1. Introduction (Delete this Slide)1
The following customer presentation is designed to guide your conversation with customers as you introduce the 2015 Retail Partners Marketing Program.
This presentation includes contract details and a brief overview of the category, including slides with information specific to the Convenience Trade Channel. Be prepared to remove slides that are not applicable to specific Trade Channels (e.g. NACS Convenience information, VAP details/Carton outlets). 2 3
When concluding this presentation, be prepared to outline recommendations and next steps.

2. 2015 Retail Contract Overview Presentation
Retail Partners Marketing Plan 2 2

3. 1 2 3 4 5 6 Contents Category Overview Portfolio Plan EDLP Option
Scan Data Option 5
Discounting/Promotions 6
Resources

4. 01
Category Overview

5. The Changing Tobacco Industry
Consumer preferences are reshaping the Tobacco Industry as Adult Tobacco Consumers (ATCs) consider different forms of Tobacco 1
RJRT is Leading the Transformation of Tobacco and will continue to commercialize products designed to meet the needs of ATCs. 2
Collaboration with Retail Customers will continue to play a key role in Transformation 3

6. Transforming Tobacco A changing Industry
As Transformation of the Industry continues there will be opportunities for…
Sales Growth
Increased Margins
Category Sustainability
Customers who embrace Transformation can benefit from a growing category.
While smoke free/alternative segments are growing and adding profits back to the category, it is important to understand the role cigarettes will play in the future.
Today cigarettes represent 87% of category sales and are by far the largest contributor of foot traffic and category profits.
In the future, cigarettes will provide resources to support the funding for innovation. Additionally, the majority of consumers purchasing Alternative Tobacco Products are moving from cigarettes.
Source: RJR Brand Tracker; NACS State of the Industry Survey 2014

7. Tobacco Category Size & Preference
Smokers 42
million
E-Cig 20
million
Dippers 5
million
Snusers 3
million
$115
Billion
retail
sales
Source: Euromonitor 2015
Source: RJR Brand Tracker

8. Tobacco’s Importance in Convenience
In-Store Sales Contribution
In-Store Gross Margin Contribution
Tobacco is still the highest contributor to in-store sales
Ranked #3 in Gross Margin Contribution
Food Service
Pack Bev
Total Tobacco
Beer
Salty Snack
Other
SOURCE: NACS State of the Industry Survey 2014

9. Cigarettes Sales and Profit by Subcategory
Premium
Branded Discount
Sub-Generic
4th Tier
Avg. Annual Store Sales
$84,245
$27,307
$2,324
GP$
$62,189
$11,702
$4,361
$339
Tobacco = 38% In Store Sales Contribution
SOURCE: NACS State of the Industry Survey 2014
% of Sales
80.3%
$466,541
14.5%
4.7%
0.4%

10. Preference of Menthol Continues to Grow
Source: MSAi STR Data

11. ASU30 Preference of Menthol is Highest
Source: RJR Brand Tracker

12. Welcome to The “New” RJRT Growth Portfolio
No. 1 Value brand in the U.S.
No. 1 menthol brand in the U.S.
Leading total tobacco brand - No. 3 brand in the U.S.
Portfolio Item 1
No. 1 SNUS brand
No. 1 brand in the moist-snuff industry
Portfolio Item 1
No. 1 Vapor brand with Superior technology

13. Complimentary Geographic Strengths
Source: Information Resource Inc. / Capstone as of Q2 2014
West
MidWest
NorthEast
19%
Southeast

14. NEWPORT is a Marquee Brand that is Driving Growth1
#1 Menthol Brand in U.S. 2
#2 U.S. Cigarette Brand 3
Growing in SOM and Volume
Source: MSAi STR Data

15. NEWPORT Share and Volume Growth
VOLUME (BN STICKS)
SHARE OF SHIPMENTS
Source: MSAi STR Data

16. 02
Portfolio Plan

17. 2015 Program Objectives 1
Alignment of the “New” Balanced Portfolio
Focus on growing NEWPORT, CAMEL and PALL MALL 2
Simplified Program Structure
“New” Rewards programs
Introduction of the Menthol Plan to accommodate outlets with high menthol development. 3
Grow the Full Price segment and continue the EDLP program for Value Price consumers
Enhanced resource package for EDLP participating outlets 4
Introduce Retail Scan Data Reporting option
Data collection will enable future analytical capabilities
Supported by additional resources

