RJR Nabisco Inc. (Formerly R.J. Reynolds Industries, Inc.) and Consolidated Subsidiaries - Page 6

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          package, (10) filter-tip type (standard, charcoal, or hard                  
          plastic), and (11) graphic designs.                                         
               In part, imagery sells cigarettes.  The imagery that sells             
          cigarettes includes imagery that projects the experience of using           
          the product (e.g., smooth or light) and imagery that projects               
          characteristics attractive to the targeted consumer group (e.g.,            
          masculine or sociable).  Such imagery significantly influences              
          consumers' decisions about which brand to smoke.  Other products            
          for which imagery is a substantial factor in consumers'                     
          purchasing decisions include perfume, automobiles, and alcoholic            
          beverages.  Such products are often described as “image”                    
          products.                                                                   
               The cigarette package is particularly important in selling             
          cigarettes because (1) some cigarette products differ little or             
          not at all in their physical attributes and are distinguished               
          primarily or entirely by the imagery associated with them and               
          (2) the smoker and those around the smoker see the package                  
          numerous times a day.                                                       
               D.  Reynolds' Marketing Activities                                     
               Reynolds regularly and continuously engages in marketing               
          activities with respect to its cigarette products.  Reynolds                
          proceeds in three broad steps to accomplish its marketing                   
          activities: (1) determining product position, (2) developing a              







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