R E:::'.-
TOBACCO DIVISIOrj BOARD OF MANAGEMENT
Fridav. 25th _'une 1976 at 10-00 a.m.
Present: Mr. P. Sheehy (Chairman)
Mr. C.H. Stewart Lock1jart
Mr. I.B.D. Bluett
Mr. C.G. Bo~ra
Mr. B.P. Garraway
Mr. N.W. Goddard
Dr. S.J. Green
Mr. R.St.C. Walmisley
Mr. P.L.. Wright
In attendance: Mr- B.G. Pearson (Secretary)
Mr. H.A. Morini
Also a~-Lended: Mc. G.t-. Dennis
Mr. P.j.H. Rackham (0.138)
D.138 Planninq
The purpose o~ the meeting was to identify
the issues facing us ir, the next terl years, so
as to be
able better- to plan the next three years at the
November
plann-f-ic -neeting.
The meeting considered and, subje=t to
certiiln chanqe:3 and clarifications, approved the
following
papers:-
The shape of the tobacco industry
Assumptions and strategies for marketing
The shape of the process
The shape of our business
A financial view -.~f the Division
Specific pointsmade were:-
1. In certain selected are.%s, particularly in the
developed and profitable countrips and in export
markets,
we ma, *, have to be prepared to forgo some
immediate profits
in order to match competiti-- by investing more on
advertising a,id promoti,_)n and in development
work in
areas which are seen '-,, h.=tve abng-term future.
but only
after we are confident Lhat the product is right.
2. The present big four companies (which may
become
the big three) will in--rease their total world
market
sh-i_--e and lh:ez implie,~ zompany acquisitLons.
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BATCo document for Province of BritiSh Columbia 28
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3. There _S need fo!:- consumer te:3ting in
developed
mar'-ets on :--T vs. PC7, before committing
ourselves by
4. Conside-stLan should be given to R,&D work
moving
a!.-j=_-_-- from t"s emphasL3 on saving money in
production
pr_,cesses tcwards quelity and control of the
product, i.e.
ac~_-eptance and lowering biological activity
a:; F, t co n t ro I .For example, possible ne-a
of z-~ttlng tobacco which do not erriploy the
~:o:-:--:,essed '~:heesel technique.
It waa reported that the Group will search _'.3r a
hoL,---3 -35 a rossible acquisition.
There -.-as a discussion on Dr. Kilburn's
technol:)gical
fcre=ast th-, as the major cost of secondary
minufacture
is -=bour, reliable computer controlled madiinery
should
be and that this will not be achieved by the
.1 ac:7--nery manufacturers following their,
present policies.
- -...-"-s felt chat such machinery was
recalisable although
~_ e -.- =-'. opment of it would involve many
other considerations,
'nc' _,dLng te-:Lslons on the extent of our
involvem,rit.
"-1r. :~ow,-3 %7-*',l prepare a paper on setting
up a group to
L,,-lr-=-e this. with a considered time limit of
per-hars
-., -ionths ~-)r the or-oup
' 4 to report.
7. In cou~-ries whe,~e BAT moves into a minority
::-;r authority and influence would be exe z is
e-4
:,~e or o~ the F-)llowing: a Board represent'a
tfve:
owne--=-'n-;p; T&A arrangements; approval of
ar.oointmenzs
::5 Senior r-nagez; a-.-,-.' training of future
top manage-- *
if _:~: is no: possible fjr, Lie representative on
the Soarrf*
(hc'~_-Tng a :.-roxy from BAT)to be a Millbank
based or Millbank-
expat_;a~e then, to avoid a possible conflict of
in:a:.-est, he should not be a locally employed
national.
S. On the question of future central support for
over-
Sess compar'as the following points were made:-
_0 2:-itLnued SAI' autho-7i~y implies
,z:7-itLnued BAT support.
(b) T*-.e dilemma that the smallest proFit
em-rners te-id to need the greatest suprort:
the d=gcee of support must be in
.-)r'-ion to total income; but that
c-siderat-'on must also be given to the
-::_~sibilitv of long-term improvements
profitat-ility in each case.
(c) 5-_::~poct must- be reduced -to countries.
i-- wh_:,_-h we -n..)ve into a minority
-Ituation t:~d which cannot repay the
a--::-Por-t b,.. income to U.K.
