RESTRICTED
TOBACCO DIVISION BOARD OF MANAGEMENT
24 th/26th October 1979
Present: Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
P.
C.
1.
E.
D.
N.
M.
R.
R.
P.
Sheehy (Chairman)
Stewart Lockhart
D. Bluett
A. Bruell
Dunbar
Goddard
Marjoram
Olsen
Pritchard
Wright
H.
B.
A.
S.
W.
W.
V.
J.
L.
In attendance: Mr. B. G. Pearson (Secretary)
Mr. B. D. Bramley
G.48 F7ANNING
Key area planning papers were d4scussed. Amended
sections used in guidelines t~: companies will be
subm-'tted
to the TDB in Januarv 1980.
Other points that arose zut of the discuss-'ons
were:-
Difficult economic cond'z'ons are expecte-: in
mcst
countries, especially next year, and the likely
consequences
must be borne in mind in all planning aspects.
2. Future papers should include a more detailed
study of
the strengths and weaknesses cf the szrategies of
c=mpetitors.
There was discussion of -he accuracy of forecasts
in
t'-,e Market Expansion paper. --Ds will check each
company's
forecasts and will provide ficures to Marketing,
taking
into account such factors as: previous degree of
accuracy of
each company; sensitivities to success or failure
o-14: new
brands; companies with static or declining volume
or market
share. TDs must then be prepared to explain any
differences
between these forecasts and t:,e statistical
forecasts
prepared by Marketing Department. TDs will take
similar
action regarding competition figures.
4. The slowing of volume gr:~wth emphasises that
the
primary marketing thrust must continue to be
market share
and the quality of that share.
5. The Board cannot accept the forecast situation
of a
decline in group volume growt*-. to that of total
market
arowth, i.e. group overall market share to remain
static.
iDs will investlzaate marketing factors whi ch are
forecast
QPJ
to cause this. C)
C)
~-n
~--4
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6. The Market Expansion paper will give more
emphasis
to bold leadership in marketing strategies with
consequently
a reduction in reacting to competition.
7. The Philip Morris rate of growth may be slowing
but
is still forecast to be double that of BAT. Mr.
Wright
will analyse P.M. and other international
competition by
countries.
B. USA export market growth must at least match
that of
competition.
9. To assist consideration of future marketing
investment
decisions, Mr. Wright will arrange for an analysis
of
overall expnditure on new brands, and the possible
effect
on overall volume and profits if that money had
been spent
on existing brands.
10. Recent developments in brand management
structure have
led in some countries to delegation of brand
strategy.
There must be commitment by top general management
io, be
involved. in all important proposals at an early
stage and
tc take important marketing decisions.
1'-. Mr. Bruell will studv and make proposals
regarding
t-e succestion of combining Millbank an~ Woking
IBUs at
Vic,, _i n C .
12. The development of an international U.5 :.
full-flavour
brand wculd need a long time and large
expenciture. As
reCards development in Europe, Division HQ may be
willing
t= scce=-, lower - royalties, but che
profits and to waive
ma-In supcort must be financed by the European
companies
and be c:~rcentrated on 2-3 brands: also the
present
of the Kent licence must not affect decisLons.
12 . 7he cable of low delivery trends (Appendix V!
cz~ the
mtarketi.~a oaper) will be produced again to the
next TDB
-'- i the
m
c-ing arcer redefinition of lcw delivery segment
b-.., countries.
14. 77'..s title "Smoking and Health" has been
chanaed to
"Z:7:.,k_-*!7c Issues".
15. TDs will send the complete Smoking Issues
booklet to
ali' Nc. 'Is. The assumptions will have to be
explained to
t"ose who have not received them previously.
I-'. Trying to sustain the social acceptability of
smoking
wl.~_' cost money and efforts will have to
continue over an
ex"ended period. Public Affairs Department has
recently
been strengthened but it should be possible to
pass the
wcrk out to companies within a few years.
17. Ccurtesy campaigns can assist in building an
image
of responsibility. Companies will be advised to
take the
lead in initiating such campaigns, either by
themselves
or by the industry. Mr. Wright will consider
whether
brana or .nouse names can be used in such
campaigns.
12. The rate of return on funds employed must be
improved LN
an-4 assez productivity must be a major
consideration in (Z:)
nlans.. C)
Lrl
CY\
1 \J
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3
19. The target of 10% annual real growth in
Trading Profit
is not forecast to be achieved, if BAT (UK&E) is
exi-6luded,
but is sufficiently ndar to be achievable.
However, growth
will be 6rom a lower base because of the 1979
decline; also
the grow--h is dependent on the first two years
and on a
few companies. TDs will ensure all company
managements
understand the necessity for a real growth in
profits.
