R.J. Reynolds beats P-M to the punch By Fara Warne

NEW YORK--R.J. Reynolds Tobacco Co. fired off its answer to Philip Morris' pricing strategies last week. It announced a six-week nationwide price promotion with $

“Reynolds is establishing the standard,” said a New Jersey distributor. “This has been the most well-thought-out promotion I’ve ever seen.” Brown & Williamson in Louisville, Ky. is also on the verge of instigating a $4-off price promotion for Kool. Such a move could force the other brands to discount menthols, something Reynolds and Philip Morris hadn’t planned on. Philip Morris’ program still has not been committed to a formal proposal. As it stands, distribu- tors and retailers will buy Marlboros at the regular list price. Then during a four-week period starting May 24, the retailers are expected to reduce the price by $4 per carton and 40 cents off the pack. P-M will supply displays and in-store advertising to push the new price. Then Philip Morris will pay retailers the difference. But as one distributor put it, “They’11 have to create a Marlboro Police Team out there to make certain the prices come down and that retailers aren’t selling at full price and pocketing the difference.”
The pricing strategy is now under the scrutiny of James J. Morgan, the new senior vice president of marketing who replaced Lawrence Wexler last week. Wexler was named vice president for finance and planning. Morgan has held several marketing positions at P-M, including brand manager of Marlboro.
Philip Morris already has said its Marlboro pricing strategy could cost it some 40a/c–or $2 billion–in profits this year.
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