NO COPIES MAY BE MADE SECRET
Tobacco StrategT Review Team
A meeting of the Tobacco Strategy Revie. Team was
held on Wednesday, 26th
February 1992.
Present Sir Patrick Sheehy, Mr. M.F. Broughton,
Mr. B.D. Bra.ley,
Mr. R.J. Pritchard, Mr. A. Monteiro de Castro,
Dr. R. Salter (Secretary).
In Attendance Dr . B. Schweitzer, Mr. E.E.
Kohnhorst (whole meeting) and
Mr. D.S. Watterton (items 24-48 only).
Mr. U.G.V. Herter and 11r. J-L. Mercier -ere
unable to attend.
Dr. B. Schweitzer attended in place of Mr. Her
tar.
The C"lairman noted that Mr. Herter's absence was
due to
exceptional circumstances and stressed the
importance of
ensuring a full attendatice at meetings of the
Team for which
alternates would not normally be accepted.
Minutes of the Previous Meeting/Matters Arising
1. The minutes of the -3eeting held on 2nd
December were agreed.
2. China Re-org.nisation : It: wag noted that the
new organisation to
serve the China market and Hong Kong had been
implemented:-
(a) BAT China is re-qponsible for the development
of the China. market. It
is operating but a new CFO for the company is
still to be recruited.
(b) BAT Hong Kong is responsible for the Hong Kong
and Hacao domestic
markets and ~o- duc7-f:ee sales. Mr. Berr7 vill
take over as
Managing Director of this c=pany when Mr. Aitken
reti-as in March.
(c) The Far East Sales Unit (FESU) is responsible
within 3.,'.~'UKE for
produce inv-),:ing and supply to BAT China and BAT
Hong Kong.
~ir. Duncan !~e3ds the unit with Mr. Cunningham
reporcin; to him.
3. -~n objective in sp-::ng up FESU was to improve
the forecast'ng of sales
requirements month by month to assist in planning
and budgeting in the
production units. qowever, experience to date in
1992 has b;en that the
call-off from Macon has been considerably less
than had been forecast.
Mr. Bramley-will iny-pstigate the reasons for this
and %rill report back
to the next eeti~g on action taken to overcome
these initial probleg.
Marketing Issues
4. November Marketing Seminar : tt was noted that
although there were
papers from Souza Cruz and Imasco, reviewing
significant issues to have
emerged from the seminar and recommending action
to pursue these, there
were no papers from the -other operations. Mr.
Bramley, Mr. Pritchard
and Mr. Verter were asked to produce papers for
the next meeting at
which the Souza Cruz and Imasco papers would also
be considered.
5. I.T. in Sales Seminar : Mr . Pritchard reported
that the seminar held
in Louisville during Febru ary had bee n very
valuable as a means for
exchanging in formation on the use of I.T. in
selling. He had been
surprised by the extent to which I.T. systems were
in use throughout the
Group and by the depth of experience which could
be shared.
C.)
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6. Key points to emerge from the conference had
been the importance of
focussing on the users rather than the providers
of the systems (i.e. on
sales/marketing rather than MSD) and the need to
establish both best
practice and the potential for extending the use
of the data produced
(e.g. by the capture of data from vending machine
sales, as practised by
Coca-Cola).
7. Mr. Pritchard will arrange for a summary of the
main conclusions from
the seminar to be prepared and these will be
circulated to the members of
the Team during March.
8. Marketing Information System : Mr. Bramley
reported that an external
consultant had been employed to assist in the
implementation of the new
marketing information system. The programme and
allocation of costs had
been agreed with the other Operations and
implementation was on schedule
for completion by the end of the year. The
Chair-man welcomed the progress
which had been made and emphasised the importance
of ensuring that the
system was functioning fully by the end of 1992.
Competitor Analysis
9. Philip Morris : It was noted that a
significant: proportion of the
volume increase of 8.31 in cigarette sales
achieved by Philip Morris in
1991 was accounted for by special business to
lussia and the acquisitions
in Brazil and Ease Germany.
10. Profit margins still continued to improve both
in the U.: domestic market
and o~e:seas and there appeared to be continuing
pressure on reducing
costs and improving cash flow. It was underatcod
that all new machinery
purchases for 1992 had been cancelled. Rowever,
there -apre plans to
expand the Berlin factory to a capaci:v of 50
billion p.a. at a cost of
D4115 million. It was also understood that DM40
millic-. was being spent
on upgrading the 12 billion Dresden factory.
