RESTRICTED
Reference No.
F2.i
Researc'- Conference, Canada - A---.7jst, 1932
A COM@AR:SON OF R&D ACTIVITIES OF BAT AND COMPETITORS
IN T94Z TOBACCO INDUSTRY
R.C. Hook and K.D. Kilburn
INTRODUCT14
An accurate cortnar4 son of own and comoetitors' R&D can contribute to the
planning a! effectIve technical innovation'.by prcmpting questions such as:
(1) Should we be working in areas of technology where
competitors =by_3:b_t=w_'1___._1 -2--nar-7
(2) Tn thcse areas where both we and competitors are
;ctive, havewe the appropriate balance of effort?o
(3) :n those areas where we believe we alcne are activep
or havs.&.4i9nificant lead; do we have the resources
or the commi-brtment to explains the technology as hard,
and as fast as possible?r
Alternative'-.-, are -we reaLix-convinced that our assessment of the value
of the war., correct?
SOURCES OF
information about the R&D activities of icamoetftors is necessarily
i4vccmV1*". Secrecy increases as an idea appr--aches commnercial reality
and even t-e total effort available is uncertain because the contracted-
out component is -isually unknown.
Some infornat-ort arises from the social nature'o! the R&D activLtyp, where
people proL'q ;.dma@ and assess each other as part of the technical community
of the free world. Scme Ercri the publication of research - -which is
usually (but not al-ways) necessary for key -'rdividual groups to gain
recognition '--y pe,?r grounr., and to gain access to the latest unpublished
information in f3st-roving Technologies. The level and trend in the
publication of patents -#is another quantifiable source. They are an-
outward R&D effort of previous years and
.particularly of de,.#e.'opmcnt effo.rtj which tends noz to be seen in technical
publicaticr.s.
Finally, date on R&D staf! memberv send their Specialities Opersor"Ll,
contacts, and press reports-rrovide supporting evidence.
OD 19$:F!-
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BATCo document for Province of British Columbia 19 April 1999

-2-
PUBLICATICNS
The scientific papers known to ZR&DC which were published between January
1981 and April 1982 fell into the following subject classes:
I Company
Subject
BAT PM RJR Rothmans Lorillard JTS
Flavours 1 4 1 4
Nicotine & Pharmacolocry 6 1 1 2
Chemistry
Combustion 2 3
Analytical Chemistry 3 4 4
rnfocmation Technology 3 1
Tobacco Physics 1 2
Cigarette Design 1 2
Agronomy 3
Biotechnology I
Total 12 24 7 1 4 26
.2 199: artlub Am-,3,, Tobacco C.@ LW. T!!i- rfti- me-: t!-. c.V-eci r4 It-v'wrv Ic- oingutherised persons. CZ;
Z-1
BATCO document for Province of British Columbia 19 April 1999

3
PATE14TS
GR&DC records of company totals for 1970-79 and trends in subject classes
are as follvds:
Company
Subject
BAT P4 RJR Rothmans JTS
Flavours & Addit-'ves 12 19(+) 10(-) 2 44(+)
Reconstituted Tc'--acco 9(-) 13 3 5
& Substitutes
Monitor, Control, 14(+) 16(-) 1 11(-) 2
Analyse
Tobacco Process-7iq 9 12(+) 6 9(+) 3
Tobacco Rxpansicn 15(+) 13(-) 2
Processes
Filters 53(-) 20 3 5(-) Is
Cigarette Wrappers/ 12(-) 22(+) 6
Ventilation
Cigarette Making 20 7 9 12(-) 1
Packinc
Materials Handling 6 6 5 10 2
Miscellaneous is 16 la 3 40(++)
TOTAL 156(-) 146 74(-) 52(-) 114(+)
increasing through the period
++ increasing rapid'--
decreasing
2@-
C:
A-tr:,:an T,!'.-ac:o Co. UJ This -num not copied tr %Kw's
BATCo document for Province of British Columbia 19 April 1999

