Tobacco Documents Online

WILEY, REIN & FIELDING 1776 K STRF'ET~, N.Wo W~HINGTONt D, C, 20006 (202) 429-7000 FACSIMILE (202.) 42.9-7049 TELEX 24~}349 WYRN UR MEMORANDUM Privileged & Confidential Attorney Work Product TO: CC: FROM: DATE: Scott Appleton David M. Bernick (w/o enclosures) J. Kendrick Wells, III (w/o enclosures) Andrew S. Krulwich William A. McGrath September 27, 1995 Imperial Tobacco Ltd. Documents Kendrick sent us the enclosed Imperial Tobacco (IT) documents that were referenced in the Analysis Regarding the Food and Drug Administration's Jurisdiction Over Nicotine-Containing Cigarettes and Smokeless Tobacco Products, 60 Fed. Reg. 41453 (Aug. 11, 1995). We prepared this brief summary for your use in comparing the documents with FDA's assertions. The Analysis references some IT documents that we have not been provided.1 We have included FDA references to the documents ~ E.__~_., Overall Marketing Objectives - F88, 1988 Imperial Tobacco Ltd. Marketing Plan (cited at 60 Fed. Reg. 41344 n. 138); The Creative Research Group, (continued...)

we have that were contained in both the jurisdictional statement and the FDA's justification of its proposed regulations. I. DOCUMENT: DATE: BY: FOR: Project Viking Vol. III: Product Issues February - March 1986 Creative Research Group Ltd. Imperial Tobacco Corp. SUMMARY: Project Viking was directed towards an examination of both smokers' and nonsmokers' attitudes toward smoking in an effort to evaluate both product innovations and advocacy efforts that might be undertaken in order to ameliorate the effects of industry decline. The Foreword to Vol. III identifies the industry as "under siege" due to a declining smoker base resulting from successful quitting and anti- smoking publicity "such that the future starting level may be in question." The authors of Project Viking identified it as a "pro-active program" designed to maximize ITL franchises and to consider "serious attempts to combat those forces aligned in an attempt to significantly diminish the size of the tobacco market in Canada." Id. at 1. Project Viking consisted of two components, Project Pearl (described as directed to "expanding the market, or at the very least forestalling its decline" through examination of "attitudes and issues with the potential to be addressed through advocacy") and Project Day (directed to "the tactical end by which ITL may achieve competitive gains within the market of today and the future" by examining "[u]nmet needs of smokers that could be satisfied by new or modified products . . . which could delay the quitting process"). Id. at 2. Project Viking consisted of interviews with randomly selected individuals age 15 or older. The sample included both smokers and non-smokers, although a quota of 25 % of the total sample was imposed for non-smokers in order to "maximiz[e] the base of people with smoking experience." Volume III of the study examined attitudes of "Never Starters," "Smokers," and "Quitters" towards cigarette smoking in order to determine whether product changes could address some of the concerns of each group. The report specifically examines the extent to which either a "low irritation cigarette" and a "safe cigarette" would address the concerns expressed by each group with regard to smoking. The study indicates that "no product solution seems viable for Never ~(...continued) Project Viking, Volume I: A Behavioral Model of Smoking (Feb.-Mar. 1986) (cited at 60 Fed. Reg. 41344 n. 139); Lecture by J.S. Campbell, American Organization of the Imperial Tobacco Group Ltd. at a Conference on Social and Economic Issues Confronting the Tobacco Industry in the Seventies, Lexington Ky. (Cited at 60 Fed. Reg. 41704); U.S. Patent No. 4,370,072, Bolt AJ, Chard B., Smokable Device, Imperial Group Ltd. (1982) (cited at 60 Fed. Reg 41752 n. 528); U.S. Patent No. 3,861,400, Perkins PR, Bale CR, Nicotine Fortification of Smoking Products, Imperial Tobacco Group Ltd (Jan. 21, 1975) (cited at 60 Fed. Reg. 41684 n.375).

-3- Starters;" id. at 5; and that even among smokers, "there does not appear to be a product with any substantial for success. Some of the health concerns may be met with a safer cigarette, but the social barriers will remain a potent countervailing force." Id~ at 7. With regard to Quitters, the report appears somewhat contradictory in indicating that both the "less irritating" and "safe" options might address some concerns, and that, "[s]trategically, it would seem that reducing quitting is the most viable approach." The report states that "a product solution may not be sufficient on its own" and that an "advocacy thrust may be necessary" to reassure disaffected smokers that they are "not social pariahs." Id__~. at 8. The report also examines consumer reaction to five new product concepts: new smoking material, smokeless cigarettes, aromatic cigarettes, pre-formed pipe plugs and dry snuff. The report states that only current smokers showed any enthusiasm for any of the ideas. Id. at 45. The report concludes that "no product solution with the potential for arresting or reversing the decline in tobacco consumption has been uncovered .... At best there is a small opportunity to slow the rater of decline, but this probably involves advocacy or reassurance to the beleaguered smoker in addition to product options, and this is a tenuous one." The report did note "some evidence of short to medium term tactical advantage for ITL in further considering some innovative products." Id. at 56. FDA REFERENCES: A. 60 Fed. Reg. 41331 Evidence indicates that acquiring a portion of the "starter" market, overwhelmingly people in their teens, is regarded by the industry as essential to a company's continuing economic viability .... To further this goal, ITL hired a consulting research company to investigate attitudes about smoking among people aged 15 years and older. The purpose of this research, i.e., how best to recruit new smokers, is indicated in the following statement: It is no exaggeration to suggest that the tobacco industry is under siege. The smoker base is declining, primarily as a function of successful quitting. And the characteristics of new smokers