18. Two Programs to choose from:
2015 Program Overview
Two Programs to choose from:
Portfolio Plan
Available Nationally
For outlets with opportunity to drive growth across all segments of the cigarette category
Requires a minimum of 26 CPW Industry volume
Menthol Plan*
Available Nationally
For outlets that have a high menthol development
Requires a Menthol SOM of 50% or Greater
Accounts may split outlets between either program
* Refer to the Menthol Plan Presentation/Brochure for details

19. General Requirements 2015 Program Overview Space Signage
In order to participate in the 2015 RJRT Portfolio Plan Retail Program, the following general requirements apply:
Signage
Consumer Pricing Fairness (CPF)

20. Fixture/display configuration does not dictate resource levels
2015 Program Overview
Space – General Guidelines
All highly visible space can qualify for a contract
Space = Space
Fixture/display configuration does not dictate resource levels
General Requirements =
Vertical
Horizontal
Kiosk

21. General Requirements 2015 Program Overview
Space – General Guidelines, cont.
RJRT brands will be merchandised in no less than the #2 position as defined by RJRT.
All RJRT space must be “Featured Shelf Space” from the point of purchase as determined by RJRT.
“Featured Shelf Space” is defined as merchandising space no less than 24” from the bottom shelf of the fixture or 27” from the floor and highly visible from the point of purchase.
General Requirements
The 24/27” rule will apply to all high profile sets.
In low profile sets, if the entire set is “highly visible,” only the brand communication signage must be above the 24/27” line.
Non-Vertical – RJRT must occupy a minimum height of 18” across the fixture.

22. General Requirements 2015 Program Overview
Space – General Guidelines, cont.
Percent of space requirements will apply to all contracts regardless of configuration and/or trade channel.
For back bar configurations, RJRT brands will occupy “Featured Shelf Space” that is equal to, as determined by RJRT, the greater of (i) RJRT’s outlet SOM, (ii) RJRT’s local SOM, and (iii) eight square feet. In no case will RJRT “Feature Shelf Space” be less than 8 square feet.
General Requirements
For traditional pack and kiosk configurations, RJRT space on the kiosk window or counter must, at a minimum, equal the greater of (i) RJRT’s outlet SOM or (ii) RJRT’s local SOM. In no case will RJRT have less than three displays and/or three square feet of presence or be merchandised in less than the #2 position. This option is only available if there is no visible consolidated back bar.

23. General Requirements 2015 Program Overview Signage
RJRT will be allowed to place off-set price communication signage for up to three brands within the retail outlet in a highly visible location as determined by RJRT.
General Requirements
If no competitive off-set signage is present in the outlet, Retailer is not required to have off-set RJRT price signage provided that Retailer provides sufficient space on the merchandising set for RJRT price communication.
RJRT has the right to match competitive signs based on share of signage at the discretion of RJRT.
Share of signage = Share of Market in the outlet.
For example, if PM has a Marlboro price sign, we can match with a NEWPORT/CAMEL price sign:
Marlboro Price Sign = NEWPORT or CAMEL 2x2 Price Sign.
L&M / Maverick Sign = PALL MALL Box 2x2 Price Sign.

24. General Requirements 2015 Program Overview
CPF Requirements—All States (Excluding Missouri*)
Fair and equitable pricing of NEWPORT, CAMEL and PALL MALL will be a critical component of the 2015 program. The CPF requirements of the 2015 program will ensure RJRT growth brands are priced competitively in the market.
The CPF Program consists of four components:
General Requirements
Maximum cigarette single pack and carton pricing.
Application of retailer funded multi-pack discounts to RJRT brands.
Pass through to consumer for VAP.
Maximum MSFT pricing.
*Missouri will continue to have separate CPF Requirements for PALL MALL.
Retailer’s maximum penny profit for all styles of PALL MALL cigarettes must be no greater than the lowest penny profit Retailer uses or has for any brand style of any competitive savings brand cigarette product.
NEWPORT, CAMEL, VAP and MSFT requirements will be the same as outlined on the following pages.

25. General Requirements 1 2015 Program Overview CPF Requirements, cont.
Maximum cigarette single pack and carton pricing.
Retailer’s maximum margin, markup, or penny profit (as applicable, depending on the pricing method used by Retailer as a business practice) for all styles of CAMEL, NEWPORT and PALL MALL Cigarettes must be no greater than the lowest margin, markup, or penny profit Retailer uses or has for any brand style of Marlboro, Kool and/or Winston (i.e., the smallest amount of margin, markup, or penny profit shall be applied to the above RJRT brands). If Retailer participates in and complies with the EDLP Program, then Retailer will be in compliance with the PALL MALL single pack and carton pricing portion of the CPF Program.
Retailer is always free to lower the prices on RJRT products.
General Requirements

