PRIVATE ?,- CONFIDa-TTIAL
TOBACCO DIVIST()i'l BOARD OF
Minutes of the meetiniz held onTuesday,22ndOctober
-!.~-74 at 2.20
Present: Mr.
Mr.
Dr.
Mr.
Mr.
Mr.
Mr.
Mr.
P. rlacadam (Chairman)
I.B.D. Blue7:
S.J. Green
J.T. Husban~-3
C.H. Stewar7 Lockha-n~
P. Sheehy
E.J. SymonS
R.St.C. Walmisley
In attendance: Mr. B.G. Pearscn (Secretary)
Mr. H.A. Morini(Hinute 3.E08 only).
Absent: Mr. C.G. Bowra
Also Attended: Mr. P.D. Tindlel-- (MinuteE
B.602-606)
Mr. T.E. Davies (Minutes B.598-606
and s.:---08)
B.11-98 Australia
Mr. Macadam reported on a -.,isit. -,',e cnuntry's
economic recession is verging :n severe.
in about five years tie s--re of -ne cigarette
market has drop7ed from 463/6 t: 176~1o, larrely
because
of weakness in the lower DarrE :!f the zar',et.
This
is now being rectified and Wi--s hope t: be up to
40% by the end of next year.
The ot-er activities seen all ap-pear to be well
run but there are problems of c-ntrol Tf such
varied
activities.
There J-s a gap below the --:., mana~=-ent but
managers are moved frequently 77 gain insight into
different aszects of the Grou--'s busineSSes.
Profits are down, largel.y ~-Ue to s-crtage of
meat sales.
B.59q New Zealand
Mr. Macadam reported an =---.'-'usia---fc team but
lost sales due to production fa--:Its.
Profit is up, due to an item.
Trading profit is down.
B.600 South Africa
Mr. Bluett reported on a
There are continual small 7olitical changes
but no major breakthrough is f7reseen. The
economic future is reasonably '---right in Spite
of
inflation.
Cigarette sales have beer. affectea a price
increase and market share is d-- "-a to 2C--'~ :a
Management is now more realisti: and is ' king
more
notice of views ,f staff of ot--?:, eth-i-4--
R-roups.
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Willards i-t slightly increasing market share
at ab,,ut 4051o but the main ccmDetitor will not
agree
to increase prices.
The confectinnery business has an enthusiastic
team and is ahead of target.
Profits are on target but will be down next
year unless there is a cigarette price increase.
Central Africa
Mr. Bluett reported that morale is high, volume
is improving, and market share is up to 6211o.
Profitability is slightly down but a price
increase
expected any day cculd double profits.
--32 Brazil
Dr. Green rezorted on a visit.
The new la'-oratory has a young and Dromising
team. It is honed they will contribute ~o product
knowledge, particularly with the need to combat
P11.
Their programme and budget were discussed and it
is
hoped that they will be able to benefit from
Gr;up research.
A waste-ut~lisation study group will be set up
in Brazil a-rid it is hoped to have a preliminary
re-port
by mid 1975.
=.;:.)3 U SA
Dr. Green re:)orted concern at an article in
Marketing News, reorinted frcm the Financial
Times,
which it was felt could cause some embarrassment
in USA.
The technical difficulties of Duolite and
programmed filters have been overcome.
The research budget is relatively static.
7 :..:)4 Canada
Dr. Green rejcrted that the basis of sharing
research knowledge and the ownership of patents
is not well understood in Canada and he will z~ut
it in wbiting for their consideration - after
discussion it- EX. Symons.
The biological work in Canada is now
effectively guided by Group R&D.
The RLD pr-~gramme in Canada now looks relevant
and effective.
-:0 5 Belgium
Mr. Stewart Loc-'hart reported on a visit to
discuss the Benelux budget.
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The -'elgian market share is 13%. There will
be a 355" -:rice increase in two stages over the
next fel.., months. Volume reduction forecast is
4%.
