BIAIT .: STRUCTURED CREATIVITY CONFERENCE DELEGATE PRESENTATIONS CONFIDENTIAL: Group only MONTAGU ARMS HOTEL jO BEAUUEU, pAMPSHIRE, UII 25th· 28th JUNE, 1984 ~ BATCo document for Legal Services : Health Canada 21 May 1999 THE ORDER OF PRESENTATION WASI 1~ iED PARPP~K : BROWN AND WII1IIONI USA · 2~ DA~ID [REIGHTON ; PRDOUCT APPLICATIONS GROUPI GR&DC 3~ ~WRI[IOWU~SER TABnCAHnRIA,tANnRvIsIES It, 6EOR BRWKS : ~RKETING' DEPARTMENT, MIUBANK 5~ IPII ROSS · : SURN TUPAKR, FLN1ANO '6· B~ SCOTT : BRi UK g E, UK 7~ BOB BEXON ; IMPERIAL TOBACCO IlnrTm, CPJIADA 8..COLIN GREIG : PRonurr APPLICATIONS GROVP, GRgDC (CONVEMOR : Ros FERRIS, 6i~CC) I~?PI& SINCE IZR SCOTT JOINED ~ME CONFERENCE AT SHORT NOTICE TdE REPUIRE' mM FOR R FOIIMRL PAPER WAS RELUISEDI H~II~ERI AN INFO~W. DISUISS1W nAs PRESENTED ON THE SUBIEC7 OF BAT UK g E INTERNATIONAL BWU(D PWINIHE do I1R SCOTl WENT ON TO EU\BORRTE A SHORTER LWF(HIRmUeEO 'IOBACCO C6HtENt PRODUTT PROPOSAL WHIM WAS EYALUArm 1NO APPEARS 1N THE ~41N WCVRNTATIDN OF CONFERENCE PROCEEDINB~ BATCo document for Legal Services : Health Canada 21 May 1999 THIS BINDER [NUUDES THE FOib~ DELEGA~E INPUT r0 THE STRUtTUROI CREATIVITY CONFERENCE, iN THE FOW1 OF PAPERS PREPARED PRIOR TO JOINING THE CONFERENCE AND PRESENTED AS OnE HOUR SESSIONS OH THE FIRST DAY OF PROCEEDINGSI -oOc- THE BRIEF REGARDING THE COMPOSITION OF MESE PAPERS WAS AS FOLLOWS : 7HE THEME OF ME PRESENTATION MUST BE A PERSONAL INTERPRETATION (A) THE CURRENT TOBACCO ~WS[~#6 SCENARIO, ItS KEY CONSTRAINTS CHALLENGES AND OPPORTUNITIES; (B) A PREDICTION OF FUTURE MARKET'TfiENDSI DIREQIONSI CbN' STIRAlhTS AND OPPORTUNITIES; (C) A PERSONAL VIEW OF THE CURRENT AND FUTURE DEVaOPHEh'T OF CON' SUHER NEEDSI A~II~TUDESI AND SEGMENTS; AND (D)VIEWS ON CURRENT AND FUTURE PRODUCT TRENDS, NEEDS AND OPPORfllNITIES~ THE PRESENTATION SHOULD BE STRUCTURED In SUCH A wAu As To mo WITH ~e FULLY SPECIFIED PRODUCT PROJECT PROPOSALS ACCOMPANIED WITH REASONABLE SPECIFICATI[)NS OF PRODUCT PARdMF~ERSI CONSU~R RELEYAHCEI MARKET SCENARIO AND, IOW1Y, TARGET SEGMENT PHD C(~UHICATIDH STRAfEGYII -oOrr THESE PAPERS REPRESENT INITIAL PROPOSALS WHICH WERE SOBSEPUEMLY DISCUSSED IN DETAIL WIMLN ME CONFERERCEI FOLLOWING WHICH EACH PRESUlfER RE'[AS'T HtS ORIGINAL PARIECTS TO REFLECT MORE TIGHTLY SPECIFIED PROJECT OB)ECTIVES AND TECHNICP~L~IZAAKETING FEPISIBILIM~ (SEE MAIN PROCEEDINCS·) fs BATCo document for Legal Services : Health Canada 21 May 1999 C c Y .· r~i s·· ·· C" cu · ~c~~ · · ,-· ·~· -g ..~. . .. .~J· r; ~·*: .~t 11~ ~~3 ·~ · " ··r.· -c. 4~ n ·-· 8~ · ' a I:' ~I· · ': r` "" ·~ ·' ·~. ·: " ~·1 · '' r *~ n-. I : · · · · · ·~' ~G *1 W1: WPAAPPLX c- :4 ~ II~Slb L ~a BPaa ~ams 2· Lm QQ ~SIRma · · - . · c I, ,, ; ··~ ·· ~lSi ~I · ·· ·~ · :· 1 :~e ~·. · 1·· ·1; ·. :~ '5~ A; , "' I.. ~c. L ·"·"~: i~' ;~' ji,· ....~· . · ~ ' ~ . '· P ·j! O .su. 'r · ' ~· Q u, ·~ 6. W 'P ·~ ' '' r · W B~TCo dPcumont br Legal Slnlcca : Hlllh Clpda i~ Yy 1999 Z Z c~ a os ~J a: a a s z L) o: w J 51 c a U. Z Z Z ru e z w N Z e~ a Z " 5 4 r~ z·w a O a: Z a a X u w O O Irl P BATCo document for Legal Services : Health Canada 21 May 1999 Z O co Z W w L' Z Z(Z t ·w L O O Z c L~~WI Of4~7 ~wPa~ w~ TU )DJ~Z W3~~0 ~U>WU i. r>, r r O O 9 BATCo document for Legel gent,s : Houlth Canada tl Yly 1199 C ..~c- · -··-~·-. X O O in W f W r P O w W P r P O O g g WTCo doeumcnt far Laid tenkll : Health Canada 21 May 1419 t- P 4 W w 0: Z u. p: P v, W Z E O 3 O U O O W Y BATCo document for Legal Services : Health Canada 21 May 1999 :i' ··· ·..';.i·:2.·''-` ~~~-'·" " w eJ c u u L" P d O J P: O 0· 'O O g W BATCo document for Legal Services : Health Canada 21 May 1999 I ···--· .. .· I~·: : ·· J UZ LPZ OP JD O Zw UW WC Z 'O V) J J O U t Of ZW r: c·a wg YJ fw C) Zw a O O W 0\ BATCo document far Legal Services : Health Canada 21 Yay 1999 C 1 U a 4 L O L U O 3 P P O O g g O BAtCo docunent for Lsgd Senlos : Hsllh Clnada !1 May 1998 -= ~-~ea-,- · Ct ut rW Or U Sb L o~ t r> L uu n e z r P a B O Y O P r W W U r0 W t I : P cr P X Zw W W W L >t uo ~z a O O V BATCo doellant lar Lspd Ilnlas : H,~th allb 11 Tty IlsP ~rz · ~:~ ' · Z W Z LU 4 t 4 r t Z W P: P: 3 U M P O O IC·l r0 BATCo document for legal Services : Health Canada 21 May 1999 C 2 r lu C w w O 6: 3 2 C 3 rw ~ 3> rw ~W CO eI w4 L L 3U PI r W W LO 3t (W ZZ W~ Pod N O O U BATCo dccumant far Lesal Ilntsl: He~t~ Canada 21 Ya 1199 ·X* v) W w u, Lr~a: P~PI- U w ~-LOI. JWw IL~D ~o lo 2 W f UT 2 U or ~3 2 1 3 O o O OY ~ a 2 WW W to ~~ ~ w < < ~J 3 LL b: P rl 22 C J~P 0: O~J LL~YLL C1iLCI w~P: WWO Z~Z O O W U P BATCa document for Legal Services : Health Canada 21 klay 1999 w > WO~ z 5 LL LLW3 ~WJU f W·L ~Cw J U O U ~C4 g t I L L S w u r a u r O ou r 2 P w0u W~A Z d 01 P D ·W Z W 'E r P ~ 3PS~ a4~w tDUO oaro U~r4 O O g W BMCo docamlnt Cr Ilal Sonkw : Holrh Clads 2~ Yly 1999 r '1 ··'. ~' r'' LU P: 3 C1 W U a PI. P W V) Z O Z W s a vl ~J 4 4 r M O O \Q Irl (3\ BATCo document for Legal Services : Health Canada 21 May 1999 -is· ,·A~l ::: ~ · ~· U) Z W P U P: r .S(: o O Z1Z ~J O IL w e~T > t ~U Z c~ Ei 5 w rs p: ~ 00~a P LLJ~ w Zua U I- w Z W U O P:ZZ U We~O TZU t" 7 rr v, W Z v, O w~ w· W U P Z G W u r; P O O \D Irl V V BATCo document for Legal Services : Health Canada 21 May 1999 C 2 L r O O O u 2 U L a 2 2 2 P U c 2 O W Z P LL O O t L w O t O W 2 O w 2 U O O W O 2 0 c 3 O W P cn > 2 2 o u r O 2 p t U CPU n O O U BATCo doclmont for Legal Sinks : Hoalth Canada 21 May 1999 I .I:- u a e W L" c P ~LI O r, xr ~ 3 P: 5 R ~U U. O Zw O O: P: P P ILI P t W V) Z Z O: U L 4 eel W 2 yml· U g~0 Wv) Z 00 PO O mwJ 2 u u w c co z c P WOW O: w ~- U C~ ~L P, ~a' p; M o P Q O \D r U BA'fCo document for Legal Services : Health Canada 21 May 1999 U g. C U X U I t W U C c 1 O P O t tO f ~· ' O OQI 4* uwr r P W * W LP r0 n ou -~· uw ( EL CC LU E U~ ~t ~ ~u ~o t O~ ~U .a w< L u ~~n~ w at OL T Y UP L O mZ f= ~I ~ W(O~ O ~ wT ~~ *O =~ C m u O O 9 W O BWCo docunsnt for Lsg~ Senlcsa : Hsa~h CaPads 21 rpy ~999 CC·__·__ ·;· · ~-Zvl rn O O WIZ C' 4 W S u ~ L1 J u, r O L1 4 r W w Y r P: L1 X n: C· P: W W VI t S! O E M P: U 4 J vl E 0 W C1 O e: d ·u; p O O w a3 BAfCo document for Legal Services : Health Canada 21 May 1999 ,I~LI · · · J 4 P J U U Z 7 O O L 4 ·o ,~· r U X~U Y O~' 4 ~*P r; rww F 4 O O W BATCo document Pr logll ttnkr : Heath Canada 11 May 1999 C ·i. r u z 2 J r O le 4 Z h 4 O O \O W W BA'ICo document for Legal Services : Health Canada 21 May 1999 BATCo document for Legal Services : Health Canada 21 May 1999 --I-1~--~"" B L U P P L-N r~O :*" ~UW r ~ao PWE o O r wC S a W Z DLO UUI W MZE 00C MUO B O O BATCa doclmlnt ror ~I~ Slntos : Hl~tl 4116 21 ra 1)98 U. 0 ah > pC a W~ 3 W O OW gc~ eUC3 a 3v JLW a (0r r r ~re yJz 00 ~o OLU io3 OUT WrO 3 S I L ~Z IPJ 023 UOU ~WO W h I C~~< WI w~ I 3DPI YI~ Wr3, ~~' T~av ~XS WOr t r wyg ro~ 000 Z Z UY3 gw~ Z J O I X o j WI( L~W Wgp I(O ~oc O O BATCo document for Logel Services: Hoelth Canada 11 May 119) P: P: a Ct44 J t LL a O! .vl a ~er-l uw ~o ·w ~ ~WJ ~03 P~ L' a r VI~-Z w b ~ r 3~C en~e clUEI p~ w C·c4 a r ZcE: 5a~ ~n>Xw LCOC· w~J~- ELL W S L cn~L~~ ZJtO 01Ji UIL3U P O O \D Irl CP BATCo document for Legal Senrices : Health Canada 21 May 1999 j I Q \O BATC6 document for Legal Services : Health Canada 21 May 1999 PAPER 2 1 DPX1D [REIGHTON PROJECT PROPOSRISI I· FROKI GYD LIFT 2· COnPENSA'fABLE FILTERS 'P BATCo document for Legal Services : Health Canada 21 May 1999 