INDIA INTERNATIONAL REVIEW INDIA 6 SEPTEMBER, 2012 CONFIDENTIAL The brands trademarks and logos of third parties used in this presentation are registered by their respective owners and are used here solely as examples with no commercial purpose OVERALL STRATEGY INDIA 0 Shared objectives, strategies, action plans with GPI 0 Develop synergies with GPI at all levels to accelerate distribution visibility Marlboro available in all shops where Classic Balanced Taste is sold 0 Use pricing as a competitive advantage in case availability doesn?t improve 0 Expand portfolio only if GPI commits to clear distribution targets 0 Use sampling as main Marketing tool 0 Continue building strong, focused and effective commercial organization 6 Proactively defend our business in India Build Marlboro among LA-24 in India INDIA COMMERCIAL - SALES BPWATTS Marlboro has positive brand image but low availability awareness/trial um; Build strong base for growth INDIA GPI Structure GPI Factory (2) GPI Wholesale Distributors (647) Salesman (5,200) Wholesalers (22,000) Retailers (673,000) Source: GPI estimates IPM Structure GPI Factory (2) IPM (6) GPI cams) Wholesale Distributors (388) Salesmen (3,021) Wholesalers (1,775) Retailers (93,986) ALL INDIA - DISTRIBUTION ITC Structure Factory (5) ITC Wholesale Distributors (1,500) Salesman (12,000+) Wholesalers (68,000+) Retailers (1,150,000) BACKUP IPM VISIBILITY - .I-w W3 at E's-Wan-A I - i; - I?Eij; .. 3W 4; i 55;; -, v: A IPM GPI SHARED IPM GPI CO- EXIST IPM OTHERS Joint negotiation: 2,526 Ind. negotiation: Industry co?exists: 5,756 i i '55 mgr-.31. '1 am:- V. .. vu"" Flagship stores: 2,814 Tactical Visibility 3FC CE Platform Economies for Joint Presence costIOutlet - $14 costhutlet - $14 costhutlet - $65 costIOutlet - $18 Accelerate synergy with GPI 0 All India IPM permanent visibility - 12,567 outlets 3 FC IPM permanent visibility - 9,988 outlets Samoa: pM Estimates ,4?ng Targets TBC upon completion of new census INDIA COMMERCIAL - MARKETING BPWATTS Marlboro has positive brand image but low availability INDIA COMMERCIAL MARKETING 0 BPWATTS Marlboro has positive brand image but low availability 9 Maintain consumer centric manageable portfolio given distribution challenges introduce Black Menthol for LA-24 smokers, 2013 Launch Ultra Ice Blast in growing KS segments in 2014-15 9 Leverage strong Marlboro imagelperformance in key focus cities BE MARLBORO campaign introduced in May 2013 High reachlimpact consumer engagement - pack sampling as main tool Focus on generating trials in high LA-24 areas with availability INDIA COMMERCIAL MARKETING BRAND IMAGE THE Indian brand - Standard offering for mainstream LAS. - ?Balanced? smoking experience - Downdto earth, honest, approachable Indian brand with international/premium feel - Stylish, classy up-market, discerning - A brand with pedigree (Wills heritage) International brand of repute - Premium and expensive 0 A A brand with prestige, status, - Modern. Trendy (for Gold) - Nice packaging - low on aspiration - Not contemporary old world Intense! harsh product (Red) (Less post pack revamp) lmageIStatus it? i LOW HIGH ., ?9311 'gH Iggy ml! Post reva Source: Qualitative research FFILTS adult smokers Oct 2010 to Jan 2012 INDIA COMMERCIAL MARKETING BE MARLBORO - INDIA TREND The desire to take charge, be self-sufficient and create one?s own opportunity and success Irrespective of the class the underlying desire of every LA (min. 18) - 29 smoker is to attain- POWER, FAME, MONEY I 0 Enemy to Decision Making - Societal Pressures Constant struggle to balance tradition and modernity BE A Torn between ?Duty? and ?Self? MAYBE An' Baf?n 0 0 BE MARLBORO Enables the moments of decision that inspire you to follow your dreams Marlboro enables the MOMENTS OF DECISION that inspire you to follow your heart/dreams. KEY Enemy to decision making Role ?3f the Campaign roll-out March 2013 INDIA COMMERCIAL MARKETING CONSUMER ENGAGEMENT 39-1?2 311?3 Adoption Costladopter Contacts 71 80 20% (?000) $47 Pers 'zed Brand Ambassadors Budget $618 5761 Cost! Contact $8.7 $9.5 Contacts 700 830 . 