This wc- mean no dividend this year but future
years w"ild be more satisfactory. But the volume
reducti,~n may well be more.
Pres-cure on production has eased but there are
still s,~=e problems. The Mark 9s are now working
better b--zt there is still high wastage.
Co=jnications within the management in
Holland have been weak but will be improved.
B.606 Denmark
Mr. Stewart Lockhart rep,7rted that there are
now two elected workers on the Board.
The dividend is unchanged.
The irofit forecast this year is down slightly
because zrices cannot ---e increased.
Ci~srettes contri't-ute irds and cigars 4rd of
Drofits.
B.EO7 USA
PIr. ',;almisle,-.- re~,orted on a visit.
A ~-ffficult FC season. ELT had to buy !7-',1% of
a crop sf 227 million pounds in face of heavy
demand they are on schedule and will fulfil
require--e-rs.
Qu---ity is good. Average price about S".05
against .irder 891 last year. BAT ex-port price
will
be abaut 3-1.09.
EL-- is now more efficient and morale is good.
Weaknes-= =t the top but middle management is
promisina:.
Processing iS gocd and ccsts competitive. ELT
has better equipment than B&W and throughput is
'10% hia:'-.
At *,-.*I*lson, the warehouse is completed and the
new prcczssing plant nearly so. The new machinery
is alrec4-.- installed and the old machinery will
be
transferr~-d at the end of the year. Processing
will st=r-. on 1st July 1,975 and througtiput will
be
two milli-il pounds oil double shift daily.
Thm 'inal cost will be about $1,c4 million
against t-e estimate of $10i million - partly
extra
equipment, partly inflation.
There will be cas' flow problems due to financing
the new -~Iant and cost of borrowing. The
possibil-Ity of increasing char.-es is being
studied.
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The Burley market opens soon. Quality is
poor and the cror will be 555 million pounds
against a demand of some 650 million. Average
price likely to be V-15 against 92,,4 last year.
The Viceroy/`~aleigh blend has been -im-,roved,
with more air-cured and oriental and better
density.
The South Carolina lawsuit is expected to die
after elections next month. The Kentucky lawsuit
is expected to dr?3 on for a long time, and
therefore cost money, but is likely also to die
out.
B.608 Tanzania
Reference: E-r. Morini's note of
17 th October 1974.
It was agreed to recommend to the CFC the
draft Technical Ccnsultancy Agreement, for BAT
to provide BAT Tanzania with technical and
c,nsultancy services, and the Side Letter dated
October 1974.
It was noted that:-
1. a,,2:reement for three years from
ist January 1975 provided receiDt ~__' do -w n
payment ~n the sale of the remaininz
shares, or from such payment;
2. fee of 0-~_S% of turnover plus agree.-i s-=s
for UK e-,-)enses of expatriate staff:
3. satisfac---)ry terms for e-=,atriate Z-caff
who will remain BAT employees;
4. Wills anc: Players names and marks tc be
transferred to BAT except Embas-s-7 and
Legation; and
5. six months' notice of terminati-n on
default.
B.9-109 Switzerland
Reference: EC_':~ Form dated 18th Oct~~`ter
It was agreec to rec--mmend tn the CPC t'-9
construction of a warehouse on land adJacent to
the Geneva factor-Y at a cost of S.Frs.
E,L7,2,.`00
(Z1,238,000).
B.-I-10 NiReria
Reference: MC'_::~ form dated 17th Oct_-~ber '97-
As part of a planned expansion and mcdernisation
programme to increase secondary manufacture fror.
800 million to 930 million monthly by September
1976,
it was agreed that Nigeria should order 5 x 20s
5,000 AMF soft-cu-o packers at a cost of
N. 700,000 (E482,LOO).
(11r. Dawson
Mr. Keen)
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1 Malawi
Referencr. Mr. Bluett's n,:-e of
15 th October and cable dated, -t"- October 1c)7-.