STgt)erWED CREATiVITI ~I ~SEHIITIOIS D,E, Creilhton Bat Tobaeeo B~lrinl leario - lto LJ btn~t~, Chollaga ad ~)plt~tlC(I The ourrent Icac differs aatlufl~ fta atV to encVI W ~ e6atralt state ronopoIieo in dereloped a~triel with eqrtltin rl~atl In dereloped co~ttlc~~ Pe oan eontraet dereloped coantriee with or without restrlftIons with deteIopIng countries with or without rc~~rictis~l~ SIlllnrll pr nan r~h ~fflPat or poor Ilgnll in 111 these narketal ~ere II therefore no lImple or ~lcd tile. %oh r~et Is In a different stlte of de~elopnt, hat ~ of the dartlop~l e~t~ rerktts ~re Eopylag the lor~ lenloped ca~tric~, b! blroduclag reltrlctire legIeIntion iad increneed tlxell To this ten he Idded the eInoot world wide aclpdt receesIon end preslon on Im repatoents and reltrletloaP on forelln a~te ~~ll~blliO~ Thne In PV dereIopIng eountriell they Ilt hcall rre self Ilffrclcnt, are apre be~l$ produced Pteebll inc8d8y tobleeo lad hence 'mtcn~tlall Ireadl' nuat either he reduced In eveiIebIIity or (Icnctl~) rcaPeed In (~lltJ and eltcred In tlste hf the ct of loFI1 neterlals, kq countries t~tl esignifionnt pert of their 1Pcr In tohcco tar, than the jarernpents here e rented interest in tbe ~atcme of de lnduetrg, enpecielly if it II 1 toheeo exporter as ~11, ee this Ibnea~ lorelp creltc. `Pe t~~cmt ollo hi to st Int pt up s front that it II copetned for the benltb end ~lf~re of ica people end barl of tllo fool It is rlr to Ic~o~LI lad If thl darlp~ eatllal In ILdPI rcltrlctlo· a Be item BCltO I)cnrlsa ·1 E3ATCo document for legal Services : Health Canada 21 May 1999 ~tca. SPIIL OI these rnrrl~don~ hen been lopond u the rrsal~ of arFnlllatloa aeh II OH~ etc. pL~lng condlrlPna on lid Irhlch Include the tobacco resrrictloPs~ the hduerry vin pot dccllncl I: suspect that these pressures w I do nor sec the tstn IlttsCJL~ being on the h~ltb trbnt tore on rhr are laklog lar sud getting more ,d~~n~e frDDt· ~8tiOU6 pressure groups restrictions a where Ipabn can ImDLe. Spd~l~B 16 b~cd In aal elneuas end tbesrres, DOBI Of PObr pllbllC trPmp0d lnd a$Ln an null aIIoued to oecllpy the lelst deslrabre eats In dtenft~ The ~obt Is in p4 pLcll Pade rp feel tbs Odd one out, where se hlsroriellly stains vis the aoelal thing to do, ~aay people in dl~cloped Ebunrtlca baoe tlwen up or 'educed their ao~iPg beeauee of these pressures; aamelP. hulth cnc*n, sntl- eaelal bchado~r anp ec6nonles· I~n~ of these pellle an lost to us for rwr~ knetally, In my experience, It Is the cts~ohr who Is the nest vociferous In their antl-t6baeco vlevs, In all markets that I know, prob~bll better ehp 71~ of sales ,, In the full f~~out u:ego~~ bu delivery ptodueta h~e been dlsproportloPally supp"rtcd and proeteq bur this Icg~a~ has grovP ccnp~nri~ly llOYll· The total ~sthl Is lenLnrb ststle In dcnlapl coontrles or deellnlng, although there Is gmtlh potentltl in dertloplPg cwmles if theg an let the Mlctkla to naie prodPets· we therefore hte to eoapere to increase our 11~1 IhIL YIIIPB t~CtJ ttlC~ thl we how but alag lure that the Offers a p$xe ire both'cndlble pd ~ood walue, ror the forsable future the fun flsvom ~r~l Iwlu the nest lue~lrln as the product II generalIJ both cheaper to uh end ullcr to selll BATCo document for Legal Services : Health Canada 21 May 1999 ·3- Rrtar~ kr~er InPdl, Dlrecrlaoa Cwarnkls sad Opparl~oitirb I prediet: i, glow growth In the low dellPerg yr~t uulesslnptil Irgllktlon and lot taxation nLel high tar and middle Dr anattractlpe to cool~en~ i. Incteaaed pressure from anti social, nuisance aspects cause further restrictions ct where it Is permitted to emo~cl Shia would pot be stopped by eg~ low sldestream products, even if II pto~ucta were lew Ildesttcam- there is still I~alatel i, &eansL of [1) a new generation of low dcU~Fr9 products of which BIIICW Is the flnr~ ~hese will be products with a high taste to tar tatlo, uhich mag be Eompensltable· i, Rlh reerrlcdoPs on uxl~um permitted delivery levels, the classic Vlrglnla product will decline due to laeir of tute, to he replaced by nPdlflrd Blr$lold (Ezst btlnnlle taste) loPlng BllldllJ tOY8lds the Pest ~tranlle and OS blended style of product. 5. hctcaslPg use of tlavPur additives and novel filters to achieve the lafreaae in taste relative to tst dcl~erT~ 6~ IneIe~alPg use of expanded tobacco, with the use of new growths grown with mon dealable chlrscterletrc~ after expansion, 7, Ilore attention to pack design end product dLplly in consumer outlets and to the mdc~ Ihb may be the oPlg foa of product connuolcatlon nellable to us in the f(tture. g, C~peritlon with eannabis, glue sniffing and possibly hard drugs - heroin ad cocaine. 8e wust find a way to appeal to the to~mg, who want to protest so that the product image, and the product will satisfy this part of the pht~ Illt Cigar and pipe Mr~ct haa an "old' imap~ Cl$ateltca will follow as something ~I father BATCo document for Legal Services : Health Canada 21 May 1999 ;·n;:i.--···· lie and Cramdfather did' unless us are Eotcful~ 9, Ildditionol conattainta on delivery to include C~J~fde, Acrolain acculdehgde, B~n~g btlls, ntr0l~in~6, tllttie OI~de and Benepyrenes, 10, Illcotine classified as a scheduled poison and lord 'oa prescription w19' to registered taers. lr( Inctes~ing use of "noval filters by competlrion re velr as serf - sons cornpePBBtlblC 8~ selective flrtratlon typesl 12, BesttictloPs on product nsnes, parallel advertising, ptonotlon of sport and pack designs to follov advertising banal BATCo document for legal Services : Health Canada 21 May 1999 ~fl CuneDt ·1 future ~.1I1I~ (·'" L~L *~Dll~d_S~e~ la tit ~d rd I~r dtb It, II NcvSooltcrl air rcn It~tt ro eLt ootta ~ ~ ddd~e Slloh ~~rs roJd rr vlnt 1 la tor t lov ar I~t 161 like dlPI ar te id SfSdn br dYL Qr d~l lvItehIul devp due a cmcm euer ?r~~~ of 'facancl' s~ats vho dll 3, Blrr it I fldle arltot Ilpt tq rp Idbl 1~, l(nerelIl nll bl yld 1*I utlefeetDrI tblc their ·4111 dYL "' p"d"" * h~ tqhl Ib·cs 1· nr )roPPlitlope a flld ·( tLt Idl t· de, Yt 9'"~ L o,hictrod, octdo 11 da~llt, vhtch I Lllen to i, ~th a the list of eollrar ~ bl mb Irhtr end a,tea ~ I·YILb~~· I&I picptlue in luftldent IltltJ re ItLII dC I(I11 0f the 11~1 the r~~r clp ~i Illl up illtogethcr( O) nut brL te I la Iff~llc~lere~ (C)~CCI lvltchinS ~~11I~ L IalC"~' of bl 'vdma'l ~~s~ll~ll~ er mel da md fneIee Bee thellrlIel u dyfer~ol ulth different ~lpl"d~~' hi there Ilr ND Illtllcl llr1D; lTItheeeeCUlIneend ie·llnr hy~ I~~ lapl~d· lal~ to ether ~latllLlle Init II be ~~8,'(· "PLtl~ltC1 (11 a~hl I Ic~~L~e( LpX I*Unl eLI ~' venriel uaivlnl eLI Le) Spenlnl (pr dd ' l~d~ bp) ~ar, ~··Be IplalPr~ePn~nlt$~ ktle, Cntl~ hL d~ M nf de L1 ell be dillLened hi 1 P,11Pllt~ Ir eset t)~ZI If dl Tlha ~I e e~nl hp, Cc *t ~lad· a 4~ 1, lith ~rt~b~d It ealtl BATCo document for legal Services : Health Canada 21 May 1999 -61 6. 