NO COPIFS MAY RF MADE
A meeting of the Tobacco Strategy Group was held
on Thursday 27th July 1995,
SFCRFT
Present: Mr U G V Herter. Nlr D P Allvey, Pvfr B D
Bramley. L'Vfr N, G Brookes,
I
Mr A M de Castro, Dr B Schweitzer, L1Ylr P Viner,
Miss H C Barton
Lord Cairns, ?vfr S P Chalfen. Nlr N Davis. Dr E
Kauscli, ivir C Read and
Dr L Rudge were present for items 1 to 4 1. rv[r P
Radford was present for items 2 to
14. Nlr K S Dunt and Nfr D G Stevens were present
for items .50 to 54.
Minutes of Previous Meeting
It was acreed that minute 12. "the CEC should be
informed in -advance abc---- possibie
decisions that could lead to accounting
provisions", should be quaiifled. NL- -kilvey wiil
amend the accountin2 instructions. either to
specify the type of :cems wh.:c' should ~e
communicated. or to scecify a limit.
Product Contamination Control Procedures
Nfr Read ourfined the current produc:
contamination controi procedures ~-ound
Group. Generaliv the Grouc, ainis -,o work -Lo the
moszstringent liational rez-.::Z-.ions. bu:
riot ail companies hav,- -he same leve! of
sophistication. V,-he.-!,.-e- incoming
ma:er:ats aiz!
Prcc.-dures Pr2 ~e;na -zxtended 'o the aud;t of
orcces--es. FOr
the only corn7an:.- zo a5k for the hiszcr-.. or"
use or tankers. ana 5ouza Cz-..Lz is zhe ond'
company to insis-, zi-a- smailer quamities are
de;i%*eleci in nev-". rion-re,:s-~--! dr-,Lms.
'-et!n :!~:z:-anc2-4 n ~'~
bL;,' 7h:S ill ric- 2n-- -! -.hat `2z:
:-rac:I;ce is adocz2d-
I 'vlaintenancc and se:---:Ace are times of high
risk for product =nrarninazion. They are
controlled by cus-,om and practice-ai.*h- A start
has been made in tn-szainsz *,har
procedures ar.- aria but the otal GroL::: no, '--e
complete until the end of 1996.
Nlr Read recommended that Finished product samples
shouid be taken for sensor-,-
analvsis from each biend lav-do%,,,n; the
practicalities of this were questioned. but the
recommendation was accepted. Some manufacturing
operations have a poiic-.. of taking
ci2arette samples following manufacturing material
batch ch. ---- z e s (i.2.
casings/adhesi,-es), whiist encouraged. it is not
considered manda--ory with z.:cd supplier
qualitv and in-cominu material controis.
6. vLr Read further recommended that the product
leaving Southampton shouid be marked
with the year and machine of manufacture, as now,
but the month of manufac-ure should
be replaced with the week of manufacture. this
would ensure that BATCo would have V1
one week to recall product if any problems were
identified. This was agreed. C:)
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The importance of continuous operator training was
agreed, but it was noted that this will
become less effective as factories are automated.
S. All materials are cleared for use by A,1v1GP,
however, it excludes some products boUghE
in from other manufacturers. It was agreed that we
should ask product suppliers to
disclose their materials, on a confidential basis,
in order to meet our duty of care.
9. Mr Chalfen reported that, in the US, all
manufacturers disclose their additives to a US
law firm and the consolidated list is available
for regulatory purposes world-wide in
support of US export trade. BAT needs a procedure
whereby all the additives used
throuchout the Grout) are added to this list.
Suppliers of finished product should then be
asked to certify that their product contains
nothing that is not on the list. The creation of
a Group-wide consolidation of this list with any
additional BAT additives world-wide
was endorsed at the KIC and this should now be
implemented. Mr Chalfen will report
back to the November TSG meeting on what has been
agreed.
In summarv, best practice is not implemented
even-where. It was agreed -hat there is a
need to apply rigorous Grout) standards. A
comprehensive manual is being established.
Companies will be asked to certify that it is
being followed, and it %-,iil be checked
through produc-ion audits.
11. Nfr Radford re-jorTed that the procedures
adopted for disaster recovery c--- be used ~or
produc- recail. The need is for broad-based
guideiines. The Operating Goups would
then deelop detailed proc.-dures tailored to their
different distribution charine;s. The
.,,uide!ines should cover contract manufac-ure.
-%;il dra~~ a :zui_`e;ine '--a-zed on 'est
ora:::~,zz ~`rorr. -i'a Oce-ati::-_ Croucs
Mr
-xremai oenci-imarks. for discussion with the
Ope.-ating Groups.
Internet
It -.,-as :o zh~- azrzn,~zn 0-2radnz Gr,-,-:7
C'aiairman that :: .5 ~hz!
poi:cy -,;-.a.- cori;-.e-_,iori zo :ne inteme, is
L-7ohibited. A note to this effect has 3=:
the H.-zds of"AIS. but :ho oceratinz Grouo
C~airmen must ensure that this crohibitict-i :s
kno,,,-n and enforced. Mr Radford WEI ensure that
Imperial Tobacco, Canada. is aware or -
BAT's concerns. and Mr Bramiey wiil communi-m
--itl-L-BATCo's associate companies.
