2011 Annual Report

Our product development is about understanding — and responding to — adult smoker preferences. The process begins with focused market research that results in a rigorous assessment of the challenges faced by our brands and the most consumer-relevant solutions. This insight then drives the development of innovative product concepts. One such concept addresses a growing adult smoker preference to personally adapt, adjust or change the product when desired. In turn, this has translated into the commercialization of a new hybrid product: a regular cigarette that converts into a menthol product when the capsule within its filter is crushed by the smoker. Probably the most innovative addition to our portfolio in recent years, the hybrid concept was successfully introduced for the first time in 2011 with the launch of Marlboro Beyond, highlighted later in this Report, in selected markets in our European Union Region, and L&M Forward in Finland and Poland. These brand variants now complement our existing menthol-to-menthol capsule brands, such as Marlboro Ice Blast, which are enjoying considerable success in Asia and Latin America.