Davidoff Strategic Brand Review

DAVIDOFF STRATEGIC BRAND REVIEW
WITH A FOCUS ON THE PREMIUM SEGMENT GROWT H
Executive Summary
1 . Introductio n
II . Performance Overvie w
Global Super Premium Segmen t
Global Premium Segment - Duty Free Market
Regional Volume
Key Markets
Brand Health Indicators
Ill . Marketing Strategy
New Brand Launch
Launch Sequence
Hit and Run Case Analysi s
IV. Marketing Mix
Product
Packaging
Pricing
Communication
TMD, Sponsorship & Direct Mailin g
V. SWOT Analysi s
VI . Scenarios & Strategic Implications for BAT
VII . Conclusion s
Appendix
1 . Key Marketing Communications
II . Key Davidoff Variants
Contact: Rebecca Won g
BAT Brand Performance Manager (EXT.1208)
ORACLE
MARKETING INFORMATION
325141216
Executive Sumniair y
Since 1994, REEMTSMA has continued to increase ATL spend at over
10% p .a . on Davidoff which has grown volume at 29% p .a . Davidoff's
global sales of 8 bn sticks in 1998 represented 0 .15% of the
international cigarette market and 34% share in the global super
premium segment .
■
Davidoff has established a unique selling proposition with a
combination of luxury length, bevelled edge boxes and charcoal filter
in japan . Davidoff was the first brand to launch bevelled edge boxes
worldwide .
Key markets are currently Taiwan, China, Germany and Russia . We
anticipate that the emerging markets will be Netherlands, Japan and
Poland . In the last five years, Taiwan has demonstrated impressive
growth rate of 35%, with sales increasing from 1 bn sticks in 1994 to
3 .3 bn sticks in 1998 . Germany has grown 35% whilst Netherlands
and Russia grew at 40% and 135% respectively .
■
• Strategically positioned in the super premium segment, Davidoff has
maintained its pricing for all variants at over 10% above Marlboro .
Positioning Magnum as the Image Leading Variant for new market
entry, Davidoff has created its "above all else" super premium image .
It provides a destination brand for uptrading from Davidoff Classic
and Marlboro variants .
■
In the dark market environment Davidoff has invested in TMDs,
Direct Mailing and BTL . Successful Davidoff TMDs such as Cool
Water and Goodlife fragrances as well as Davidoff Coffee were
developed to create alibi advertising opportunities for the brand .
These have made ATL market communication possible even in dark
markets such as Germany and Taiwan .
■
The development of a showcase feeder brand - ZINO Davidoff, has
indicated the brand's intent to attract ASU30 smokers . Rather than
riding on existing brand imagery Zino imagery and packaging appear
more ASU 30 oriented .
■
In light of the rapid growth in the Global Super Premium Segment, it
is anticipated that Davidoff's growth by year 2002 is likely to be
focused on Europe and Asia . Davidoff will be a major competitor for
SE555 International and Dunhill International in the future . It is
crucial to understand its strategic direction in terms of brand
portfolio, market entry strategy and communication platform
exploitations in order to implement successful pre-emptive moves
with BAT brands.
ORACLL
MARKETING INFORMATION
325141217
I.
Intro tinctiO n
THE DAVIDOFF PORTRAIT CAMPAIG N
In light of the growth of Davidoff in the global premium segment over
recent years, a strategic review of the brand's current performance,
global positioning and possible future strategies was conducted .
Davidoff was first launched by Zino Davidoff in 1985 . The brand has
established a unique brand positioning world-wide . It is a cigar heritage
brand priced in the super premium segment . With extensive
exploitations of different marketing communication platforms, it depicts
a brand world of sophistication, exclusiveness and luxurious . The claim
of the brand is to offer connoisseurs supreme pleasure .
Davidoff is a global rival to SE555 International and Dunhill International
in the super premium segment . This brand may be a threat to SE555's
positioning in Asia and Dunhill's in Europe . Its target market and
consumer segments appear similar to SE555's and Dunhill's propositions .
ORACLE
MARKETING INFORMATION
325141218
II . PERFORMANCE OVERVIE W
■ GLOBAL SUPER PREMIUM SEGMENT
■ GLOBAL PREMIUM SEGMEN T
- DUTY FREE MARKET
■ REGIONAL VOLUM E
■ KEY MARKET S
■ BRAND HEALTH INDICATOR S
OR,AClF
MARKETING INFORMATION
325141219
11 . GLOBAL SUPER PREMIUM SEGMEN T
GLOBAL SUPER PREMIUM SEGMENT BY BRAND 1994-9 8
94
95
96
97
98
♦ - MORE - ~-- DUNHLL INTL --4.555 rL
- -x- - ROTHMANS INTL - * -DAVIDOF F
Source : MR& I
KEY FINDING S
` Since 1997, Davidoff has overtaken More to become the leading
brand in the global super premium segment . Davidoff grew from 9%
share in 1994 to 24% in 1998 at 8 bn sticks .
' SE555 International is the only other growth-contributing variant in
this segment between 1994 to 1998 . SE555 International grew from
1% share of segment in 1994 to 9% in 1998 at 3 bn sticks .
STRATEGIC IMPLICATIONS FOR REEMTSM A
REEMTSMA is likely to further exploit growth in the super premium
segment by engineering new brand entries or introducing brand
extensions in other super premium markets, e .g . Japan .