!1. Product develop-nent appeared to be ciencred
on *w tar (including a new
dual concentric filter) and the camtpaign to
establish de-nicotined
cigarettes is also continuing. At the same t:=e,
Yarl~~= remains the
central focus of Philip Morris' gtrat,197,
esp;~:ially in international
markets.
12. The Chair-aan noted that Philip Morris still
had a polic7 of lobbying for
the highest possib1-e--pr,,F-.- Of specific
excl."se, suggesting that
expanding sales of full-revenue cigarettes was
still t!~eir preferred
strategy,. At the same time, they were also
promoting lo,er priced
cigarettes, especially in Central and Eastern
Europe. '."hat -as not clear
was whether these were opportunistic sales or part
of a sustained strategy
to develop the VFM segment of the market.
13. Mr. Pritchard said that the strategic
direction of Philip Morris would
be researched further by Brown & Williamson. Fe
will report back on this
at the next meeting.
14. It wag noted that BATCF, in conjunction with
BATCo. would be carrying out
resear ch into consumer attitudes to Marlboro in
Germany, Switzerland,
Spain, Italy, France, Greece, Hungary, Poland and
Moscow. The results of
these studies will be reported by Mr. Herter at
the September meeting Ln
of the Tea..
... CXJ
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15. R.J. Reynolds had experienced a downturn in
profitability in the US
domestic market in 1991 where a key strategy is to
concentrate on the new
.rap. The main weaknesses have been in failing to
secure shelf space in
retail outlets and in the adverse reaction to the
plethora of new
launches, including Camel Wides which require hand
sta,mping.
16. Despite continuing losses of market share in
Germany and no clear thrust
in Japan, Thailand and other Asian markets,
profits in the international
business have improved. However, some of this may
be due to loading. RJR
have been active in Turkey, Poland, Russia and
elsewhere in the CIS but
announcements of investment intentions are still
largely tentative.
17. It was noted that Nabisco were active in Latin
America and in addition to
purchasing Maguary, they were also potential
purchasers of EverCrisp in
Chile. RJR had offered to licence their brands to
Souza Cruz and were
also thought to wish ~o obtain licensees in
Venezuela, C`hile and elsewhere
in Latin America. It was noted that BAT already
licenced RJR brands in
Argentina. However, no advantage was seen in
licencing brands in
Venezuela, Chile or Brazil.
18. It was noted that although RJR Nabisco was
having continuing success in
refinancing the Company, it was still possible
that certain elements of
the International business might become available
for sale. Mr. Pritchard
will arrange for an evaluation of the current
status and potential
interest to BAT of the various elements of RJR's
International business.
Mr. Broughton will then arrange for an update of
the report, originally
produced in Dece-niber 1988, assessing the value
of these activities in
financial ter-as.
19. Rothmans : It was noted that the main reasons
behind the observed
improvement in Rothmans' margins in 1990/1991 and
the first half of
1991/1992 had been improveraent3 in Australia,
Malaysia and Europe, where
there had bf-en substantial rac-onatiaation. It
wag believed that they had
been relatively unsuccessful in the full-priced
segments of the market and
-ere now concentrating cr lo,ar-priced products.
20. Rothmans were also developing their business
in Fine Cut and Sticks.
Although an increase in excise in Canada had taken
away much of the
competitive advantage of Sticks, they could have a
potential in Germany
wbere lobbying to have them. classified as
cigarettes has been less
successful than elsewhere in Europe. However, the
main threat in Germany
remains the possibility that Rothmans will tr7 to
promote a low-price
cigarette in the markcrt%~-----
21. Mr. Bramley will arrange for Mr. Bingham to
anal7se Rothmans' strategic
thrust over the past 5 years. He will report to
the next meeting on how
efflecti~e they have been and how their strategy,
is likely, to develop in
the future, especially with respect to low-priced
brands.
22. JTI/Anti-Dumping : It was noted that there
were no markets here it was
thought to be either feasible or desirable to
initiate anti-dumping
actions against JTI.
Canada
23. It was noted that following the imposition of
an export tax in Canada,
off-shore manufacture had become more attractive.
RJR were known to be
planning to anufacture in Puerto Rico and Imasco
had enquired whether (_n
Brown & Williamson could undertake the manuCacture
of certain Imperial CD
brands. The Chairman asked that every effort
should be made to assist r"i
I.asco in overcoming their current difficulties.