A review is be-miz carried out of wheher
attachment to the Internet might i-e permitted in
some stand-alone situat;ons. Nlr Herter urszed
that the review should be completed as
soon as possible to erisure that compentive
advantace is not lost.
Smoking Issues
15. Dr Rudge reported on de,.-e;opme-its in
smoking issues over the past year. Press
statements and briefina materials are swiftly
being communicated to the whoie Group.
The Operating Groups were asked to send any
additional questions that should be in the
questions -and-answers material to the Key Issues
Council. The Key Issues Council will
consider how communications can be dealt with
pro-actively.
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16. A project has been set up, headed by Dr C
Proctor, to run from September to December,
to examine the possibility of "bringing sciences
back into the public debate on ETS". It
is intended that this should be piloted in the UK.
17. Other topics raised included: IARC ETS
studies; the UK SCOTH review of ETS science;
the publication of an analysis of B&W documents;
the FDA regulatory proposal to
P-,esident Clinton; and the potential class action
in Australia.
Scientific Research Group
18. T-he SRG was established in 1986 to identify
research relevant to smoking issues.
Ex-ernai expe:-L5 review project proposals, and
the results of external research are
published inde::e-idently by the researchers.
19. Since B&W fian:ied the %vork considered by
them as most relevant to the US in the CTR.
B& W withdre,.%- from the SRO iri 1994. The work
of the SRO is not budizet constrained,
and add:tionai 5ands -ould be provided for
recommended projects.
Group Technical Programme
T-n-2 Best programme has achieved parity in US FF.
has not.
ac-;e,.e,--; sup-.7:ority. -artly because ofthe
:e-enizineering approrch. and par.':.- because
n .-- '. as re ar -= ea s d e ~_, - _- --;.
21. T.- -z re z* of s,-ckers have bareiv chanced
over the years. They ---,-anE more
!es--- ~-zzation. less dr-mess. more naturalness
and less artinciai,.-.-. Some
:k2 M-72 bu: othe7s ould!ike less suen~-
~-s and weaknesses :r: our ovm Droduc:s an~ in '
f~-:*Coro. is
F-: e Improvernem Programmes. Work WEI cz:-:;-Iue
but
-cok an iuovauve aouroaca ba:~t on oU":-_7 ioC:-
Is.
's
C011"In"_101- ezt onal improvements.
24. T*-.! W_`_3 PrCZ7!M,--e .vas asked to
re-evaiuate the impact ofm
am.= Qf zoicacco. Nlr
_,)Kes
zl-= PVs duration in the US is 'S months. a2ains-,
1` -zr-.ths for
and Vic!!roy made from lonLer-matured tobacco
achieves siznificantly
ir-:701-e-_4 sme:1"ne qu-.iiz-.- ratines from
consumers. BAT Germany has recently raised
the dura:lon w ::s flavour grades to 24 months,
although overall duration will not change.
Hc-_,se , -17 ?rinci : s made usinp, tobacco which
has been matured for 2 to 3 yea:s in whole
lea-- ronn. Once the impact of maturity on smoking
quality has been re-evaluaEcd. the
firancia: cons_-z-.;.--.c_-s of an,,- chanize in
policy will be examined.
25. Tn-. Liz---s biend has achieved parity with
Nlarlboro Lightsin CPT.
26. Tht-e is no 1;V`.V3 prograrnme for
Ultra-Lights as there is no benchmark. In its
place,
there is a projez: to draw up a tool box for
improving Ultra-Lights products.
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27. The WNVB programmes should ensure that
knowledge gained from American Tobacco is
shared around the Group.
Innovation
28. The Group Tcchnicnl Programme has providcd a
forum for sharing information and has
created an excellent team spirit. It has achieved
parity on IBs and identified strengths
and weaknesses, but we are now at the boundary of
our current capabilities.
29. In 1991 the decision was taken to focus R&D
effort on product development, and
BATCo merzed the Group research department into
its R&D department. The decision
is believed to have been the correct one with the
elimination of duplication and R&D
becoming more Nfarketing-driven. The focus of the
last few years has been short-term
with the neez4 to address deficiencies. The focus
now needs to switch to a more long
term orientat;on, to ensure that we do not fall
behind azain in smoking or product
quality. Banaiion is addressing the question
ofinnovation.
30. BArs freque-icy of pateriting is risiniz.
Compared with competitors we art inactive in
zhe areas of::2ckaz;r,-2 and alternative products.
Coresta
31. Coresza has four stu'"', zrouns (Aizronomv.
Phytopathoiogy. Technology-'. and Smoke)
%%hic'-. conczntrate on analytical me:hods. test
meihod-z. standards. con_z'szency and
-zz:e-iz;;-,c ou'_-'.:cat';or.5.
-I en~2r7~'-_- 'Ssue< 'nas Tezt--nilv beer. o=ed
bv PM. RJR. and 3.-.T.