3.2% p000) Targeted BST Retail I $61 LAMP - Budget $1,231 51,810 I Cost! Contact $1.8 52-3 :21. w? . Retail i: i Budget $884 51,129 Visibility Total DME $2,733 $3,700 0 Device an optimal mix of reach impact based CE programs at Retail (pack sampling) through Brand Connectors. 0 Increase the visibility 2013 based on census results (10k 915k outlets) Source: Adoption rates from Advance/Gold CE study in 2011; PM Estimates INDIA COMMERCIAL MARKETING CONSUMER ENGAGEMENT LEARNING RETAIL CE: High reach activity ideal for generating mass awareness and trials NTLAMP activation dials up consumer interest impact significantly Specialized training programs enhance engagement quality. E.g. NLP Low on engagement impact due to limited smoker timelattention No of contacts (2012) 695 Cost! contact 1.4 Upgrade programs to maximize impact Source: PM Estimates INDIA COMMERCIAL MARKETING RETAIL CE - IMPACT PROGRAM SMART BST PROFILE 9 B, B?school Graduate 0 Smart, conversant in English Hindi Conversation instead of message delivery THREE PILLARS OF THE PROGRAM TRAINING PROGRAM 9 Training Academy Personality Development Brand Immersion Product knowledge Retail Simulation 0 Premium Venue LA-24 HOTSPOTS 9 BST at NTLAM Ps on flexi- time 3? Desired TG profile 9 More engagement time at hand 9 More receptive to brand messages I Cost contact: 3 Re-position the Program from Conventional 9 Contemporary 0 Arrive at optimal frequency of contacts re-validate the Adoption rate Source: PM Estimates INDIA COMMERCIAL MARKETING LA-24 HANG-OUT ZONES 7X it; . .. Cafes& Corporates Eateries . 04> Tutorials BPOS ?0 LA-24 Hotspots ll ?1 0 Census information critical for better targeting 0 Meet Engage with LAS at their popular haunts through different day-parts INDIA COMMERCIAL MARKETING CONSUMER ENGAGEMENT LEARNING LAMP CE: Very expensive to contract Top End outlets, ITC dominant Develop innovative programs identify alternate touch-points to target competitive smokers Upgrade programs to maximize impact INDIA COMMERCIAL MARKETING TARGETED LAMP CE 9 Very expensive to contract outlets, particularly image outlets has dominant presence, 175 contracted outlets in 3 cities ($12 to $100 pa) - Activating F1 property (Passion Unleashed) - Planning to tie-up with Redbull Racing Team at global level 9 Cut back in LAMP contracts/programs in 2012 due to budgets 2011 2012 2013 Image outlets 3 -- Reach outlets 22 9 BA parties in LAMPs an opportunity to sample to LAS in contracted outlets 9 Identify alternate touch-points to target competitive smokers Source: PM Estimates INDIA COMMERCIAL MARKETING ADDITIONAL SUPPORT IN 2012 BST ACTIVITY (OCT- 9 Build trials for Red through stick-sampling at Retail with 100 BST3 0 Create experience at select few outlets in corporate parks/BPOs 9 Generate additional 168 smoker trials F1 ACTIVITY (OCT) 0 Replica placement at access restricted Retail points with VAO offers (range of 4 F1 lighters) Plug-ins to drive F1 association selling kiosks at the F1 track ,5 Bunny 5 crn??w Erma/a 1 Access restricted retail Lamps/Plug-ins At track USD 400 required for F1 Program and BST Activity for 2 Months Source: PM Estimates INDIA COMMERCIAL MARKETING TARGETED - OUTSIDE IS THE NEW INSIDE (LAMPS CE) 0 ITC has dominant presence in this channel (175 contracted outlets in 3 cities) 0 Cut back in IPM LAMP contracts/programs in 2012 due to budgets