1. CIGARETTE MARKET 2008 RUSSIA ALLIANCE MAJOR SOUTH FEDERAL DISTRICT research by

2. ALLIANCE MAJOR MARKET RESEARCH COMPANY SINCE 1994 ROSTOV-ON-DON SOUTH FD of RUSSIA www.allianc.ru alliancm@aaanet.ru

3. GENERAL MARKET PERFORMANCE RUSSIA

4. CONSUMER BASE* MALE FEMALE 31% 65% MALE & FEMALE 46% * data of Rospotrebnadzor, early 2008

5. early start of consumption * 80% of men and 50% of women started to smoke before they were 18 * data of Rospotrebnadzor, early 2008

6. RUSSIAN CIGARETTE MARKET MATURE growing in value faster than in volume SATURATED showing distinct overproduction

7. KEY MARKET TRENDS 2008

8. SLOW-DOWN of INCOME GROWTH driven by global financial crisis - slower uptrade (young consumers) or even downtrade (elder consumers) - reducing consumption frequency/volume

9. WHO FCTC accessioned by Russia in 2008 - heavier control over advertising and sales - higher excises - training of anti- smoking public opinion

10. HEALTH & WELLNESS getting increasingly popular in Russia - increasingly high popularity of super light offerings especially among young female consumers - amplified impact of anti- tobacco social programs - alleviating of smoking takeup influence factors such as peer pressure, parental smoking and advertising

11. HOWEVER, IMPORTANT PSYCHOLOGICAL ASPECTS of SMOKING - anti-stress - indulging make it a lasting habit hard to quit

12. CONSUMER PREFERENCES in South Federal District of Russia

13. THE REVIEW IS BASED ON PURCHASE REGISTER* wave 1 held in MARCH 2008 covered CONVENIENCE RETAIL (kiosks, independent stores, etc) wave 2 held in AUGUST 2008 covered RETAIL CHAINS (supermarkets) * representative sample; details on sample size, geography and register methodology available on request

14. GENDER / AGE* * total sample wave 1; deviations in wave 2 insignificant

15. AGE GROUPS* * total sample wave 1; deviations in wave 2 insignificant

16. CIGARETTE TYPES* * total sample wave 1; deviations in wave 2 insignificant

17. CIGARETTE TYPES* * wave 1; deviations in wave 2 insignificant

18. PRICE CATEGORIES

19. PRICE CATEGORIES* * total sample wave 1; deviations in wave 2 mainly relate to value and super premium segments however general trend is the same

20. KEY OPERATORS* * total sample wave 2; deviations in wave 1 relate to larger shares of Gallaher and Donskoj Tabak with correspondingly smaller shares of Philip Morris, JTI and BAT

21. KEY BRANDS* * total sample wave 2; deviations in wave 1 relate to smaller shares of above premium, premium and some medium brands (mainly Winston) with respectively larger shares of value, low filter and most of medium brands

22. CHANGE OF CONSUMPTION PATTERN earlier smoking startup; even gender distribution of young consumer base (under 30) while in senior age groups male smokers increasingly dominate; higher popularity of super light and light cigarettes of above premium, premium and medium price categories among young consumers (under 40).

23. please contact ALLIANCE MAJOR at alliancm@aaanet.ru www.allianc.ru CREDITS all wonderful pictures are taken from Flickr.com great thanks to artists and their models FOR MORE DETAILS ON THIS RESEARCH PROJECT