Mr. A. L. Heard m. Oldman
    MO/AIB/38 26th July, 1982
    Comments on W. Tennyson's notes regardiali KDK's Paper:
    "Products of the Late 80's and 90's"
    The general "reactionary" tone of WT's initial comments (regarding
    environmental problems, fire risk, sidestream, etc.) cam as no surprise.
    Wilmat is a salesman par excellence. If we can provide him with
    marketable products for which a demand exists - or can be created - I
    am sure he would exploit such innovation.
    His comments regarding the "barrier of taste dilution" clearly reflect
    our own thinking regarding the need to improve the low delivery smoking
    experience and I take his views as an endorsement of our intentions in
    the "smoking dynamics" area.
    His hypothesis regarding the influence of cost is very interesting, but
    difficult to test. Certainly, the "value for money" argument is claimed
    to be the reason why, in Denmark, the move to low deliveries has not
    yet taken place to any significant degree. One could argue that, if
    the consumer is buying nicotine, then we should endeavour to maximize
    the pharmacological value and minimize the tar "cost" penalty. Pursuing
    such a line of thought almost leads us to the "pharmaceutical" fix
    which WT rejectst
    Given WT's analysis of the consumer's cost/benefit judgement (with
    which I am sure we would all agree) and his prognosis regarding the
    development of real monetary cost, we are forced to look for enhancement
    to the "pluses" to offset the growth in the nminuses". As you know.
    whilst we recognise the importance of financial cost - particularly in
    price promiscuous markets like the UK - we have not felt able to
    incorpomte this dimension into ou:r own models of smoker behaviour.
    There are techniques, such as conjoint analysis, which we have looked
    at in this connection but, like so many "what if " procedures, it is
    subject to several assumption problems. (About five years ago, B&W
    Market ReBearch were heavily into conjoint measurement - per Rich Lewis
    but I don't know how this turned out.)
    Surely the problem-about taxation and cigarette prices is only a problem
    when the Treasury 'loses" to the Health Minister. If prices only
    increase in line with R.P.I., then we should not be too distr ed. In
    Canada, I believe, the concern is not solely with the tax/RPI relationship,
    but, rather more importantly, with price/unemployment. Significant
    proportions of their market now have reduced disposable income (due to
    unemployment, short time working, etc*), hence the increased demand for Ln
    fine cut/tubes. For these people, cost is a real concern, ---J
    110
    BATCo document for Legal Services : Health Canada 22 October 1999