4 consumer is going to rm~e fudgements about a new product, ·:'i* probably rl~~ln the first few puffs on the first cigarette from the pack, This judgement uiU reflect quality and strength of taste, as well Is impact and Irritatloa~ First impressions ate therefore very important, 6 further judgement may be made at the end of the pack, vblch could relate to how long the pack lasted, and whether there Is any residual taste, irritation or lack of eatLfPcrloa. The first few puffs need special attention, 71 eoae~cr attitudes may be segmented into those who' only believe health problems effect other people,"If i give up i can still he w over by a bur', 71V father ha's smoked 40 a day for CO years and is still moving the lava", 'I i give up i will put on weight", Illth all the polutlon etotmd In the atmosphere smoking can't w~t any different", etc, These herd Eate will probably be the main source of consumers ~ho either do not worry, do not believe Pt dcllbeta~c~V wish to project a hard imagel The vorrledlconeerned stoker shove little brand loyalty and is likely to give up anyvag, The target ~artet is therefore, the hard core and those that can be recruited to join it~ important aspects therefore are: Coed value, Lnr price Mequate quality Enough nicotine so after tastelltrltatlon fo offensive image Easy to draw smoke, BATCo document for Legal Services : Health Canada 21 May 1999 -7e Current sud Future Fraduet Itads, Iseda and Opporrunlda 1~ b suggested earlier, high oo the list of product reclulrements is an adequate level of alcollnttarmstelntbe wo~~ghabil· Sadrers Lire 1 nicotine threshold below which It Is hffeed~e~ (In $ case this 16 a tndlt!Paal product with no less thm 1~2~ nicotine when weeurad by standard maehlne smoking;) Such nicotine thresholds will ~ary with dlffermt consumer segments, hut far the lujorlty of s~o~crs Pho hul elgaret:es and gaP~e them rcp]srlf Icoels of nicotine below 1.Lg standard dellve~ will be unaarLf aeroty , 21 LLan7 studies of smokers indicate that a large p~bcr will compensate for reduced delivery by increasing the amount of smolu rllw ftoo I cigarette with lower drli~F:I· it is also true that lost no~ttl will cai~e less 8po~e from a cigarette with higher delivery thu their usual brand. Clearly it Is easier, (leas effort) to t~h lees smP~1 from a cigarette than to talre more Imp~e~ he a noderate dLllelrg product can easily satisfy a smoker with 1 low amoke requlremeot, whereas It is much Pore difficult for a product with low dalhcrl to satisfy a saoker with a high requirement for smoi;e, if the high requlremeut aolret smokes the low deilPtrg product with high Intensity thlII so~lng becomes latrusi~L on normal aethlty· Smo~tlng is' unull~ a p~sda brha~lour which ~ccwpaPlts other aetiwltlcs rather than being an acthe puteufr· j, following on fra this theme, ant future of the cigarette design which Is rclparlubly different from the ~ao~rs usul product will stud Wi and draw the I~O~eIB attention swat from what he i) doing rpd onto the cigarette, The slolur may then analyse the BA~Co document for Legal Services : Health Canada 21 May 1999 cigarette critically to say what the drffercncss Ire In taste, harshnese, nechanics etc. host ~oLers are therefore very conservative and not unhappy Pith their corrent product, i, Changes In the product should he minimal 88 far 88 the smoker Is co~eerPcd. Thus any innovations shouldnor be intrusive Iptlher appearance, feel or sloke perforaePce~ is a rule of thumb, changes of less than 20Z In delivery are nor noticeable to the untrained consumer, The tolerance bandwidth will however vary frw aspect to aspect. Changes In taste could be more ohtrusive than changes in i~pact level. 5~ For economic and political reasone I expect to lee se increase in the apount of expanded tobacco used In prodst~. 6~ I vould also expect longer flrtera and.shorter tobacco rods. 7. Smolten will be veaned gradually to expect fever puffs, but each puff vlU have more presence, ~bla is a Pal to give satisfaction In alpo~e at overall lower delivery, vt~llst alntalalng prlcel 8, bae to the 'aakncsa" of Virginia tobacco taste at lover dellnt~ levels, i expect to see virginia products fortified with stronger tasting robaccae - i~c, MDdlfled PfrginL Blenda, ad the increasing use of fk~our sddltlvcs as and when suitable enhancers are developed, 9. because of the difficulties of satisfactory iou delivery (fllb 1S8g) Virginia produce, I trend to nS and k~aan blended style products will be est9lilhed bod inctcaeel 10~ because the recession is world wide, the developing countries will not begin to catch up bur fail further behind developed eountries· packing *I change in developing countries to smaller packs, for BATCo document for legal Services : Health Canada 21 May 1999 -9- International brands or individually wapped cigarettes in say plastic sausage skins for stlcL tales of domestic pioduct~ U, Cigarettes vlth compcontable filters mill be developed. Such products dir have lov delivery when saaited under standard coadit~ons~ bet, being velocity sensitive, a smoker may tadlll take higher delivery thp the standard delivery, If he so vlshell~ Selective filteg mill be developed for qclIle markets and le~wnrl vhlcb remove specific delivery components vhiek do not affect amoke taste; eg. Bcllo7 metals, nltro~docs ledeln, and ~cet~ldehldcl 13. aith an assumed reduction In the availability of advert.iaing and prcootJ.on, the presentstion of tbe product at ail stages becooes of increasing ImpottaPcc. Every opportunity should be taken to check the visual Impact of pack designs for the msrket segeent and in the total market context - Cash and Carry. 1W Cases, tOb'e cartons or bundles and Individual packs. With the loss of ability to sustain a bread image by advertising the product in the pack must be of even better qaalllg than ever bcforc~ Especially from the point of vlcv of physical, taste and ilavour and good value ~rt~lbutee when compared with co~pctftloo~ 14. pith the increasing use of Expanded Tobacco anem problem starts to arise due to the egailfbrium moisture of DfEI. DIPT both picks up and loses mater more rapidly than normal tobacco. Iba a nea style of packaging 9 be developed, mhich besides providing a barrier to the gain or lose of moisture VIKP sealed acts as a alf conditioning · cabinet for an opened pack. If this can be made to vork, then the last cigarette fre the packmoald smoke a mall II the tlnt· It mould also help to increase the Shelf life of traditional pmduFtll· BATCo document for Legal Services : Health Canada 21 May 1499 -10- Specific ~r~~ rron~ the fotcgobg mg thesis Is tht nicotine, flewur and anality are of paramount Importance to s~o~crs. I tbL un be offered totetbet vith delivery reassurance and the option that the product can he made to deliver anything from ultra iou to middle tar vlth only 1 moderate iPcruet in slad3n~ effort, me have close to I universally acceptable prod~ct , II A Ca~penearable Filter Product The design of a cigarette with a ca~pensatsble filter will have a high taste to tar ntlo· The tint important component is I good blePd olth high taste. SuCh a blend Is litel~ to contain DIET It say 24X - 3%X. Becsuee of the ccwparatlltl~ high DlET level the tobacco rod is gchg to burn fast so althera burn retordant on the tobacco is aeedtd or at lease a slow bpr~ng paper to reduce aoulder tate. Tppe 1 · The HE filter, Dlag~l This usa designed In P Banburg lad has been taled os constmcra, who folmd the cigarettes too strong, As the sspple cigarettes had a machine eoa~ed delivery of shoot lag tar, the product west k very ecPplput~ble~ Our out tests both subjective and objective suggested BATCo document for Legal Services : Health Canada 21 May 1999 ·· -- -11- that it io I eoeoensetshle filter, oho erolted eDaiojt an~ltlr48 ertnctcd tatroll. The ohjectioe teet