ORA(_LE
MARKETING INFORMATION
325141220
II . GLOBAL SUPER PREMIUM SEGMEN T
DAVIDOFF PERFORMANCE INDICATORS 1994-9 8
1994 1995 1996 1997 1998
-DAVIDOFF
3
VOLUME (bn )
SHARE OF INT'L MARKE T
% OF TOTAL REEMTSMA INT'L BRANDS
5
8
9
8
CAGR
29%
0.05% 0 .10% 0.14% 0.16% 0 .15%
10% 16% 20% 21% 21%
87 .8% 39 .3% 12 .2% -5 .6%
% Growth
Source : WORLD CIGARETTE MARKET FACTBOOK 1998, MR&I
KEY FINDING S
■
Since the mid 90s, Reemtsma has increased total spend on Davidoff in
markets worldwide . Its ATL spend has increased at over 10% per
annum, whilst the volume growth rate was 29% CAGR in the last five
year period .
■
In 1998, Davidoff's share of REEMTSMA's total International Brand
sales increased to 21 % . It is ranked second in REEMTSMA's brand
portfolio after West . Unit sales of Davidoff decreased by 5 .6% in 1998
to 8 bn sticks despite volume growth in most regions . This reduction
in volume was a result of the economic downturn in Russia . Sales in
Russia was down by 80% in 1998 .
■
Total Davidoff sales represented only 0 .15% of the international
cigarette market but its share in the super premium segment has
increased from 9% to 24% (15p .p.) between 1994 and 1998 .
SUPER PREMIUM SEGMENT - SHARE BY BRAND 1994-98
MORE
DUNHILL INT'L
555INT'L
ROTHMANS 1NTL
DAVIDOFF
94
33%
9%
1%
2%
9%
95
31%
9%
2%
2%
16%
96
30%
7%
4%
3%
20%
97
24%
9%
7%
3%
25%
98
23%
8%
9%
2%
24%
Source : MR& I
ORACLE
MARKETING INFORMATION
325141221
II . GLOBAL PREMIUM SEGMENT DUTY FRE E
GLOBAL DUTY FREE MARKET 1994 -98
SHARE BY BRAND IN THE PREMIUM SEGMEN T
Source : MR& I
KEY FINDINGS
• In the Global Duty Free Market, Davidoff Classic is positioned fourth
in the premium segment with 11% share of segment after Dunhill
Int'l, 555 Int'l and Cartier.
■
In 1998, the primary source of Davidoff's Duty Free business was
Europe, followed by Asia Pacific and Japan .
STRATEGY IMPLICATION FOR REEMTSM A
With the abolition of European Duty Free in July 1999, this has resulted in
volume lost for Davidoff from this market . It is anticipated that
REEMTSMA is likely to shift focus to other Duty Free regions, e .g . Asia
Pacific, to support their growth in other duty paid markets such as
Taiwan .
REGIONAL DUTY FREE MARKETS 1998
SHARE OF MAJOR PREMIUM BRAND S
Dunhill Intl
Davidoff Classic
Cartier
SE Intl
I®F oArnesca DF oAsla Pacific OF O America Pacific DF • Latin Arnerica D F
Source : MR&I
0RACLE
MARKETING INFORMATION
325141222
11 . REGIONAL VOLUM E
DAVIDOFF VOLUME BY REGION 1992 - 9 8
100%
80 %
60 %
0%
4
20%
1992 1993 1994 1995 1996 1997 199 6
■ AMESCA UASN PACFCaAM61cA PACFC/EUROP E
Source: MR& I
KEY FINDING S
■ With the presence of Taiwan, Asia Pacific accounts for 78% of
Davidoff`s total volume . The region has established a growth rate of
38% for Davidoff since 1992 .
■ The emerging region is Europe, driven by growth in Russia at over
100% and Germany at 40% over the past five years .
STRATEGY IMPLICATIONS FOR REEMTSM A
• Growth In APN Capitalise and further invest on the growth in
China, Taiwan and Japan .
■
Rebound strategy for Russia Invest in Russia to regain brand
volume when it re-emerges from the economic crisis .
DAVIDOFF VOLUME BY REGION 1992 - 9 8
SUMMARY
AMESCA
ASIA PACIFIC
AMERICA PACIFIC
EUROPE
TOTAL
1992
1993
1994
1995
1996
1997
1998
CAO R
02
903
2
276
18
1,624
1
298
14
2,575
1
327
13
4,650
12
803
55
5,842
19
1,716
97
5,833
30
2,602
184
6,279
15
1,603
60 %
38%
45 %
34%
1,180
1,941
2,917
5,477
7,632
8,562
8,081
Source : MR&I (Units in mn sticks)
ORACLE
MARKETING INFORMATION
325141223
11 . KEY MARKETS ANALYSI S
VOLUME OF TOP FIVE DAVIDOFF MARKETS 1992 - 9 8
sticks (mn)
TAIWAN
GERMANY
CHINA I APN
HONG KONG
RUSSIA
TOP 5 MARKETS OF TOTAL
1992
1993
1994
1995
1996
1997
1998
CAGR
898
154
0
1,105
161
490
1,690
185
840
3,178
247
1,435
4,409
300
1,090
4,698
442
700
5,011
707
670
33 %
29 %
5
0
4
0
5
10
12
300
321
1,114
397
1,823
523
358
253%
90°.0
910.0
94%
94°!0
95%
94%
90 %
6%
145%
Source: MR& I
KEY FINDINGS
■
Key volume contributors Davidoff's top five markets represent 90%
of Davidoff's global volume in 1998 . The core markets are Taiwan,
Germany, China, Hong Kong and Russia .
