LQI~ )Jb· 2, HO eo~ss ltar n 1I1ID~ SECI ;, i,, II mEAOCO S~EGT WlEp 22A1 I ~- A Ipsati~g of the Tobcco Strategy 8wiew Tea was held on 30rb Hay 1991, present: Sir Paaick Sheehy, ~lr( HIP, Broughton, LI B10, Braaleg, ~irl Blf, Ptitchrd, Hrl R Berter, Hrl I, Monteiro de esstro, hi J-I, Elereier, Dtl B, Salter (Secretary) in Attendance : Nr, T,J, Uylie, Wrl BI Xohnhorst 1, The Qllia~n nlepocd Hrl de eaatro as I Pnber of the te~ in place of h, Rcobst, who is tetldng as president of Souza Bzl Illnutes of previous WettinglHatters Arising 21 Ibe ainotea of the oeeting held on Zlth kbruary 1991 were agreed, .· 3, Hatters ariaing frog the Ifnutee uete:- (aj JTI ~ it ~9~ noted that there bad been continuing wnieoring of JTIas conpetitsrs, Although they continued to be active in far Eastern w~l~ts, there ~me no evidence of dnnping, There las also no evidence that they vere cospetiog accivelg for business in Eastern Europe or the IISSB, (b) a(eraeaa Travel : There had been Po prebless in f~placnting the proposed reduction in frequency of Technical liaison leetiogs, The Qlait~an Qphasised the need to heap a strict ~atcb on travel overall, ensuring that the sane rigorous criteria were applied in juatifying overseas visits by Indipidlulsl (c) Export Training in Sot~ Cw : it was noted that training in B~LT~KE n being arranged for the Brazilin Export eanager, However, it iud not been possible to provide a 81511g~2 lanager to ~n~rf, in BtMill The Chairaan stressed the benefits in traaeferring expertise through secoadnents of staff and ae~d Hs, Btirrcy to coDsider further uhethet it would be possible to Pslre Iwcope available for seeondpent to Brasil, (d) WI P~d~P~ amPgPaatl ;Hrl Broughton reported that the details of the arrangeenrs for chargiPg out the colts of the centrally funded research in the nest tar-efficient my bad not let been finalisedl Htl Mercier suggested that for ~perial Tobacco the tote acceptable wthod for charging night be baled on a fired fee plus a percentage of turnover, it ~pe also Doted that following e#e relexation of the Btazilian regl3etioas relating to ppcaro for technical assistance, Sa~e~ Crul night be able to contribute to the costs of central tnesrch, BI de CastrP was a~t~ed to invljt5pee and to let L1 8roUghtOP know the current position on this, ~IIII ~u BAT Industries document for Legal SeNices : Health Canada 20 May 1999 -2- b~nllt ~rhtinl 9eninst i. Ic Pro9tl98 tcytt an the atrnoOUsnt9 for the IIIPIP LI to he held in O~LPIO, nOfib fr0ll9eh to 13rd torslblr rl ootld~ II it at also noted that the QIlirnan *ola Oand out inviriltione cirll in June nod thlt kl ~h~ add ehan follrop dth delsgntoa on the detlilcd Iraaralt~ for Be aGninarl 6, The apnaDsts to be invited papld bs as folloall- Lol i lilli~,oa b~~l[r, WOitehair, 8F80labachler, rito~rlcl bPtl Crnt Qltto, Plldredl Inpetinl roblceo Iros,Le Yla : SchwsitGar, ~t : IrPoh~, Pn1, Lttlttol, 1~1, Inedllct, Grlat, Tandtup, Viler, ~l~~ar, ~ld, tunl EbDnnds, ~qh, Lrlol, NoDovsIl, g~oto~, Lbp, ~II b~llt, Mane, 8anbiazawaLil fl MditiDnl eaplr~ with ths li~r ~rld in FebrnOrl pre Dwt, hlloc, Y~ and l~bi~rrP~~I Of theae, bllot toplnoea Prlile and the l~lt tm nre recent raCruitJ to the 1~01 bird, Who Ore due to join the eolyq in the I~lr, frol ApllQ11 and Sunhnrda rl~plctld~~ 8~ ~1 Qlioln, Mr, Btoughron, L, Rrll!, al Pritchard and ntl Lrter dll alao attend the ~drr nod it vill be Ide clear Co cvlrloao that rhi9 in an ~po~t~lt amt to whioh cbf are spctla to live lyptopriltl ptiotitl in enauring attendance and in praonring tot the ooecinpl 9, ~~iedat the ptogrune, it vao agresd that Ir~d CoodvlIl, 8xciao Sttct~cl, Codt'efisetIVeness of PrlOtlR, eoptitOf &~flil 1Pd Oilttilrto~~d~ bl~t~alhipl pre the ~J 11~·~ lich ehonld L ai~ell~cdl Elovsvet, it ona en9tc9e9d tht, Ibjeet to tht arsilsbility of ths oltaidl ~p~r, fhe propoasd ordlr of the ptogrrr Iho4d be chlp~d, atsrtin8 vith It9la ~odd)l Ipd heile Ltrpet~c~ an the fitdt dnJ Pd than going on to Dl~p~f4CLIIIPIII Of Ptolorioa on Dlt 2~ ~o~ ansIi_tI 101 mt Chairnsn propOasd that ippraring the nooking glli~ of the 6alp'l produete Ihoala Is I bf starllk thnut fat 1991-1992, 81 Iplaltld that COPPIII rded to develop Lprovtd nonanrea of lo~a 8UoIitf Ilch rclltcd nora direEtl)l to cor~r ~CfC~IPCII· ~~t than nodsd to ~~~ eyacd progtsopee, noiDO thsol critsri~ hOth to ~1~Le par prod#tl nod to IPlitOT hoW I~ltiq ItDdPCrl etood relstits to coppstitotJ, It ·I Lprtlne ehnt Chore a8ouid he an inorenOad COPICIOIIPIII thtonghout the eOlp of tbl LprtlPft Of ~~o~nl 9·l~tf aod of the neod 0 oxehnnge apriaPcr on the Lit eechPilwl 1II1 P BAT lnduatrioa docllcnt Lr Llgd Cenks : Hoalth Canada 88 ray 1918 I -3- 11I Hrl Iohnborst described the evaluation techniques used in brown i UillLloal de stressed the i~apartaPec of bridging the gap between internal tests and the co~it~aot to a test market in a way that gave added confidence that the test parhe vould be successful, without involving the need for extended periods of intermediate testingl This had been achieved through the use of an axtarwl (Dupont) panel whose characteristics had been recorded in a way which enabled markets to be simulated on a small sealet Ihis had enabled brown 6 Uilliaason to cut down si~ifieafitly on the cgclwime and cost for teeting new products, 12. Mr, Mercier stressed the importance of differentiating qualities required by different edne~er groups, in Canada, certain qualities which were a plus for Players smokers would be a substantial negative for du Haurier smokers and vicweraal JPS, which in theory was the best cigarette imperial made, appeared pot to appeal strongly to any group and had a very low ~arht ohtel 13, When Imperial made changes to the fwpoeitiop of du ~uriot (elg. to reduce tar levels), care was taken to have each new variant tested by' the established du Hsutier pad of aokere~ Itl It was noted that B~TCF place a high priority on bath the physical characteristics of their products and also Bmollag quality, which is monitored against competitors on I regular annual basis, In cases where BUeF products are found to be inferior, appropriate develoFoent programmes ace initiated. 151 Illthough Marlboro has shown a steady ~sprovemeot gear by fear, hc~y Strih is still thought to he superior on B~TeP's criteria. 88 is judged to be inferior but some apparently 'bad' gualitiea may make the cigarette more attractive to older smokers, 161 BATCF will consider ~ethet the Dupont technicluee might be adopted in developing improved testsl 17, It ~ae noted that smoking quality use still a problem in Soula eruz and improving this would be given a high priority in 1991-1992, l8, Vithin BATC~I,, IMECa testing panels were being established and were in place in most companies, Bow~er, it was recogoised that smoking quality still needed to be given a higher priodtg~ Qrrent initiatives included improved training prograonsl Consideration was also being given to the need to upgrade the function of quality controllers so that this became more Of a Job in its own right rather then a staging post for developing managers. 19~ It us suggested that further consideration should be given throughout the Group to reducing the numbers of blenders and to increasing the status of the lew really expert blenders that a copaPg required in otda to be able to develop and maintain produce qualityl 201 It was noted that another key element in achieving and maintaining quality was the way in which the tobacco was proeessedl In brown i Williaoson, a change in the re-drying process for burteg had been Identified as the cause of a sharp fall in smoking quality in repeat tests on a product whose composition had apparently been unchanged, The quality of ~rlboro was also thaught to depend more on their process than on the quality of the Tobacco used in their produces. BAT Industries document for Legal Services : Health Canada 20 May 1999 -II 2~1 It was speed that the Chairman would orgaaiJe a meeting with Elr, Kohnttorot, h, endtade and representativea from BATeo, and BAIC1 to consider what should be doal:· (a) To establish a better interchange of experience on quality testing within the Grcup~ (b) To improve the effectiveness with which sacking duality is waslped and monitored, 221 it ~tils agreed that ooUdg quality should be given a higher priority and that each company should be asked to include in their plans a section on improving the measurement end upgrading of smoking gualityl ~thdPg issues 23, Wlrkting IofotPaticn System : Hr~ lramley reported that the work to develop a camon information base of marketing data, accessible by all Operating Groups, was almost completer BovePer, there were still a few issues to be resolved on the type of data to be collected (e,g, shipments or end market sales), on the arrangements for secess and on the costs of settiog up and maintaining the system. ~~ Bramley will set up a meeting to resolve these issues and will make recommendations to the next meeting of the tew, 24, Sponsorship : It ~Rls noted that the locky Strike sponsorship of Btor Cycle racing appeared to be fulfilling its objecrivell~ however, the cost-effectiveness of sponsorship associated with the Group's other international brands Deeded further rlvicw:- (8) The prog~spe far Iltasoo C Bcdgn will be roieved by the new PrLting director for BATCo, (b) Toe programme for SE555 needs better definition and a more effective use of sales of peripheral products closely associated with the main sppaloshfp, (c) The gent programme is thought to be too fragmented and to lack a strong central themel nr, Bramley and Hrl Pritctard will report back to the neat meeting on the results of these reviewsl 25, it was noted that German TP may refuse to televise Woror Sports on the grounds that they are sponsored by Tobacco Foopaniesl It was agreed that Hrl Lttcr Muld check on this and find out whether the btpt Sports themselves were apposing this banl In the meantime, the possibility of a ban should be taken into account when signing any contracts, 26~ Trade ~L~t~ Diversification : It was agreed that Fwpanies Should keep within the spirit as well as the letter of the law in any promotions of Porrrebacco products carrying Tobacco trade~lrh, P BAT Industries document for Legal Services : Health Canada 20 May 1999 btLtlutiaorl Brands 271 05 IOtCtOlfiOpll grands : L~ Pritchard reported that ~S export and contract sales were 2 billion below budget for the first quareer~ however, after reviewing the situatioa with regional managers, it had been sgreed that the budget was still achievable and might be exceeded by up to 2 billion, 281 For gent, it was noted thee lire shipments were below budget, in-oarlret data suggested that final sales to consumers were holding up well, Deviations froF the standard specifications for the brand ~Rre being eltinared progressively but it was noted that there was a continuing pto~la in South Mricel It was agreed thee, if gent could PPt be plDdu:ed tp thellS speciflcatian, the brand should be withdrawn from the rParketl 29~ lucky Stt~e continued progressive hut there was still a need to improve distribution iIISpaiP~ A problem in some markets was that the brand had been introduced before aooonia treatment vos specified as an essential part Of the manufacturing process, Cwspdnies without stainless steel e~uipent in their primary deparoents were still unable to iattod~e this treatment as a standard part of the process~ Elsewhere, there had been progress in upgrading quality, including further reductions in the use of local leaf in Spain, 30, Pricing : Llry Strike se designed to'coFpere directly with Marlboro and it ~wl agreed that the basis for this should be to achieve parity in quality while offering the coasaer an incentive to buy by positioning the brand up to one price pains below the Philip Horris brand, As an alternative, it night be possible to compete at an eguSvalent price on the basis of better tooking quality, What should be avoided is positioning the brand tvo price points below hrlboro, ~ie degraded the image and eight actually be inhibiting sales in some markets (e~gl Ifalaysia), In cases where lucky Strike was positioned ton than one price point below Harlboro, there should be an aim to increase the price to the target level by end-1992 at the rsree~l Hrl Pritchard was asked to monitor progress towards this targct~ 31~ htcSII : it was noted that the agreed strategy for Barclay was to launch the be (Ultra) version as sow as possible in all markers, allowing this to become established for at least 2 months in distribution before the standard version reverted to a 5og rating, 'Ihe timing for the subaeguent introduction of the log (Ultra) version is less critical, 321 Because of the (Borgward) testing regioe 19 Benelux, the Ultra product vil only achieve a 3og rating in these countries, Bovevct, it was agreed that it should still be latmched in the same way and to the same timetable as for the hg product in other markets. 