Possibie for discussion include machine smoLing,
ignition propensity, filter
_,7nC:1-_ =115'[Uent -.-ields and ',~e Co~-
Allme-it_-s.
-oun. PN' , 5zrorig, unif',ed focused a-7cac". RZR
is
on -in Z! = -2.- a s z. - L presenis
uinc:: !s.,arch Direzzor (,ro is a rnernoer o~ the
?-'7 :_'bard) and
Roth.m.=s :.acir -or R&D. L-zgai and Corpora-2 .-u
.iairs.
34. B.-kT Shou; d --:se its !.-.~Iuence at
Coresta. whe,-~ it currently chairs rwo key
corr-mittees, to
.15Ure_!h_ar - focuses on iis core roic of setting
standards and avoids_tqj_pMing directly
irivoi,ed :r. ind heaith issues per se. The BAT
representatnes rnusz improve
zheir ~Lnowiez~ge of Group-wide positions,
inc;uding regulatory and le-ai issues. so that
they can cc--.-,:bute %Ir Read should brief the
TSG annually on deveiopments at
Coresta.
Technology Revie, s
35. Nlr He-Ter ccmmen:.--_; !hat. except for the
B&_W review. it was difficul: zo assess our
standing to competitors from the -eviews. The
final reviews, which are due in on
18 th August. shouid contain more competitor
assessment. even where this is only our
best 'udizemen(.
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TOBACCO LITIGAT'ON.
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36. The investment programme has resulted in a
good position "vith respec: to machinery.
BAT takes the lead in co-operating with machine
manufacturers. PNI has an advantage
from its smaller range of products which allows it
to negotiate better prices and delivery
dates from machinery suppliers.
37. Nir Davis will co-ordinate a team to address
again the subject of produc: specifications,
for example, pack sizes, to make a recommendation
to the TSO.
A Most of our machinery is now very modern. but we
must ensure that the position does
not erode again over time. The machine buy-back
policy should ensure that the
machiner., is kept up-to-date.
39. The overall position is that we have now
achieved parity on smoking and product quality.
Our averaQe costs are slightly. lower than those
of our major competitors as a result of our
factories in low-cost countries such as India and
Indonesia.
40. We monitor our parents and the percentage or
turnover spent on R-ID relative to
competitors, but this does not give a measure of
innovation. or value for money in the
spend. Powever. it can be said that the orgy
cornmerciaily successfui 'products in the
past I _5 years have come ftom BAT (the rrcsz
recerit was Cacri. 8 years azo). The same.
with *,he exception of DIET, can be said for
--rocesses (for ex_-,o!e. HTD. direct cviinder
casing7 CLIFF, STS).
4 1 . Co-operation around the Grout) is good on
rnachinerl, " purcnasirg and R _ID, but 1c has
oee"', ;ess zood on %ISD. This is now be;'12
tackled. for e~.arnpie. the three dift'erent
MR-P s,.s:e-ns are beiniz liriled throuLh ar.
interrace. The O::erating C.-oup Chairmen
Must a hi uh :71`.c-1`:-., to this larve and
-7.2n, ::s.~.
--cu;d not ho;d bac;- cr-, the of -a m 2 :n
nend:nR the
negctiac:o7~s -ith -Ro-.r_man3.
Dr Sc",.ve 1viiI -_-:-.'iSe %-fr Brookes of a::-.-
change to the -'1--.Tca5z ol Vicerov
,or East Europe.
o szilz:s d-.e ',:S 4ornes- :c
7 fie 1:5i3 7eCQr-, Si-06~be extended t
4-1. BATCo and BAT Germany should propose zo NIr
Herter a dttaiied plan of how to take
Hollywood into local manufac-ure in Russia.
45. 'vfr Herter has doubts that JPGL is the riah,
'--rand for Russia. Usinz a US blend should
be considered.
46. Nfr Herter has doubts that Pall Nlall can be
:!xtended to I ma. 7he zest in Geneva should
izo ahead, but the results should be considered
carefully before roll-out.
47. There is an extending pattern of price
competition from PM. including Australia, where
Marlboro is at the lowest price point in the
market. CZ)
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48. Mr Bramley asked BAT Germany to provide BATCo
Marketing Intelligence
Department, on an ongoing basis, with the best
estimates it has available of PM's
volumes by market in Eastern Europe in order to
up-date the Central stadstics.
Statement of Trading Principles
49. There were no problems with the Statement
ofTrading Principles as presented.
Project Battalion
50. It was agreed that he strategic imperatives
must be communicated consistently across
the whole Group.
;1. The preliminary fi,-.(~ings of the Marketing
and Regional Drive Teams we.-C presenEed.
52. It was ureed tha, an outline organisation
structure would be announced in early
Nove-nbe:. to be d'Scussed in derail at a
Conference in late November. This would then
roll on into regiona; meetings to plan the
implementation process.
There vas disagreement about whether there should
be an interim announcement in
Septcrnbc-. depena".n, on what could be said vs
what rumours mi2hE fill a acui.= .
5 4. The nex: TSG mte'ng on '~~9th Septembe7 will
be devoted to a disc~:S_zion of Project
Battalion.
H C Barton
21 st August 199'_-
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