■
Taiwan accounts for 62% of total volume Taiwan is the no .1
market for Davidoff accounting for 62% of total global volume in
1998 . In the course of six years, Davidoff has emerged from a 0 .9 bn
sticks brand to a 5 bn sticks brand .
■
Rapid growth In Russia Russia has been the fastest growing
market world-wide since 1995 . However, since the Russian economic
crisis hit in 1998, its volume contribution has dropped by 80% .
■
Reinvesting in Germany Sales in Germany has grown by over 30%
annually between 96 and 98 as a result of the Heritage Campaign,
which was launched first in Germany prior to the global launch in
1998.
■
Volume in Hong Kong grew by 30% Volume in Hong Kong has
increased by 30% between 97 and 98 as a result of Davidoff's in
market Testimonial campaign launch and increased marketing
expenditure .
ORAC LE
MARKETING INFORMATION
325141224
il . KEY MARKETS ANALYSI S
DAVIDOFF INTERNATIONAL SHARE OF GLOBAL MARKETS 199 8
Market share
1998
r _.
~' ..
uEa"ON
-~
.
PACNE
~•• -
K`oNC
.,,1.
NrTH RA N
CK~CE
_
_
1AFAN
Arai
Source : MR& I
Note : The size of the bubble represents in market volume .
KEY FINDINGS - 1998 Market Share vs Growth Rate
■
Growing markets The fastest growing countries between 1994 and
1998 were Russia, China, Netherlands, Poland, Japan, Germany and
Greece .
■
Taiwan, the growing market Taiwan is the largest volume
contributor, selling over 5 bn sticks in 1998, Davidoff has grown at
35% CAGR with market share increased from 2 .3% in 1994 to 7 .4% in
1998 .
ORACLE
MARKETING INFORMATION
325141225
11 . KEY MARKETS ANALYSI S
DAVIDOFF INTERNATIONAL SHARE OF GLOBAL MARKETS 200 2
30 %
Market share
20 %
10%
o% L
-15%
60% "IT';
#o%
5 -year CAGR (1998 - 2002) >90%
All now markets In 1996 are projected at 30% CAG R
LOOKING TO THE YEAR 200 2
■
Core markets In the year 2002, the key markets will be Taiwan, China,
Russia and Netherlands for volume growth .
• Secondary markets Davidoff is projected to maintain its market
share in Germany, which provides the brand and company with
heritage associations . Belgium and Greece are likely to be the
secondary markets for expansion in the European markets .
ORA(=LE
MARKETING INFORMATION
325141226
11 . BRAND HEALTH INDICATOR S
BRAND HEALTH INDICATORS - DAVIDOFF VS MARLBOR O
SOM
2%
48%
13%
61 %
29%
GENDER RATIO O F
DAVIDOFF SMOKERS
MALE : FEMALE
SHARE OF ASU 30
DOMINANT AGE GROU P
73 : 27
100 : 0
66 : 34
100 : 0
40 : 60
29%
43%
0%
60%
30 - 44
ASU 30
ASU 30
ASU 30
019NDER RATIO O F
TOTAL SMOKERS
GENDER RATIO OF
MARLBORO SMOKERS
SHARE OF ASU 30
DOMINANT AGE GROUP
MALE : FEMALE
MALE : FEMALE
100 : 0
5049
100 : 0
54 :46
52%
ASU 3 0
41%
ASU3 0
95 : 5
73 : 27
95 : 5
56 : 44
49%
30 .44
54%
ASU 30
0 .5%
0.7%
CHINA
HONG KONG
RUSSIA
0 .0%
0 .2%
0 .2%
3%
18%
GENDER RATIO OF
TOTAL SMOKERS
MALE : FEMALE
100 : 0
50 : 49
TAIWAN
GERMANY
CHINA
RUSSIA
MARLBORO
TAIWAN
GERMANY
CHINA
RUSSIA
MARLBORO
SHARE OF LIGHTS
2%
GERMANY
DAVIDOFF
SOM
34%
0%
59%
4%
8%
TAIWAN
DAVIDOF F
SHARE OF LIGHTS
4%
95 : 5
1%
SOURCE: GCS 1997 - 99
KEY FINDING S
■
Davidoff, though not positioned as a lights brand, has achieved
relatively higher lights share vs market share in all markets except
Taiwan .
■
Davidoff smokers are predominantly male skewed except in Russia,
where 60% of the smokers are female . The dominant smokers' group
across markets is ASU 30 except in Taiwan , where the dominant
group is older (30-44) . Its ASU30 share is lower than that of Marlboro
across all key markets, except in Germany by 2 p .p.
■ Main switching in and switching out are both to and from Marlboro
FF and Marlboro Lights .
STRATEGY IMPLICATIONS FOR REEMTSM A
■
Target ASU30 In Japan Target to increase share of ASU 30 in Taiwa n
to match the profile of Marlboro smokers in preparation fo r
uptrading .
•
Target female segment in Russia
Davidoff should ride on its
competitive advantage in Russia and focus on growth in the female
segment.