33, IIIIB I h, Brrlcy reviewed progress in BK Internatiooel Brands and it las noted Lhpt there us a plan to upgrade the blend foe Players Cold leaf (PCt), It was augsuted that there as a need to revitalise SE555 and Pn, both of which were felt to have a greater potential than Ms being realised at present, There use cpveta that SES55 should be targeted more clearly at the younger adult market and that the promotional spend Fight be too low, The target market for Pn ms also thought to be Too 'highbtow' in relation to the brand's imsgel /111 o BAT Industries document for Legal Services : Health Canada 20 May 1999 -dr 34, prance : Tne Chairman cpa disappointed that no paper had been put forward discussing options for acquiring the rights to lucky Strike in Prance, nt~ Broughton was asked to follow-up on this, Ihe Qleinla also asked Hrl Pritchrd to give further consideration to the possibility of licencing Barclay to SEITA~ Eastern Luropc/OSSB 33. Hr, tlereer reported that, excluding the special sales to the USSR and even after allowing for the change in status of the East German parker, the salts increase in the Qstera European markets had glowed considerably as a result of the difficult and volatile economic situation in these territotiaa, Be also Doted that although sales in Yus#rsdl gre holding up well, there was a switch from exports to licenced gales with a consequent reduction id plpflEJI 361 Mr, Pritchard and Hr. de Castro reported that Bro~ 0 Uilliamson and Souza Crus uere also experiencing difficulties it selling to the USSR sad poland bor were continuing to seel;opportu~~ties where these 8r08el 37, hungary :Hr, Bramleg reported that negotiations were continuing with the SPA on the possibility of moving to a oajoritg holding in the company in Pecsl 38, poland: Mr, htter reported that talks were continuing with the ministries of pt·tvaeisation and agriculture in poland regarding the factory at &getsdorl and auditors were curreatlp valuing the company, A draft letter of intent would he discussed with the Chainan within the next few days prior to submission for approval by the CPCI 39. USSR :Mt~ Lrcer reported that an office had been set up in Hoscow and that the rccrui~cnt of staff was in hand, It was noted that the Chairman would visit the USSR in Septnber for a meeting of the APglo~Soviat Round Table, 40. Ihe eaeehoslovakian market had been researched and a report would be available for the next meeting, 41, BoPmil had also been researched but ~. pritchlrd reported that the parhr was in a state Of disorder, A further study of the industry structure and poteotiatoppotrwities for investment would be put in hand. Mr. tlerter had also provided the name of a potential candidate to provide representation in the market, 42( Mr, &rter also reported that a representative had been appointed in lulgaria and that it was intended to replace the representative in Yugoslavia. Other EutopuP Lrhts 431 It was o~red that Browa h Williaoson's representative in Greece had moved into the BATm(E office, that the representative in portugal hi moved into the BIITCF office and that the representative in Sweden had moved into the Tiedeaaa'B building in Sroc~horP~ C1, In Turkey, it was hoped that the distribution of cigarettes would be privatised but importation would still be subject to restrictive legislaefda, It was intended to opec a liaison office in Istanbull 10 1111 O BAT Industries document for Legal Services : Health Canada 20 May 1999 .__ ____ -7- Larinlwriell~~ribbe~p 451 liexito : Mn Ftitcherd reported that the US Congress had agreed to extend the 'fast track' authority to the negotiations for the extension to Mexico of the North ~erican free Trade Areal Brown d Wiliueoa will press to have tobacco products included in any agreement, Although the Group would prefer to wait ~mrfl it is known what the new trade regime will be, formal applications to be allowed to import cigarettes will continue to be pursued and opportunities to Panufacttlre will also be ePal~tcd, BI Pritchatd will also confirm that the FTA would not open the Mexican market to exports of Keat from t4rillPrd, 4bl Colwbia : it was noted that a meeting had been held to to-ordinate the efforts to Exploit the opportmitiea arising from the opening of the Colabiao markets 47, Sonth Cone : Mr, BramZey ~Rle asked to set up a arking party to report hack on the implications for the Group of the projected 'South Cone' common market, 48, Caribbean aapresentation : Ihe Chairman ultad Hr~ Bramley and Pritchard to give further toneideration to the possibilities for rationalisiog the Group's representation in the Caribbean, in order to improve the cost-effectiveness of selling in the region, The par East 49. It was noted that efforts were continuing to penetrate the market in Thailand end De la Le were printing Tax Stamps for use there, Bowever, the authorities were still plating barriers in the way of imports. Negotiations were continuing in Burma and ~ILLP~~ 501 China 1 It se noted that folleviag;l meeting on 29th April, of the people directly concerned, Mr, Breloy was proceeding with the recruiplcnt of the keg personnel required to head up the companies which it had been decided to form in order to provide a more effective thrust in the China market, lhe Chairman asked for s note to be prepared for the CPe as soon as possible, confirming what is proposcd~ It was also suggested that setting up the new capeoiee could predate the appointment of the respective CEOPI Manufacturing 511 Mr, I(OhnhPrst presented a review of the Group's manufacturing facilitiee, It vee noted that this shoved a reasonable level of cover for expected sales up to r993 bur possible shortages of capacity towards the middle of the decade~ ~. Kohahone as asked to extend the study and to identify where additional machinery orders needed to be placed to provide i capacity 152 greater then the sales forecast to 19951 521 Other cooclusioPe from the review were Ihot:· (a) The capacity increases should be concentrated in Brown 4 Villiamson, BIITITKE and BATCF rather than In the smaller ELWPBD~ICBI ru BAT Industries document for Legal Services : Health Canada 20 May 1999 -8- (b) The ability to produce high gualitl International Brands remains pPta~Potmt afd there should be an aim to increase the ability to transfer production from one factory to another, (c) Opgtading the standard of the production facilities in Brazil reeains a key requirement and further consideration should be given to the feasibility of importing second-hand rpachinerj froP the USA. 53, h~ Broughton presented a paper cop~ring the coatsibutions froP different masketa and froo brands produced in different locations, It we agreed that this had been a useful exercise but it ws felt that it was better to carry out studies of this type ad-hoc rather than setting up a system to collect this data on a continuing bsais, 51~ It was agreed that Mtl Kohnhorst should be asked to recommend a consistent Bchae for measuring and cwpeting production costs, groupvide, 551 It vee also suggested that further thought should be given to possible transfers of production in order to improve net profitability (i.e~ after laking into account the effect of taxation and the ownership of the company producing the cigarette~)l Transferring contract manufacture to Souehamproa would appear to be particularly 8dlJaatagcbus fret this point of view, 56, BbnTP : IL ms noted that ~, &rtcr had produced a paper for the 020 outlining the options for expanding capacity in Germany, This was presented to the team for information, It us noted that capacity in Geneny could be expanded to 50 billion plal without ,4jor structural additions or changes to the existing facilities, leaf 57, luf Plrlon~Ul~tion :Mr, Pritchard reported that the classification scheme introduced last year was working sadsfactorily~ nhe Chairman asked for a further review of the Lpace of the scheme in rationalising buying (elgl had it resulted in 8 reduction in the nuber of trips to buy tobacco in Brazil) and in reducing etocke, Mrl Ritchsrd will report on this at the neat meeting, 58~ Supply SitPltiOP : it WOE noted that Burley tobacco could be in shore supply in 1991-1992, especially if IWR and Philip Morris, who have been running down stocks, again befcme major buyersl It we again emphasised that companies lust ensure that they have security of supply for the types of tobacco they requires 59, Exports : It we also suggested that leaf exports could represent a significant opportunity for the Group, I~TCol and Scuza Cruz were asked to give increased clpphaeis in their pleas to building up a l0-yrat~ plan for expanding exports, 60, leaf Co-ordillltioa Meeting : It ms agreed that since the t~eaf specialists within the Group meet at least once a ~sr, there was little justification for orgaaiaiag an extra coordination meeting of the type which had been suggested by Souua Cruz, 61, Bovever, it Ms rioted that leaf processing vee a key element of the manufacturing process which vao not understood sufficiently well and where it light be advantageous to exchange expertise, ~. Pricchard ua asked to outline a proposal for setting up 8 oeeting to discuss this topic, 1·I1 [V BAT Industries document for Legal Senrices : Health Canada 20 May 1999 -9- ndn~gcDeal_~Dcrelopoeo~ 62. Trainiog 1 Danloprmt ~i*r I Mr, Broughton reported progress on Mt~ Boss' project to consider possible Lprovaentl to the training and development of managers in the Tobacco businesses, Be also confirmed that the project was an traflr for completion by end-July, 63, Discueaing the progress report, it ~e suggested that the final report should be related to a single population of managers and that it should be asslPsed that the expatriate pool would be phased outl 64. It was also suggested that although movements between functions could be advantageous later in a manager's career, the first priority in training and development Should be to improve managers' effectiveness within their f\mctidoal spaciplieodoasl 651 It was noted that the ehainan and ~11 Broughton would agree with ~Lt~ Rose, the headings for his final report, 66. IntrrCo~pmJ hapsfets ~ Htl Br~leg reported that there had been continuing progress in arranging inter-company transfers, A review meeting would be held in June and he Muld present a formal report, reviewing progress over the yeat, at the seeriag arranged for September, 67, Recruitment I Kt~ Barter reported that the team set up to consider possible problems in recruiting staff to support the projected expansion in eastern Europe had met and had made significant progress in manning the teams. 