26. General Requirements 2 2015 Program Overview CPF Requirements, cont.
Application of retailer funded multi-pack discounts to RJRT brands.
If Retailer offers a multi-pack price for Marlboro, Kool and/or Winston cigarette products and funds a price reduction, the Retailer must:
Offer a multi-pack price on all styles of CAMEL, NEWPORT and PALL MALL Box (except as stated below under Multi-Pack Exception) cigarettes.
The multi-pack offers for CAMEL, NEWPORT and PALL MALL must include all unit configurations that Retailer offers for the multi-pack priced Marlboro, Kool and/or Winston cigarette product(s).
General Requirements

27. General Requirements 2 2015 Program Overview CPF Requirements, cont.
Application of retailer funded multi-pack discounts to RJRT brands, cont.
Retailer has two pricing options: (i) Retailer’s maximum margin, markup, or penny profit (as applicable, depending on the pricing method used by Retailer as a business practice). The multi-pack price for CAMEL, NEWPORT and PALL MALL must be no greater than the lowest margin, markup, or penny profit Retailer uses or has for any brand style of Marlboro, Kool and/or Winston multi-pack cigarette product(s); or (ii) Retailer must provide a price reduction (in cents) for CAMEL, NEWPORT and PALL MALL multi-pack offers that is no less than the largest price reduction (in cents) that Retailer funds for the Marlboro, Kool and/or Winston cigarette product(s).
General Requirements

28. General Requirements 3 2015 Program Overview CPF Requirements, cont.
Pass through to consumer for VAP.
For all RJRT Value Added Promotions, Retailer must pass through to purchasers no less than the full value of the RJRT price reduction.
Retailer must pass through the price reduction regardless of unit configurations (e.g., packs, multi- pack specials, cartons, tins, sleeves) or loyalty/frequent shopper programs.
Retailer must apply price reductions on a product- by-product, brand style-by-brand style, outlet-by- outlet, value-by-value basis.
General Requirements
Single Pack Example:
Single Pack Price= $5.00
ATC buys a pack of CAMEL VAP $.75 off a pack
RJRT requires the full value of VAP promotions be passed through to consumer
$ $0.75 = $4.25
2-Pack Special Example:
Single Pack Price= $5.00 Outlet Funded 2-Pack Special Price= $8.50
ATC buys 2 packs of CAMEL VAP $0.75 off a pack
RJRT required method is to sell the 2 packs at the outlet funded 2-pack special minus the VAP offer.
$ $1.50 = $7.00

29. General Requirements 4 2015 Program Overview CPF Requirements, cont.
Maximum MSFT pricing if Retailer carries CAMEL SNUS.
Retailer’s everyday selling price for CAMEL SNUS products will be no greater than RJRT’s Manufacturer’s Suggested Retail Price (which RJRT sets on a state by state basis).
Retailer is always free to lower the prices on MSFT products.
General Requirements

30. General Requirements 2015 Program Overview CPF Program Methodologies
The CPF Program specifies the only pricing methodologies (margin, markup, or penny profit) a Retailer may use to calculate pricing.
Margin is retail selling price minus cost of goods divided by retail selling price. Example: if a product costs $2.50 and a retailer sells it for $3.00, then the retailer makes a margin of $ $2.50 = $0.50 divided by $3.00 = 16.7%.
Markup is retail selling price minus cost of goods divided by cost of goods. Example: if a product costs $2.50 and a retailer sells it for $3.00, then retailer makes a markup of $ $2.50 = $0.50 divided by $2.50 = 20%.
Penny Profit is retail selling price minus cost of goods with the difference expressed in terms of dollars per unit. Example: if a product costs $2.50 and a retailer sells it for $3.00, then the retailer has a penny profit of $0.50.
General Requirements

31. 03
Every Day Low Price

32. Every Day Low Price 2015 Program Overview EDLP Component Requirements
Every Day Low Price (EDLP) is an optional component to the 2015 Retail Program:
EDLP provides additional resources to support NEWPORT, CAMEL and/or PALL MALL.
EDLP Component Requirements
Retailers meeting the following requirements will be eligible for additional resources:
Incremental Discounting & Promotions
Profitability Enhancement Payments