ORAL IF
MARKETING INFORMATION
325141227
III . MARKETING STRATEG Y
■
NEW BRAND LAUNCH
■
LAUNCH SEQUENC E
• HIT AND RUN ANALYSI S
ORACLE
MARKETING INFORMATION
325141228
III . MARKETING STRATEGY - NEW BRAND LAUNC H
NEW BRAND LAUNCHES 199 8
1998
(O00
11,93 2
REGION
TERRITORY
AMESCA
DUBAI
AMESCA
AMESCA
AMESCA
ABU DHABI
OMAN
BAHRAIN
7,93 0
1 .908
1,142
ASIA PACIFIC
CHINA dom
44,104
EUROPE
BULGARIA
31,000
EUROPE
SLOVENIA
14,20 9
EUROPE
LATVIA
11,20 0
FUR )PP
ESTONIA
MACEDONIA
CANARY IS
U .K .
5 .800
5,34 9
4 .61 0
1,900
EIJR')PE
EUROPE
EUROPE
Source : MR& I
KEY FINDING S
■
In 1998, the focus of new brand launches was in Europe, where new
Davidoff variants were launched in seven countries .
■
With new brand launches in four countries, Middle East was the
second most popular region for brand launch in 1998 .
■
In China, over seven variants were launched between 1997 and 1998 .
These include Classic Slim, Mild, Lights Slim, Magnum Mild, F&L,
Supreme and Lights Menthol . It seems that this was the strategy
employed by Davidoff to obtain sales quota from the CNTC .
STRATEGY IMPLICATION FOR BA T
■
REEMTSMA has always applied a seeding strategy entering new
markets with MAGNUM . Judging from the location of their new
brand launches of 1998 in the region, REEMTSMA is inclined to
expand in the CIS markets in Europe . BAT should consider seeding
these markets with a super premium variant and secure a first mover
advantage ahead of REEMTSMA .
■
After Taiwan, China is the key priority for REEMTSMA in the Asia
region . It is anticipated that further investment will be placed in the
Chinese market to secure the super premium price positioning of the
brand as the market is going dark . BAT should consider investing in a
super premium variant to pre-empt further investment by
REEMTSMA .
ORACLE
MARKETING INFORMATION
325141229
III . MARKETING STRATEGY - LAUNCH SEQUENC E
LAUNCH SEQUENCE
MILD
F&L F&L
MAGNUM MIL D
LTS SLI M
LTS MENTHOL
SUPREME SUPREME
LIGHTS LIGHT S
ULTRA LTS
KING
CLASSIC
MAGNU M
FIRST SECON D
THIRD FOURT H
Source : MR6zI
KEY FINDIN G
■
MAGNUM is always the first variant launch in all key markets . At the
time of launch it is priced above the other Davidoff variants .
■
KING or LIGHT variants are used as second wave launch brands .
Priced at super premium segment above Marlboro variants and below
Davidoff MAGNUM .
■
The third wave of brand launch often includes LIGHTS SLIM and / or
CLASSIC SLIM, which are launched as extensions to their parent
versions . In markets such as China, Greece, Germany and Italy,
variants such as MILD, ULTRA LIGHTS, F&L and LIGHTS MENTHOL
have also been launched in this wave .
STRATEGY IMPLICATIONS FOR REEMTSM A
Continue to position Davidoff MAGNUM as the premium price
destination brand and utilise this feeder strategy for future new market
entries .
STRATEGY IMPLICATIONS FOR BA T
Consider positioning a super premium price destination brand to
promote a line extension feeder strategy . This might be particularly
useful for dark market entries to the super premium and premium
segments .
ORACLE
MARKETING INFORMATION
325141230
III . MARKETING STRATEGY - HIT AND RUN CASE S
DAVIDOFF VARIANTS DELISTED BY MARKE T
COUNTRY
Y RS
VARIAN T
CANARY IS .
86-93
KIN G
LUXEMBERG
88-95
KIN G
GREECE
86-94
MAGNU M
Source: MR& I
KEY FINDINGS
There were not many markets where Davidoff was launched and
withdrawn . The only three cases in the last 20 years were Davidoff KING
in Canary Island and Luxembourg and MAGNUM in Greece .
This does not indicate a history of Hit and Run practice for the brand .
ORACLE
MARKETING INFORMATION
325141231
IV . MARKETING MI X
• PRODUCT
• PRODUCTION
• VARIANT MIX
■
PRICIN G
• COMMUNICATION
■
TM D
■
SPONSORSHIP
■
DIRECT MAILIN G
ORACLE
MARKETING INFORMATION
325141232
PRODUCT
IV . MARKETING MIX -
DAVIDOFF VARIANT BY TAR AND NI C
MG
TA R
DAVIDOFF
DAVIDOFF CLASSIC
DAVIDOFF CLASSIC SLIM
DAVIDOFF F & L
DAVIDOFF LIGHTS
DAVIDOFF LIGHTS SLIM
DAVIDOFF MAGNUM
DAVIDOFF MAGNUM MILD
DAVIDOFF MILD
DAVIDOFF SUPREME
DAVIDOFF ULTRA LIGHTS
12-15
12-14
10 - 1 2
7
6-9
6- 8
12-15
8
7-1 2
12
1-3
NI C
0 .9-1 .2
0 .8-1 . 2
0 .8
0 .6
0.5 - 0. 8
0 .6
0.8-1 .2
07
0 .6
0 .9
0 .1-0 . 6
Source: MR&I
KEY FINDING S
■ The Davidoff Classic and Magnum are both full flavour variants at 1215 mg tar level .
■
Lights, Mild and F&L are the medium tar variants similar to Marlboro
Lights in tar level .