U_.
__4
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Key Markets
24. Eastern Europe : Dr. Schweitzer reported that
following a 63% rise in
sales to Eastern Europe in 1991, January 1992
showed sales down by 221
compared to January 1991. However, this was
largely due to the timing of
BATCF sales to Russia which had been nil in 1992
compared with 486 million
in 1991. Excluding this, sales had increased by
188%.
25. Prospects for the remainder of 1992 appeared
to be reasonably good.
However, they were subject to political and
econotmic uncertainties and
would also depend on a successful outcome to
contract negotiations with
the Russian authorities. The Chairman emphasised
the importance of
maintaining profitability in sales to Russia,
pursuing the brand and
pricing strategy which had been agreed. Tie also
asked Mr. Br..ley to
check on the ownership o~ the trademark 'Free',
which might be useful for
a lo-tar offering.
26. Hungary : It was noted that because of a
back-log of work in the
Hungarian Courts, the purchase of the shareholding
in Pecs would not be
ratified until the beginning of March. The
ceremony to formalise the
purchase had now been postponed to 9th March.
However, BAT was already in
effective control of the COMDany. A budget and
plan will be presented to
the Cliairman when he visits the company.
27. Bulgaria : It was noted that discussions are
continuing with Bulgartabak.
However, it is not expected that these will make
significant progress
until the position regarding privatisation has
been clarified.
28. Poland : It was noted that the tobacco
industry study which the Polish
authorities had coramisgioned from Morgan Grenfell
is due to be presented
at the end of Februar-, Although it is not know
what reccm=endations ,ill
be made, it is thought. that the Government will
be advised to privatise
the industry en-bloc. Because of the difficult
political and economic
situation, LC Is unlikely that there will be
opport-mities to promote
alternative, more radical solutions. It was agreed
that the Group should
continue to give support to the Augusto.
manageinent while mcnitoring
development3 in the c-.-erall gituation.
29. Czechoslovakia : It was noted that the
Slovakian authorities have
invited tenders for 31.'. of the equity of CSTP,
the principal cigarette
co~mpany in Slovakia. Since this would not provide
control and since the
minimum price being quoted
appears--arifeatt-i-cally high, it is intended to
submit an alternative proposition for 51.'
control.
30. It is understood that there is also an
intention to priVati3e the tobacco
industry in the Czech part of the country.
However, there is a rumour
that this may be implemented by striking a private
deal with Philip
Morris, who already have licence agreements for
their brands. The
Chairman has written to the Czech Minister of
Privatisation to ask that
the business should be -offered on open tender
rather than through a
private deal. SEITA have made similar
representations.
31. Another possibility for becoming established
in the market would be to
invest in a 'greenfield' secondary. This would be
sited about 200 km from
Bayreuth, which would be used as a source of cut
rag. BATCF will continue
to develop plans for this alternative approach.
V1
CD
r\J
U-1
--Ii
Co
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32. Yugoslavia : It as noted that a visit had been
arranged to Makedonia
Tabak (MT) who have expressed an interest in some
form of association with
BAT. MT have a 28% share of the cigarette narket
for Yugoslavia as a
whole and earn $60 million a year from Leaf
exports. Despite uncertainties
about the political status of Macedonia and an
absence of privatisation
law, it is still considered worthwhile to
establish and develop contacts
now in order to be able to profit from future
developments which could
offer opportunities for investment.
33. Mr. Pritchard reported that in Serbia, HIS
were putting up a new factory
and -ere said to have a contract to supply the
Russians with 7 billion
cigarettes in exchange for oil. He is intending to
visit NIS as soon as
this is possible.
34. Moldova : It was noted that- Moldova has good
quality Leaf and one of the
best cigarette factories in the CIS. A letter of
intent covering
co-operation in Leaf development is being prepared
by Mr. Watterton and
arrangements will also be made for the supply of
seed for Leaf growing. A
major sensitivity is the future of Moldova, which
might ultimately be
absorbed into Romania.
35. Romania : Mr. Pritchard reported that he was
due to visit Romania -.r.:hin
the next week. This was still a good export market
for Brown & Williamson
and -aight ultimately have a potential for
investment. However, local
manu-acturing was of a poor standard.