Activate new LA-24 touch points pre and post LAMP Deploy pilots to gather learning's for 2013 scale up Sampling outside ITC Lamps at P08 Mobile Retailer Cost per contact: USD 0.5 Cost per contact: USD 0.6 Source: PM Estimates INDIA COMMERCIAL MARKETING CONSUMER ENGAGEMENT LEARNINGS 0 PERSONALIZED: Good success with program in 2011-12 AV Link Passion and high commitment for Marlboro Very effective in targeting adult smokers and creating WOM Keep continuity of connectors Brand vs. variant specific connector DJ Kit Poker Kit Gaming Kit INDIA COMMERCIAL - MARKETING PERSONALIZED 9 Continue building on current program in Delhi/Mumbai Conduct multi variant sampling to generate trials Parties in LAMPs an opportunity to sample to LAS in contracted outlets Variant wise Split MGA 14% I LAMP I Home Parties MLB Clove 1% 59% Gold 66% 0 Program Enhancements across key pillars of the program Recruitment, Orientation and Rewards Activate BE MARLBORO through Ignite Program 9 Connector Continuity Select Ex-Connectors taken forward in the next wave Fully leverage program to build brand appeal amongst key target audience Source: PM Estimates INDIA COMMERCIAL MARKETING PERSONALIZED PROGRAM 1: PROJECT IGNITE ple are unable to pursue the more unconventional type of professions 9 Most peo IGNITE to provide Brand Connectors and their LAS friends with a platform to interact with the best known professionals from select fields and spend a week as their interns Get a chance to spend a week with a successful professional from their area of interest Few seconds given to make the LAS asked if they have it in them decision and register via mobile app to chase their dreams INDIA COMMERCIAL MARKETING PERSONALIZED PROGRAM 2: RACING CHALLENGE lNIiillillE i Marlboro Racing Challeng Few seconds given to make the decision Get a chance to spend a day at the LAS asked if they are up for a and register via mobile app Racing camp at the F1 track challenge and are strong enough to survive the racing boot camp INDIA COMMERCIAL MARKETING PERSONALIZED Recruitment 9 Use customized! fun tests 0 Identify and activate special interest groups within the program: Gaming THREE PILLARS OF THE PROGRAM .w Training Rewards 9 Venue divided into 3 rooms 9 Build greater ownership Connectors split into groups and interest Giveaways Rotation system the idea of ?Leamtainement? An interactive mix of Rewards 1 Ferrari Pilota, Ferrari World and Paddock tickets information, motivation and role-play 9 Team building exercises to increase ownership Develop Program Enhancements across key pillars of the program INDIA COMMERCIAL MARKETING PERSONALIZED BRAND CONNECTOR ALUMNI 9 Identify top performing Connectors and appoint them as Mentors To coach guide the current Connectors To help identify future Connectors Will be invited for Connector Orientation programs To be given Personal consumption stock at a discounted price Will be invited to Marlboro plug-in events Get access to Mobile app: helps them find Marlboro POS INDIA COMMERCIAL - MARKETING 2013 CONSUMER ENGAGEMENT PLAN avg. 50.60 (mio sticks) (43.02) 49.53 51.83 55.75 59.56 54_17 ADOPTERS 10,438 10,923 11,749 12,552 45,663 Reqd. 2013 CE Plan 7,110 15,878 16,822 9,630 47,046 Personalized 2,000 6,000 6,000 2,000 16,000 Targeted 2,128 6,546 7,042 3,402 19,118 Mass 2,982 2,982 2,982 2,982 11,928 CE Plan targets to generate 47K adopters in 2013 Source: PM Estimates INDIA COMMERCIAL MARKETING 2013 DME BUDGET Emotional BUDGET Awareness >J?ligtgf>> Link? Adoptic> Adoption Target - - 80,000 16,000 Target - 585,075 62,310 19, 118 1,810 Target 3,614,690 397,616 39,762 11,928 1,129 Total 3,614,690 982,691 182,072 47,046 3,700 CE numbers to be planneditracked on basis to review vs. target Source: