Altria Details Marlboro Performance Options

Published in Tobacco E-News

New retailer incentive program to begin in January

By  Linda Abu-Shalback Zid, Senior Editor

RICHMOND, Va. – The new year will bring new options for Marlboro cigarette retailers. Although Philip Morris USA extended its Marlboro Leadership Price (MLP) option through the end of this year, its incentive program is being updated, and will offer an additional option beginning January 1.

The new program, Marlboro Performance Options, will maintain MLP (with subtle updates to signage requirements and a few designated MLP rates) as a choice for higher-tier PM USA retailers, company spokesman Greg Mathe told CSP Daily News/Tobacco E-News.  But an alternative option, Marlboro Flexible Option, "allows retailers to have the flexibility to apply additional Marlboro promotional allowances in a variety of ways that best align with their strategy, while still focusing on Marlboro," he said.

As previously reported, the much-talked-about MLP option, in essence, asks operators to forgo part of their typical markup in exchange for incentives. And while an October UBS-CSP Tobacco Survey found that 39% of retailers felt MLP helped Marlboro's share trends, up from 35% in a July survey, the program did have detractors on the retail side.

Mathe said the new option evolved from the company's ongoing discussions with retailers. "What we heard was that although the MLP option did align with strategies of many retailers, some expressed that they would like alternatives," Mathe said.

MLP retailers earn $2 per Marlboro carton for maintaining a competitive Marlboro single-pack price no higher than the designated MLP.

"With the flexible option, there's no maximum price component like the MLP option requires," Mathe said. Retailers can earn $1 per Marlboro carton for those that offer an additional discount on Marlboro Special Blend packings. The retailer must contribute at least 25 cents per pack of Marlboro Special Blend in the Red pack, Marlboro Special Blend in the Gold pack, Marlboro Black Special Blend and Marlboro Menthol Black Special Blend. "Marlboro Special Blend packings provide a lower alternative for price-sensitive Marlboro adult smokers," according to Mathe.

Retailers participating in either option are offered what's called the Marlboro Share Growth incentive, which provides 40 cents per Marlboro carton to retailers reaching a predetermined share target at each store. "That's really an additional set of money that can be used to enhance the retailer's profitability, or could go to further reduce their Marlboro price," Mathe said. "So it's just an additional resource for them."

Marlboro Performance Options, including both MLP and the flexible option, runs from January through June of 2012.

"Now there's different options for different retailer strategies," Mathe said. "These options offer retailers an opportunity to differentiate themselves from their competition. These resources work to help increase foot traffic in their store, sell premium cigarettes and build consumer loyalty."

He added, "We constantly look at our promotional resources in the marketplace. They continually evolve; we listen to feedback from retailers and try to always improve upon our current promotions."

Richmond, Va.-based Altria directly or indirectly owns 100% of each of Philip Morris USA Inc. (PM USA), U.S. Smokeless Tobacco Co. LLC (USSTC), John Middleton Co. (Middleton), Ste. Michelle Wine Estates Ltd. (Ste. Michelle) and Philip Morris Capital Corp. (PMCC). Altria holds a continuing economic and voting interest in SABMiller plc. The brand portfolio of Altria's tobacco operating companies includes Marlboro, Copenhagen, Skoal and Black & Mild.