36. Russia ; Mr. de Castro reported that a
proposal was being prepared to
build a new factory on the site of one of the
former military indus:7ial
C0.17-exes. This proposal would be for a BAT
equity investment in a 3 stage
program.-_e, expanding production capacity
progressively from 12 to 2-' to 40
bill:on. Souza Cruz would have an agreement to
supply Leaf cc the --actor-7,
probably in e_xchange for oil. It wag not clear at
present to whom the
prC-~C'3a hould go, but it was thought advisable
for it to be dire::ad to
so-:ne close to Mr. Yeltsin.
37. An approach being pursued by BATCF was the
preparation cf a
prcp:sal to purchase an existing factor-7.
However, this was thoug-.- to be
less ?r:.=ising than the 'greenfields' approach.
It would also be necessar7
to v,*si-. more factories to select the best
prospect for improvement,
38. Ukraine : The Chairman reported that he had
signed a letter of intent
__T_6-h~Tkraine which would give the Group 3
months' exclusivity to develop
. P;,osal and business plan for the purchase of
selected factories at
Prilucky and Cherkassy and a tobacco processing
plant at Monastirriska.
If acluired, these would give B.A.T industries
25-30 billion capacity in a
market of 80 billion. There would also be the
potential to expand to 50~.
of the market.
39. Lithuania were thought to be looking for a
partner and it was belie-jed
that Philip Morris had entered with a letter of
intent.
40. Estonia/Latyia : It was noted that the
approach to Estonia and Lat~ia
had jeen complicated by approaches by STK,
claiming to be representing the
BAT Group. Mr. Bramley will make it clear to STX
that they cannot
speak on behalf of BAT and that B.A.T Industries
reserved the right to (_n
make independent approaches either directly or
through a Croup company
such as STOY. CD
r\)
Ur.
--A
CL)
NJ
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41. Scandinavia : It -as noted that Mr. Bramley
had informed STK that the
proposal which they had developed with Mr.
GyLlenham-ar for the
consolidation of the Scandinavian tobacco sector
was totally unacceptable
to B.A.T Industries since this would involve B.A.T
Industries holding a
relacively small equity share in a business over
which it had no control.
42. It had been suggested that a refusal to go
ahead with the proposed merger
might leave the way open for a bid by Philip
Morris for the Swedish
Tobacco monopoly in the proposed privatisation of
the
Government-controlled holding company Procordis.
However, the Chairman
did not feel that this was sufficient reason for
BAT to enter into an
arrangement whose main purpose appeared to be to
protect the monopoly
positions of the Scandinavian tobacco companies
and to secure for Mr.
Cyllenhammar's other interests, the benefits of
the cash flow from
Tobacco. If.Fhilip Morris did bid in a break-it)
of Procordia, BAT would
have the option of mounting a bid of its own.
&3. Mexico : It has been agreed previousl7 that
BAT was unlikely to wish to
re-encer the Mexican market unless the NAFTA was
extended to Mexico.
Mr. Pritchard reported that the negotiations on
this were proceeding
slowly and it -was unlikely that an agreement
would be reached until after
the US elections at the end of 1992. In the
-.neanti;-ne, Brown & Williamson
would continue to lobby for cigarettes to be
included in any agreement
which was reached.
4 a. Thailand : Mr. Pritchard reported chat
although progress was being made
in Thailand, there were continuing problems rich
the authorities who had
recently adjusted the dut7 benchmarks for US
brandg, UK brands and
Japanese brands in a way which made it more
difficult to compete.
Protests had bee, lodged through the agents in
Thail3nd and he1D was also
being sought f-= the American Trade
representative.
65. Colc=bia : Mr. ?-:it--hard reported that Brown
& had opened an
office in Bogora with additional space available
to Souza Cruz. The
budg-i-3 for 1992 called for sales to Colombia to
be =cre than doubled but
both '-;e and Ifr. de Castro were confident that
this -.-as achievable.
46. Mercosur : It -was noted that Mr. de Castro
was con'.-'nu--n& to lead the
projeo:: to determine what action should be taken
to neet the opportunities
and challenges resulting from Mercosur. He
reported that he was
investigating with Mr. Bramley, the recovery
of_th.e Grouo's trademarks in
i~araz;3y preparatory to mounting an export drive.
Following discussions
wich Mailhos in Uruguay, he would also pre7are a
proposal for entering
this =arket. Mr. Bramley and Mr. de Castro will
also investigate the
poter:-~al for seiling Souza Cruz brands in
Argentina.