68, It was noted that the project team for Poland Me largely drawn from B~i~l~ while the team for Lngarp was largely froP BATQ. While it was appreciated that this was a historical accident, it Iws suggested that there should be 8 positive effort to rmL future eeama international in cPmpaitioP( Trading Besults 691 It was noted that a hey feature of the results for the first quarter had been the 52 increase in vollllpe relative to last year, however, the full year forecast was for a volmre increase of only 3bX, 70( It was noted that the current forecast for the Crdup shows profits slightly lower than 1990 at the half I~ar~ It is important, therefore, that results equal to the budget as achieved in the second quarter, Mr, Broughton will be in touch with individual Operating eroups on this in the neat future, B~p~UrltOry Issues 71, Environmental Charter I Xt pe noted that none of the Tobacco companies wished to sign the charter proposed by the ICC, tfowever, there may need to be further discussion on this before and dlVIPB the environmental policy review by the BIAIT Indusoies Board, due in Dctober~ 72, SooUng CopcendiEl : Mr, Bramley reported that a revised version of the Ssoltfng Conpeadim~ Mold be available for distribution shortlyl 1l11 BAT Industries document for Legal Se~vices : Health Canada 20 May 1999 -rOI 731 EoPiton~aolal 'lob~Eco Lire : Mn PritcLrd reported that diacusaipns on the EPII rsPort were coaeiPufPgl /4~ fire Lfc~r : Be also reported that theta had baen no further progte# on the proposal to develop tests for a'firc·aafe' cigarette~ 711 dddititee Register : ~trl Bramleg reported that the Mditivee Register would be available for distribution later in the year, ProductionlProcul D~alopcnt 76( it vas agreed that the'dillcuaeio~s of 8idestreaa SPot4, r·1 ToLcco, DeeapositioP ~roducfs of Il~mop~ted Tohfeo sad the use of Reconstituted Sta should he held over the next ~eetiag~ liext Hcefi~g 7'11 The next Peetlng will be held on friday, 6th Septepber, Key subjects for discussion at this Peedag will be the competitive position in technology (the ChainaO'B letter dated Ist Hay refers) and the Research priorities for incorporation in the B6D progra~~el IISIDJA 6ch June 1991 BAT Industries document for Legal Senrices : Health Canada 20 hlay 1999 HO COP~lt ~ II llIOt 1Pb~co d~nte~v~ Ileetins of the loblcco 9ttitsiy 1C1IL 1~ Il held on 27$ tebrrrl 19911 PrellPt I Hr, 1.)1 It·1IJ, ~· P,fl PriecbIrd, Sllter (deeretiry)l Llbls to he prelcnt I Hr, J~tl Ptcicr ln Ittendlnee I Hrl J~I, L~n 1, The nlnuteI of the leeting held on 30~ b~aber 1)90 Ire ~lr,~d, tl Contrihutione to lsllIreh lroIrae :~1 Itoyton reported that ha had not ~t oolpleted the Ir~ 0 trrre tbie the releltcb progrule vee fnndsd in n I1 that Il ta-effieieot ad lich alao tot into ~efo·t the old to nntipile lr iacolel Be dl) report b~c~ on thil It the oat nIeting, 3, Lllal~t DneIopnent : LI IrwIhton reported that Hr, loll (robseeo) IPd Mr, Pillia~ (nPIPCII1 Ln~cc~) hid been leoooded to the project to rc~ico the ttrlagLoentl for Il~acot ttlininO ad developoent, The project hIl been Iccdsnt~ e1d ii pr doe for colplstion hy s~-JP111 ProBrell viilhs reported It the pal Icctiq, 1, Btsr~p~V ~rfar~ : Mr, Irrlct reported that there hsl hsea f trIPlferl liPCe the kle ~!ltinl~ I fnll rcda of pregtepl dariPg the Ieer iI lfheduled for tbs Jspt·bar Ieting. I, bcw~el Iearnibent : It Il noted ILt the l)a to Ippfnt IIIIIeWPt tb# for the #t$ltiCI heiod let Ip in hltl~P Europe end other a ~lbct~ bed ·pold I oeelmele it the 1Bit~ llvililahillty of CIPdlQtll for thell pltll ft II Itred tLt LI Lrtlr Rlra let up I project dib ~. ItIlel Id kl PritchIrd, to inveatigete the IteDt of thll prollell Croupyide, Id To recooInd ha it could he relf oreted I Or, blil hdd dll he lscretIrl to the projectl 6, Blia of L~ced~l ~l~ci$ ; ~1 hirchld reported thee t~ Prl l(ohnhorlt hid initiIted the project to eItIbllIh the current epd pesPei~ rPd~celeiq f~p~cit! in the Group, ed eltlbrilh whets Ibortfllll la occr end to detenlne vhete there it a potentipl Tot elPdleion or other eh~lts~ to bprorl the orsrdl P~Odlft~ltfl eplt+ff~ft~~ap~~l end ~lrtffieinc~~ eollrtiOd the CIOIP'I ~srkttsl 7, rt Il noted thIt the project tea Il doe to mte on JttCth Lrch Id it Il Ipyltca tht Mr, Lrd, hi Lri~lct end Hr, 8~11 ebould he invited to join the tlIl II It Il Illo lugselted that the tea ehourd coridlr the potentill for olinI, in Itull or etaevhete, loft eo) ad other r8incrl lich had becol turplne follbrip the Irysir of hox p~etllil ed other opltdiq It LCOP, 91 Other tclalo~ Irt in hid ii i Itdl bl ~I Lrr!r of the cxpInlion potential of )Iplptl Ild I Itudy nr ~, LolptPa of the optLP loureilg of exporta, 81 of tbil ar~ it doe to he reported in L~, 1(11 WT lndustrles document for Legal 8mC* : Health Clnlda 20 lay 1BBD ·2· 101 InforPatiop Systas :Hrl Br~oley reported prograsa on the project to ensure that figures for cigarette salts could be, accessed easily by all the0pcnling Groups in a fot~ which was of lost use to everyone who needed to use tha, The a~drmdn asked that the aystap should be capable of showing total sales to a country (ipclodiag sales to DutY ~ee) ~F~ all Group sources and that there should be a clear understanding and sgreement between the Operatioos on the conventions to ha used to calculate total sales uPder each beading (e,g, Sales of a specific faternstianal Bnod worldddc), ii, it vas pptCd that Mr, BIa~el vould led propeslf to Mr, ~ritchPrd. and Hr. tlerter in ~reh and would report at the next oecting on progress towards developing a opts which se co~proheneive and which could be accessed freely throughout the Group. 121 Bread Integrity : it vee pored that following the Chairlpen's note dated 3td January, there had been increased ptese~e to ensure that there ~ae a high degree of Mifoaity in Be crapaeitLa and prolotlon I of International Brands worldwide, ~ne in~portance of ensuring that all brands are equal to or better than cwpetitlPe brands was again stressed and it was su88ested that the US Trade Office should be used to put pressure on countries to relax rcquiratnts for the use of local leaf $ere these are still in force (e,gl in tlarayeia and Venezuele)l 131 It vae noted that BAT Espena had sgreed to talcs their lucky Strike bleed frol Brown i WilllaPson, Tire Qairmaa of the local Foopanp vill also be asked to support the case for using lore ioported leaf in order to upgrade the quality of the eig~rctteol r4. Ihe Chliaap asked Hr, Brlllley to coDfiri that there u~ no legal regulr~ent in Spain to use local leaf and stressed spin the f~portsnce of insisting that the quality of lucky Strike should be co~psrsble or better than Natlboro and Cheatetf~eld, Also, that there was continuing pressure to ioprove Bellpant and Royal Crova, the current objectives for which were thought to be too ~meebitiPwl 151 It was noted that the distribution in Spain for bucky Strike was inadequste for a brand which had a 32 larket ehcet Mr, Brawley was asked to consider how this light be strengthened, 161 Elaawhere, Argantina had nos agreed to cenfon to Brand Owners' specificstioos and Dca~ark had agreed to use the sllme Lucky Strike blend 88 Gei~sag, The current blend for Benson i Bedges in Malaysia, incorporating COX local leaf Iws also considered to give a cigarette of acceptable quality, While ueleooiPg the i~p~ove~ent in Lleysia, the (hdnsp stressed that tha at lust be to ol~ch IIK quality and BhTeo, should continue to press for this, 171 The ehsirma also Iluggceted that there should be continuing pressure to Lprove so~o~ quality in Group brands being sold in Yugoslavia sad in Players Cold leaf, worrdwida, 181 IIS International Brands : Hr, Pritehard reported that although the budget for 1991 shoved only a 7,92 increase, the forecast far sales to Chins uss consenrative and it se hoped that actual sales would show a grovth rate closer to the 152 target, Bor capacity should be adequate by ~~d-year end would be an Lportant factor in supporting sales, o BAT Industries document for Legal Services : Health Canada 20 May 1999 -3- 19, It was noted mt there were still inconsistencies between BATCol and Brown ~ Y~ll~lon vies figures but it was hoped that these would be resolved before the Hag Peetlagl 20~ Iraq : Following the end of the var with Iraq, it at suggested that iPoediate consideration should be given to possible ways for establishing brand gooduill in this market. 211 Cplppbia: It ms noted thet;lfthough there was s hish level of tax, iaports into CclwPbia were nov allavrd, L a result, it should be possible to establish brand presence in the orketl 221 fgRt : It was noted that the Rent TOT in Europe had highlighted the ptpblg that the pmlotioa and packaging projected an English iaage which was not helpful for an ~Periean eigarette~ ~arious ways to produce a ate BPericaP image were suggested including lanufecture in the USh (but thought to belmecoPoic); emphasising on the packaging that it was an ~erieaP-stgle cigarette; using a European advertising agency to give a European LPge of $ericaness; and concentrating on markets such as France and Italy where there were severe restrictions on advcrtisiag, 23~ It rws noted that work was continuing to develop II superior gent lights product end to coafia the agreed peclragiog foroatsl It was also noted that Germany will test ~pri;et Rent Ilgt~te in the 3rd barter, 24. Kept rsains progressive in (hina. Pollawing the solution of the tipping probleo and the cutting off of parallel supplies through Urugusg, it is hoped that sales to china will exceed budget in 1991. 251 It Ms noted that Rent continues to be a key International brand for the CrDup~ Hrl Pritchard will report on the plane for the Kent Leisure Package st the ~Jr aetiogl 26, UIRI ST&IEB continues to be progressive and a key objective for 1991 will be to expand Lucky Strike Lights, introducing the brand into L as Pany serketr as possible as a direct copedtor to Harlboro Lighro~ It was speed that there should be a detcniacd canpaign for expansion based on Lucky Strike plain, Filter and tights versions with Lucky Strike Super lights available if required, Bowver, it was thought that having lucky Strike Mllds as well as tights was confusing to the coaemer. It me suggested, therefore, that the current policy to promoee ligha~and to let Hflds find their own level should be lodified, dth greater effort being applied to converting Mild s~o~era to fighte~ 27, It was agreed that it would be helpful to acquire frw Callehers the rights to sell Lucky Strike in Prance and that Hrl Btrleg should prepare to open discussions with Callshers to ~ete~ine whether they would be prepared to sell for cash the rights to Ludry Strike in Prance or, failing this, to negotiate an exchaage for certain rights to ienoon b Iiedges in Europe, excluding Duty Free and k~Pangl 1B~ In preparation for this, Hr, Pritchard will establish by end-Harch, the value to 81 of owning Lucky Strike in Prance, At the sane ti~e, Eir, BraPleg and Mr, Better will assets the value of Benson 8 hedges in Europe, /LI1 BAT Industries document for Legal Senrices : Health Canada 20 May 1999 __ ·I- 291 it was noted that the salasforce in brasil etc enthusiastic about the success Lucky Sttilre 18 achieving in direct coppetition with htlborol It is also haped to launch In Chile ahead of hrlbotol 30, It was agreed thee there should be continuing pressure to raise prices with the ain of co~og close to, nstching at even exceeding the b~lbPrD price in as Isay markets as poaaible, 311 BkBna~ : It was noted thst the Persian of hrelby tared st ing was doing well in Switterlandl however, it was also noted that despite the difficulty of verifying the rating in laboratories land the lack of taste), Philip Morris sere continuing to ptaoee a Img cigarette in sweral keg markets, It was agreed, therefore, thet in addition to launching the new 218 version, there should also be a leg version available for bunch if recluired, 321 There is a continuing Peed to reposition the original Barclsy '1P8' product as a So8 product and to time this repositioning correctly in L relation to the launch of the new hg product (aad potentially also in relation to the launch of the new hg product)l 331 It was agreed that Ht~ Pritchard would present an overeU strategy tot Bsrclay at the Lg neoting, including the pleas for the 9mg, kg, 2mg and Img versions, 341 It was noted that despite a disappointing reception in the Japanese market owrall, Barclq had been successful in BOme ICsmCPtll and was therefore being persevered with, with a view to the long tet~, 35, C~BI, VI~EOI and E001 : It was noted that goal was shoving sane vitality in Par East latLtill A Dots derailed review of Kool and of the other two braode L scheduled for the Hey Eetiogl 36, lIL InlcHutiPd Brands : L1 Bteley reported that Benson & Bedges bed stabilised and was looking to increase in 19911 State Express 555 reeined progressive, especially in the Par East, and PC1 was also plOpiClljVe~ JPS was budBetted to increase in 1991 after LI crpcrlePc~Pg elJ i slilbl dteIla in 19PO, capared Ylb c luck greater decline in 19891 37, It voa noted rhlt L~ Brlolclr ~uld bdPg'togethcr L~ BlooLs, Hr, Crichton and Hiss Osborne