BATCo document for Province of British Columbia 28
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9. Before the November planning meeting it will be
necessaryiD review:-
(a) The degree of authority desirable and
possible In the case of each company.
(b) The level of support to be provided to each.
(c) The proiected number of Millbank-
o'.1/ned e:,!:atriates.
(d) The Mill'--ank organisation.
10. Because of t-.e number of companies likely to
move
from subsidiary t,:~ a3sociated company status
over the ten
year period, cons -1-Jerat ion will be given to
recommending
equity accounting --o the BAT Board, so that BAT's
percentage of the principal associated (minority
holding)
companies appears _'n BAT's published Balance
Sheet and
Profi~- and Loss A=-.Dunt instead of simply being
included
in dividends recei-:ed.
11. Substantial are likely to be available tor
investment, in adci--ion to any likely tobacco
acquisitions,
and consideration must be given to the use of
those funds.
The past ad hoc =--',::-roach is no longer
acceptable. There
should be an intai--rated Group approach to future
diversification a-_ it would be desirable if there
could
be divers if icaticn into an industry in a
developed countr,..,
which could tie ir. .-dith development of
operations in
developing countriSS.
(Mr. Rackham)
D.139 Chairman'S ReDort
Mr. _Sheehy reviewed the principal activities
since the last TD:.: meeting.
D.140 Finance ::-:-rector's Rencrt
Mf. Garraway revie~%,ed:-
1. The ofc :=Sh from Tobacco Division to &iQ.
2. The proposet :~rporate structure after the
TST/BAT
merger.
D.141 C3nada
Sheehy reported cn a visit.
The Ret-iii D;Ivisic;-, comprises miscellaneous
compar-.t_ively smi'l businesses. Most are
profitable and
dc-ing v.
P--z::---3Sso Foods in USA Ls profita',Ole and
has ambiti-ous P12--z. C)
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BATCo document for Province of BritiSh Columbia 28
October 1999


D.1-42 Oriental Leaf
Mr. Walmisley reported on a visit -_:~ Greece,
Yucsslavia ~nd Turkey wit'n Mr. W.H. Scott from
8&*.-.-.
It has been a sellers' market for t".e past
2-3 years due to small crops and big demand.
Prices
have increased approximately 100% over the last 3
years in
Turkey to USS3.65 per kilo, with sharp increases
irl.
other countries.
However the 1976 crop in Turkey haz
greatly increased. Pdces will level off ln 1977
a7d
may go down Eor some types.
B.A.T. total oriental purc"ase thl_z year
be 6.E'30,000 kilos. Owing to a big increa-ze B&W
fequiremen-.s, anticipated purchase in 1977? will
he
!'-.500,000 1-ilos.
Staff has been reduced to three. headed
b,..- Mr. J.M. Westwood who Is doing an exce--lent
The net income to the centfe in res::ect
of commis-z-'ons and buying expenses be $850.C: :
Ln
!':~'745-77 ard is forecast --: be $1,300,000 in
1977-7::.
D.'-!43 ;-'!alavsia
Mr. Goddarj reported on a visit.
Incidence o~ communist ins-red v_*:,'_ence
_iS more widespread than published and the::7"=_
is c::-=ern about
t'-e abilit- of the milit-mr-y to control the in
the longer term.
The real cfowth in GNP last year 'z ez~-imated
at 2.5% but forecasts are 6% for 1?76 ris-:ng to S
sutsequently; the inflation rate is currertly
41:!~
Market share remains 72% ('-?75 and
ma-in brand-z are selling -1-:e1l.
The 1976 leaf crop is of be:ter q,_~a-lity
but 25% Ic%.er in quantit- -.- and this will
en-zble z~.=_ over-
s--ocked position to be re--tified.
Prclit af"er tax is estimated at 551. higher
than last -ear and the c-ash position continues
-*-= :norove.
C..-2.q '4chweitzer - kezonstituted Tobaczo
Reference TDB minute D.136 :)f
Dr. Green reported that a -.aymer: :f 1p
cer kilo the Sch,..jeitze--- British paten: "as
been agreed
z,.- 5ch,.-je.:-=ec and a formal agreement is
being pre-.-aredl.
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BATCo document for Province of BritiSh Columbia 28
October 1999