33. Premium & Value Importance
Price Tier Share of Market
Price Tier
Source: MSAi STR Data

34. A Decade of Excellence
SOM
Source: MSAi STR Data

35. EDLP CPF Requirements—All States Excluding MO 2015 Program Overview
Why EDLP?
Opportunity to have the #1 Value Brand in the U.S. at an Every Day Low Price for Consumers
Rising Cigarette Costs and Declining Sales create an opportunity to Manage SKU Proliferation of the category. EDLP can help achieve this!
Premium/Super Premium and Value represent 93% of Category Sales. Price Tier Shifts have been relatively flat over the past decade and opportunity in the low price segment is minimal.
Maximize Resources on RJRT Growth Brands; (NEWPORT/CAMEL/PALL MALL) which represent 29% of all Cigarettes sold in the U.S.
RJRT Growth Brand CPW is 35% higher in EDLP outlets. This may accelerate now that NEWPORT has joined the RJRT Family
EDLP
Source: MSAi STR Data 2014

36. EDLP CPF Requirements—All States Excluding MO 2015 Program Overview
EDLP Component - Requirements
Retailer must maintain PALL MALL as the lowest, or at parity with the lowest, priced savings brand of cigarettes that Retailer sells.
The only exception to this is with respect to a lower price on a value added promotion for a full price brand (as an example, RJRT considers Marlboro to be a full price cigarette brand), RJRT does not consider such pricing to violate the pricing requirement for PALL MALL.  For purposes of this exception, a value added promotion is a temporary price on a limited quantity of specially marked products.
Example: Marlboro Special Blend Promotions
Accounts cannot split EDLP vs. No EDLP.
Entire account must participate if this component is chosen.
EDLP

37. EDLP CPF Requirements—All States Excluding MO 2015 Program Overview
EDLP Component – Requirements, cont.
Retailer will:
To any consumer who asks for a low or lowest priced cigarette product, offer PALL MALL to that consumer as the Retailer’s featured low priced cigarette product.
Provide clear PALL MALL price communication to adult consumers.
Display and merchandise PALL MALL inventory at parity with, or superior to, any other savings brands.
Provide parity or superior distribution of PALL MALL styles compared to other savings brands.
Provide at least advertising parity with any other savings brands.
EDLP

38. EDLP 2015 Program Overview Incremental Discounting & Promotions
EDLP – Resources
Additional incentives have been aligned with EDLP to further support the Full Price business.
The following resources will be available for EDLP participation:
Additional discounting overlay on NEWPORT, CAMEL and/or PALL MALL (not applicable in Massachusetts).
Additional VAP promotional periods available for EDLP participating outlets.
Refer to details outlined in the VAP section
Incremental PEP Payments
EDLP Participant’s store name will be listed on the store locator to be added to PALLMALLUSA.com
EDLP

39. Portfolio Profitability Enhancement Payments
2015 Program Overview
Portfolio Profitability Enhancement Payments
Profitability Enhancement Payments

40. 2015 Program Overview
Portfolio Profitability Enhancement Payments
PEPs may be used at the Retailer’s discretion:
All contracted retailers (Base and EDLP) are eligible to receive PEPs; EDLP retailers will receive higher rates
Portfolio PEPs will have a maximum quarterly dollar amount a Retailer can earn.
Base = $520
EDLP = $1,560
Any change in PEPs rates will be communicated along with the published discounting rates on a state by state basis.
The rate per carton/sleeve will be subject to change on a monthly basis and will be communicated along with our published discounting rates on a state by state basis.
PEPs will be paid quarterly
In determining volume eligible for PEPs, RJRT will make adjustments consistent with provisions and limitations in RPMPC.
PEPs

41. Profitability Enhancement Payments, cont.
2015 Program Overview
Profitability Enhancement Payments, cont.
PEPs Grid – Contract Rates
All contracted retailers (Base and EDLP) are eligible to receive PEPs
EDLP retailers will receive higher rates
Base
EDLP
NEWPORT
$0.10/CTN
$0.30/CTN
CAMEL*
PALL MALL*
$0.15/CTN
CAMEL SNUS
$0.10/Sleeve
$0.15/Sleeve
Payment rates listed for 2015 only *excluding non-filter
Payment rates subject to change and may vary by state

42. 2015 Program Overview
Product Availability
Product Availability Table

43. 2015 Program Overview
Product Availability Table

44. 04
Retail Scan Data

45. Retail Scan Data Requirements
2015 Program Overview
Retail Scan Data is an optional component to the 2015 Retail Program and is available for both Portfolio and Menthol Plan contracted outlets.
Retail Scan Data Requirements
Retailers meeting the following requirements will be eligible for additional resources:
Profitability Enhancement Payments

46. Retail Scan Data 2015 Program Overview Retail Scan Data Benefits
As the Tobacco Category continues to Transform and become more complex Retail Scan data can be a powerful tool that supports analysis of business performance and development of category strategies.
The Retail Scan Data option is intended to provide insights in the following areas:
Analyzing business performance
Development of category strategies
Understanding the Adult Tobacco Consumer
Retail Scan Data