-4- are changing such that the future starting level may be in question. COMMENTS: While Project Viking appears to have been designed to find ways to increase the consumer market, as opposed to market share, ITL has considered it "an attempt to determine whether ITL could - or should - take a more active part in the smoking and health debate (e.g. through advocacy advertising) and whether the current climate surrounding smoking offered any competitive opportunities (e.g. through the launching of new products). The answer is negative in each case." December 18, 1991 Memorandum. Study did not solicit underage smokers, but 15 year olds as part of representative sample of population. Study was first time its author, Ian Brown, had conducted research on 15-17 year olds for ITL. These age groups were excluded from Wave 2 of the study. ITL has never taken any action on Project Viking. Project Viking, inter alia, evaluates the potential success of "low-irritation" and "safe" cigarettes, new product ideas that would directly address consumers' (and presumably FDA's) health concerns. Like all of the documents reviewed herein, these are market research studies. They do not appear to have been produced by scientists, or the result of scientific methodology. FDA stretches the scope of these studies in contending that the results thereof indicate tobacco manufacturers' knowledge of the purportedly addictive property of nicotine or the alleged pharmacological aspects of tobacco. B. 60 Fed Reg. 41671-672 Market research documents also show that tobacco companies have conducted research in quitting behavior and have documented the reasons why people quit and why they fail to quit, despite a desire to do so ..... [Citing Project Viking Vol. III and Project Plus/Minus] The fact that many smokers smoke even though they do not enjoy smoking is conceded in a candid marketing research document prepared for ITL, which reported that it is particularly difficult to sell cigarettes by "trading on the positive" because the industry is "vexed by the unique problem that users of the category do not necessarily like the product." 5t3f;G 8844

-5- COMMENTS: FDA misrepresents both quote and thrust of study. Study indicates that one of major "likes" about smoking is relaxation; "one can assume this is attributed both to the physical experience and the psychological soothing in the ritual of lighting, inhaling and exhaling and, in the group context, the ability to break eye contact or, alternatively, occupy one's hands." Thus, consumers expressed, not addiction to nicotine, but enjoyment of physical sensations and use of cigarette as social tool or crutch. Smoker dislikes are identified as health and social concerns. With regard to new products, study indicates that "[s]ome of the health concerns may be met with a safer cigarette, but the social barriers will remain a potent countervailing force." FDA's citation of Volume III of Project Viking to support its conclusion that "tobacco manufacturers are aware that the large percentage of their customers who try to quit but fail continue to buy and use tobacco products, in large part to satisfy their dependence on nicotine-containing tobacco" is inaccurate. See 60 Fed. Reg. at 41672. Nowhere in Volume HI does the study address the question of nicotine addiction. The "likes" and "dislikes" addressed in Volume 3 of Project Viking are physical and social benefits and consequences. H. DOCUMENT: DATE: BY: FOR: Project Day: Exploratory Phase in Edmonton August 1988 Creative Research Group Ltd. Imperial Tobacco Corp. SUMMARY: Project Day was targeted at "exploring alternatives to conventional cigarettes.., with a greater level of safety. The belief among many smokers, although not supported by direct evidence, is that certain diseases are associated with smoking. An enormous benefit and marketing opportunity is seen in providing a viable solution to these issues." Id. at 1. In the Edmonton Exploratory Phase of Project Day, 36 smokers aged 18 to 34 were interviewed. Their views as to the benefits and drawbacks of smoking were discussed, as were their reactions to five potential new product concepts: modified tar/nicotine ratios; synthetic tobacco; new filter technology; tobacco purification or treatment; and new delivery systems. The study found that relaxation was the primary benefit sought from smoking. Among the relaxing attributes cited were having "something to do with your hands." the visual effects of exhaled smoke and smoke rings, the smoking ritual, improved concentration, and the "nicotine effect," which was described as both "calming" and "stimulating." Id. at 7-8.

