tried to create romance in the industry and take it to the next level."

Mr. McGearty and RJR blend specialist Jerry Marshall struck up a conversation a few years back about tobacco leaves, likening them to the tastes of coffee beans or chocolates. "We identified things such as coffee, beer, wine, liquor, chocolate, teas, and in every one of those categories a `super-tier' brand had emerged within the last six months to 10 years," said Brian Stebbins, senior marketing director at RJR. "We conducted some research and found that a sizeable group of adult smokers wanted such a brand."

RJR is not treating Marshall McGearty as a loss leader. "When you do that, you make undisciplined decisions," Mr. Stebbins said. "We are, in fact, treating it as a profit center. It's a retail store. We're a business. We want to make money like any other business. We wanted a super-premium brand and this was how best to take this to market.

"The lounge is really a tactic driven by the brand, not the other way around." RJR is marketing the lounge with print ads in local Chicago publications.

Critics see the lounge as the latest attempt by Big Tobacco to hook kids.

Getting around the law

"Framing this as a way to romanticize a high-end product is consistent with their years of marketing techniques," said Matt Myers, president of Campaign for Tobacco-Free Kids. "The lounge concept might be new, but the fact that it's for adults only increases its attractiveness to adolescents, because the most effective marketing campaigns to kids are those that make cigarettes a part of looking like a successful, virulent young adult."

Statistics from the group show that 80% of smokers develop the habit before the age of 18. Despite the restrictions of the Master Settlement Agreement, the Federal Trade Commission reported that the industry spent $15.15 billion on advertising, marketing, discounts and other promotions in 2003, the last year figures were available. That was up 21.5% from 2002 spending.

The Chicago lounge is considered a retail tobacco store, despite serving food and liquor, and was able to get around the city's recent ordinance banning smoking in bars and restaurants.

Fred McConnell, RJR's senior manager-communications, said marketing for Marshall McGearty "falls within the strict guidelines" of the 1998 Master Settlement Agreement.

If RJR is able to get around ordinances in other cities that ban smoking in bars, it will likely open more of the exclusive lounges in other cities. "This is something absolutely new for my company and my industry," Mr. Stebbins said. "At this point, our focus is entirely on making the Chicago lounge the best it can be."

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