4
Diagram I shows that the relative position of BAT in respect of patents
has declined since the early 1970s.
it must be stressed that patents are only a partial indication - e.g. BAT
took a deliberate decision not to patent many of its process improvements
on filling power Improvement and on some sheet tobacco processes on the
grounds that (a) the patents could not be policed, (b) the know-how built
into product quality should be kept secret. RJR took the same decision
on their sheet-making process.
PEOPLE
Informatiorr-avail'able"to GRGDC is regarded as highly suspect, especially
in regard to comparisons of quality - L.e. Ph.D., B.Sc., technical assis-
tant.
There is some evidence that, in respect of the number of people employed
in R&D, BAT's share of the total world effort has declined in recent years.
An overall feeling is that the present order of relative strength of the
::-,ajcr companies is:
Philip Morris
BAT
Reynolds
JTS
Rothmans
PRELIKIWARY CONCLUSIONS OU COMPETITOR STATUS
r,itting all available data into perspective, together with information
from conferences, personal mee ngs, etc, the following is a brief
assessment of each company's position in and attitude to technology:
Philip Morris research is wide ranging and professionally competent.
Many of its published papers have a "safety first" flavour and appear to
be rather academic. The product develo;ment function is underpinned by
an excellent chemistry department, both for synt'nesising flavour release
agents and for instrument technologies to provide information to aid
c-'garette design. Their patents on no-.cl cigarettes show an effort to
spearhead product innovation. Production technology i3 adventurous, PM
lbeing willing to use non-traditional technologies (e.g. DIET) before
competitors.
PL;A has excellent analytical, product development and engineering resour-
ces. It adapts developed technology to its own purposes (e.g. computer
control in factories and mat-trials handling) and buys in advanced compo-
nents (e.g. Filtrona SCS filter) . It aims to use basic technologies
very efficiently. There is little evidence of explorative R&D from the
seventies, although the RJR !1avour wor -C and their expansion process of
the sixties act the pace for the rest of the industry. RJR supports
tvbacco research into varieties, Cultivation and postharvest treatments.
X__
BATCo document for Province of British Columbia 19 April 1999

jTS (japan Totacco & Salt Monopoly) laboratories provide a conprehens;ve
techni=al ser,.:.z-z for the tobacco business. Their publIcaticns, taken
individually, are competent but not particularly exciting: the concentra-
tion on the c@-e-_4stry of flavour (especially that derived from "__4os-..nthe-
sis) and the experience of large scale call culture could lead to valuable
cigarette ingredients modifying the taste and physiological effects of
smoke. lnteracmion with Universities appears to be good and in science
there may be a similar sub-contract situation to that developing in pro-
cess eng.neerinq where individual small (7) companies specialise in compo-
nents f-.r an cverall factory equipment plan. in product and in ;rocess
machinery, JTS is in areas that could profoundly change the business.
Roth=ans @&D is principally technical service, quality ass-ararce and
cost-reduzing =recess innovation (notably in the primary man-.1-facturing
departnent', - :t buys technology as hard-dare from machinery su=pliers and
licences Processes (eq DIET). It has virtually ceased to publish, :-.ut Ls
known to regar-4 itself as strong in smoking behaviour (mostly via cc.-Izract
work).
ASSESS.111ENT. OF BEAT IN RESPECT OF R&D
R&D is principally directed at three broad classes- ofV
@technoloqy:.
RASE technology - vinere the'-technology--in question is available td
most competing businesses, e.g. where the prime aim is the reduction
of costs and of de=ands on resources.
XEY'technolocrt - where specific- technologies underpin com--erciall,
co,
c mceti tivenesVp and where improvements -are 'sought in, e.g., product
quaiities,' processes and materials.
PAC:NG technology whi6h-lifini p'roviaa a future advantacep e - q.
in testing new ideas, developing'new 'insights and transforming con-#
straints into commercial success,
In the context of BA-4 and the tobacco industry, the technolzgies given
belcw have been classified according to the above three catecories and to
the ;rincipall reason for R&D's involvement.
BASE Tec_.-nolczies
cigarette Des_@7-i Blends, optimise use of expensive materials;
Puff number control:
Transmission, ventilation, filtration of smoke;
Smoke quality: organoleptic assessment,
health related indices.
Pack Des-,an Psychological impact;
Flexibility for vending machine;
Material savings.
Tobacco :1rocessinc Determination and control of physical properties;
Waste avoidance;
Control of composition, additives;
Microbiological cleanliness;
Expansion processes.
BATCo document for Province of British Columbia 19 April 1999