for a meeting to review the overall strategy for the pro~otion and develoawt of IIK international Brands; confirming the positioning and potential of the individual brands (iPcluding SE 555 HildsJ; ad discussing the relationship between the promotional spend and the narket potential for each brsad~ 38. Eastern Europe i Hr. ~rtet reported that excluding East Cenaay which ~B now included in the total Ceroan market, Crwp tales to Eastarn Europe and the USSR increased from l~t billion in 1989 to 2195 billion in 1990, with exports increasing fro~ 111 billion to 2,2 birloo~ 391 Iha (haiwp stressed the need for lit, Fkrter to proceed with urgency on the sppintment of repreaentatives in Bulgsris and Ingoslavia and to complete the market study in CzechoslotsW11 Obtdning good information was an essential precursor to identifying and evaluating opportunities within Eastern Europe, 11.1 N BAT Industries document for Legal Senrices : Health Canada 20 hlay 1999 ·:: _. _~1~11_ -5- aO, It as noted that there hid been continuing progress on negotiations which could red to joint ventures in hungary sad Poland, The Ilait~an will discuss with Hr, Bramley and Kr, Bertcr he these pro~eca Bbould be maged. It ~ze eugscoled ~hd~ the plfoibillrl of recruiting Polish spca~etl fro the nSA should he borne in mind, 41, It as noted that grown 4 WilliaPeeo auld complete a survey of the PouLn ~ahr bg the end of ~tF1 and would report on the potential of the utlrer at the E~g,e~tSpgl current salts were handled through 29 independent distributors ad are for full margin products onlyl 421 In the OSSE, it as hdped to finalist the choice of an office in ~reh~ Grblp companies were continuing to pursue import opportunities within tha price and brand par~eters which had been agreed, however, swingeing increases in import duties and the gevral disotgsnisatfoa within the country made it difficult to build up stable trading relPtloashlps, 43~ led Mtrilo~ ran : tlr, Brsmleg reported that the teaf Uvisory Tea had completed an initial survey of leaf growing in Poland, hungary and Balgaria and had caoe to the conclusion that whereas if might be comparativelp easy to effect irprovcmaate in Poland and Lngary, pan radical changes to the systems night be required to bring Bulgarfaa production to a satisfactory standard, 04, It ms agreed that an important elaeat Of any investment proposal in Eastern E~ope would be to determine the tpp of cigarettao to be Ide 4Pd to aaseIa the improvements to ~caf quality that ~uld be needed, The proposal should then include appropriate recommendations for the tea required (e~g, an agroPwls~ ad aalender) in order to achieve the required improvement. 451 Other ha Ibr~et~ :h~ Pritchard reported that the leader of the coup in Thailand had bean a strong supporter of the national woopolp Therefore, there as unlikely to be sc improvelent in the current situation where although Lporte were allowed, the lowest practical Spite at which those could be sold was 10 baht compared with 15 baht for local cigarettes, 461 Hrl BrlPI1Cf reported that BITCol nov hd an import licence for Iluico and would be bringing a project to the CPC proposing a re·opepiog of the market, Zbete had been no significant new developments in Tur~e~ or in BPrPa and Vieep~, bwver, it as hoped to have the position on SDn,clarified further before tha (;hsirmsn's visit to Singapore in June, 171 Brariliaagrporta : It as noted that Sours RPL had exported 70 million to Poland in 1990 snd as hoping to increase this to 700 million in 19911 Other leat~tll were also showing significant growth, The Chairman eaphasised the need to build up a stronger orgabiaation overseas and suggested that training for the people involved could be provided through BhTUKEI i,,, N BAT Industries document for Legal SeNices : Health Canada 20 May 1999 -6- 68, Ltioorlirotion of OPasau Representation : Mr. Btaley reported that there as I programme in hand to strengthen the Group's representation in oversees markets and to ensure that where there as more than one Group company represented in a martret, consideration as being given to the potential benefits of sharing facilities and people, h new office had been opened in Greece, facilities in Thailand end hiutn had beep ratfonalised, lotu as ~der discussion and I]bE, Sandi, Pong gong and ~r~do~ were also under review, 491 it as noted that hi Bramley and HrI Pritchard would report in BY on the results of the study let up to determine the optL~ structure for serving the Qtpl market. 50, JTI : Htl Bralleg reported that 3T1 had increased their sales to the South yeat ~illP markets by a substantial sPtst~ ~here had been a suspicion that they had been dumping but further investigation had not substantiated this, Their activity as competitors will, however, continue to be monitored closely, 511 General tfaoagera Marketing Serinar : Hr. Pritcbard and Mr. ec8oan reported that it as hoped to make a final rec~menderian for the location for the conference by eod-brch, it was agreed that of the locations which had been considered, Orlando, ~lorido Appeared to have moat to reccomend ~rl Uthough the dates prwisionally agreed far the seminar had been 2Qrh-21th Havabcr, this had now been found to be impracticable and, subsequent to the meeting, revised dates of l~th-23rd November are agreed, 521 ~~ Berter (bcist Structures), Mn Brapley (Braad Goodvlll) and k~ Pritehard (Cost-EffectfPeneas of Promotion and Distribudonl~ade Relationships) confined that the preparations for their respective sessiops were going ahead, Mr, hrter will circulate a paper Po excise before the seminar to enable delegatee to prepare their ovn contributiPnr~ Hr, Bra~Pleg asked for examples of the impact of qualir]r oP brand goodWill and It was suggested that Brown 6 Williamson might be able to provide help on this, 531 Tne provisional list of participants to the seoinar use confined as follows :- Browni Wi111100P Sandefur, Whitehair, Schoenbachler, Fitwaurice Sours Cruz Caltro, Andrade imperial I Brown, let BATCF Schveittcr, Toret BAfCo~ Brookee, ~z~, Vattertoa, Rots, Brute-Miller, Grant, landrup, Freite, Viner, Wurmser, knold, LalR, Edmunds, augh, Borloz, HcDovcll, ~t8peroe, liahn. Changes from the previous list are the substitution of laux for Stephenson and the addition of Bahn, Rose, Stuart sad Bootalingam had been deleted from the original list but were still considered as poasiblea~ Ht, Broughton vee asked to review and report back on other potential candidates for the seminar, ut~ieh was designed for younger general managers vith t6p1anagscnt potcotial~ Subsequent to the meeting, Bunt and PI Brooks were suggested as possible additions to the lilt, 1I1t o BAT Industries document for Legal Services : Health Canada 20 May 1999 -7- 51, Technical liaison LCrlPOI I Hr~ Btrleg presented I review of the Technical liaison o~rdngl held in 1989 and 1990. it 191 agreed that while the Tobacco Strategy Review Teen wished to encourage the interchange of iofoaatiop and expertise by individuals, there should be a reduction in the frequency of general oeetiags involving large a~bere of people, It was suggested that when general #etings were held, the ai~ should be to Ulit the attendance to the chairrPaa of the leetiag plus one representative frw each pplration, it was 6110 agreed that the frequency of these general Deetings should be reduced to the fplloving:- (a) Research Policy GrouplProgress Review Fund~z~ental Research - Co~b~ncd Annual KeetingI (b) Scientific Research Group - Anauall (c) Product DaPelopoot Ctou~ - Every Second Year, (d) Ad-hoc Workshops, etc, - 0019 where initiated or agreed by the Tobacco Strategy Review Tea~, 551 leaf SPpplir~ : it was confirmed that leaf supplies were likely to be severely restricted worldwide in 1991, with Burlg in particular in short supply, US prices were Expected to increase by 52 and greeter price increases were expected for supplies froP Brazil, Argentina end Zfobak I It we also expected that the EC stockpile of 300 sillion kilos would be rM down and that the pressure on led prices would embarrass companies who had eo~lpitted to supply low price cigarettes to the USSR, 56, bl PritchPrd, Mrl Braeley and nrl tEerter confirped that supplies had been sec~ed for 1991 and that the likely swing in the penduluo in 1992, as current shortages encouraged are planting, had also been taken into account, 57. Hr. Rbmbaut reported that Souza era ate still behind on durations lad it ~B agreed that it was i~portant to talk to the Braeilian Gover~ent about how increased leaf production could be eneoutaged, Ibe ai~ should be to increase leaf production by 1SX sad Hr, bbaut was asked to report to the a~aiann how Souza Cruz wuld ~tle~pt to encourage this, 58, Enoiro~tnt~t Tobacco SPob : Hr, Ritcbard reported that the two draft reports by the US Environmental Protection Agency on Health Effects of Passive Sucking end EnvlrePmenfal Tobacco Lcll in Workplaces wre still under review by the CovsFnmePt's Scientific Advisory Board (SdB)I Brova 6 tlillianson believed that the Tobacco Industry representatives were oaneging the issue satisfactorily and that no further initiatives were called for at present, however, this would be kept under review, 59, Nte-Safe$ :Hrl Pritchsrd reported that a Congressional co~itfec had concluded that it ~we technically possible to produce a self-extinguishing cigarette and had initiated further work aimed at drafting legislation to specify this as a require~eptl However, the dnimuo period required for the further testing which auld be necessary prior to fF~iag the legislation would be three years, Current indications were that further problePs bed arisen in defining a valid test for a self-extinguishing cigarette and progress appeared likely to be slov, However, this auld continue to be aonitored, 1IIl To BAT Industries dbcurnent fbr Legal Services : Health Canada 20 May 1999 -8- 60, EnPironPental eharten : Mr, Broughton reported that the International Cheber of CoFPerce had put forward I Charter of Eavir~~ental principles to which eompaoies would be invited to give focal support, This was similar to the Yaldez Principles presented at the last Peering but was more pragmatic, seeking steady i~ptavelenr rather than teeting absolute etanderd~~ Since it Iss also supported by a body with more standing than the CEPBS pressure group, who ware ptoPoting the Paldee Principles, it could gain sore support than the very low level achieved by CEBES~ 61~ The current view on the ICC [Ihstter was that although the wording of paragraphs 6 and 7 of the principles, on products/Services and Cuecomer ~~ice, sight raise difficulties for 8 Tobacco c~panp, qualified acceptance of the ~ha;ter Fight be desirable, Companies would be asked to consider, with their legal advisers, whether these paragraphs could be redrafed in a form which would be acceptable to a Tobacco fompadpl 62, It wee noted that there could' also be a ra~uirspnt for independent environmental audits and Mtl Bxoughtw would discuss with companies how I ~heee aight best be carried wt, 63, Mr, Broughton will write to companies separately regarding the whole question Of Eo9ll0llfBI Po1IcPI which 10 also due for review by the B,b,T Industries Board in October 19911 631 SopUpp eolpCadlll :E1I1 Brlssley reported that the SaoWng Co~pendhr~a would be updated by end-April, 64, Sidvac~ Ssolre : It was 4greed that although there were doubts about the potential for promoting reductions in sldestresm smoke as a selling point, there should still be fatal objectives to reduce visible sidestreaP sPolte frolD CroUp products, It was asked that companies should introduce appropriate objectives into their product development and quality control programmes, 651 hdditivee Begister : Mr, BraPley reported that the Additives Register was aLost complete and would be circulated later in the yeat, 66, Illenden Handbook :Hr, Pritchard circulated copies of the Blenders handbook to membersl 671 I-1 Tobacco : It was reported that work to incorporate Y-l blends into lo~tar cigarettes was continuing, including its use in the f0rthf(WiI~ trial of Barcley in Horay, HePbers wet asked to report progress It the next Fleeting, 68, PeealtitPttd Stem : it was Pored thst work to increase the use of reconstituted sta is continuing, It was agreed that this should be pursued with the objective of Faking full use of the potential for ilpropePent offered by this process, 69, lPsoona Treatsent : It was Doted that the work to EharactedBe the decomposition products of cigarettes containing Ilmwniated tobacco was continuing and that the results of this work would be reported in kptsbet, Mr, Bmley toes asked to ensure that products from Brown i Williesop and results from their own work ware included in the overall review, fD, Bates of 1Pext Meetings : me next meeting has been arranged for Thursday, 30th May, Subsequent dates are friday, 6tb September and Monday, 2nd December, aslo~a Ud Lrch 1991 O BA"f Industries doeurnent for Legal Services : Health Canada 20 May 1999 ~rFcfl ~ i~v~n~u~~I SECRFT /'" lobeeeo I~cg Lia L bt~~ed re o copf of the leprc~ of the bl~eco Stratogg ki· h~l IlltiP held or 27th kln~ rd a dr~it esepde far the retinI due to be hold on30tb Hot, C I·r 211 hw i pt ~ ~ ~ld~ 1~1 )r LI ~~~ keeordiog to It paell, lohjecto too ore doo to re9srt oo at the Met Ilstil ore Ie iolra, I~~~ I~~lt de oIoodo itsl and dth rlrcranca to ~~ oPotoPrioee dnlts~ frr the feet ooetiog ohovo iP PIreothelil ofter s~eh:- 2(1) Allocatioo of QooIoo for Y·(ltP leoeorch (OiDUte i) (a) &abc~ ~rbrip Srir : Y~tio~ pr~tior (I~ote SS)I all) Lpnltn~tiol iP Pi~ (IL!ra 49 : ~II)· I ~rt SooreioI : (Ihte 9), 11(e) ProIreee asp3rt oo TreipioI rd Oe~llyaPt Itojrt (1~1 j). i' C~ 12 ~~~ of hdig Lldel : kir of let jir~tr Tohaoco qP11 11(o) amito~rt~ AIl~I (IBtll LOdJ), 81 ~t~~a for pr I~iontio~ ore eopies of the ~ri~f4 ·rll Ilt O de other tar rohere, let a, Selter alpa Ilth ~rch 1991 ~~o~lrl~ BAT industries document for Legal Services : Health Canada 20 May 1999 ~ conn~.