lcli late to 8.1, Catravay, eaq, From: A,I~ Heard Smokeless Cisarettes I am responding to your request for any background material in relation to the announcement by Rlf~ Reynolda of their development work on a smokeless cigat~ttas~ Theoa Ire rather 'oft·thr-rop comments which should nor be taken as thoroughly validated, First, some contents on the RJR produet~ This appears to work by providing a heat source (burning carbon) at the end of the cigarette, insulated from the lain rodl This rod contains tobacco, set within which Is a flavour cipsule~ Heated air is drawn through the rod where It picks up tobacco extract, flavouring and glycerinc~ The net effect is to create a 'saokr*, capable of being inhaled by the smoker, that consists primarily of glycerine, water nicotine and some flavourings. The product makes no sidestream once the "futnace' is Established, It also produces no ash and has low ignition propensity on iextlles~ The product is covered in two guropean patent applications which, doubtless, have their US counterparts. (?e are currently checking the patent coverage and evaluating the validity of three filfngs~) Analytical and toxicological testing is inc:ipleic, For example, the Press Release refers to inhalation studies on glycerine which are Still being eonducted~ This, and the unavailability of the product (~~r an undisclosed time) suggests that there has been a 'leak' from the research programme to which RJR have chosen to respond by a Press Releose~ Reactions are mixed but at this early stage it appears that neither the Industry nor the Anti·Smoking lobby ate happy with this fnfi~ative~ The Industry can see addiction issues being raised, for instance, it is even possible that this could lead, as with FAVOR (the Advanced Tobacco Products smokeless device), to classification of the product as a drug, in vhic~ case it would fall within the aegis of YDA~ i have appended some early thoughts by R,I~C~ Fly on Public Affairs aspect and by P, Bingham on Marketing issues that relate to this kind of prPduct~ My own view is that the consumer has proved extremely reluctant to make trade-offs from his normal expectations in smoke, taste and flavout and the probability that he will find satisfaction from a product that is so different must be low, 86V are trying to assemble a similar product (froP the patent) and this pay give Dome indieatlon~ Another factor that tty create problems for the RJR product is the marked exhslate produced during sloking (ve have a TV news clip demonstrating the product - although BJR claim rapid dissipation of the exhaled smoke, i; will still be noticeable by the social anli·saokcrs), Turning to our own technological position, vhilst we do not have a product of this type within research, we have various elements of technology that would enable us to move towards such a product within a year or tva~ A lot depends on what product performance Is re~u~rcd~ For instance, we have satents (nov expired) around project IRIEl which dates back tb Sir Charles ellis and Rally Ru$hes~ h Clit; PDF -!::!!::!!::!.f3 StlC.i: Dill ·2· This device yes of the form: b~c~,~ ~-------t--· iekcco - -- ~a~'i~l c~vD b~t I yp.7g hll~* ~l\tpT, ul ~r~l This uses burning tobacco Is a source of heat that is used to volatilise aicotfnelflavourings coated on a frangible ~ub~~ The design snows for the proportion of tobacco smoke mixed with the tube volatiles to be varied - even down to zerD~ In contrast with the RJ1 device, since burning tobacco is the lull, IR~il does produce sidcstreai~ (r have get to discuss with my colleagues whether we could substitute carbon for the tobacco In l\glEi · if so, we could be close to the RJR product~) quite separately, ve have filed patent applications covering improveaenta on the FAVOR concept including the sttaeh:eot of a fiicotinelflavour plug to a conventional tobacco rod, which Fight allow very low smoke deliveries get significant nleotlnelflivour deliverfcs, k'e also have an application covering a nicotine aerosor dispenser but this is moving some way from a clgarctte~ Given the impetus of the RJR initiative, I believe there could be other patentable material within out increasing knowledge base on aetosolr, nicotlnelflavour transfer and extrusion technologg~ I propose to pursue thin~ ~tltl)l~~tltt~tl(l(t~211~~~ In summary, RJR have responded rather dramatically, and perhaps too quickly, to the passive smoking issue with this products The testing is incomplete and the views of the Authorities could be ncgative~ If the product sPokes yell, not by any means an easily attainable goal, it may sell but its acceptance