Product Manufacture Reliability engineering;
Strategy 1;
Measurement technologies
Technologies bought-in from machinery suppliers.
KEY Technologies
Design of Products I. Understanding a-id using the processes that
to minimise adverse lead to purchase decisions and attitudes by
pressures (commercial Individuals (particularly consumers) and groups
constraints, social groups in society.
attitudes)
(a) Extending techniques of psychological
assessments of population samples;
W Extending techniques for product evalua-
tion.
2. Developing methods of designing, making and
controlling products
(a) Combustion and sidestream control;
(b) Smoke control through flow and filtration
control, and blend design;
(c) Defining smoke qualities and measurement
methods;
W Broad control of smoke dosimetry and t1he
behaviour of smoke in the tracheo-bron-
chial tree;
(a) Understanding the physiological, chemical
and physical influences on percept'-on of
flavour;
(f) Cost and control through understanding
the use of expanded tobacco, and physics
of cigarette rod filling;
(9) Process control.
PACING Technologies
Creating diversity in Novel smoking materials;
products and in process Structured cigarettes (design and manufacture);
Microbiological processes/additives;
Control of structure, composition and behaviour
of the particles in s,.wkei
Use of nicotine and augmentations of its effect;
hood control.
Transform current Strategy II
constraints o! Fast primary;
cost and qu a 1 -4 ty Up-grade tobacco quality;
(Microbiology)
0 19S2 Dmam Arimcut Tr+:ccu, C,, L:d Thi- must not
BATCo document for Province of British Columbia 19 April 1999

7
As a point for d1scussion, it is proposed that there is a need for SAT to
intensify Its efforts to convert selected PACIING technologies into KEY
technologies - t@ereby taking SAT ahead of, or level with, our competitors.
conversely, if in some KEY technologies we @udqe ourselves to he signifi-
cantly behind our competitors, we might consider the alternative route
of buying in know-how and concentrating our efforts on applying those
technologies to practical advantage.
Being realistic, the above is probably too much of a generalization and
it might be better to consider each area of technology on its merits,
questioning the assumptions as they apply to each case.
Thus, we might cons'-der the following questions:
(1) Is the list of technologies adequate and are the placings in
BASE, KEY and PACING categories acceptable?
(2) Is t-cre enough relevant inforzatJon available to classify
BAT'S position, in each relative to competitors?
(3) Can areas be identified in which:
(a) We (BAT as a whole) are not i-urrently active but shculd
be7
M We should relax or redirect our efforts?
(c) We should intensify our efforts?
(4) If the information on competitor activities is seriously in-
adec-uatc, hcrd could it be improved before the next Conference?
c:;
!7' IOS2 Ftrai@h A@:--:--t Tah.%c:o Ca, Ltd. Thii Must not F-c- cor-cd tw 0own te anauthmicd vc-iwts 11Z
Z@
C)
BATCo document for Province of British Columbia 19 April 1999

8
RANK ORDER FOR NU?-'Z--RS OF PATL-44TS GRANTED TO SAT GROUP
AMONG SE.7: MAJOR TOBACCO AN I ES
1
2
3
4
ORDER
7
1970 1972 19-0 197G 1978 1980
SEV-el: TOBACCO C--X.2A.4IES SAT
PHILIP MORRIS
R.J, Rr114OLDS
ROTHMANS INTERNATIONAL
JAPAN TOBACCO r SALT
IMPERIAL GROUP
SrITA
0:
BATCo document for Province of British Columbia 19 April 1999