• Ultra Lights was a new variant launched in 1998 at 1mg in Greece . In
other countries the variant is positioned at 3 mg and was launched in
Abu Dhabi, Bahrain, Dubai, Japan, Kuwait, Oman, Qatar and Saudi
Arabia .
• In Japan, Davidoff is characterised by its white tipping and charcoal
filter, which is unique only to the Japanese market .
STRATEGY IMPLICATIONS FOR REEMTSM A
Launch low tar variants to exploit growth in the ultra lights segment .
A SUMMARY OF ALL PRODUCT BY TAR LEVELS
Product ,ittributcs - Tar Level s
0
Source : MRSH
ORACLE
MARKETING INFORMATION
325141233
IV . MARKETING MIX - PRODUC T
PRODUCT LENGTH OF DAVIDOFF VARIANTS
LENGTH
% PROMINENT MARKET
mm
LUXURY 93-97
KING 83 - 87
LONG 78 - 82
Asia
Europe
Austri a
93%
6%
1%
Source: MR&I
KEY FINDINGS
■
The top four variants of the super premium segment account for 85%
of all the luxury length cigarette volume .
• 93% of all Davidoff variants were in the luxury length category .
These luxury length products are mainly for consumption in the Asia
market .
■
Mostly consumed in Europe, 6% of the Davidoff variants are of King
size length (83 - 87mm) . 3% of Davidoff Classic and 8% of Davidoff
Lights are of king size length . These two variants need to be
standardised in length to achieve global product alignment .
` Menthol variants are launched in only three countries - Hong Kong,
Italy and Taiwan .
• Japan is the only market where Davidoff has a charcoal filter .
However, Magnum in Japan is still in a normal filter .
STRATEGY IMPLICATION FOR REEMTSM A
■
REEMTSMA is likely to standardise the product length of all Classic
and Lights variants . Small scale product launches are anticipated in
markets such as Austria, France, Greece, Italy, Netherlands, UK,
Lebanon, Slovenia and Macedonia .
Taiwan is likely to continue to be the testing ground for future new
variants .
AVAILABILITY OF CHARCOAL FILTER BY COUNTR Y
JAPAN
HONG KONG
GERMANY
TAIWAN
TURKEY
CENTRAL ASIA
CLASSIC
LIGHTS
MAGNUM
ULTRA LIGHT
Y
N
N
N
N
N
Y
N
N
N
N
N
N
N
N
N
N
N
Y
N
N
N
N
N
ource :
ORACLE
MARKETING INFORMATION
325141234
IV . MARKETING MIX - VARIANT S
VOLUME DISTRIBUTION BY VARIAN T
9000
8000
7000
2
6000
w
5000
400 0 -
J
0
3000 2000
100 0
I
0
1988 1989 19)0 1991 1992 1999 199 0
■ MING SIZE p CLASSIC p CLASSIC SLIM ❑ FOL
❑ LTS SLIM 0 NAG
■ MAG MILD
1995
1996 1997 199 8
6 TS M LTS MT M
❑ MI L D C SUPREME
■ U/LTS
Source : MR& 1
KEY FINDING S
■
Found in 28 markets, the most popular variant is Classic ; followed by
Lights in 27 markets and Magnum in 23 markets . The main driver of
volume growth in the 1990s was Davidoff Classic .
■
Davidoff King has been diminishing in total house share since early
1990s.
STRATEGY IMPLICATION FOR REEMTSM A
Increase focus on the Ultra Lights variant, position as an extension to the
Davidoff House after Classic and Lights .
VARIANT DISTRIBUTION BY MARKE T
ilia' A1F MIL L
MAiAIuMMIt
:
.
.IA•D,UMA -
117-1
B
-
'LDSSIU 9iiM -
K1 & 31 ze
0 5 10
15 20 25
N. of
:0 35 markets
Source: MR&I
ORACLE
MARKETING INFORMATION
325141235
IV . MARKETING MIX - PRICIN G
MARLBORO PRICE INDEX BY COUNTRY 199 8
DAVIDOFF MAGNUM
DAVIDOFF CLASSIC
DAVIDOFF LIGHTS
555 INT'L
DUNHILL INT'L
TAIWA N
CHIN A
HONG KON G
RUSSIA
140
136
126
112
107
133
NA
NA
133
131
179
NA
104
156
125
150
11 4
NA
NA
NA
Source : MR& I
KEY FINDING S
■
Davidoff Magnum has been positioned as the image leading variant
at super premium price positioning .
• All Davidoff variants are priced above Marlboro variants in Taiwan,
China, Hong Kong and Russia .
■
The pricing of Davidoff Magnum is superior to both 555 International
and Dunhill International in all Davidoff key markets in 1999 .
STRATEGY IMPLICATION FOR REEMTSM A
Maintain price positioning at super premium to project an image leading
variant .
ORACLE
MARKETING INFORMATION
325141236
IV . MARKETING MIX - COMMUNICATIO N
GLOBAL ATL SPEN D
KEY FINDING S
■
In 1997, Davidoff spend accounted for 12% of REEMTSMA's total
advertising spend . Despite its increment in spend of 12% in absolute
terms (from 6mn in 1996 to 6 .7mn in 1997) ; its share in REEMTSMA's
portfolio has remained stable .
■
REEMTSMA has increased brand support for Davidoff in absolute
terms but the increment of West has outweighed Davidoff in terms
of portfolio weighting .