will probably be slov, WI have some technology that might be adapted for a parallel produet~ At a rather low level of reseatch effort we ate also developing building blocks of technology that might be assembled to make radically modified products addressing either mainstream or sldestreap pte~sures~ If the Group believes that such radically alternative products do have a role in the future of the cigarette business, we shell have to accelerate our work in this area (currently very iou priority) quite draairic~llp~ Clit; PDF -!::!!::!!::!.f3 StlC.i: 0111 ·_ ·3- Looking back over the last two rears, there in several pointers to the fact that those supplying the cigarette consumer are prepared to be more innovative end technologically based In their Ittatrgfci~ FAVOR, the RJR double blend (a cigarette produced with two separate tobacco sectional), a recent vary low aidesttee~ RJR trial product, our own CAPRI, COHCORDE (from FM vith an adjustable delivery system) and now the RJR smokeless product are all testimony to this move to respond to tither regulatory or coniumer need for products that obviate perceived shDrtcolDings of the traditional products, Ito~·~~ ~U·· C a,t~ Beard c~c~ E,hlX, Bruell, Esq, bce: R~~. Htncley, Esg, R~5~D. fly, Esgl P~r~ Blngham, Esg~ Miss A~ Johnson Y~t~ Reynolds, Esq,, BiW litt~ AIHlnEr 17th S~pte~bet 198i Clit; PDF -!::!!::!!::!.f3 StlC.i: 0111 _1_13~e~L~_·_ Note to Sr, d,l, Heard RJ~ Revnolds · New Product from a Public Affairs point of view 1 number of paints occur to us: i, Our own response to ant ~e~u~st for information from the press should be, we suggest Ihie is a competitive product about which we have Po information, We are therefore in no position to comment,' If we are further pressed about ant research or development work that we may be doing ourselves, we believe we should maintain our position that 'ue ha PO co~ene to MkC~ i, Reynolds statements, The following points arise: a, A number of words is used which we believe are better left lot comment by R6D, Such words include *smoke", "eliiostiop of compounds' etc, They are presumably attempts to describe in layman's language tatters which are complex technically but the result may well be misleading, b~ Any launch of such a product is likely immediately to raise the guestion from opponents 'So this means that you admit that products which burn tobacco directly are unhealthy', Reypolds have tried to cover this point and two statements are mentioPed below; i, 'Compounds that ate often associated with the S~R cooetaverq i, The word associated is ambiguous and unqualified; not helpful from an industry point of view, 'TeEI~ V" do"'t agree with the allegations about the ~ndustr~"~ (See radio transcript), Again ambiguous and unhelpful - to what poilt do they agree or pot agreel 3, Practical Consequences We do not believe their hope that the 'cigatette" will be allowed to be used where smoking is prohibited since by their ovo admission there is *IIDOtL* when it is first lit, b, Opponents of smoking will certainly question bath the so-callad "sderg' and the rechnleal details of the product and are likely to reject it as an acceptable alternative to the standard cigarette, Press cuttings slnldt reflect such attitudesl c, it is difficult to judge how reliable mt share price reaction may be particularly if, for instance, the VS Surgeon General were to make any comment, It is likely that this would reflect aot only on RJR shares but also oo the industry as a whole~ d, RTR sag they will refer tests to scientists before launching the product, Who will be the scientists and to what extent can R1B be bound by their obsenatioasl This could have product liability implieltions~ Clit; PDF -!::!!::!!::!.f3 StlC.i: 0111 ·2· I~ The serious tests referred to sill not be rsedilt understood by the public end mat therefore leed to UnDecessefl ePPrehensioa, i, further Possible AetioP nI We should consider prepering e series of eoPPents on serious sspects Pt this end nlated products for wt in the tuture should the aefessitl odlal b, We mat need to prepere infb~tiop for our openting eapaoles about this dnctopoLot, The topic uas raised by delegates to Chelvood MDP 68 on 1Sth Septaberl c: I 1/i ·1: "1. R.I,O~ EZY noala 16eh Scptrbcr 1987 c,c, Miss Al Johnson, Hr, P, Binghap~ Clit; PDF -!::!!::!!::!.f3 StlC.i: 0111 Note to: Mr, A,1, Hard REYNOIDS SMOKELESS GIGMETTE following our discuaaions and Lying read the RJR publicity hsndout, r would make the following observatoon: i, rheSmoking issue The key isaue for a smoker is whether he lurtl and continues to smoke or not, The key influences upon this