47. Sum=rising, the Chairman said that the work to
develop into new markets
was a long-term programme with one or two major
investments in each year
likeiv to be the most that could be achieved. He
believed that the
current arrangenents were effective with a small
team at Windsor House
able to draw on support from the Operating Groups
for specific projects.
He had been impressed with the level of
co-ordination which had been
achieved and hoped that this could continue ro be
developed.
48. It was intended to have a review meecing
specifically on new markets on
20 th May in Budapest, ahead of the conference
planned for the rest of that
week. Progress on all potential new markets
including Vietnam, Cambodia
Myanmar and Cuba would be reviewed at the meeting.
NJ
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Budapest Conference
49. The purpose and arrangments for the conference
due to be held in Budapest
from 20th May to 22nd May were noted. The list of
attendees was also
agreed. The next stage will be for 'sponsoring'
companies to write to
each of the delegates regarding the conference,
enclosing a formal
invitation from the Chairman and a questionnaire
regarding hotel
arrangements and requirements for translation
facilities. Dr. Salter will
provide the letters of invitation and
questionnaires and will also be in
contact to discuss the form and content of the
presentations to be toade
during the conference.
US International Brands
50. Mr. Pritchard reported that there had been
good progress in expanding
sales of US International Brands in 1991 except
for Kent for which sales
in China and the Middle East had been
disappointing. The overall budget
for 1992 required volume growth of over 14Z. This
was demanding but
achievable. Menthol brands -ere expected to
continue as an important
element of growth, especially in the Far East.
51. Kent : It was noted that growth in China
continued to be a key factor in
determining the overaLl success of Kent. However,
following a relatively,
unsuccessful launch in Munich, it was agreed that
it might be necessary to
re-think the positioning of Kent in Europe. One
possibility would be to
use it as a lower-priced International Brand,
perhaps sold as 259. This
would leave Lucky, Strike as the leading
full-flavour premium brand with
Barclay as the key low-tar brand.
52. Lacky Strike : It was rioted that Lucky Strike
continued to make progress
worldwide but that there were still some problems
in ensuring that qualit'r
was uniform in all markets. If the problem in
Belgium cannot be overcome
direc-,1,7, suDD17 from Ger-manv will be
considered as an alternative.
53. It ~as noted that the a~e7age age of Lucky
Strike smokers .;as generally
thought to be lower than for Marlboro. However,
Brazil -as an exception
and the Chairman suggest-2d that action should be
taken to res:ifv this
-ich promotion at places . .here young adults
congregated. Re also
suggested that there should be more concentration
generally on promotions
in hotels, restaurants and cafEs.
~4 larclay----It. was rioted that the re-launch
with changed- -numi _r 3 ha4 been
successful in Belgium. However, the Chairman was
disappointed with the
overall budget for 1992 and suggested that this
should be reviewed market
by market to ensure that there was sufficient
thrust behind the brand.
Mr. Pritcbard was asked to report back on this at
the next meeting.
55. It was noted that the possibility of launching
Barclay in France would be
kept under review but no decision would be made on
this until the position
on Lucky, Strike had been resolved.
56. Other Brands : It -as noted that Capri,
Vicero7 and Kool continued
progressive and that Fall Mall was continuing to
make progress in the
German New Lands. It -as also being held ready as
a possible lower priced
brand in West Germany. The Chairman believed that
both the price and
volume potential for Hilton had been
underestimated and Mr. Pritchard
wag asked to review this for the next meeting.
Co
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UK InternationalBrands
57. Hr. Bramley reported that although progress
overall had been good, Beason
& Redges had been disappointing. Work was in hand
to d6velop a new
environmentally friendly pack and to prepare a new
campaign which will be
launched in the second quarter.
58. SE555 continued to be successful and line
extensions were being developed.
Sponsorship was being rationalised and pricing
reviewed to ensure that
SE555 was positioned consistently as a premiun
brand.
59. Players Cold Leaf was being upgraded to bring
its packaging and product
quality up to the standards expected of an
International Brand. The
Chairman welcomed this development and suggested
that there should be
increased eaphasis on encouraging specific farmers
to supply higher
quality leaf for use in'the brand.
60. John Player Special : It was noted that JPS
was now used less as a general
Tnter-tional Brard and more as a tactical brand
for use in particular
situations where a~-ditional impetus was required
(e.g. in Malaysia).
61. Summarising, the C*7.air-.nan said that there
were encouraging signs of a fresh
thrust in UK International Brands. He asked Mr.