PM Estimates COMMERCIAL MARKETING DME BUDGET llarlhuru?; BUDGET i 19H Generic Flavor FGOIFII (BE MARLBOROJ an? 761 - - - 16:1 227 398 835 350 1,810 - 397 219 513 1,129 Tota! Source: PM Estimates INDIA COMMERCIAL MARKETING INVESTMENTS 41' CE SPENDS (1)00) . ggLo 2011 2012 2013 {it Delhi 773 1099 310 1414 w?v?P U712 22;: elhi - 1 r) 171 miem J1 Fig,? I DIW2 Hui?H filmy?w: J/aj 3 21?? (14 SW fr 5/4 3/1; \ij R. ,il a? <29? Mumbai (Jr Vol. 193 min SOM 4.5% CE SPENDS (?000) CE SPENDS (?000) 2010 2011 2012 2013 2010 2011 2012 2013 ?i Mumbai 994 978 810 1156 Pune 442 367 Pune investments minimal due to budget constraints Source Vol. Shipments 2012 Nielsen INDIA COMMERCIAL MARKETING PUNE CE SUPPORT 0 Background Over 500K LA-24 student population* Most often used Brands Classic Balanced and 0 CE Retail no BST activation since 2010/11 2013 Additional investments for base BST support at Retail 4 Month Program with 20 BSTs Additional Consumer contacts 76 0 CE Personalized - no initiatives since 2010I11 Good response in 2011 - 6K Adult smoker trials in 3 Months 2013 additional investments for Connector Program USD 125K - 4 Month Program with 25 Connectors - Additional Consumer contacts 10K Pimpri Luv um Chinchwad .- - . f?J'h 3 Lame .. Pune I) Ia :l 55 Khadakwam - r'uadJ'r. Farms-3' I I 3:101 om 12?om 4 Map can: USD115K 9 Investment to support Pune via CE 240 USD 4 9 Additional Smoker Trials 86 SUMMARY 9 BPWATTS Marlboro has positive brand image but low availability awareness/trial Consumer centric manageable portfolio, new launches contingent on Num 9 BE MARLBORO main 2013 campaign 0 Menthol launch visibility only in high LA-24 areas 105 Pack Sampling via CE (retail BST connectors) key focus Focus on higher impact (quality vs quantity) vs reach in 2013 Frequent tax driven price increases foreseen through 2013-15 Price align with Gold Flake KS Follow differential price in case of VAT increases 30% (Le. if VAT 30% in Mumbai increase pack price only in that state to cover tax) OO0m eg if a 2892 . 93333%? amagca 39% ll!? . vnpu; .n uJi 4 .1 11 .Uauixj 3.. uni-2.; nud?uduvu - In 1. 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INDIA PLAIN PACKAGING 9 BPWATTS Plain Packaging surfaces in India 0 Background Australia-India Institute releases report on Plain Packaging leading to spurt in media Government has received representations from various forums in the past few months Up till now issue have not been taken up officially 6 Our Action Plan: - Engage for strategic discussions on the issue in order to build opposition agaisnt plain packaging - Explain to the Government that Plain Packaging has no scientific basis and is yet an untested concept with possible negative repercussions Continue to monitor the issue INDIA ARGUMENTS IN OUR FAVOUR Bilateral Investment Treaty Agreement (BITA) - India has entered into 82 Bilateral Investment Treaty Agreements (BITA) across the globe: - Article 3 of BITA between India and Switzerland provides protection to the investor towards his/her investment in the contracting state - In case, plain paper packaging is introduced in India, investor would not be able to use his IPR and trade marks which would lead to infringement of protection provided under treaty On infringement of protection granted investor may sue India for compensation 0 Increase in Illicit cigarettes Increase in availability of counterfeit cigarettes negative health implications Increase in incidence of contraband cigarettes loss to the exchequer (cigarettes and cigarillos of tobacco and tobacco substitutes are the fourth highest in excise contribution) 6 Impact livelihood of 36 million people involved in tobacco cultivation, processing and manufacture 4 SourcezPWC THANK YOU