decision Ire Smoking ad Health, Social Acceptability and the economic factors of disposable income and price, The key issue for a non spoicr is the 4nnoyance" factor with smell, smoke and dirty aahtrays being kry elements of this, Here recently, the alleged health risks have also emerged Is s relevant factor, The RJR concept addresses itself only to the social acceptability aspect which is of partial relevance to the smoker lad of total relevance to the non smoker, however, one must remember that consumers primarily buy things to derive satisfaction themselves and not to give satisfaction to others, Any product sold to smokers must primarily meet their needs, not t~l needs of the non smokers, The interaction of the influences upon Smokers' decision to start or quit are complex, Although they sly that price, income and social acceptability are relevant to that decisio,a they are only relevant in the context of the underlying Smoking and Health issue, One must therefore interpret what they say and my interpretation is that the fundamental reason why consumers do not start or quit is the Sloking and Health reason, All other id;~enecr ore subsiding to this underlying reason, The process of quitting is complex and variable but is normally either trading down to a lover delivery Product pod then quitting or quitting without trading down, Although the social acceptability aspect interacts with this process it is largely handled by smokers continuing re smoke, and disregarding its effect upon others by building up a mental barrier, or by smoking in an environment which is socially acceptable, The above is largely obvious and well known but it is important to understand the context when assessing the potential of the BJB concept, One final aspect which Should be remembered is that smokers buy brands not products only, vhic~ is also a key issue on their decision to smoke or not, Clit; PDF -!::!!::!!::!.f3 StlC.i: 0111 2, The Consumer Alpece~ of the RJR ~lelP~i. The RJR smokelesa concept addresaes only the aocial acceptability aspect, it has little or no relevance to the Smoking and health aspect and i assume will be conventionally priced and rtklted in I branded format, ~he "eDvumet benefits" promiaed arel - continued taste and satisfaction, This is vital because if the product fails to deliver the promise it will pot succeed, virtually no uh or tobacco smoke odour, Thia is a positive benefit ii true, however, reference is made to the fact that the process ions sloke which looks and tastes like smoke produced by other cigarettes, Reference is also ~de to the fact that there is smoke during the first few puffs which somewhat negates the claim and will probably be a serioua drawback to eatablishing any eredibilitv that the product is socially acceptable, Non smokers uiil rctll; fat nothing 1tII than no soolrs and IPeil st sil. the claim that it is unlikely to ignite most materials when lying down is of 13V interest to smokers who are well aware of the fire dangers and so lake care to extinguish cigarettes, The "smoking" process of the RJR product is so different from conventional cigarettes that it is likely there will have to be a significant period of familiarisation for the product to become accepted, Smokers have a high interest in product innovations which promise benefits related to Smoking and Lsilh and Social Acceptability but ate conservative in response to them if they fail to :ulfit the promises made and if they fail to deliver their fundamental neej for taste, flavour, satisfaction and image, 3· ~xperirnces of Product innovation The experience of Accord, Passport end favour have all been negative but it is interesting to loot at why: Accord smokers can compensate without undue difficulty by adjuating their "smoking intenaity" of I cigarette, The adjustable filter offers them no new benefit, Passport filled despite high awareness interest and trial because it gave 03 or low levels of satisfaction i,e, the trade off was too great, favor · despite high awareness, interest and trial, it failed because it failed to give them an acceptable level of taste and satisfaction, To conclude, a perception of the BJR product potential is that it ii unlikely to be high because: Smoking and health it the key issue, not aocial acceptable Pad the latter can only be solved by quitting or by having a product which overcomes all the social negatives linked to sloking, the product doean't addresa all aspects of the social acceptability issue because smoke is still generated through uae, a pe~P.H. iinghamlEZ, I~~h I~r~aacr 1981 O Clit; PDF -!::!!::!!::!.f3 StlC.i: 0111