ORACLE
MARKETING INFORMATION
325141237
IV . MARKETING MIX - COMMUNICATIO N
DAVIDOFF ATL SPEND BY MEDIA TYPE
COUNTRY COMPARISO N
NEWSPAPER MAGAZINE 1V OLIDOO R
Source MR& I
KEY FINDING S
Davidoff's current usage of media type is as follows :
1. Outdoor (48% )
2.
3.
Magazine
Newspaper
4. TV
(45% )
(3% )
(3% )
STRATEGY IMPLICATION FOR REEMTSM A
If the launch of Davidoff Coffee in Taiwan is successful, a similar TMD
strategy can be rolled out to other Dark markets such as China,
Netherlands and the Ukraine to gain ATL exposure .
STRATEGY IMPLICATION FOR BA T
If the launch of Davidoff TMD is successful in Asia Pacific, it will raise
Davidoff's share of voice significantly in these markets . Arguably BAT
should speed up its development of TMDs for the super premium brands
such as 5E555 and Dunhill Internationals .
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IV . MARKETING MIX - COMMUNICATIO N
KEY FINDINGS ON MARKETING COMMUNICATIO N
Davidoff has been very clear and consistent in its communication of a
brand world within each of its markets . Its communication employs some
variation on "Heritage" and "The Connoisseur Experience", with an
emphasis on philosophical and premium quality aspiration cues .
Davidoff projects sophisticated, successful and prestigious imagery . The
communication fits well with Davidoff's pricing and upscale image .
Brand Offer: The claim of the brand is offer connoisseurs supreme
pleasure .
The Davidoff Brand Wheel was developed by BATES to represent the
brand essence, personality, values, benefit and attributes .
DAVIDOFF BRAND WHEE L
Cosmopolitan, Smooth American
Taste, B tended Tobacco (Virginia,
Burley, Turkish), Stylish pack,
Established name (Signature),
Exclusivity, Heritage of quality,
Cigar heritage .
Prestige . Exclusivity,
AcknovUedged, Confidenc e
Discerning, Smart Respectful,
Knowledgeable, Urban e
Man of the world, Mature,
Charismatic, Informed,
Accomplished, Experience d
Marketing Information
Demonstration of
connoisseurship and
celebrated success in life.
Source : BATES London (1999)
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IV . MARKETING MIX - COMMUNICATIO N
TM D
Davidoff has established a few TMDs globally . They include whiskey,
coffee and fragrance for men and women . The TMDs allowed Davidoff
to pursue brand communication in ATL channels despite the tobacco
advertising restrictions in dark market environments .
TMD - Coffe e
Davidoff cafe was first rolled out in Germany in 1998 and subsequently
Taiwan in 1999 . It is produced by a major German coffee company
named Tschibo, which is owned by the owner of REEMTSMA- Genter
Hertz .
DAVIDOFF COFFE E
CAKE.
11NF. ?I Lit'Jt:SS
4"W--'--- -MEOW
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IV . MARKETING MIX - COMMUNICATIO N
TMD - Fragrance
Copy: "Dedicated to Passion "
The Davidoff Cool Water fragrance for man and woman were
distributed globally to provide brand name support through alibi
advertising .
Launched in Germany in 1988 Cool Water was the pioneer of "Water"
fragrances . The trademark was owned by Lancaster/Benckiser .
The assumed target consumers are male/female, 18+, upper to middle
class, mid-income . Educated, confidant, at the start of their career .
Aspired to trustworthy well-known brands .
The executions feature relaxed and passionate close-ups of male/female
faces . All imageries are outdoor with sea/water, sky (refreshing colour
cues) . All ads include the Davidoff signature which demonstrates the
branding .
DAVIDOFF COLOGNE
FOR MA N
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DAVIDOFF PERFUME
FOR WOMAN
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IV . MARKETING MIX - COMMUNICATIO N
TM D - Fragrance
Copy: "The new fragrance for men "
The Davidoff Goodlife cologne for man was another fragrance launched
in 1999 to provide brand name support through alibi advertising .
The assumed target consumers are similar to those of Cool Water with
lesser of a fresh and outdoor image .
The executions feature relaxed, sophisticated & confident close-ups of
male/female faces . All imageries are black and white outdoor shots . All
ads include the Davidoff signature with the brand name Goodlife.
DAVIDOFF GOODLIFE FRAGRANC E
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IV . MARKETING MIX - COMMUNICATIO N
DIRECT MAILIN G
II. DAVIDOFF CONNECTIO N
A direct marketing scheme named Davidoff Connection was established
in Hong Kong in 1998 . Once becoming a member of the Davidoff
Connection scheme, members can enjoy discount opportunities with golf
resorts, classical concerts, Davidoff merchandising as well as the purchase
of cigarettes with gifts . A new brand identifier for the dark market is
developed - "D" .
Objective : Effective reach of targeted consumers, database building
exercise reinforcement of exclusivity & prestige, stimulation of purchase
& trial .
Members of Davidoff Connection scheme provided access to selected
venues -e .g . shops, restaurants, clubs .
DARK MARKET IDENTIFIE R
0
Please refer to Appendix for more information on market
communication .
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SWOT ANALYSI S
After two rounds of strategic
information review sessions with
members of the IBG and global
research team, a SWOT analysis was
conducted to assess the strategic
positioning of the brand Davidoff .