~ It ltaDt Tobacco Straten latter Tcu 1\ ii Aleeting Of the Tobacco Strategy 8eviev TeaP was held on 27th hbnutg 1991. Pr#ePt Sit Psfric~ Sheehg, Ilel IIPI Broushton, Hr, BID1 IlrsPley, ~b~l B~fl Ritchard, Hrl~l Better, ntl OJI hbeut, Dr, BI Salter (Sccree~ry), Unable to be I~e~tnl : Hr· JIL1 Hetcier In Attendance : ~I J,ll~ Echnn The linmtes of the leetiag held on 30th NwePber 1990 were agreedl Contrihntions to Ptluteh hogt~na : Mr, Btoughton reported that he had not pt Eoopletsd the Mr~ to ensure that the research progtsPe a~ fdcd in a way that rl tax-efficient and which also tOolr into BCcouPt the need to Plari~Le Ut incoPe, Be will report bilclr n on this It the nut PeCtlPpl ltanaguent ~e~cfoplar I llrl Broughton reported that ~tl Boss V (Tobllcco) and tl YilliaPe (~in~Pci~ Services) had been steopdd to the project to review the arrsngePents for 11188C~bPt training and developPt, Tbe prefect has been accelerated and is pow due for coPpletion by end-July, Rogtws will be reported pt the nut Peatingl i, ~ntrFColp~q ~t~ufer~ :~~ BraPley reported that then has been 3 transfers since the last oeetingl A full review of progress during the year is scheduled for the SeptePber Pasting, 5. Increased Prcrai~cnt : It was noted that the need to appoint PanagePent teens for the activities being wt up in Eastern Europe md other new Parlretl had exposed a vehua in the ILitsd availability of candidates for these postsl It vat agreed tlut:~b~l letter would wt up a project with k, BraPley and ntl hitcLrb, to iavaatigate the extent of this probla, Group-wide, end to rccarnd bow it could be aPeliorsted, Dtl Doris Wte will be secretary to the projact~ 6. Pllla of &nofactPting Gapacttl lHr, Pritchad reported that Ilr, Estl Ilohahorst had initiated the project to establish the current and potential w,nufacturinl capacity in the Group, to establish where shortfalls Pep occur sad to deterPina where there is a potential for upansion or other ohanges to iPprove the overall produetivilp, cost-effectiveness and tsmffideocl in aonrcing the Group's Ilorlrstll 71 It us noted that the project tBI11 was due to nest on ItMtb parch and it las suggested that Ehl lord, Ilrl Bannister and ntl Slbok should be iaPited to join the fsll 8, It wat also oqscsesd that the last should consider the potential for using, in Brazil or elsewhere, loft cup rpd other ~chincry which 1l becoPe surplus following the crpmeiw of box pac~agiPg and other UpgFading at ILCODI otbar rel(Rant Klt~ in hand is I study by MT~ Berter Of th QPacsion potential of bgrcath and 1 study by L~ Btoughtoa of the apt~P~ eoutcing of exports, All of this woe~ is due to be reported in L~, 1(1( lu BAT industries document for Legal Services : Health Canada 20 May 1999 -2- 10, Information Systems :Efr, Br*lcl reported progress on tbs project to ensure that figures for cigsrette sales could be accessed easily by all the Operating Groups in a form which vas of wee use to everyoae who needed to use them, The (I~i~an asked that the system should be capable of shoving total sales to I country (including sales to Duly Fret) fra all Group sources and that there should be a clear understanding and agreenent betveen the Operations on the conventions to be used to calculate total sales under each heading (e.g, Sales of a specific International Brand ~rldvfdc)l It vas noted that Mr, Bramley vould send proposals to kl Pritfhard. and Ilr~ darter in March and Kluld report st the next meeting on progress towards developing a system which was comprehensive and which could be accessed freely throughout the Group, 12~ Brand Iotcgrity : It was noted that folloving the ehalrman's aote dated 3rd January, there had been increased prualpe to ensure that there was a high degree of ~m~fo~ity in the composition and promotion of International Brands worldwide, The importance of ensuring that all brands ate equal to or better than competitive brands was again stressed aod it use suggested that the US ILade Office should be used to put pressure on countries to relax requirements for the use of local leaf c~ere these are still in force (e,g. in Malaysia and Venezwla), 131 It was noted that BAT espana had agreed to take their lucky Strike blend fro~ Brown 6 Williamaon, The Chairman of the local company will also be asked to support the case for using sore imported leaf in order to upgrade the quality of the clsa#~tes~ II, Ihe Qlai~ao asked Mr, BraPle]r to confits chat there as no legal rcquiramcn~ in Spain to usa local loaf and stressed again the importance of insisting that the quality of Lucky Sttfir should be comparable or better than hrlboto and (;hesterfield. Also, that there was continuing pressure to isprove Beboae and b~al Crown, the current objectives for which were thought to be too ~B~DbltfOUB~ 15~ It was noted that the distribution in Spain for lucky Strike was lnadeguets for a brand which had a 32 market share, Ht~ Brasley was asked to consider how this sight he ~trangehened, 16, Elsewhere, Argentina had nov agreed to conform to Brand Owners' spcificatippl and Denmarb had agreed to use the same Lucky Strike bledd as Germany, me current bleed for Bensoo 6 Badges in Malaysia, incorporating 602 local leaf n~ also considered to give a cigarette of acceptable quality, Uhile welcoming the improvement in Falegeia, the Ihairman stressed that the aim Rat be to match Utt quality and BIUCo. should continue to press lot this, if, The Chai~sP also suggested that there should be continuing pressure to improve smoking quality in Group brands being sold in Yug~alao~a and in players Gold Leaf, rmrldwidel lsl OS international Brands : Mr, hitchard reported that although the budget for 1991 shoved only a 7,91 increase, the forecast for sales to China vis conservative end it was hoped that actual sales would show a growth rate closer to the 151 target, Box capacity should be adequate by mid-year and would be an important factor in supporting sales, 1111 BAT Industries document for Legal Services : Health Canada 20 May 1999 -3- 19, It as noted that there were still ineonsistenciea between IUTCo. J II Brow d Pilurson sales figures but if as hoped that these vould be resolved before the tkg meeting. 20~ iraq ; Folwiag the end of the war with Iraq, it as suggested imoediate consideration should be given to possible ways for establishing bread goodwlll in this rrlet, 21, blolrbL : It as noted that although there as a high level of tar, imports into Colwbia are now allowd~ As a result, it should be possible to establish bread presence in the wrket, 22. rrm : It ale noted that the gent TOT in Europe bed highlighted the problem that the promotion ad packaging projected an English image which was not helpful for an ~Lriean cigsreete, krL~8 ave to p~odoe a mre American image are suggested including manufacture in the DSA (but thought to be InecoPc~fc); emphasising on the packaging that it was an American-style cigarette; using a European advertising agency to give a European image of Americaness; and concentrating on markets such as Prance and Italy where there were severe restrictions on advertisingl 23. It as noted that work was continuing to develop a superior gent lights product sad to confirm the agreed packaging formats, It as also notd that Germany will test market B;ent fights in the 3rd guartar. Zb, Int r~oiae progressive in china. Following the solution of the tipping problsP and the cutting off of parallel supplies through Bruguay, it is hoped that sales to China will peed budget in 1991. 23, It as noted that gent continues to be a key International brand for the Group. Hr, Oritchrd will report on the plans for the gent leisure package at the hg meeting, 261 lOen gTglgH continues to be progressive and a key objective for 1991 will be to expand Lucky Strike Wghts, introducing the brand into as many markets se possible as a direct competitor to Marlboro Lightel It was agteed that there should be a determined campaign for erpansion based on tudy Strike Plain, Filter ad Lighk versions with lucky Strike Super lights available if requiredl However, it as thought that having Lucky Strike ~ilde as veil as Lights as confusing to the consumer, It as suggested, therefore, that the current policy to promote Lights and to let Mtlds find their ow level should be modified, dth greater effort being applied to converting KLU smokers to tlghtsl O It was agned that it wuld be helpful to acquire from Callahsrs the rights to sell Lucky Strike in France ad that Hr. Br~ley should prepare to open discussions with Callahers to determine whether they would be prepard to tell. for cash the rights to lu8y Strike in France or, failing this, to negotiate a exchange for certain rights to Benson b Bedgee in Europe, ercluding Duty Free and Ce~y, Ia preparation for this, nFI PriffLrd will establish by end-Harch, ' the value to BAT of owing nutty Strike in Ftancel At the s~e time, Iltl Branley and Mt~ Pmrter will assess the value of Benson b hedges in Europe, 1t11 BAT Industries document for Legal Services : Health Canada 20 May 1999 -4- 29, It was noted that tha rlutorel in Brazil era enthusiastic about the success lucky Strilre is achieving in direct competition with Marlboro, It is also hoped to launch In Chile ahead of Ltlbotol 30, It was agreed that there should be continuing presslae to raise prices with the aim of coming close tot matching or san exceeding the Marlboro price in as many markets as possible, 31, BIPC~I : It was noted that the version of Ilitcleg rated at ZrPg was doing well in Switterlandl Bouever, it a~ also noted that despite the difficulty of verifying the rating in laboratories tend the lack of taste), Philip Morris were continuing to promote I log cigarette in several key madetal It was agreed, therefore, that in addition to launching the new be version, there should also be a log version available for launch if requircd~ 32, There is 1 continuing need to reposition the original Bsrclay 'tmg' product ad a 518 product and to time this repositioning correctly in relation to the launch of the new Zlpg produce tend potentially also in relation to the launch of the new Ilpg product), 33, It vas agreed that Mr~ Pritehard would present an overall Strategy for Barcley at the ~hy meeting, ~focludiag the plane for the 9m8, 5mg, bg and bg versions, 34, It was noted that despite a disappointing reception in the Japanese IlrLt overall, Barclay had baen successful in some segments and was therefore being persevered with, with a view to the long term, 35~ CIPBl, ~IC~OI and IOOL : It tws noted