os hope used it to m~e re 31 Pd 561 puff ~1Pw~ md to to if tbe ioreese in dc~~ ~t the higher puff ~olPe 1o proPtl or Ire, Oitb 8, the dcUlc~ RI rore th )tnltl. IlthouOh the end Ippntace of Ph io ~Yl~r to htron It doa hete ore edrentlge over Actron in that it ie Pot Iloeeptlble to the Philip P~I~ Inlplnd llolring refile which Uocb off the 66 of the grooves at the r~~h and~ With llctron the IdtilltiOP Ilodd fell to zero upder there eondltlonl hot dth 1 the ~etlktlaa folio from 761 to 561 II there Ie m lir p~t~~ fomerdo to the Cob(fco rod end through the filter, The In Plltcr I Iecoad Ittclpt to n~e e colln~ltll~~ filter vee to tr7 to exploit the Ipcfi~l propertier of a Ilngle orlfleal mb Ipeei~l proprtJ Ie thet the rcllrlonlhlp bcaeca presllre drop end fla through thI OIlilCI II Ip~~~ root whIruI th~OYlh I pl~lllll badle of flbrII It II linelr, Thle ii I ~~ old prinelpll flnt puhlished hi ~~ooll B the 1740'1, ~11 eeene thpt If the at~ktla to the filter is hlr I eillle hole then ee the flow rate through the cigtrette 1e ~cn~~ld thea the ~ntlLtlnt llr YWid rot Inereeee Ikeltlf LEIIII the PreeoUTe drop of the orifice ladtthg the ~atll~tlPf dr orld rleel 6 Lte rdl up I~le~ using three oopperetitelf rev teehpologiet odohined Bto at filter, aurl~ lyh lwldlug, the~ pllltle 11II ap eod Llct Isde~tla~~ ItruoturI II: Dlgr 2 a filter BATCa doelmlnt for l,gal Sorvicos : Hldth Canoda 21 Ya 1999 -U· other advbntPges at thill deelgn are: I) The end appearance id cammtlotul~ b) ~he allolag pattern is white eentre, dark onrer' i~( noPel~ e) ~enlllatlPa le controlled hi the hole In the filter nor the tipping so "flpgcr blecklng' lo afoot Impoae8lc. d) We ten see a my to ~an~IectPring ~hll at nllon~blc~e~st ad high qeedl e) No ptsemblg ptolle~s enPisagtd on erandsrd prPdUCtloP machlaery~ Ihe two Pobe 8~oUng sehew was used to abral abjeetlPe data · se veil se subjcetlve aokfng against a copveptlPnallf cenetructed eontrol· however, It does not work at low and ultra low derln$ as a c~mpcnaatable filter. Th~ hole she Is too large for 1 hanan sP~et to po~e onto the non linear part Of the curve,. ad the flbree under the hole are Interfering with the flow patteras. it le Il~ly to be wore effeetlR for a 14ag product which emobs Ilke an 18mg product as 1 s~ller hole altc.csn be ueedl i, Our next stage is to t~ plastic tubed In the tilter which iud frop the Broom to the louth end through the filter, cg~ Ult' Fllgn Dlagn~ BATCo document for Legal Services : Health Canada 21 May 1999 -13- Second Py~posel - Front End Wft ~aia my concern for smoking pliey is shown by the choice of a project to enhance the taste, flatout and impact of the first few puffs on a eigarette~ It is these puffs which are most likely to be noticed and assessed by a smoker, particularly with a new ptcdee, before he nses sowing u an ajunct to other activities, I do not have a specific segneot for this objective but consider It to be almost universally applldle, but probably most appropthte bllk31~ far law delber~ products, and lovered delivery products, Ye Inov that the use of high paper perPeabilitles will have the opposite effect to the one we Slant, This Is because the dr entering the pipe: during puffing is at Its maXlmUD, when the cigarette Is lit, As the cigarette is burned d6vo, so the dilution mechanism is burped away aod the concentration o~· amoke in the puffs rises, a more even dilution of air pet puff can be achieved by tip ventilation In association with a lovered paper peneabllty~ This copcpt of 'yropl tad Lift' can be further extended by the use of added flaoours which tend, If volatile to have the highest concentration In the first few puffe~ Other ways would be to se (a) a structured cigarette rod so that the moat flamutso~e tobacco, were losted at the Ilghtlpe end of the cigarette, Haehlao modifications to make such clgaltlea are poaalbre as os demonatrated with the CODE~A~ products, Alternative ways would be to use sections of dlffcrmr' tobaccos oseembled and wmrnppcd, hlPg this approach there are O~e hlCllltlPg p0sllbllltles for c~ple a OS blended start modng to a virginia dddle ;ecdoo and krgel~ stem end part, which II ulalr~ throua away aod not saoltcd~ dbllbcr Icsl of BATCo document for Legal Services : Health Canada 21 May 1999 -14- DIET could be P"t iP th first seerlPa to gin the larrultd sCnsstloPs e4lLd for and lover DIET Inela in the relf of the product" b) The use pt bhddab filters. It 1 pr0ht Is dstiacd to bm I L fllhatlal efilclracl blriill~, but Lbe ao~e dnPP throulb the filter bhelr the mslnst!eam flPs from the tPhcco.lod, fhm an Inltkl high dcliPrrg sbeuId reduce as the e~g~rta Is a~d do~p~ bpe n7 to echlcn this is ulng eoPthlng llhe the BEE conc9L' Diagra~ aeelcs~ PFltar that its f,D, IillC8 and Blocking oeeure in the orifice area so sir Is dmm la through the nnts bchlad'the groon· ~mother vol Ehot might work is: Diagram Smoke is ·dIawa frw the t~leco rad dth I geall anoont of ,,~iLtlng air to the atlldL air ayee. Ibr s~L esp escape re the no~r bl eae Of fiww 10~1(11 either through spirmw gap Ietseca the WL ~c~!aP sud the eesled end or b~ piling Into the CI thrP~h ganublr plug rrs· Tar shOuld Uld PP OP the plY~V(IP It the IDtllh Id Of the UL so ~oh, feklng the ca~leer p~th~ pDsiei thrrm~ the plugvnp Into the U further btcir (tOwPtdi the Loheeo rod) d Is this filtered more. BA~Co document for Legal Services : Health Canada 21 May 1999 Cwclulioa I ban talcea a a~ple viev da a Pcry compler wbjeet~ Hy thesis is that sFolrers are very important people to us end they should be gioen ~hat they sat, vlthin the ~au~ ~oblceo taete is an iFpottant consideration and the difference between tobacco and other shtcddcdlcul IlaPt rrm~erials is alcotlPc· ~ baP~e tried the iou lellnry rroduct roPte with li~led weceJb· Zhi8 Fight be beesuse the nicotine In such products Is belov the pharrmcologiol threshold of dfectlwcss· S~otcrs have disappointed us in that they ha~e pot chosen to sFobre twice as UOJ 10Pg cigarettes If they changed fra iOmg products, Thss In order to reinforce the pr(nary pleasures of aFeking, I hape proposed to she it essier for sobers to talre what they vent frona cigarette which Fight well hs~e a low dellPery when sPtd by machine which oorrce~cs current legal constraints and to enhance the Iweadaa~ froa the first fru puffsl I expect are nstrlceleas to be applied to the ~rrtdcms of tobacco coPpanies to proPote and advertise their ptoduetl, sc that the cootrlbuth of bge to the total offer will lead to i~U~ ID this case the actual smP~lng plalltiee of the product In the pick and the design and quality of the peeling have to be emn pore ipportenl than it L aov. BATCo document for Legal Services : Health Canada 21 May 1999 - :i I. .:.~. :·' t·r·~ ;, ~ ~Jtslc,: L: ,.- :i *' ·Q?;il I.·y·~il i. i'.C ··~· :· ·. :.... ·:: 4*::i :? ~? T.u~: -:.I~ :~-··- :": i"':: ·:·: ~'JI ": ·-·I"~~:~·~ S : 1 ~Y·~~~' :·i~:t~~~~:· :i'' :?i~l~·s·~ ·e ·····- .I .1 i ii7R)~I: Y.( ·:, :~: : - "'"' ~~4~ ~a~v3'; I :: ·.::hl.C:':·I ·;~CI~ : ·- ~ ~~~·i :i \\.~·~?lt~:~z~J~rr~n~.·~~a ,1 i~·~Lkpr ·I. ~ ~r · '';'`' '~;: , T` :z ~ ·5:·: ~~ ""'" 'I ~ :F ~:*. ·i W~":2~. ': ...' ....., 1'1 B:I.:L I:r `: · i :I· "' i"· '(.~i -.·~: 'i·4";) ··: :~·Y ''':::.;: ·: ~~ '" ·' ·: ·:" : :ir ..,. ·~·· .· .: :· : :;: !·; ·· t. ·rJi~ ;.