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SWOT ANALYSIS - FROM DAVIDOFF'S PERSPECTIV E
STRENGTHS
f
• Focused super premium price strategy across countries gives Davidof
a high net contribution . Magnum, the leading image variant at above
super premium price positioning, has been the new market entry
variant in most of Davidoff's new launches .
■ Strong cigar heritage, luxury length, premium quality product and
bevelled edge packaging denote premium and unique values to create
a perception of status, which is a relevant proposition for the Asian
market .
• International brand image and distribution . Consistent marketing
communication to project a Davidoff brand world through time .
• Consistent family packaging through the years .
• Established world-wide TMD Blue Water & Goodlife perfume,
Davidoff coffee.
• Established sponsorship - music scholarship, classical concerts .
■ Established dark market identifier - "D" .
WEAKNESSE S
• Volume dependent on two countries - Taiwan, Germany .
• Low level of combined volume .
• Unfocused variant and line extensions .
■ The expansion of WEST has reduced available resources on Davidoff.
OPPORTUNIES
■ Invest in premium segment growth .
• Focus on lifestyle psychographics instead of demographics .
• Exploit dark market strategy with established identifier .
• To establish tie with JTI for a foothold in Japanese market.
THREATS
• As the tobacco industry consolidates, REEMTSMA's power to compete
reduces.
• Constraint by financial resources for market expansion .
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SCENARIOS
AND STRATEGIC IMPLICATION S
After two rounds of strategic information review
sessions with members of the 1BG and global
research team, two potential future scenarios
projected over the next 10 years were
developed . The purpose of these competitive
scenarios is to stimulate thoughts and contribute
to our current strategies in the super premium
segment .
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SCENARIOS AND STRATEGIC IMPLICATIONS : 2000 TO 201 0
SUPER DAVIDOFF
SCENARIO
BRAND STRATEGY
GO MAINSTREA M
1) GROW SUPER PREMIUM SEGMEN T
- ATTACK DUNHILL, 555
GROW MAINSTREAM MARKE T
2) INVEST IN A FEEDER BRAND - ZINO
IN PREMIUM / HIGH PRICE SEGMEN T
3) DEVELOP TMD - CIGAR BARS ,
CLOTHING LINE, MIX YOUR OW N
TOBACCO SHOPS .
CHANNEL STRATEGY
DAVIDOFF CIGAR OUTLETS,
CONENIENCE STORE ,
REDEFINE EXPORT STRATEGY
EXPOR T
1) EXTEND TO OTHER LUXURY GOODS
GROWTH MARKETS
MARKET
2) GROWTH MARKETS CHINA, JAPAN,
RUSSIA,NETHERLANDS,POLAND, GREECE
CONSOLIDATE ON HIG H
CONTRIBUTION MAREKT S,
E . G . GERMAN Y
1) FOCUS ON ASU 3 0
TAR(,E1 CONSUMER
CORPORATE STRATEGY
EXTERNAL ENVIRONMENT
ORACLE
2) TARGET FEMALE WITH LIGHTS
St MENTHOL VARIANTS
1) REEMTSMA INCREASE SUPPORT
EXPENDITURE FOR DAVIDOFF
CONTINOUSLY RISING SUPER PREMIUM
SEGMENT
ASU 3 0
1) DAVIDOFF WITHDRAWS LICENS E
FROM REEMTSM A
2) REEMTSMA CUT SUPPORT
EXPENDITURE TO INVEST IN WES T
3) ITI ACQUIRES REEMTSM A
1) GLOBAL DECLINE IN SUPER PREMIU M
SEGMENT DUE TO WORLD ECONOMI C
DECLIN E
2) TAIWAN SUFFERS ECONOMI C
DOWNTUR N
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SCENARIOS AND STRATEGIC IMPLICATIONS : 2000 TO 201 0
CONCLUSIONS
■
Defend Future growth markets The future growth markets of
Davidoff are likely to be Taiwan and China in the Asia Pacific
Region and Germany, Netherlands and Russia in the European
region .
■
Investigate the price repositioning of SE555 International and
Dunhill International Both SE5S5 and Dunhill Internationals'
pricing is sub optimal to Davidoff Magnum's in most markets .
There is a need to investigate repositioning these super
premium brands' pricing at parity or above Davidoff Magnum
to project a super premium image .
■
Explore new channels for distribution for the Super Premium
Brand Davidoff will continue to exploit established cigar
outlets for both product display and distribution . This
facilitates the perception of a super premium image .
■
Defend Asia It is crucial to defend Asia and not allow Davidoff
to lead the Super Premium segment . Increased investment
strategically in a super premium offer, such as Equinox .
• Defend the premium/ high price segment brands Global
economic decline would lead to downtrading from Davidoff and
Marlboro worldwide . It is necessary to defend BAT variants at
premium / high price segments should Davidoff pursue direct
investment in a high price line extension .
• Seed super premium brands in Asia If JTI acquires REEMTSMA,
it can assist in the growth of Davidoff in the super premium
segment . BAT need to seed and grow the super premium
market in Asia to anticipate Davidoff's expansion .
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APPENDIX
I
KEY MARKET COMMUNICATION S
This section was part of a Communication Review conducted in
conjunction with Bates London in 1998 .
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DAVIDOFF PORTRAIT CAMPAIGN 1998
Tag Line : the more you know
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DAVIDOFF CAMPAIGN IN GREECE 1998
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APPENDIX : MARKETING COMMUNICATIO N
Davidoff Assumed Smoker s
Based on their market communication, it appears that Davidoff appeals
to the following consumer segments in the various regions :
ASI A
The assumed smokers are status and prestige orientated who
demonstrate their sophistication and success through their choice of
cigarettes . They are status and prestige-orientated, achievementorientated, materialistic, extrovert and business-minded .