Bramley to arrange for
Mr. Rembisze.ski 'i make a brief presentation to
the next meeting,
enlarging on the c---erall strategy and plans for
Benson & Hedges, SE555 and
Players Cold Lea;.
Tal isman
6 Z. Mr.Broughcon repor-ed that he had continued
his discussions with American
Brands regard-.~g z--2 possible sale to B.A.T
Industries of the rights to
Lucky Strike in se'ected markets. A further
meeting was to take place on
24 th March at -h--'c'- American Brands were due
to react to BA7's estimate of
the -;alue of he 7:ght3 to the brand. Xr.
Broughton -dill report progress
at the next
Smo king QualitT
63. Mr. Kohnhorst repc7:ed on the project to
upgrade the testing of smoking
quality and to use -.he improved tests in the
development and quality
control of product3 which consumers would
recognise as being equal or
-" perior to-)4arlbc----Y-.
64. It was intended to prepare a review report
documenting best practice in
testing and product development. Mr. Kohnborst
will circulate this to team
members in April. The Chairman stressed that this
would be a highly,
confidential report and should be treated as a
high security document.
65. It was noted that, in product development, an
important intermediate stage
between the team developing the product and the
consumer tests was the use
of internal panels of trained employees (OMEGA
panels). However, the
Chairman questioned the value of these and
suggested that there should be
a more rapid progregsion to outside consumer
tests.
66. It was noted that a key factor in improving
the overall standard of
testing and product development was good
intra-Group communication and it
was noted that the project had been particularly
valuable from this point
of view. However, it was suggested that Mr.
Branle7 might wish to review
BATCo's representation on the team to ensure that
the results of the work
could flow back ii--o BATCo. in the optimum way.
NJ
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67. It was noted that following the distribution
of the 'best practice' report
in April, the key objective for the team was the
development of a product
to match or better Marlboro by the end of 1992.
68. Methods used in quality control on-line would
also be reviewed during the
year and Mr. Kohnhorat highlighted developments at
Macon aimed at reducing
problems associated with inclusions of foreign
matter in cigarettes.
69. The Chairman congratulated the project team on
the progress achieved to
date and asked Mr. Kohnhorst to provide a further
review report on the
work of the team in September.
Product Developutent
70. FRC : Mr. Bramley reported that Mr. Graham
Read had been appointed to
head the newly-merged Research and Development
department in BATCo. Work
due to be transferred from the Fundamental
Research Centre to the
development teams in the Operations was being
handed over on schedule and
no problems had been experienced.
71. Research Co-ordinator : It was agreed that the
Post of Research
Co-ordinator should be allowed to lapse but Mr.
Brantley would review the
pogition at the beg4nning of 1993 to confirm that
this function was not
required.
72. T-1 Tobacco : It was noted that there was
limited demand for Y-1 Tobacco
in 1993 a~l that the productivity was relatively
low. Mr. Pritchard
agree,! that further genetic development wag
required.
73. Reconstitmted Tobacco : It was noted that all
companies were ccncinuing
developments with reconstituted tobacco, aimed at
producing cigarettes
with impr-d smoking q,iality. It was agreed that,
in fut..;-,-!, ',-..e
developmentq should be reported as part of the
project to ==rnve smoking
qu.lit, (see items 63-69 ab.,e).
Leaf
74. Leaf Processing Seminar : Mr. Pritchard
reported on the seminar on Leaf
processing held in 1991. This had been valuable in
drawing attention to
the broad range of development activity in the
Group and the participants
had fcL=e ~- ;-P-er-chang- -of ideas to be very
stimulating. Yr. Bramlev----
agreed and said that the meeting had been
particularly use-u! in
highlighting the potential for further
developments in Green Leaf
7 hreshing (GLT). Action programmes were currently
being developed to
improve GLT in BATCo. and Souza Cruz. These would
be significant in
improving quality, especially, in Leaf for export.
75. Answering a question from the Chairman, it was
noted that the switch to
broader band equipment, which was virtually
complete in Wilson and which
would be implemented progressively elsewhere, not
only improved quality
but -as also more environmentally acceptable in
reducing noise and dust.
76. Leaf Costing Guidelines : Mr. Broughton
reported that the Guidelines had
been produced for setting prices for Leaf
purchases. BATCo. companies and
Souza Cruz would be encouraged to use the
Guidelines in determining the
terms to be written into contracts with farmers.