that Kool w~ showing some vitality in Pat East markets, A more detailed reds of gool and of the other MI brands Is scheduled for the Map weting, 36, UI:~aterpltio~ Brands I Mr, Bt~le~ reported that Benson 6 Badger had stabilised sad vas looking to increase in 19911 State Express 555 raained progressive, especially in the Far East, and Pn was also progressive, JPS was budgetted to increase in 1991 after experiencing only a slight decline in 1990, compared with a much greater decline in 1989, 37, It was noted that Mr, Br~ley would bring together Mr, Broolres, Cr~chtoa and Miss Oeborne for a meeting to reds the overall strategy for the promotion and developoent of Dg International Brands; confining the positioning and potential of the individual brands (including SE 555 ~Ulds]l and discussing the relationship between the promotional speod and the marlret potential for each brand, 381 paataln Europe : Mr, Barter reported that excluding East Germany which was nw included in the total German market, Group sales to Eastern Europe ad the OSSR increased from 1,7 billion in 1989 to 2195 billion in 1990, with exports increasing from 1,1 billion to 2,2 billion, 39, The Qla~naa stressed the need for Mr, Better to oa the cppJi~ola~ of reprtnPurlvcl L k~llfrt yugoslavia and to complete the marbe study Obtaining good information was an essential precursor to identifying and evaluating opportunities within Eaarern'Europcl 1111 N BAT Industries document for Legal Services : Health Canada 20 May 1999 *-~-_I~ ·51 40, it vee noted that there had been continuing progress on ncgo~iatioas vhieh could read to joint ventures in Hungary and Poindl The projects should be ~aaagtdl It was suggested that the p3lllibilit7 Of /i Chairran will discuss with ~lsl Braeley and nr~ tIetter how these recruiting Polish speairers ftcm the USA should be borne in aiod~ 41, it was noted that grown b Yillia~eon would complete a survey of the Pomanilp narltet by the end of april and would report on the potential of the market at tQ Hay meeting, Current sales were handled through 29 independent dfatributcn and ate for full margin produces only, 42. b the OSSI, it vas hop~ to flaaliu the choice of an office in Hatch, CFoup companies were continuing to pursue import opportunities within the price and brand parameters ~ich had been agreed, However, suiogeing increases in Import duties and the general disorganisatioP within the country made it difficult to build up stable trading relationships, 43, leaf Mtisor! Tan I Nr, Bramleg reported that the leaf advisory Ten had completed an initial survey of leaf growing in Poland, Hungary and Bulgaria and had crse to the conclusion that whereas it might be comparatively easy to effect improvements in Poland and Hungary, pre radical changes to the systems eight be regulrad to bring Bulprlea production to a satisfactory standard, 44. It was agreed he an ioportant element of any imrae$eat proposal in Eastern Ellrope would be to determine the type of cigarettes to be made and to assess the improvements to leaf puslity that would be needed, he proposal should then include appropriate recomosndat:opo for the ten required (elgl so agronomist and a blender) In order to achieve the required improvement, 451 Otbet Netr Ldatl :Wrl Pritcherd reported that the leader of the Coup fp Thailand had been a strong supporter of the national Ipoaopotgl Therefore, there was Milly to be an improvenenr in the current situation Mere although imports were allowed, the lowest practical price at which these could be sold was 40 baht compared with 15 baht for local, cigereteel~ Hrl Brolef reported that: BATCo, nov had an import Licence for ~krieo and Hluld be bringing a project to the BC proposing a re-opening of the Ip~rlret~ mere had been no significant pew develPplPte in Turk~ or in Hnna end liatnm, However, it was hoped to have the position on SUT, clarified further before the Chairman's visit to Singapore in June, Itl ilnr~U1P grports : It was pored that Souta Cnr had erported 70 million to Poland in 1990 and was hoping to Increase this to 700 million in 19911 Other ~ar~ts were also showing significnt grovthl The ehPinan empbasised the need to build up a stronger · orgaaisstion weteeas and suggested that training for the people involved could be provided through BUmfE, 1,1. ru BAT Industries document for legal Senrices : Health Canada 20 May 1999 -6· bB. aationalisation of Otrrseaa grpresentation : Hrl Bteley reported that there las a programme in hand to atrengthen the Crnup's representation in werseas markets and to eneure that where there ~as more than one CrouP company represented in a utbt, consideration was being given to the potential benefits of sharing facilities and people, A new office had been opened in greece, facilities in ~bni~Pd and Taiwan had been rationalised, lotu was under discussion and O~UI1 Saudi, aongXwg and Barbados were also under review, fi~jII .aa ootrd ~h~t ~r~ Bra~lly i~d ~. hlthd.uld iea~r I~ 81 pn the results of the study eel up to determine the optima structure for serving the Chinamarketl 50, Jn I Hr, Btsleg reported that JTI had increased their sales to the South East Asian markets bye substantial a~clat. There had been a suspicion that tty had been d~pfng but further investigation had not substantiated this, Iheir activity as competitors will, however, continue to be monitored closely. 51~ GaPurl Ln~gan bbting Seminar ~ ~h, Prilehard and ~I Ecbaan reported that it was hoped to make a final tecap#adattop for the location far the conference by end-~ch, It was agreed that~of the locationa ~ich had been considered, Orlando, Florida appeared to have most to recommend it. Illthough the dates provfsionally agreed for the seminar had been 2bth-29th No~abet, this had now been found to be impracticable and, subsa~uent to the meeting, revised dates of 19tb-23rd liopaber were agreed, 521 Etr, Berrer (ercise Structures), Elr, Brolcl (8rand Coodvill) and Elr, Ptitchad (eost-Effactiveoels of Promotion and Mettibutionl~~de BalatiDnships) confined that the preparations for their respective sessions were going ahead, L, barter will circulate a paper on excise before the seminar to ensble delegates to prepare their own cootribueions, Hr. Bramlef asked for examples of the impact of quality on brand goodulll and it was suggested that grown d ~illLeon might be able to provide help on thi~~ The provisional list of participants to the seminar was confirmed as follows :- brown b Willi~eon Sandefur, Whitsbalr, Schoeobachlar, Fitzmaurice Souza enu Castro, ~drade bperial Btownllee 8aTR Schweftzer, T~t BA~Co, Brookes, Lsel, Watterton, goes, Btuce~llct, Grant, Tsndrup, F~etfe, viner, Uurmser, Bold, taur, Edmuads, I~hugh, Borlor, McDowell, HarP~or~l, Ashn. ~S~Jk Changes frcn the previous list were the substitution of kux for Stepheneon end the addition of Bahn, Roaa, Stuart and Booralingao had been deleted from the original list hut were still considered as possibles, Yr, Broughton was asked to review and report back on other~ potential candidates for the seminar, which se designed for younger 1 general roapra rleh top-management po~eatiall Subeegueat to the meeting, Dunt and ~, wre suggested all possible additions tn the listl 'fV 11,1 o BAT Industries document for Legal Services : Health Canada 20 May 1999 5d. Technical Waian Meetings : L. Bramlel presented a review of the Technical liaison meetings held in 1989 and 1990, 11 as agreed that vhila the Tobacco Strategy Kevin Tea wished to encourage the interchange of infaraation sad expertise by indiPiduals, there should be a reduction in the frerlwacf of general meetisgs Lorving large m~bcre Of peoplel It as suggested that when general meetings wart held, the ain should be to limit the attendance to the chirma of the meeting plus opt representative from each operation, It was also agreed that the freguency of these general maetfpgs should he reduced to the follodng:- (a) Research Policy Group/Progress Review PuPdecntal Research - Combined Annual Heedng~ (b) Scientific I(cacarch Group - Annual, (c) Product Development Group - Every Second Pearl (d) Ad-hoc Workshops, etc, · Oary where initiated or agreed by the Tobacco Strategy Review Tees. 551 leaf Supplies : It as confirmed that leaf supplies are likely to he severely rastricted worldwide in 1991, with B~1$ in particular in short supply, US prices are expected to increase by 52 and greater price increases are expected for supplies from Brazil, Argentina and Zimbabwe, It us also expected that the EC atoctpile of 300 million kilos would be nx down and that ehe pressure on leaf prices would embarrass eopsnics who had cmdttcd to supply in price cigarettes to the 16SE(. 56~ kl bitchard, dr, Bralep and Mr, krtcr confirned that supplies had been secured for 1991 and that the likely swing in the ptodulu in 1992, as current shortages Encouraged pore planting, had alao been tplrea into PCEOUPr~ 571 nt, Roob~u~ reported that Souza Cruz are still behind on durations and it as agreed that if was important to talk to the BraziliM Governmant about how increased Leaf'production could be encouraged, The aim should he to Increase leaf production by IfX end ~r, Ronbaut was laired to report to the (hairmaP how Souua Crut would attempt to encourage this, 581 tntiroaentll rohceo Smoha : LI Pritehard reported that the two draft reports by the US Eovfra~PantP1 Protaction Agency on Bealth Effects of Passive Smoking ad Environmental Tobacco Smoke in Workplaces are still under review by the Government's Scientific Advisory Board (SAB)l Brown b WilliaPson believed that the Tobacco Industry representatives were managing the issua satisfactorily and that no f~rthcr initiatives are called toe at present, Rowever, this would be kept ender review. 591 pire-Safety :Hr, Pritcbard reported that a Congressional committee had concluded that it as technically possible to produce a self-extinguishing cigarette and had initiated further H,rkr ai~ed at drafting legislation to specify this as a reguiramentl Bowevet, the minimum period required for the further testing ~ich ~utd he necessary prior to framing the legislation would be three years, Current indications were that further probla~s had arisen in defining a valid test for a self-extinguishing cigarette and progress appeared likely to be olou, Bow~er, rhfa vbuld coptioue to be looitorcd~ IV 1,11 a BAT Industries document for Legal Senrices : Health Canada 20 May 1999 ' ' -8- Charters :Hr, Broughton reported that the International Chamber of ~erce had put forward a Charter of Environmental principles to Ilch companies would be invited to give formal support, This was similar to the Velder, principles presented at the last meeting but was more pragmatic, leeldng steady improvement rather than Betting absolute atandards, Since it rma also supported by a body with more standing tban the CEBES pressure group, who were promoting the Baldez Principles, it could gain more support than the very low ~evel~ achieved by CEBES, The current view on the TCC Qsteer was that although the wording of paragraphs 6 and 7 of the Principles, on products/Services and Customer Mvice, might raise difficulties for a Tobacco ccpang, qualified acceptance of the Charter might be desirable, Companies would be aelred to consider, with their legal advisers, whether these paragraphs could be redrafted in 1 form which would be acceptable to a Tobacco company, i B environmental audits and L, Broughton would discuss with companies how It Has noted that dere could also be a requirement for independent . these might beet be carried out, O Hr~ Broughtoo will write to companies separately regarding the whole question of EwiroPoental policy, ~ich is also due for review by the B,A,T hduatriee Board in October 1991, 6?1 SpoUng eWPPPdltPI : Hr1 Bramley reported that the SPoUng Compendiums would be updated by end-april, 61, Sidestreem Saoh : It was agreed that although there were doubts about the potential for promoting reductions in sidestresm smoke as a selling point, there should still be formal objectives to reduce visible sidestreo omoh from Group products, It was asM that companies should introduce appropriate objectives into their product development and quality control ptogr~es~ 651 ~dditinl ~gi~frt I ~r, Bramley reported that the Mditives Register C as ~DJlt co~plere ~d vpuld be circulltd ~tlr L tb~ le~r. 66, blenders Bandbook : ~r, RitcLd circulated copies of the Blenders Bandboo~ to mePbers, 67, r-1 Tobacco : it was reported that vor~ to incorporateY-l blends into ~orhr cigarettes was continuing, includiog its se in the forthcoming trial of Barclay in Noruay, Hembers were ulred to report progress at the neat meeting, 68, %can~tlt~tad Stem i It vee noted that Mrl to increase the use of reconstituted stem Is continuing, It was agreed that this should be pursued with the objective of rUag full use of the potential for improvement offered by this process, 69, ~aod~ Treatment : It was noted that the VOr~ to characteriae the decomposition products of cigarettes containing ~ooPiatcd tobacco vee continuing and rhac the results of this work would be reported in Septabetl ~lr, Braleer was asM to ensure that products from Brown i Villia~oa and results from their own ~t~ were included in the overall rwicw, fO, Bates of heat Iketings : ~he neat meeting has been arranged for Thursday, 30th hay, Subsequent dares are Friday, 6th September and Monday, 2nd December, Rc,n.ra 15th ~Fch U91 O BAT Industries document for Legal Services : Health Canada 20 May 1999 _· __ I_C~C_··__ 5, · --_ ..