On one hand successful and upwardly mobile individuals, on the other
hand people who want to give that impression . They are successful, or
pretend to be, and demonstrate this through their choice of brand .
Everything European is considered especially valuable and desirable .
EUROP E
The assumed smokers are ambitious consumers who want to
demonstrate success and "savoir-vivre" in their respective social circles by
using status-orientated products with a degree of subtlety . They are
likely to be status-orientated and love prestige products so underlining
their cultural/social superiority . This group of smokers tend to be
conservative, extrovert, status affinity and materialistic .
EASTERN EUROP E
The assumed smokers are status and prestige orientated smokers who
demonstrate personal success through their choice of cigarette . They are
prestige-orientated, success minded, extroverted, materialistic, efficient
(smart) in business .
Upwardly mobile, having quickly adapted to the western economic
system . They have high to average income and lead extrovert, selfconfident lives .
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APPENDIX : MARKETING COMMUNICATIO N
NEW CAMPAGNE COPY IN 1998/ 9
The main campaign copy "the more you know" was introduced in 1998
worldwide .
This new branding devise was a prominent cigarette placement in all the
headlines .
This thematic campaign displays a close up of male faces (25+)
sometimes at a smoking moment . It features an open pack with the
cigarette shown with variations . The mainstream variant is always the
pack shown on display . The brand image projected is modern,
individualistic feel, sophisticated and knowledgeable .
Proposition :
"Those who know choose Davidoff, as it's the most exclusive cigarette" .
Campaign copy "the more you know "
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APPENDIX : MARKETING COMMUNICATIO N
PRINT & DUTY FRE E
Objective
To support/bust sales, ties in with premium quality & international image
in global duty free channel, positions it as most exclusive & prestigious
tobacco brand .
Print Ads with thematic advertising to support and build brand image are
placed in all In-flight and Duty Free shopping guides through out the
year .
Eastern Duty Free Shopping Guide '98
HONG KON G
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APPENDIX : MARKETING COMMUNICATIO N
ADVERTORIAL ADVERTISING
In Hong Kong, advertorial advertising was used to create a liaison
between the brand world and its consumer lifestyle . Articles detailing
the typical lifestyle of a Davidoff smoker were printed in local magazines .
All of the restaurants and bars mentioned in the articles are part of the
Davidoff Connection group, which provides discounts for Davidoff
Connection smokers .
The objective is to increase relevance and appeal of the brand amongst
the target group . The brand world depicts high living and yuppie style
afterwork leisure moments .
"The Modern Way to Enjoy Life "
SMOKING g :U0,1S
YOUIRSEI .F -1NI OTH1.RS
A
"The Choice for a Relaxing Weekend", HONG KON G
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APPENDIX : MARKETING COMMUNICATIO N
BTL : DAVIDOFF CIGAR AND MERCHANDISE SHOP S
Davidoff shops are the specialist shops that sell cigars and cigarettes .
They provide premium pricing opportunity for the Davidoff cigarette
variants . They are located across the world in Asia, Europe, Duty Free
and America .
These shops facilitate opportunities for building the relevant brand world
and reinforce brand heritage . An image of stature, prestige and
exclusivity is communicated to consumers . By selling cigarettes in the
cigar shops, it also creates an opportunity for alibi advertising .
DAVIDOFF BRANDED SHOP S
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APPENDIX : MARKETING COMMUNICATIO N
NEW BRAND LAUNCH : ZIN O
In Germany, a Davidoff line extension (sun cured tobacco, 0 .9mg of
nicotine) named Zino Davidoff was launched in October `9 8
Proposition : "For people where sense and pride belong to the daily
business . For people who dream of this world and attracted by it ."
The pack features bold Zino branding with traditional Davidoff signature .
The assumed target consumers are ASU30, male and female, upper to
middle class and well educated . Their aim is to succeed in life and enjoy
its pleasures . These smokers have assumed sophisticated taste and aspire
to luxury goods and leisur e
ZINO ADVERTISING IN GERMANY 199 8
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APPENDIX : MARKETING COMMUNICATIO N
SUMMARY ON MARKETING COMMUNICATIO N
Davidoff's marketing communication has successfully portrayed the
brand's premium positioning . It is consistent and provides synergetic
communication of brand imagery "through-the-line" .
Its promotional strategy is focused at target consumers, whilst the
premiums and give-aways are of premium quality .
Sponsorship activities aimed to reinforce brand's premium positioning
via high quality music, fashion and sports events .
The successful use of TMD in dark market environment to support brand
positioning with Davidoff coffee and Cool Water fragrance has enabled
brand communication despite the advertising restrictions imposed by key
markets such as Germany and Taiwan .
The launch of "feeder brand", Davidoff Zino, was launched on the back
of the "Cool Water" success targeting at younger consumers . It has
created a cross generation bridge for the brand . On the one hand, the
Davidoff parent's thematic portrays a Sean Connery style sophisticated
and knowledgeable image ; whilst the Zino thematic depicts a Joseph
Finnes' style, young and passionate . With both brands sharing the
common name of Davidoff, this creates a liaison for the two brands
despite the different target consumers .
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APPENDIX 1 1
KEY DAVIDOFF VARIANTS
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