··, -~· :· ::: PAPER·3 ,::' 1BflffIC~O 'WURHSEP · ·: :,~ ..: ;:I ·:: ';.;' :~ · :·1-· ···I·: ~ ·'·: ------- ·i ... $~·i· : : ;· j;:~··: ·~·; .i'r '' lyi : ··ti.*: r i L ·~ ··· ·· .4i ·; ;; .:I ·-~ ··:, : : :S· ~:" ~·~: : ,· ·. . · ·c~ ·· ·:~:; WIOJECI PROWSAhS: 1· Im LoEs~Es~A~mloRAtm ARau PRoD~ ~:* t·- :~ 2, NICOTINE CARRIERS (I1El MOISISNWF) ·:~ ].t' · ' · '. : : ·:: · ·~.7~ ·' ··' i .1. i- · '':' :::~i ,, ·· 1'·i:I,-... I ·; .t.i~.·: 1·:· · 1;,1·· ''" x. ~- ~-:·*~ t i'·l :··`~ I'··~ =L~:' " ' '':: ' i·, ·:7 .,I ;·l.··'r;' · " ~;·~:·~* · :::::Yz::f;cf~~~:a 1!' h~l~:i ::8· · ·, ..~L~l~i :,,, '*?1~1:1~ ~"rf.~·. ali71~;~~S, ·G '·' :r~3FL.3 ni'' :· :a~r :;a?~ · ~ ,· P~t~: ·, -·: r ·~~ri iJ~·····!::~p.~ 51;1* 2·.r~;~;'xB ·:! .-F~~ '" ·~·· O "-; ~i~ ·· :~-·· :?;; " 'r ·;~ 1. -. ,., :,. ..s~io, · **·rv ~s~. · I-·:;~~ ?~·i :: ·I ifj r .p: ·. :; · 'i·-i"-l* ' · ..:. ·! :~D : :· ''' '·· ·· '':;:;!:~~CFz ' ·~· .v : Irl ··: 1~ ~~. ·* : '· ::~ '~P 1~1 · i ·I ·':···~, ,··! : r.. · ·. ·· . .·. , N ··,. ..· Q V1 BATCo document for Legal Services : Health Canada 21 May 1999 ·· A STRUCTURED CREATIVITY GI\OOP R Presentation Given by J, M. WIIIPISER Bealieu, aanpshire 26th june 1984 BATCo document for legal Services : Health Canada 21 May 1999 CURRENT ~BACCO I?AI~ETING'SCENARIO A. ECONOMIC Retail prices for cigarettes have escalated in an accelerated way as a result of manufacturers under- taking stiff price increase policies to offset both inflationary pressures and large excise tax increases. Consumer purchasing power has diminished as most of the free world has been facing a severe economic recession with continuously high levels of unemployment and high interest rates. As adverse economic conditions have brought about a mole rational approach in oonsnmelr' vays of oginising their purchasing power, manufacturers haveresponded by moving away from.orthodox marketing practices and into the frontiers of value for money offers ranging from heavily discounted "branded products" to "own label" and "generics", The ability and determination ~ta either ~pre-apt or react.p:3mp:ly and decisively in the price-cutting and value for money scenario has given manufacturers the competitive edge in different markets. B, SOCIAL Pressures from the ~EID and theanti~sa~oking lobbies have brought abbut.an ever increasing awareness of the' Smoking'and Health issue both to the consumer and to the so-called 'passive smoker",. The social unaeeept- ability of smoking has also emerged as a more delicate issue and a difficult one for the cigarette industry to tackle, as mote guilt is brought into consumer behaviour, p BAT~o document for Legal Services : Health Canada 21 May 1999 ~~EII~ ~SC~IR~O CURFENT BBAeCO I i ·· I. ECQOMIC LOIl r*b fDr dpD~b ice tsc~ in an accelerated way s9 " 'CSUlt of lnanutacturers undlr· takiaq stiff price increase policies to offset both inflationary pressures and large excise tax inerllsrJ· has diminished Is pst Oi the Consumer pp~~sling power_ las · _ free #tld has beg facing a severe tmPade recession with continuously high levels of uneqloymant and high interest rates, As adverse economic cooditiops have brought about a more rational approach in eonsunerJ' ways df otpimisins their purchlsing power, nanufacturerJ have rsPond~q~ aing IrR bolabbPdo~ l~k~14 practicer Id hb ;;h;rontiers at value for money offers ranging from beavily discounted "btlnded products" to bwn label" and 'generick', ,itrer PrralPt or The abilitr and ddter~rnatioa lo PIr -- react promptly and docisive~ in ~B pticrePtting and value for money scenario has given manufacturers de competitive edge in difflrent pILtts~ 1. socI~ Pressures tIa the 80 and the anti-smoking lobbies h~e btought ahcut an ever increasing ewalcnors of the' smoking and Hsal~ issue both to the consumer and to the so-called 'plssive smoker"l. me social pl~ce~ Ibilig of ~Li4 has ~se emerged as a are delicate issue and a difficult oDa foI the cigarette indosttl ~ beth, as more guilt is brought into consumer behaviour, · · BATCo document for Legal Services : Health Canada 21 May 1999 Product innovation has become a key opportunity area as cigarette manufacturers respond to the challenge for "safer" products barne out by consumers' health concerns. The clever and opportunistic manipulation of league to work to Klmpeti', Table publications has also proven tive advantage in most instances where this has taken place, C, LEGISLATIVE ' A more restricted cawereia~ environment has crippled the cigarette industry's abilityl through the use of traditional and more effective coranunication vehicles, to increase overall volume by inducing more consumption, or taking volume away from competitors by increasing share of nnarket, Government imposed restrictions have also been hrin~p to light the issue of social unacceptability of smoking, as consumers are now either prohibited from snaking Under given circumstances or confined to specific areas. Official League Table publicat~pns are another key ele- ment in arousing consumers' awareness of the S i ~B isse UeS, Creativity and innovation in ro~nn~uni~atino product bene- fits and buildino or sustain~4 brand imagery vithm restricted advertising enFironments represents one of the biggest challenges that the cigarette industry is facing, and an oppbttunitY henceforth, Manufacturers' ability to Inrieipate.and properly deal uith qovernlnent's initiatives to introduce or expand on restrictions continues to be an opportunity area for dounpiayind the final impact of those measures when finally put into effect, O BATCo document for legal Services : Health Canada 21 May 1999 D, COMPETTTTVE ' Faced with declining volumes everywhere as a consequence of a reduction in the incidence of smoking, cigarette manufacturers have become more desperate and therefore more eager to undertake aggressive actions to prevent own volume declines even at the expense of short and medium term profitability, BATCo document for Legal Services : Health Canada 21 May 1999 F[ITORE E~AT(KET`TRENDS 1~JO'D~RECTTONS The economic reeession'will bottom out and a period of re- eovery and growthwill soon materialize in the industrial- ised world, followed by under-developed countries where res covery will take place later in time and with a lesser Im- pact. Consumer concern'over''the 'Srooking and`Heal`th _issue_will' con- tinue to increase.in the short term and will eventually he downplayed as pressures upon the cigarette industry should move away to other products and manufacturers, However, the concern will remain present, It is the pressures brought upon the consumer by the Social 'Onaccgtabili·tv of smoking that will become a much moreintense issue'as we move further in time. Gaiernment .lesislation will .further restrict the commercial activities of cigarette manufacturers, thus reducing even more the industry's dynamism and ability to manoeuvre from the present levels. Despite a mid-term gloomier economic outlook, which should release some of the current pressures on consumers' purchasing power, thedecline in both ~incidence of smoking and tSe'average ~daly rbnsumptian will continue mainly as a result of the Health and Social issues, Thus overall cigarette 8obe will continue t~ decline in the short-term and it is more likely that this trend will not be reversed in the medium to long-term, More severe. financial ressures vill ~bo'brought