It was agreed to recommen.~_ to the CPC that
BAT (Malawi) increase the is=-;e- capital of
Kw. ?00,000 (V350,000 - 80%~ 'LA-_1 20% TET', by
capitalisation of Kw. LOO,Or~C '1'200,000) from
reserves and then the issue Of ".- 300,000 or
Kw. 366,000 at par to the In-!es7ment &
Develonment
Bank of Malawi, giving that ts-, either 21.435% or
250% of the total issued
B.~_:-12 Sofical
Mr. Bluett reported that S,)fical have suggested
a joint holding company wit, ---=sibly 4.09,
Sofical 40% and MIC 20%. Thi'S -...-juld nct give
us
control and our share must '-.e 'righer.
Sofical have asked if a :,,--,ion of our
interests in some African c,~-;anies c~,uld be
included
in our contribution e.,-,. Ghana, :!igeria and
Zaire.
However, if we are later re~:U_47ed to increase
the
I , w e may
percentage of local shamholdinz. then .
thereby lose control. It was falt that we could
agree that we were interested in ecplcring this
idea up to a small percentage =-~- 5%. 7t was
agreed to recommend this tc t-= GPC.
B-6-13 Educational Assistance in TK
It was agreed that the ==sals c=ained in
11 r. Calvert's note of 25th. Ss-,-.eziber !':;7L
be
referred to fir. Dennis for consideration
but that implementati-_,n of nn7 aecisicn snould
be
backdated effective t-,e Aut.,___ -erm.
Dur*---=--'
_z.~5'4 Marketing Committee
The mintites of t-.e mee-,-_n~, ~f t-
Marketing Committee held on October '1974 were
noted.
B-6-:5 Tobacco Division Staff Stre-Z-.-
The list showing Tobacc-- ---4-.-ision staff
strength as at 1st October was noted.
It was agreed that the establisi=ent
should be shown on the next re--arn.
R.616 TDB Meetings
Reference: The Secretar-,~-'= note of
18 th October 1974. It was acre-d to rescind
Minute B.574 and, as BAT Board `eetings will
generally be held on the last __-.iesday in each
month, Tobacco Divisi-n Boara `eetings will, with
effect from the first meetinF -in November, be
held
every Thursday at 10.`:0 3.m.
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B.-317 TDB Cutstandings
Reference: The Secretary's note detei
18 th October '1974.
The list of -,utstanding items was reviewed
and it was noted that:-
1. Project Bronze is abandoned';
2. Mr. Symons is studying the ta:r
implications of expatriates in some
countries being BAT employeeS on secondment;
3. some, but not all, Territorial
Directors and teams have t-~ed out the new
management appraisal syst=--
4. Dr. Green will circulate a :,e=t
on the growing and productisn of
menthol; and
5. it was noted thatall Direct:-'
letters relating to policy and all
other important matters sho-ild be
circulated on the TDB Direc-.~rsl
Reading File.
E.6118 Tobacco Division Projects
Reference: The Secretary's note :f
18 th October 197a.
The list of Tobacco Division
occupying management time in London -...sZ
_-evielje~.
E.C-19 UK Market
Mr. Sheehy reported that Americ=n ':'-acco
may have acquired a ccmmon law righ-~,- -.~ Luclcy
Strike
in the U.K. It is therefore unwise 7: c-_rtinue
importing the brand from them and h-= --'-=
urFently
examining the necessity of -supplies fr=_ a EAT
s;u~ce
as soon as possible.
B.9-20 Brazil
Mr. Husbands reported an averr,:.-= '2~~ Drice
increase from mid-October which wil7 . -
7 ieL,_ a
substantial increase in profits, abc-.;t CrS .70
excess
or Z1,250,000 up to December 1974.
r
21 Mexico
Mr. Husbands reDorted that the 7----;ce increase
reported lact month aid not go into effect until
17 th October 197!'. Increase 10~ to ~-er cacket.
The meeting ended at 5.00,P.m.
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