Mr. Broughton will
report on this at the next meeting.
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77. Leaf Supply Contracts : it was noted that
following the review by B.A.T
Industries' Legal department of the terms of the
contracts for supplying
leaf to distributors, these will be changed to
eliminate clauses restricting
the freedom of companies to sell Leaf on the open
marked. Progress on
this will be reported by the Secretary at the next
meeting.
Filter Tov
78. It was noted that Mr. Pritchard had studied
the supply position for Filter
Tow and had found that the worldwide capacity to
produce this critical raw
material was sufficient to satisfy the expected
demand, at lease for the
next 2-3 years. It was agreed that it was not
necessary to take further
action to secure supplies.
Management Development and Training
79. Mr. Broughton presented a paper by Mr. David
Stevens proposing a new
structure for the training of functional managers
in the tobacco
businesses.
80. The Chairman noted that considerable progress
had already been. made in
designing the functional courses and asked that
proposals for these
courses should be brought to the next meeting (All
Members).
81. He questioned t-.e inclusion of separate
business courses in the overall
schene and suggested that this element of training
should either be
arran;ed separately outside the Group or should be
integrated with the
functional courses, using business experience
available within the
operating company mounting the course concerned.
Mr. Broughton -as asked
to re7ort back at the next meeting, at which time
the overall plan would
have been develc:;ed further and would form the
basis for discussing
whether the proposals being put for-~ard would be
a more cost-effective wa~
for providing training than the current syste=.
82. Inter-Company Trimsfers : Mr. Bramley reported
pr~,grags in arranging and
implementing inze:-company transfers of personne*.
A current to
al= was
e,ctend the syste= to younger managers for who= a
spell in a smaller company
could be invalue'--le in providing a testing
ex-::er:~nce ear17 in their career.
Trading Results
83. Mr. Broughton reviewed the latest estimates
for 1991 and the budget for
1992 for the--tc:)acco bu-si-ness-Ts-a- _wR"cle.
Me=bers then reported on the
resui:3 for Jarua:7 and on current trends in
r.hei- Operations.
RegulatorT issues
84. Environmental Policy, : Mr. Broughton reported
that the arrangement to
ensure compliance with the Group's environmental
policies appeared to be
working satisfactorily.
85. Advertising Restrictions : Mr. Bramley
reported that the debate within the
EC as to whether there should be a ban on
cigarette advertising was still
unresolved. The Chairman reminded members that
Governments opposed to the
ban were under continuing pressure from
anti-smoking groups within their
countries. He ~phasised the importance of ensuring
that the case against
a ban was also put forward as strongly in each
country -ithin Europe.
... NJ
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86. Environmental Tobacco Smoke (ETS) : Mr.
Pritchard reported that
although there is continuing pressure to tighten
the rules on ETS in the
workplace and to pursue legal action against the
industzy, there had been
no adverse developments since the last meeting.
The industry is
maintaining its position that employers should use
better ventilation
rather than autocratic no-smoking rules to reduce
ETS.
87. Firesafe Cigarettes : Mr. Pritchard reported
that little progress had
been made in the authorities' work to develop a
test for a fire-safe
cigarette. However, a more dangerous develop--ent
vas the publication of
data purporting to link the initiation of fires
with certain specific
brands. There was a fear that because most fires
occur among the low
income, younger, black population, who also tend
to smoke methol brands, a
false correlation might be deduced.
Tranadermal Nicotine
88. The Chairman drew attention to the reported
development of a product which
could be applied as a patch and which would
transfer nicotine into the
body. A description of the product was circulated
to all members who
were asked to discuss with their marketing and
technical people:-
(a) Whether this is a significant technical
advance which could be
developed into a saleable product for mass
markets.
(b) If so, does it represent a significant threat
to the tobacco
industry.
(c) What should be the reaczion, if any, by B.A.T
Industries.
This will be an agenda item for the next meeting.
However, the Chairma.
asked that answers to the queries raised should
also be passed to him
directl7. ahead of the -:ieeti-7g.
Dates of Future Meetings
89. A meeting specifically to di3C_;S3 '~ew
Market3 Wi:1 be held in Budapest on
Wednesday, 20ch May. The next full meeting of the
Team will be held on
Friday, 29th Hay and subsequent meetings have been
arranged for Thursday,
3 rd September and Wednesday, 2nd December.
RS/DJS
12 th March 1992
Un
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