~r·····~·· D QOpXI(S ~I 1 Mit SE r I'' U i Tobacco Smealtr Inip Tea I i. ' -~ "'"' ' ' I nacdPg of tbs Tobacco Strategy BnL Tea Me held on 30th loPlet 1990, present: Mr, P, Sheeht, Mr, LP~ Broughtoa, Mr, B,D, Br~lel, Mr, B1J~ Prftchard, ~~ II~ Berter, Mr, D,JI Bdaut, Hrl f·l~ Mercier, Dr, 81 Sorcer (Secretsry) tlrl d,l, Beard attended for itenls 35-51~ II ~e dxotal of the nesting held an l?th Sepcgbet are agreed, 21 IntaFCapany Transfers : it naa noted that opportunitiea to broaden ~PnPgcta' uperience and to transfer expertise through Po~a~nta of staff between Group fapdes are being pursued activelp~ Bweting to review edsring secondnents and to review progress on the identification of new opportunities rod new Candidates will be arranged by Hr, Brdcg in dd-1991. The results of these reviews will be reported to the teen in Scptombar 1591, 3, Bepressntation in Overaeaa ~kriLtl i It as noted that in eope marhta where Ipore than ope Group co~p~ny as tapeasented, insufficient advantage as being ta~sn of opportunities to reduce cotes and i~Ppto~a efficiency by ehari~ office facilities, narlret inforaation, Pafht research, etc, It as agreed that 8, Branley, Hr, Ptitchard and ~itl Barter would review the srrange~ents for their overaaaa representation and RIUld rep" baclr to the next Pledng on specific action being tab to inprove e~oediPntion, b, IiS International 1randa :nt, ~itchard reported that sales of USIB for the par would show a significant (r3z) increase on 1989. Tbs rate of increase in the second half of 1990 would be less than in the early part of the pat but there are specific factors explaining this (e~gl the tLiPg of the ~ineee New Year; of launches in Japan; and of the opening of Eaar European prrlpts), Thus, it did nor represent a B~BCkDIPp in the mderlylng non~cnr~ of growth in OS Interaationar Brands, Brown L Villia~eoo were co~ltred to the objective of achieving 152 p,s, ~ol~e growth through identifying ad L·fuUf ue~oiting pu~r Ppportlmities a these bro,a, vDrldwide~ 5, Per gat, it as noted that a first evaluation of the Total Offer Tetra in Erope vould be nade in dd-Dccaber. Bso~miag that this evaluation shows encouraging results, test Pr~ta·~re planned for 1991 with a pan~-gu~opan launch in 1992, It as also noted that the launch in Brazir had been bro~ht forward Ita 1992 to 1991. 6, loct~ 5Lrit lights as considered to have a good growth potential and would be available in 15 countries in 1991, d possible launch in Veaatuck as being considered end luclty Se~rih was naldns good progress in Bradl, prospects in Europe were considered to be particularly good with significant progress in Csrpany ad f~uehct launchsa planned for 1991, The Quirasn underlined the i~portance of Ipo~Iil~ing a really effactiva sales drive for this brand, cranmsurPte with its exciting p~o~pects in the natht, It as also Qportant that the guidance on pricing end on blends was followed in each ~arht to ensure the tight positioning relative to Marlboro, 7, Mr, Bmley at asltad to ravieu the blends, pricing and distribution in Spain and to report befit to the next Peedng on action t~hp to i~pto~e puality, raise prices and strengthen distriburion in this TV ParLet, O i,,, BAT Industries document for Legal Services : Health Canada 20 May 1999 -2- 8. The Chairman stressed the importance of conforming to the approved blends for gent and lucky Frfh worldwide and aobd for reports for those ~athtl where other blends were being used, outlining action in hand to change to the approved rccipee~ 91 Far ~r~, it as agreed that it would be critical to avoid damaging the image of Bsrclag as cdioiag full flavor with low deliveries. It was important, therefore, to be in a position to launch Bsrckg Oltra Lights (291) ahead of any change in the tar rating of the existing product. BeviPed strategies should be considered for chose urb~a where it had been intended to launch a 588 rated product ahead of the 2q versiool The rwiaed strategies for krclag will be reviewed at the next meeting. 10, It was agreed that Qprl and other superslim products would continue to be significant as niche products but, in future, progress should be reviewed at 6 monthly intervals rather then cluatterllr, 11. It waa noted that viceroy and Ioo1 continued to be progressive in selected markers end it was suggested that further consideration should be given to the potential for expanding sales of Menthol cigarettes in the atricalEliddle East region, 12~ Ie as aP~cd rha~ P9b1 as importaar as a leeding ~opprlccl brand for Eastern Europe and for Ge~any~ The [hai~an stressed that it was important for the brand owner to control the blends, however, prodded this as done, the markets should be supplied from the lowest cost source, subject to the fustbee condition that the business aust be profitable on a full cost rather than a marginal basis. Specific consideration should be given to suppry~ng~al hall ftw Brezil. Detsils of the blend to be used will be supplied by Hr. Ptitchard. 13. Ibe 1991 plans for the major OS Intarnational grands will be reviewed at the neat meeting. In addition, Mt. Pritchard will also provide a note explaining the differences between the methods used to calculate the figuree for US International brands as presented by brown 8 ~iilli~Pson and BATCo, relpefrivelfl C 14. U[ lnterastieaaI Brapds : Elt~ Brmlay reported that dthough do~elltic tales of Dg International brands, apart from Players CoSd leaf (IQ), are static or declining, Export sales of SE 555 and PCI were progressive and the declines in Beneoa d Bedses and JFS appeared to have been haleed~ Dvetall, sales of Vg Incernetional brands were continuing to expand. 15, for Bonson d Bedges, it was noted that there had been good progress in Trance (0,9X uelrat share) and the position in &at Lftifa appeared to have atabili#d~ Thl evaluation of the potential for launching a Benson h badges $erican Lights had not been encouraging but was being looked at again in the context of the Llaysian aat~t, 16. State Irprau continued to do all in the par East. There IRd a Deed to redesign the pack for the low Tar variants bor it was agreed that the brand image was sllfficiently strong to allow considerable latitude in design, ~7~ Smoking Pnalitf was a continuing concern and it as agreed that in order to uiPrsin the image of the Ipreaatiooel grands, it vail important that these were based on international blends. EVIII· effort F1) should be made to negotiate an end to any restrictions (elgl in Spain O and Blagefa) re~uirtng the use of local leaf. N BAT Industries document for Legal Services : Health Canada 20 May 1999 -3- 18, Pastern ~Ptopc : ~lr, Better reported that even excluding Past Germany, which is nov part of the German doneltic market, 1990 sales to Eastern europe up to the ed of October were 2.5 billion, which we over 502 ahead of the corresponding period in 1989· tlovever, IsrLt conditions ste becoming note difficult de to political ~cer~aindes ad a YITBIPIPs ecOnOPIc situation. it was also noted that Philip Morris ~a still~ore successful in penetrating the ~rhts and in expanding satPs to duty free Pad hard currency ovtlc~e~ 19, Ihe 11999 was being visited during the veer and one purpose of the visit will be to set up the Moscow officel The Crwp had alresdy established a range of contacts in th VSSR and in addition to offers to the Central import $ePc~, enguiriae ware also being received fta traders who were believed to be supplying the nrb~ through counter-trade arrangements, 20, In Poland, increased tares and pmititre duties on imports were severely restricting business, especially in the hard currency outlets. Although there ~Rre s~ne opportunities for imports from Brazil (which attacted lower rates of inport duty), longer ten expansion rJas lilrely to depend on ~snufectuting in Poland. 21. Mr~ Better had bad talb with the works council of a factory in Poland which could be privetised and the next stage vDald be t~ send a fd~al proposal for II joinc venture. Although the factory was smaller thsn the NO leeding manufacturing plants (uhich are in negotiation with Philip Lrris and gJg), it appears to be reasonably efficient ad has roon far expansion. If the Group proposal were to be accepted, the likely level of investment would be around e4,5 ~illion, which Light be in the form of machinery. 22~ The (hai~naP suggested that it ~uTd be helpful for Mt, better to sae~ assistance from a company in London which was hP~a to the Group ad which had apetience of negotiating joint venture srtangsente in Poland. Mr. Better said he would do this ahead of sending the proposed letter of Latent to the Polish 1Yniater for Foreign Investment. In addition, it was noted that the Group should also be prepared to advise the Polish Covermnent on excise structures, which I appeared to be tudlentarg at presents 23. Bunguy ;Kr, Braley reported that a proposal for an inoestnent in a factory at Pees in tIuagaty was currently being considered by the State Property Agencyl Although their response on this had been delayed, It eRI expected within the nut few daysl aowever, the change of Pfnance Minister in tlupgary night cause a further delay. 