qon cigarette manufac- turers who will struggle to make diminishing resources avail- able to fend off fierce competitive activity and to invest in technological development that the future outlook demands, BATCo document for Legal Services : Health Canada 21 May 1999 ~PORTL~NInES a. Anticipating Consumer Needs me rn-atpth llnllysis of past and Present consumer h~ haPfour and wall structured actionable research will he decisive in providing us with a better understanding of the changes experienced in consumer values, attitudes and buying patterns, ~ps enabling us to det,ect and anti- cipate future behaviolr and needs, b. pursuing a Creative and innovative product Development 'Policy ' ' ' "' 15 we become are knowledgeable on consumer behavioPrll trends, it is of paramount i~rtance that technDlcgicai changes take place to allow for greater flaibilig in pursuing a creative aWroaeh to Product Development, product innovation will be a key feature in reacting to consumer needs timely and properly, c. Effective Exploitation of lonclcaditional Communication Vehicles Effective communication of product benefits, as we move into the product innovation Ire, will demand from laa- · facturers the discipline to continue to explore for more effective communication vehicles within the already rt~ stricted advertising scenarios, The fostering of brand imagery to sustain and urpand on existing consumer iI·- ohises will also demand a continuous effort on this line, BATCo document for Legal Senlees : Health Canada 21 May 1999 '' ~TJ d, Operating ~ere Productively ' Opportunities for productivity exist along the many facets of the cigargtte business, rrom high technology in the agricultural and manufacturing fields, to squeezing sup- pliers' margins, or rationalisation of materials and com- ponents, manufacturers could benefit immensely by optimi- sing resources that can in turn he applied to I~nnotrati~e ~Produet Development, orto compensate for profit short-· fall due to volume loss, e, Antieipbtiog Co~petitive Moves and Leading the Way The opportunities that the future environment will bring to us require the need to anticipate competitors thoughts and plans and to be adequately, prepared to lead the way or·to react promptly and decisively, BATCo document for legal Senrices : Health Canada 21 May 1999 CONSUMER NEEDS;'ATTInmES ~RND SEGMENTS 'tTalue for Moneyl.iP an element that we have become familiar within* the present market scenario and one that is very likely to stay with us for a long time. Consumers have be- eane accustomed to getting more for their money and more so as manufacturers have proven their willingness to sacrifice their own revenues as they struggle to retain consumption. Added value offers, smaller pack contents, price cutting branded ;Iroducts, unbranded products, and generics will con- tinue to represent an important segment of the cigarette mar- ket and a growing one, Consumer demand for "safer products"'will continue to rise but not at the pace experienced in recent years, ~L~though it is a recognised fact that the cigarette industry itself has overplayed the need for health reassurance brands in the market place, some dissonant smokers obsessed with their health concerns but unable to cut down or give up altogether will comfort themselves by sticking to low delivery products, The growing concern over the Social 'Unacceptability of smoking will draw'Consumers' 'attention to prodUCt Goffers that can com- pensate, at least psychologically, for the guilt emerging from the supposed threat brought to the health of others, Side stream smoke and the unpleasant smell of ash and cigarette butts will gradually emerge, among others, as key tangible elements that can be dealt with to a certain extent to allel viate smokers' guilt. Some consumers wlll'also'become 'sensitive to alternatives to conventional cigarette smoking to obtain some of the pleasure and benefits of the smoking habit in physiorogical terms, but without facing the pressures that~emetge from the Health and Social aspects, BATCo document for Legal Services : Health Canada 21 May 1999 The core of the smoklng~ population will,'howeoer, remain unchanged in the medium to long-term. Those consonant · smokers that truly·value,the pleasures of the smoking habit will survive the pressures from the Economic, rlen~th and Social fronts and will stick to cigarette smoking and to the fundamentals of it. That is, those consumers that smoke simply because they enjoy their smoke and their enjoy the physiological and psyehDlopical dependance that smoking creates for nicoti~ne,~ BATCo document for legal Services : Health Canada 21 May 1999 1·:0.·· PRODUCT 'TREWDS a, CONVENTIONIIL · low tarlnicotine with taste, or taste with low tarlnicotine expanded tobacco · multiple packs content (smaller and higher than 20's) · un-branded, generic products b. NON-CONVENTIONAL; ' · short, satisfying cigarette low sidestream smoke reduced ash and reduced cigarette ends reduced unpleasant aroma of cigarette smoke, ash and butts · extruded cigarettes c, AL;RRNATE snuff · nicotine aerosol · nicotine chewing · nicotine puffers (refillab~e or disposable) BATCo document for Legal Services : Health Canada 21 Yay 1999 PR~TECT 'ORION ~WUIETING OBJECTIVE To preeemptlavoid potential volume decline from consumers pressed by the uncomfort and distress caused to nonlsmokers in social and work environments, BRAND POSI~TIONING :, Rn offer that provides mature, dis- Eerning adults with a low tar product alternative that brings comfort and reassurance to smoking in social/work environments, vhilst delivering good taste and satisfaction, TRRG~T CbNS~ER : OcmPgraphic - lddle class and upcale smokers, 25 to 40 years old, predomi- nantly male (70!), Psychographic · The guilty smoker obsessed with the pressures brought upon himself by the negative impact of his smoking upon others, Both the socially insecure individual highly sensitive to personal rejec- tion provoked by his individual bel baviour, and the self-conscious maw ture smoker genuinely concerned with possible harm to others caused by his actions. BATCo document for Legal Services : Health canada 21 May 1999 hp-i~; PDmCT ATTRIBUTES h conventional lovlfar cigarette tbat provides a veil balanced, satisl fyin4 smoke, pins: low tidestrcr smoke reduced alh reduced unpleasant ~ga CONSUMER PLATFORM Copy Bsadline :. Reep year friends around and .,,,, SMOKE Ar EASE Copy Bog With nM zENlTE cigarettes po cap lay back and enjoy a good saKIke, puff by pPff, without disturbing yDPr OUSfDOPdiPgs. Onll new ZENITB delivers the perfect blend of advanced cigarette tcchnol~ logy with low tar taste satisfaction, A 8elightfpl a~e~phe~e of pleasant aroma with nearly visible smoke and mioimrm asb residlalsl SENlTB I,S,P, h new generation in smoking techno- IoOI BATCa doeunsnt far Legal Services : Hss~h Canada 21 May 1999 pRo3Ecr ~m · NbRKEft OJI~~W~: b clpitalizl on ~e ptentiel deetn- fall of the nooking habit as the only means to aehieve nicotine satisfaction by presenting an alternative waY, free of Soelal/~cal~ concornsl BRAND ~gIr~OlIt : I predict bat offers complete nitotine jatisfaction through a revolutionary lnethod of application, for hardcore nnokers desperate to 9uit ~e smoking habit bocaupe of Bc~~lSoc~al pres- BPr851 TARGET CI]NsIRlER DlOqIlphiC'·dddle