BAT Realigns Brands Among Roster Shops

Global shift affects below-the-line units of Grey, Ogilvy and Cordiant

In a global realignment involving three of its roster shops, British American Tobacco is reassigning Pall Mall, which has done well since a repositioning two years ago, and Lucky Strike, still looking to gain traction in the U.S.

Grey Global Group’s G2 integrated communications unit will get Lucky Strike from Cordiant Communications Group’s 141 Worldwide, also a marketing-services shop. WPP Group direct unit OgilvyOne will pick up Pall Mall from G2, the London-based client confirmed.

B&W put nearly $30 million in U.S. measured media behind Pall Mall in 2002, according to CMR. Lucky Strike recorded no U.S. ad spending last year, according to CMR. Global spending could not be determined.

BAT’s travel/retail business is being consolidated at 141. The work, which historically has involved promotions and advertising at duty-free locations worldwide, was previously divided among roster agencies, the client said. Total spending for that business could not be determined, but sources said restrictions on advertising have kept spending down.

Pall Mall has enjoyed some success of late, particularly since it was reintroduced in January 2001 as a longer-lasting cigarette, said industry analyst David Adelman of Morgan Stanley Dean Witter. The cigarette, which competes with R.J. Reynolds’ Doral and Altria’s Basic, is backed with advertising that promises, “Tastes smoother. Burns slower. Made to last.” Doral and Basic were each backed by $15 million in U.S. spending last year, according to CMR.

While revived in recent years, Pall Mall has slipped in domestic market share, dropping from 0.4 percent in February 2002 to 0.3 percent in February 2003, according to analysts’ reports; Basic and Doral owned a 4.7 percent and 5.7 percent market share, respectively, as of February.

Lucky Strike, which has faced the challenge of an aging demographic, has failed to attract a younger set in the U.S. despite BAT’s efforts to reinvigorate the brand via below-the-line promotions, said a tobacco-industry analyst who requested anonymity. “There’s no equity behind it. It is perceived as a brand your dad or your grandfather smoked,” the analyst said.

Lucky Strike, which competes with premium brands such as Altria’s Marlboro and R.J. Reynolds’ Camel, achieved the height of its popularity after World War II with the catchy acronym LSMFT (Lucky Strike makes fine tobacco). Lucky Strike dropped from an 0.2 percent market share in February 2002 to an almost negligible share this February.

Camel had no recorded U.S. ad spending last year, according to CMR, while spending on Marlboro, which has a 38.8 percent market share, was $1 million. Camel has a 6.4 percent share.

Lucky Strike has found success in Germany, said divisional vp Ludo Cremers of BAT-owned Brown & Williamson in Louisville, Ky. Brown & Williamson is testing a Lucky Strike marketing campaign in Seattle, he said.

BAT rearranges its brands every few years—in the late ’90s, for example, the company moved Lucky Strike from Grey to Bates.

“141 has done an outstanding job on Lucky Strike, and so has Grey on Pall Mall, but these decisions are made on a global level, and we will assess them going forward,” noted Cremers, who said the realignment is likely to take place over the next six months.

A BAT executive in London confirmed the moves but declined to discuss why they were made. “British American Tobacco has rebalanced its agency portfolio, as it does from time to time,” said David Graas, BAT head of marketing strategy and planning.

Other BAT brands are not part of the realignment. Those include Kool, which remains at 141, and Kent and Dunhill, which are staying at G2.

With fewer marketing outlets at their disposal since the 1998 Master Settlement Agreement, some tobacco companies have dramatically lowered their mainstream marketing spend and now rely heavily on below-the-line activities, including event sponsorships, point-of-sale and promotions. BAT, however, has increased its budget, spending $50 million on U.S. measured media last year, up 9 percent from 2001. Spending by Altria, formerly Philip Morris, and R.J. Reynolds declined 50 and 22 percent to $95 million and $35 million, respectively.

The travel/retail business that 141 takes on is not as attractive as it once was because of the decline in travel and restrictions that have been instituted to cut down on tobacco smuggling across borders, the analyst who requested anonymity said.

The big tobacco marketers in the U.S. are “trying to be perceived as good corporate citizens,” said the analyst, whereas British company BAT can afford to be more aggressive. “Tobacco is not quite as demonized overseas.”