47. Retail Scan Data 2015 Program Overview Retail Scan Data Requirements
Retailers must provide transaction-level retail scan data for each outlet:
Retailers must submit Scan Data for all tobacco industry SKUs.
Submissions must be made weekly in accordance with RJRT requirements.
All outlets within an account must participate
See Scan Data Reporting Program Requirements Document for complete details including technical specifications.
Retail Scan Data

48. Retail Scan Data 2015 Program Overview Scan Data Reporting PEP
Retailers that choose to participate in the Retail Scan Data Program will be eligible to receive a rate per carton on CAMEL, NEWPORT and PALL MALL through the Profitability Enhancement Payments (PEP) Program.
Scan Data PEPs will be paid on a quarterly basis.
In determining volume eligible for PEPs, RJRT will make adjustments consistent with provisions and limitations in RPMPC.
Retail Scan Data
Scan Data PEP funds may be used at the Retailer’s discretion.
Any change in Scan Data PEP rates will be communicated along with the published discounting rates on a state by state basis.
See Scan Data PEP Grid for 2015 payment rates.

49. Retail Scan Data 2015 Program Overview
Scan Data Reporting PEP Grid
If Retailer participates in the Scan Data program, Retailer will be eligible to earn PEPs per qualified carton.
All contracted customers are eligible to participate in the Scan Data Option and receive PEP.
Retail Scan Data
Brand
Rate
NEWPORT
$0.15/CTN
CAMEL Combustibles*
PALL MALL*
Payment rates listed for 2015
*excluding non-filter

50. 05
Discounting & Promotions

51. 2015 Discounting 2015 Program Overview 2015 Discounting
Contracted retailers will receive discounting on 2-3 brand families
Discounting rates will be determined by state and brand.
Retail Delivered Discounting (RDD) will be available nationally for NEWPORT, CAMEL and/or PALL MALL (not applicable in Massachusetts).
Newport discounting payments will be capped at 7,800 cartons each quarter.
Outlets may become an “Uncapped Outlet” by submitting an Uncapped Outlet Request Form; providing Scan Data to RJRT in the form under the RPMPC; and complying with the other requirement in the RPMPC. Refer to the Retail Partners Marketing Plan Contract for complete details.
RJRT will decide in its sole discretion whether to approve a request for an outlet to become an Uncapped Outlet. All approvals will be in writing.
2015 Discounting
2 levels of discounting
Base and EDLP
EDLP participants will receive enhanced discounting on NEWPORT, CAMEL and/or PALL MALL Box (not applicable in Massachusetts). Refer to State Specific Overlay Table.

52. EDLP Discounting Overlay
2015 Program Overview
State Specific EDLP Discount Overlays
EDLP Discounting Overlays
Copy and Paste State Specific EDLP Discounting Overlays for NEWPORT, CAMEL and PALL MALL. Overlays will be supplied under separate cover.
EDLP Discounting Overlay

53. Value Added Promotions
2015 Program Overview
2015 Value Added Promotions
Portfolio Plan Base Outlets
NEWPORT – based on geography
CAMEL – National and geography based
Portfolio Plan EDLP Outlets
CAMEL – same as base plus 4 incremental waves each year
PALL MALL - National
Value Added Promotions

54. 06
Benefits & Resources

55. Benefits and Resources
2015 Program Overview
Portfolio Plan Customer Benefits and Resources
Significant Rewards Structure
Dedicated resources such as Discounting and VAP to drive loyalty, traffic, sales, and profit.
Profitability Enhancement Payments
Portfolio Plan PEPs.
Scan Data Reporting PEPs
Competitive Brand Discounting
Discounting allowance on select styles of NEWPORT, CAMEL and PALL MALL.
RJRT Trade Marketing Support in Category Optimization
Resources include Engage Trade Partners.com and your local RJRT Representative.
Benefits and Resources

56. Portfolio Plan Resource Bundle
2015 Program Overview
Portfolio Plan Resource Bundle
Use this section to present/review customer specific resource bundle tool. Copy/Paste the results page from the bundle tool available on Engage Trade Marketing (RJRT Tool Kit).
Bundle Tool

57. 2015 Program Overview Key Dates
Contract Sell in Period 8/12/15 – 11/13/15
Current Contract End Date 11/15/15 (RJRT/Lorillard)
Contract Effective Date 11/16/15
Contracts must be signed prior to 11/16 in order to prevent contract resource gaps.
Merchandising Resets begin 11/16/15
Submission of Initial Scan Data File by 11/18/15
For Customers who participate in the Scan Data Reporting Option