and upscale srnekers, 30 to 50 years old, both male and fc~ale, Pryehegraphic -Hypcchendriaes and social parmPic adults desperate to 81t tbe woking habit. BATCo document for Legal Seniees : Heath Canada 21 May 1999 with mouthpiece : Small spray can PRODDCT ATTRIBUTES that teieases nirotine aet6scl into respiratory Systa· COMMDNICAT~OI PUTFORM : : Forget about smoking ··1··'~' Copy Beadline GD FOR A QUIM(EF~ 1 no to cigarette : flew ca? you say Cspy Body soaking and yes to nicotine? presenting : New ~UICR~ER nimtine acrosol· Instant pet50"al. relief. without the smoke, ash or odour .I·~· and with fresh mouth aftertaste. NEW PDTCKEEK: lo tar with nic, is what makes the body kick~ BATCo document for Legal Services : Health Canada 21 May 1999 ~··-' ~1ARKETINGIRbD LWS~~: SrTW,nI~a(ED C~TIIJ~Pi Paper fi3I Dis~sirm - G.O· ~aks a) Orrem Tcbacco ~xketing Scet~ip Cmsttzlints, Ihallencps a~ OFpc~t~U~ties. The Trinciple collstrakt ~r~ will inhibit grc~U1 in rost naricets is price, stenrjnl ~gel~ fcon irrreased rawtim a: a~e forln or anthe-. Rlthagi! the balance is very fine, Cowmans appear to ha~ fcurd t~ ulti~rate short term policy ~nieh will satisfy toth~the e~chequer ard the S & 8 lobby i~ the form of ~ increasirg ta~ticn on cigarettes. I sai shc~t term because there will mw a time ~ten ciguettes ~cxne tm expssive for the e~dinaS( wn to ccertjp~e to i~l~ in this pleasure at his ptcse~a level. Ihe danger era, with soft and hard s~ prices falling, Kill be wha~ the tkD am equivalent; tmfmtunatelyl ~rtp~ traffic is raJt mm~U~d in the sam way as cigarettes. IioJever, this tcq~ic is beyond the smpe of the awent sexli~r. M~tising restrictions will ~t, in thenselves, affect the'total narket, rut will inhibit n&r brard activity at a mrrparry level, calling for wenrme ingenious methods of eanr~ni~ati~~ I suPcca~t this statement with the rmntey #1 adwrtisin3 restrictiors wfii~ deronstrates inaearin; sales~in total ban sitwtica~. Snaiin3 and Heal~ ~eness will ira~ekse, hut as in the pest, will ~ve Li~L~e effect (e.g. Pae)e Warning Clauses bec~ixe part of the pade desig~ in a ve~y short pri0di because of the lcng term Mture of:the clained health hazard. Ihe social uMcceptabillty of sroking because of e?virrmwntal pslluticn will be a ~IP~ bigger problan ard althw~ lart~ely insoluble, will be a ~jor challenge to the Inr~sstry~ Ihese then very briefly are the win factors in the wrent sc°slarj~: Constraints C~allenws and Cacc~c~nities " Irraasins tnwt~en Pleaper products Pdv, restrictions Betterl~iffere~ o~m~unicatiors strate~ Scciallenvirorr~ntal problem Sidestreamle~led srpke reduction sr8 publicity ShH research b) Atture Ekrket Trends Directions, Cc~tFaints and qpe~tunities · The Free World cigarette wri(et Fp~e~ at an at~n~rag~ rate of 21 between 1978 a~d 1980, HMever, Sn~prth in 1981 slPjed to 0.8% ~here~s sales have declined in 1982 and 1983 by 11 and 1.21 respectively. 15p win reasors for this are the inpaet of t~ ~wld recession and the hr~ ~ice i~eses in key aarkets. Ihe cutlc~ 0 1988 is ee~e of wFe recavery from the recessic~ hot with cr~p~tk~uing pressure ~an Fnice iraeases ad ardiirg ~srmes~ EQ~e~ Departaent's forecast to 1988 is fra gr~th to 0.51 per annua khich, in reality, is a fae~ost of remvery as epFased to real grcwthl ..../2 ~D BATCo document for legal Services : Health Canada 21 May 1999 -2- o t~y: evide~ce of trends ard past perfor~ance, ~arketing Depa~nsrrt's forecast is fca a further but wrg~al decline in sales, plus a ontinued decli~ in arr kee Ucald share to 18,1$, ard share d t~e Big FOLP~ to 35.6%, The i~lieation of t~i~ ~me~ast is t~t Philip Ebrris ~uld overtake B~A.T~ as the ~o~l C~paty in t~ early 1990'sl In tears of the product itselfl the followlq extract ~frPn the ~Farl~t ~aFsion Cocm~Ent nx~~nctly deaibes tt~ p3siticn as I see it: In the face ed esalatilg prices, co~s~P~s dll ra~d to justifi their habit anl their c~ic~ aC brand, and they will i~er~esingly demand product quality in scPking ~s, seeking better tasti~ ard nore satis~ing prcducts at 4 deliver! levels. Tne full fla~w segrmnt will rmrrinlE to accwnt for ~e IrajotFaoportion of sales in ~s: ~kets, and the deliveries of fuLI flawur brands will s~bilise at or at~R a thre~d of 12414a9 RUNF belon which arrent full aaaour s~iokers will a relactant to Snl ~his thres~d nal adpenranerrt sicn~ficance as ~a~sur~rs seek value fcc ncnej in terlrs of ~ki~ leasure ard hene~ satisfac~iw· R~rg the five year pericd, t~ ~ild andl~ 1~ tar (0-9ng I~l~~ft~) se~nt will.beo~Jrre ncre significant in sore trarFets and the ultra laJ tar (0-5n3 BZ1Fi segent will rwfain a ~nor se~iem in nest mukets~ LI ~th d these segrents, tec~a~ical inrovatiln and ~teful ~enduct design, ai~a~ a: producing nrxe satis~iirg law delivery Itcduecs will ~ecare increasingly i~rportant in ~ai~Ilirg se~nt S~are~ The o~stxaint~ will be similar to those Mljned in the first sectien M there will be n, technical onstmints (II i~anufacture or inlcMtiol since the Industry hds ~cnrt~ated in the past that it 6~n adapt wi~ klMMCLiPIS s~~h as e~ande~ to5acco, hlFPI 6Fea~ trakers, Linked ~akers/phcke~ a~ the use of lasers a~d mrFuters early in their ~evelcFent. Ihe c~ca"im=ities arp there if we take than and will largely involve iTP]OMt;ON base2 en the mnventicM]. cigarette format. We rrust ~ain'ain aatisfaction (i.e. nicotine), gxd redfdnis ard appropriate slroke fla~zPa( against a badrgrpmd of slo~ly dwe~i73 Imoking nachine' deliveries (facel by Invermrmt in sore MunLies) and the need to ~ i?Nxatiw in terms of ~acdue: a~earance ard possibly r~vel tastes, Qnstraints ~pFort~aLities DeclinSg os static wIkets Bridging the ~4 threshold Na~ate~y delivery red~ttjm IrwMtive F~Dduct desia ard appearance I~classification of tar bands ~bvel tastes P~wtisinj pstxictic~ Social nuisance pr~lurs 1..1/3 BATCo document for Legal Senrices : Health Canada 21 May 1999 _ -3' Fonp erc~m ~T II~I~S I, mg ,,_, ~~c~ TilEND r~WIS ~~~5 DIP~m Jil!:Pns 1978 ~81 l9B3 ~88 LPall Grovth 11:~ lier. Ice~ Est~ ~clst 78-12 83 83~88 Fret Uorld 01? . Z83l n98 2DO 1,0f (1121) O~IX Lrt·I 1651 UI 10 YB 0,61 8~0 0,12 &rh~ rB 1l51 1132 1l# LI a~a 11~ .n~~ Ctcug ~L1 574 546 ~ n6 0,32 (5,02) (0,31) ,unr mp 11 at uo LI 2,22 272 ba 173 260 I,az (5,92) t0l9zl 166 183 180 ` 182 2,52 0,22 ,~.