2~, Butearia ~ Following a visit to evaluate 3 factories in Bulgaria as potential iaPeeacnts, it was intended to send a letter of intent which Hr~ Pttsrton hoped to discuss with the Bulgarian authorities in January, Mr. UaltcrtoP would also seek to identify export opportuoities during his vilit~ 25, lad Advisory raa : Mr Br~Ple~ reported that the leaf Advisory Team had been set up along the lines previously agreed sad the team planned to visit ~rungaty, Poland and Bdgetia during 3anuary. It was hoped that by April next year, the te~ would be in a position to provide useful, advice on leaf growing in each of these eoun~riee~ i... BAX Industries document for Legal SeNices : Health Canada 20 May 1999 26, ~iLtn~r : Mt~ Brlllnleg reported that lit, Uattctton had visited VietoaP and would return in January for further discussions on the potential for investment there. In the leantime, It as thought that there could be opportuaftiss to proaota exports of SE 555, 27, 1~ : B~TCo~ had sent in so adviser to help the Burmese GovermPeat set up pn excise ot~ucturc· Iltbpugh imedioee oppPrt~miriecs for increased trade at investnent appeared to be limited, contacts with this ~tbr would be ~a~ntaiPed~ 28, sna : It as noted that BAT had been all ImoM in Victn~ and Bu~s through S~L and the Chairman suggested that aformal agrcc~ent with SI~TL light he considered as a vay to build on these contacts, 29. Mexico : Mr. Braley reported that the Group's bnods had been registered in Mexico and an fqort licence had beeP applied for. The p6teneial for setting up a secondary ~aPufaeturing plant as also beiog iavea~igated, Attempts are being made to ly bad; the rights to the viceroy rradaarlr but the current owners are resistant to this. L 3D. T~ I Xr~ Brdel rcpartcd tLe a *etbg vould be beTd ealt in Dece~bet to progress the negotiations on a potential iaes~mt in Turhy, This project had now been handed over to Mr~ Lttceeoa and his tee, 31. lraailiangrports : It as noted that following a significant increase in 1900, the target far exports from Brazil ID 1991 would be 3 billion, which as over double the vohlPe achieved in r989. The Chairlan stressed the need to upgrade tL staffing and expertise in this activity aDd it 18 noted that Souta Crut are obtaining help frost Brova i Ellllli~meoo in this respect, It as asked that Souta ~I~ should report progress at the net Petting, considering the price and profitability of exports as wall as the Polaa, 32, Mannfaetnring Capacity :FoUwing discussion of an initial sa~ey of the present and potential capacity of the Group's moia manufacturing facilities, it as suggested that flsther tRr~ as required both to establish where shortfalls might occur and also to L) establish where there as a potential for expansion to improve the overall productivity, cost-effectiveness ed tax~cfficiency in sourcing the Group's ~irlretl~ 33. It was agreed that Mr, Kohnhprst should be ae~ed to arrange a meeting of the Group's production directors and that he Should produce a review for the Hay teeting of the tee; showing the currently planned capacity and output of the Group's lannfacturing facilities; identifying potential problems; and considering optloas for specific e~paeofone to provide extra capacity and oppct·t~midee for lore cost-effective ed tax-efficient Irsys to peel overall Group danand, 30, The Qlairan noted that Mr, BaMister It BIUIIIIE had produced a good appraiast of the potential for expanding Southaapton and suggested that a similar appraisal should be carried out for Bayeud~ Be also stressed the peed for each company to ensure that PachiP~ry rmuld be 8vailable to ~ec~ planned expansion and reIutbis~nl up to r995~ It woe also suggested that Souza Cruz should contact nchiPerg Pandaceurete to try to encourage improved availability in Brazil of the equipanr needed to update their ~apufpet~ring f~cllities~ 1111 BAT Industries document for Legal Services : Health Canada 20 May 1999 ·5· 31~ Yu~~ Pesurcb ~l~s : Introducing the proposed proOrane for ruudaenrsllesesrch, Hr, heed srld tht there hd been e obsPge of erphesis with greeter prioritt I being given to providing the scientific hlil for inproved product design, k I result, less priorltt ws being given to regUlOtor]f 1IIII sud to specuIetive 11h on innovative products, Tbe proposed ~oarLP of effort ~s:- (1) SI~ Prlitf Inprovenent 351 (b) hl·tite products 201 (c) Il(~~to~ issues igI (d) GnviroPsentsI I;sPes 171 36. Mter discussion, It Ps Ilrea thet the proposed alioostion of effort Id the total budget or 13~6111111100 pla 10129L dlliOl for the Scientific acselrch Crop projects Pre wc~pt~blc, mt propoesls for tbs contributions fia eecb capat to funding tbs ~alru~ vss noted but before egreeing these it rs ssl;ed t&t there should be s further chcct hi al Itolhton to ensure that the slIoutioos ire oule ip the lost L~tfflCilnt PI. 37. bioIogicI h~tl : I specific issue discased in the review of the reseeroh Tolrr at the Croup'8 position on testing for 'blololicsl Ictivitf' II the L1~ test end hi other llethods. It PI noted tht there is I coPridq ptolr~ to nonitor trends in the Irrltme of new bioslsnls snd to an8op expertise in those which nsI bl relevsPce to tobrco Cadctl, It wt llso noted thet despite the llncert4ipti pssoeisted with current in vitro tests ad their spplicebilitJ to coupler sIstens, thef could provide infonstion both II to ha people who use these tests a cheracterise CroPp products ad es to ~ltblr further teseerch is telolred, bracr, this does not ~p$ sceepteoce of the 14Yi~l of these tcl~~~ 31. LcM~ ~f~i~op 1 Elevieving the hlrrent lrrsngenents for technical 1Wson, it Ps noted tht the intercblnge Of B~ntiol on ~O end product dcvelopent eppesred to be HIrldng ell but there PI less L confidence in the effectitreness in sharing ipa~EiOp Id Ipttill on llsnllfacturing proc . 391 It Ps arld thet, wherever possible, tcelicQ Ulirn IhoQd he on a ed boF bssis end rgdlr li~i~oP nsotings should bs evoided, It vu rlso sngrested tht it Ms better for the person responsible for a activity to he involved directly rsther then bsving one person responsible for lieison over I rage Of sUbjeots. ~ lJhile it ~~ scee)ted tbet secoPdPents Pre I veri effective Pas St Ihaiq gparicPea in depth, these should be restricted to ceses ~lr~ there vis s specific purpose related either to the ttlrllt of specific expertise or to rlpr dnllPprt, 401 ~e Q1~~1 ~~Y L~ Lllrl 0 Irrql for e peper to be presented to the nest peering, detpiiing the t~fLie~ liaison r~t~lll which U occurred in 1919 sud 1990, showing the locetion of eecb ad the usl of the people 6 hd attended, Ltd on this, the tea would then be Ilhl to decide Q~tblr there ps s csse for reducing the number of ntiql ed whether the lttePdPnCe It futUTe Deetings ought to iRDlllllid~l Ipc~t· of people, i... O 8~ industries document for Legal Services : Health Canada 20 lay 1899 -61 41~ Begnlatory lssuee I SIDUns oalircraft : Hr. Brp~le]r introduced a paper suggesting approaches which Group companies Fight take when faced with the possibility of airlines introducing bane on nP~ing, It was agreed the the paper would be wlfd u general guidance for use by indipidnal cwpanies and ehauld be Pade available to then far use in this MJ~ It ~B also suggested that an additional point to be Ipade was that the airlines gained fron ~wobdng bans through reduced addnistrative and cleaning costs~ Hence they would not be judging the issue entirely froP their cuet~~ts' point of oiew~ 42, I LnvirolnentI1 Protection ~genc]r : It we noted that the ITS Eavironneatal ~rotoction Agency had produced eKI draft reports on Health Effects of passive Snaking and EPoiroameata~ Tobacco Saolre in Brlrplacesl Hr, Pritchard reported that these uete pow being considered by the eover~ent'a Scientific ~dviaorg Beard [SAB). Be will report the reactions of the SAB at the neat #ering~ 431 Siduttcs~ Slolre : Objecrfves for reducing aidestra~ sob will be reviewed in february 1991. 44~ Slollng CoqsndiPu : it wea noted that the SPoking and health Compendiums will be reviewed and updated in January 1991. 45. Tba ~dditilal Register will be cwp~ered in the first ~astrer of r991. 46, Gttlll Issues : It vas noted that the win iesw likely to be of significance to the Group use the attitude to packaging and the related work in the European Cpd~sioo which could leed to a Directive, based an proposed Ge~Pan legislation, to rrmlre retailers responsible for the collection of packaging used on products which they sell, It usa agreed that develop~oo in attitudes to packaging would be a by issue to be lonltored by the Group. 47, Valdar CbaFta ~ It ms noted that there vas increasing pressure in the USb for olajsr co~paaics to sign an eaviroapental charter based on the 'Valdez principles', The Secretary ws asked to report back on the possible significance of this to B.A~T IPduettiee~ 48, ~rodoeo Incorporating I-t Tobacco : Hr, Pritchard reported that products incorporating 1-1 Tobacco were undergoing tests, the results of which Ixl~d be reported at the neat meeting. Elr, Herter reported that tests of BATCP products were due in 1991 and BBTeo~ also reported that Y-I was being evaluated, 49, The Hiders Handbook bdd hew EOPpfeted and Hr, Pritchard would arrange for this to be circulated throughout the Croup, The handbook would be treated as a high security doc~ent and this ~Ruld be reflected in the way in which it we distributed and subseguently held, 50, ~oai~ Technology - DLeolpodfionProduct~ I It ~ms reported that the project to characterist the decwposition prodncta of cigarettes containing naterials subjected to enPonia trea~ent is dw for coPpletion by lid-1991, Results of teats to date have not given cause for concern, fl, pee of lecotutituted St~ : It usa agreed that the project to evaluate the benefits of incorporating ate in the fon of reconstituted sheet should be rwpleted as soon as possible, Ass~nniPg that this shows that the use of sheet is beneficial, plans should be prepared for Peering the tcquiegeot for sheet in Europe, drawing an the Ulpetieae of brow Er N WilliPmloa who have sheer de for rha by Kimberry Clark, BAT Industries document for Legal Services : Health Canada 20 May 1999 -7- 52, leaf Supplies : It as noted that reviews of the li~Rly availability of tobacco in 1991·1992 hod.suggested that shortages could develop, especially in Butlcg~ It was agreed that all companies Should ensure that orders were placed as early u possible in 1991, sufficient to cover the total rc~uirault: for 19921 If there Ire any shortfalls, action should be put in had bedktcly to expand supplies within the Group (elg, in srazil and Nicaragua), 53, Grade Bationaliaation ; It as noted that the worl;ing of the leaf Grade rationalisation scheme as due for review in ~g 1991, 51, enrrent Trading : Bevieving the results for the Group's tobacco businesses up to the ed of the third guetret,·lir~ Broughton drew attention to the increase in vohe which, for the full par, as expected to be 11 billion higher then in 1989, despite an ulaed 3 billion reduction in trade loading in the DSh~ Trading profits are also expected to show an increase co~pored with 1989 despite an adverse ~oocmene in exchange rates, C ii. B ~ss sotrd thsr ~tCo. we holing for a litnlilclpt iPcnPsl on 1989 despite adverse effects due to exchange rate movements ad an economic dOMtlP~D 10 Africa, Spain bad prfonned better than expected, Msrlret share and profits had increaaed in India in local currency but this had been offset by the devaluation of the Bupee~ 56~ grown L YFlllwon are also hoping to mat their profits budget but volue could be slightly below budsetl The results were adversely affected by the expected intention of Philip brr~s to increase trade loading as the pressure gtovs for their tobacco bwlped#s to cwpensare for reduced growth in their food businesses, 51, B~Q profits before tax are pn5 million below budget at the ad of the 3rd Quarter but were expected to wat tbs bdglr for the full gear. 58, Sow Qpl ~ns expecting to achieve a Illptlrel stare of 812 for the full par but there wuld be a negative variance on profits dur to L. price controls on cigarettes and the adverse effect of an wlrpalwd Quzeito on Leaf exports, The current trend as for the Crudra to daalae which ~uld be good for exports but would have an adverss effect on the translation of profits, ~ 59, Imperial's Pat~et ahsre had increased to ~OX and operating Profits were expected to be CanS11, million belter than budget, Bovevcr, industry volupes are down 1,52 on the par and this trend usa expected to continue, 60, ~Lnyc~Pt Development : ~~ Broughton reported that the project to review the srrangemants for ~oo~gaPcPt training and davelopnent bad been Ist-up and would be cbardinated by Hr~ McBeath, The main part of the Y3~ would be carried out by two secondeeal we from Tobacco and one from Pinaacki Services but it se also intended to use consultants to collect data on current practices both within BIl sad in other fwpaPies, 61~ It woo noted thmt It as li)rely tit the coasuleaat to be used would be Bill laidlaw, who had wr~ed for RotLne ad as now a partner 13 Iloeaic, a spall independent consulting firm epee~alieSog in this field. i,,, BAT Industries document for Legal Services : Health Canada 20 May 1999 __ __ _ LZ~ It was agreed tbst the person ccoded to the project should he a high potential ~nagar in 30-40 age group and should preferably not be a personnel specialist. ~ specific a~inatLa 911 wade which will be follovsdup by ~. 8toughtoll 631 me QaiaaP aslred that the Icr should be ptaided with progress reports u the project developed, 64, Ehr)teting Directors Scninat :The GZlsirnsP thaahd the ~c~bets of the ten for their suggestions for issues which pight be considered by a future ~arltbtiog directors' sc9lnar, The errengaaents for this eainlr will now be progressed tom the CePtre. 651 Datea of Fntore Lct~ng~ :belinga in 1991 will ta~e place on Vcdaesdg, 27th February; Zhtlradal, 30Lh ~y; Prideg, 6th seprabLr; and HoPday, 2nd Deccmber~ asloJA 12th I)ecenbet 1990 BAT Industries document for Legal Services : Health Canada 20 May 1999