20. Divisional expectation of cash flow will be
remittance
of 100% of BAT's share of PAT after retentions to
cover
inflation. This expectation can be modified, for
example
where a company can show a need for further
retentions, but
even then, in order to assist BAT Industries, ACT
problem,
consideration will be given to remittance to UK
and lending
out again as necessary.
21. Millbank expenses are forecast to increase
faster than
.income and immediate action is required. Mr.
Stewart Lockhart
will di-c=uss with Directors and formulate an
action plan.
22. A procedure is required for assessing the
actual results
of investments against the results planned e.g. an
audit of
performance of machinery against claims made. One
suggesrion
was for :he company concerned to be given a copy
of the
MCP and asked to renor-t. say, six moLlhs after
the machinery
was installed. It was a-greed that a trial should
be made
of a few relativelv simole cases. The Secretary
will extract
a few sa7,ole MCPs from -2-3 years ago and TDs
will ask t-.=-
companies concerned to carry out a simple audit of
the key
elements which were quoted to justify zhe
investment
e.g. we_:='nt savings.
2'. Mr. ;',Iar-.-.)ram will review and make
recommendations on
fuzure czerations in Cyprus in the 11ch-1 of the
AC-_ problem.
24. in view of a possible renewal of interest in
tobacco
substit-.::es. Mr. Pritc'nard' will check the
developmenz
pcsizicn of Batflake and will make recommendations
imis~-1980
at the 1_=stest.
25. Mr. =.-itchard w-,11- consider wider
distribution of
summarieS of R&D recor-_S from both G:"&DC and
from CAC
companles.
26. TDs will enccu-"ace companies to adopt wider
use :4-F
computer techniques in cigarette design.
27. Mr. =ritchard will submit a note on leaf stock
durazions,
distincl_'ishing between flavour and filler
tobaccos.
28. Mr. Pritchard will circulate a note on the
const itu tion
and role of the Leaf Steering Committee.
29. Production Department are investigating
underlying
reasons for variations in efficiencies between
companies.
30. Mr. Pritchard will examine the economics of
increasing
machine speeds by re-building Mk 8s rather than
buying
M]k 9 s .The came might apply to HLPs.
31. Mr. Pritchard will linves-ligate control of
machinerv U4
spares by use of data processIng, where it is
believed we
are behind compet-4 .clor. C:)
C:)
Qn
(_114
N)
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32. Mr. Pritchard will investigate the possibility
of
obtaining commissions by BWT placing Molins
machinery
orders through Millbank.
33. It is likely that within a few years there may
be only
three secondary machinery manufacturers: Molins,
Hauni and
Sasib.
34. There is a strategy to encourage at least two
suppliers
of each of the important types of process
machinery. Future
papers will list which are the two suppliers in
each segment
and what is the present stage of development in
each case.
35. Future Production Advisers may have to be
recruited, or
possibly transferred from R&D, and be men with
technical
ability and able to appreciate new technology
instead of
men witli long tobacco experience.
36. Expanding volume requirements needing
machinery
investment should be taken as a better opportunity
to improve
people productivity, rather than in static or
declining
volume situations.
37. "Energy Management" is a new key area paper.
The
intention is to give a lead to companies to adopt
the
attitu~- and discipline necessary for both
immediate action
and lorger term plans for enetgy conservation,
without the
employment of extra people although with local
consultants
where necessary. All companies should carry cut an
audit
of ener=y usace and cost and thereafter energy
should be
included as a component of productivity in company
plans.
The head of Production Planning, when recruited,
will
coordinate all energy issues; in the me-antime.
ac"on will
be take.n by territorial teams and coordination
will be
through-. ~he Ch4ef Engineer.
38. Information systems within companies is a
matter for
their decision provided the interface -.-iith
Millbark is
satisfac--ory. MSD in Millbank should assist
Millbank users
and be concerned with the interfaces w1th
companies but is
not ccrserned with internal operations of
companies.
39. T-s Millbank information handlinc study wIll
be ccnfined
to Direc,:ors, coordinators and heads of
departments only in
the exploratory study before further consideration
is given
to extending the study.
40. Directors will pay attention to formal
training as well
as development experience of both GMs and
identified candidabr-,
Mr. Dunbar will arrange to circulate the ICPs for
GMs to all
Directors.
41. There appears to be a tendency for management
recruited
young tc reach the top and for specialists
recruited later
to stay in their specialisation. When specialists
are
recruited in future,criteria should include GM and
cross-
functioral potential.
42. In many companies a longer term approach is
required
in industrial relations which should be planned on
at least
five year time scale.
CD
43. The Public Relations paper contains many
zol.-cies C:)
and the3a will now be converted into strategies.
Next C)
vear's --sPer should report on progress and should
also
include _z section on the PR profiles of
comper-itors.
BATCo document for Province of BritiSh Columbia 28
October 1999