*kr 1311 nm y~ !so3 t' 0,62 I Free Yo~ld 'I 50,11 53,21 52,11 52~11 1 811~t~ Ilmn~- ~uF~e~E rgn ~ IO81E48Ts 111111 Biliious 1978 1982 1983 1988 gn~ Cr6vrh PlreJ Icr, kt· Ice; Ilcut rjg~gi~ I 83-88 Group i 5661 571.1 545.7 Y6~ 0142 (5,02) (0.32) World ShPre 20,82 20,32 19,52 18,72 ef Big Four .41.21 38,12 17 15161 T. ~· ttd. 378,b 398.4 390,4 403~0 1,OZ (2~0r) .O.dr I~· ljdurtrics'l 1175 USJ ~fJ Uj~ O~~Be COWIKY F0R5WS'25 C. I,l.t· IOS~~bQ- lLl!lcns 1918 :982 1983 1988 ~~II CreRh Rat~ dct~ ler~ Ift~ F'cl~t IB*82 83 83-88 crDu, YI~ nl~ ~LI -~13 LU U'B) 1,52 World Shire Q~bX 20~3I 19,5X 20,52 of Ilg Iovc 11.21 38.11 37 ·, ~, ee IrL 178,6 1~LI Isc~ ~oi (1,OZ) 2,01 175~8 115~ (I~bX) (D~7X] 0,41 1 LL1~ I~~srr~~ Lc!lba, ~II Blc~ ~:il mi flrr~cral. BATCo document for Legal Services : Health Canada 21 May 1999 -Ce c) Be ~ ~e YC~ of uns;lDer Y, ~it~es d Sgnl5~s_ ~ of this has been ~p~d , ~ c~o Ib)but I ~ ~C ~ rakdora 1~ o rrmP~ needs he"' It cannot b denied ~ inaq~ ~ pad(agL]g pr the lBjOT role in dy~~ sales d rp ~tter hcw ~ the pzohictl ~e f~· ~ be the ~~~g force ~e~ind~ Imaa but it is the ptduct ~~ is the fclpzdation ard scstaicinS f~ bekird ~ 5P~S especially the ,ti~fa~~ clemrnt of sa7king· ~ is ~ necessarily related to delivery levelsl bearin3 ~ ~ ~ ~ da~ds 1~ b''eliabl ~, of inpact and ~~ac~c~io~ a ~a~d by the sa3ker ol ~~~ ~ d~ dC~· ~ rmst thcrefm ,,id judgiq the ooking gualitY d,~a~s m b3tal C1~ he Iv3 mrs~er is able to ass ~ t~p~erigo other t"an on a g g Puff basis and ~ probablY assess a B ~ii d~~ as ~ satisfying ~ a IEarg, 10 ~ dp~c~ RlternativelYl tt"a 14"9 dsarett~ ,ith be Ir puff ~mb~ would ~ ~~ as dissirnilar in ~erwt~i if or ~d 8 ~ti nicdCine deliverY (j'e' a la ~~ dcdine ~1~ in at erdwe ~~ recognise ~ it is satisfacticn d e ~a~ Df moking ~Q ~e~ "3 ~ ~ d rmw to ult=a 1Q de~ivery d~~· I~~a the irrp3rtancC d ~~ "d'~~' "easy to srrdne" p~m ~b the ~Qy re~liresl ~ full fla~,ur delivelY levels this shwld h a ~$ easy task, but · d3 not a?pear to a~eff it often ~~g· At b aellverY levels it is ~ ~e ~~i~~ ~ ~e it is a~td · it is with Barclayl whirh retains these easy n~ ~derhtb, a ~ss~ ~unch is ~ cier~ n~~ enp~s~d ~ ~~s are rot the end Of th" ~~~ Developrent task, Mdb ~ increa~ loss ch am;unieatia~~ ~ ~C ~ua will ~ 0 ~, be brand are ad ~a ad ~ all' gd~iu~ should ~ a pla~L CIQ~ ~ 6~~~ i" 9~ ~ b talLimra cSo~~ ~~as will not c~n~e re~ardi~g th, basio requirwfflts ~ dg"Jett" ~ ~Lmrrs Kill beane ~~eas~g~ inkibitd bY social nuisance aspects, apeuially in ~a.Rls ~ ad ~~ forsee a ewmua ~~~ ~ ~ sce~atio, leadin3 to ~ dve~· products and P~~ vith ~m they a able to 'sJ Id b axmtad. Ira~oMti~ here in t~ of ap~eara~o will b a oppsrunity, enmnpassing perhaPs, cheaper ~~' lcker EYa~a and sane visual ~a~ ch difference tlgl 1~ ~nnberena~ in tenrs of segruhs, the m~~g trend for Int~r~tio~l Brands is upnr~ ard g~ tD l9BB ~ forecast at 1~8~ per annum ~~ is three tines the rate of 4roJth ~r ~ ~ Pa hM ~t~ ~ Ea~~ ~ ~ rate of rKoverl ~·~ss~ will benefit ~ regne3t m than local ~~~ ,,,,1.5 BATCa document for legal Services : Health Canada 21 May 1999 -5- Within this, Yle 15I~ s~sqera is forecast to grrw at ~ice tk rate of the 1IK Va sub-se~hent and hence I believe all p~uets should rove in the directiol of US blended ci~arettes. ~n a desi~pl poict d vi~ this ~n oily be 930d news since it is rmch ~sier to ~aintain satisfaction and flaunt with tSis style of pI~cL. where Surlqr tobac~ gite nme taste aoJ i~aa ecmaared to ire i~ducts at the sane delivery level· In de~iwrj tenmr trerd data ~culd indicate an increase in lar delivery products bR this pibllre is cm~se~ by deliwy oteWI league table classificatica~ ard butt le~gt~ differences· In gwerall if delivery data is rat se~nted, the trend is t~r~ds a thres~ld at 12-15n9 of tar for 'full flaMur' ~aru~ with loJ tar ~a~s ~-leo~ growing ~ slrwly d ultra kw tar cPcducts ~atie ae ~clinircg (exwFt kbere Barclar ct~uss the pattcm) hence t~ thres~old will be a key ~a11~63e f~ the fuClre~ Cigarette length will h gxrened large$ bi lo~al ~~msta~ws bR i~e plssiblethe trend will h tohare longer length. The Renthol se3rent ~eh·5 to re static but has, al~ys ~bJn Fatential ~ greater things. d) Olrrent and Emure Prc~ucts'kends Much of this section ~velcps frmn the ass~n~tio~s in h previcus s~ctiw and is best slmrrarisei under the follcwing options; 1) C~ensatihle Cioarettes pre idea of a cicarette whi~ will respond in delivery tents to increased dra~ eiiore is not new but is still an opp3rtu~j ~i~ wwld Mtisfy Vie need o ~ndge the thresh3ld between gra~ine Icw tar and .fuU fla~xu prcdu~s. HoJever, we shwld strive to achie~ this effect without appeari~ to ~Hve a cigarette t~t Cheats the league table. Ideally i:Sw~ ameb- to h rxl different froo a norsel cigarette thus reducing the likWlccd of a mnpetitive d~allenge~ It should also be cqmble d delivering IIo to 100% ~ore t~n i~ nad~i~ delivery. 1~ ~csw '31is ratio because I believe anything rmre t~n this ~xlld lac~ credibility frao a cc~slmers point of view. 'Ihws an 81rg product capable of delivering ~16ng ~uld allow the current full fla~xw a~ker to continue to moke wit~ reassurantE but K, loss in tesrm of pleasure, 2) Lo~ cost products Hnether in the form of 1008 e~cpanjed tdbaco3 ~ ultra-slim dgarettes, this will be a theme whi~ will continue to be of iaF~rtanee even if ~ald eaoncnrics rme ~art of recession, since as prwio~sly merrtie~ed, taxatic~ will continue to fuel price inereascs~ ffnether these laJ c~t benefits are pissed an to the eohslper or used to irslaase aargi~ on a staller sales ~l~me will deperd cxl the relativity bet~een taxatirn and tiellirg price· ,,,,I~ BATCo document for Legal Senrices : Health Canada 21 May 1999 -6- 3) Visually Oifferen: Fro;3ucts In this area, inrPMrim in deS3:ative effe~5, djlre?sie~ and r~W structural flter technolo~b~ will all ham a role for new products. I~iwd tf~ey ray lead to solving s;rrr! of aLr other prpblens ach as ampe?satible b ~st or la~ envirau~n~ polluticn pra~~zis. 4) Menthol Alternatiw As stared before, there should be a viable alternative to ~e?thol, escecially when one P~nsi~ea ~e Fo~kllaricJ of Beteks (woual) in ~~donesia.'~kny ideas r;ay ~ve been atteraxed before in t~s field but we should try to get th~ whole brard pac)rdae in i~ nore acceptable fon~ as kes done for I(ml kZle3 it ~as in its early days. 5) ~pgg~B~E~~bLlt;~w lk Cn.l IL~L~'IU~BII;JI hin~,n~ i. ~Cl~cr · ·-S I hve c3t so far touched on t~s subject sise I hoM little 5p3e of fildinl a so!utic~ short c:. nec!icjjle reten?i~ of R4~ ~cc~nel with IOh192Sr~Sel If ~iiS were Foss~!e it ~Yruld Ba ~seful iul3Mtion~ Tne c~7an~es I fear are ve,y snail. 6) Low I~ndrormP~tal Psllvtion C~cacrcites i;rllilSt I believe swre progress ~s bes rrade, the solpticm to rwn ~zt~, s~ll, ixritaticn ar.d oeneal cigarette debris elude us and I beliaveare largely ~nsolujl;. In orriet to siroke onelrJs: createslroke even ii this is restriad to that Gh~Ch is e~aled, we will dU have the P;DS1EPG WtljS1B~ ~WVE· The wsji;7ilities c;utljned a~ove are not devastatingly creative 5ut ~ey are praai~l and to sy view, of irpor~mce. I have salec:d (,1! mlllklilP 5$ m~ project prop~s fo: biscussirn: i) A fully ccme~atible cie~ette Fs described ab3ve, I see ~is as a 6-Birg product Ilhid? delivers 1;1-1M when extra ~ati elfort is a~plied. The effort s~oul~ r~-, be excessive· 'kere ~wld be little or M visual difference beslrr ~2is and a nsnra: YS filter product arC oertainly rr,ol~F~""itY for cxnpetitiw attack. It should be a blerded ~n?lL"i or heavily ~i~ied Va. in aD3ropri3te nn~rkets~ Its appeal vill be to full ~la~ur sr;okers and ~oul~ not therefore ham a leJ tar gge~ It should nst najor m te~L13lo~y ~xlt shdl ~ve "yle pleasure is back'' type reass~ance~ I~s ~tinuing sale~i~ depend (11 trial and therefc~e i: rmsr live f~ ~ to the promise. O ··~~/7 BATCo document for Legal Services : Health Canada 21 May 1999 -7- ~c~~ thro~h Gwtrrrrent ~s~srl ~ reduce daLiveries a fa ,,,~, ~ ~I~ ~a b~d~ the ~~C ~6 I bcIiwt ~lh a a~p~la ~ ba Ird~stry ~ the r bae~ ii) hnw~ol~~~e ~ ~~ ~ b a mi KS d~~e of Q nenthol stYlo but Q$ either dd a a~ pig ~sd a a wert It ~d ~ a hn ~~r ~a at the Mltset wiul 1 ~ ~g ~ tYPe ble~ to lupFore h flavour· Its plat50rrn maid ~ as 4 dol ~ter~ti· r nenthol Plus the extra p~~ ~e q be 6cm3 ~~ ~ dean ~mtb ~osbness, ~ It ~ MturaUy b a fFmini~e ~i~c~ 14~ Sat ~~ BATCo document fot legal Services : Health Canada 21 May 1999