-6- Social drawbacks such as the smell of smoke, bad breath and stained teeth were mentioned before health concerns, although the study noted that "it is probable that some panelists consider the imputed health risks of smoking to be so obvious that they do not bear mention (before the social concerns)." Id. at 10. FDA REFERENCES: A. 60 Fed. Reg. 41671 A market research f'nan reporting on a survey of smokers' views about the health implications of smoking observed that: a minority expresses a resentment about the addictive aspects of smoking. Being "out of control," unable to quit causes them to feel unworthy ..... Nicotine is usually singled out as the culprit here. However, even these smokers would be reluctant to give up the satisfaction elements in smoking. So they are in a quandry [sic]. COMMENTS: Once again, Project Day did not focus on "why people quit and why they fail to quit," as FDA suggests. The quote taken from the report itself indicates that only a minority identified themselves as addicted, and that those smokers "would be reluctant to give up the satisfaction elements in smoking." While that reference to "satisfaction elements" may be equated to the socially and psychologically relaxing qualities cited above, the prototype advertising concept used in the study to measure reaction to modified tar/nicotine ratios (low-tar cigarettes with nicotine levels equal to regular brands) equates nicotine with "satisfaction." Interestingly, this proposed product prototype was "met with some lack of interest." Those already smoking low tar cigarettes "have difficulty with the idea of increasing their nicotine intake," whole others were concerned that "such a development would require removal of nicotine and therefore-reduced satisfaction." III. DOCUMENT: DATE: BY: FOR: Project Eli Focus Groups Final Report July 1982 Marketing Systems, Inc. Imperial Tobacco Corp.

-7- SUMMARY: Project Eli was designed as a follow up to a 1980 study exploring consumer reactions to low-tar and nicotine (LTN) cigarettes in order to "concentrate on the growing ultra-mild segment." The study primarily focuses on the concerns of LTN smokers and ultimately concludes that improvement to the taste of LTN cigarettes is required in order to capitalize on the market. See August 26, 1982 Cover Letter to Carole Brohman from Eli Seggev, Ph.D, at 5. FDA REFERENCES: A. 60 Fed. Reg. 41671 n. 347 Smokers refer to smoking as "satisfying a craving." [Cited in conjunction with Project Day study as ostensibly documenting reasons why smokers quit or fail to do so] B. 60 Fed. Reg. at 41672 n. 350 and accompanying text. Another document reports that many smokers of ultra-low tar and nicotine cigarettes want to quit and "refer to their behavior in terms of 'satisfying a craving' while smokers of stronger cigarettes talk about taste and satisfaction." COMMENTS: Standing alone, the comment is taken out of context. The overall point made in the research survey is that LTN and ultra-mild smokers (those who smoke the lowest levels of LTN cigarettes) desire additional taste in their brands: Smokers of ultra-milds are aware that they are smoking very low tar cigarettes. They speak differently about their cigarettes then [sic] smokers of higher tar and nicotine cigarettes. Often, they do not talk about taste; rather, they talk about satisfying a craving, working their way down the scale and ultimately quitting: "This is to satisfy a craving; it's not really giving me a whole lot of pleasure at this point." Project Eli at p. 23. As the study later notes, "the reality of today's market is that tar levels will probably continue to drop. The competitive reality is that as tar levels drop, taste is negatively affected." Id. at 29.

-8- The Project does no more than identify taste as the primary complaint about LTN cigarettes and recommend research and development into flavor improvements. IV. DOCUMENT: DATE: BY: FOR: Project Plus/Minus May 7, 1982 Kwechansky Marketing Research Inc. Imperial Tobacco Corp. SUMMARY: Project Plus/Minus was undertaken to update Project 16"s research into the reasons young people begin smoking and to expand upon that research by examining the motivations behind "late starters" and by examining the experiences and attitudes of successful quitters. [p.2] The study was based on focus group interviewers with Toronto smokers aged 16-24 and quitters aged 19-24. [p. 3] While citing many of the same reasons behind initial youth smoking, the study places the beginning of "serious smoking" at age 14-17 [p. 11], significantly later than the 12-13 year old range suggested by Project 16. The study notes that the most often cited positive aspect of smoking by respondents was that it helps to pass the time. [p. 13]. Relaxation is also cited as a major positive. The study notes that "this is only partly due to the pharmacological effects of tobacco, and also partly (and probably most importantly) to smokings [sic] psychological effects." [p. 19]. With regard to negative aspects, the study notes that, while both starting and more experienced smokers recognized, at least in the abstract, the health damages posed by smoking to greater degree "nearly all still reject that smoking is addictive." [p. 25] The report purports to identify a pattern that shows how and why the health hazards do not really enter into the decision to start. It's no longer because they are sincerely disbelieved.., but because they are assumed as not applicable to the person who won't become addicted. But addicted they do indeed become.., what then? [p. 26]. The study then examines "rationalizations" smokers purportedly employ to overcome this dilemma. The study addresses the addiction issue again in its discussion of current smokers' views on quitting. The study states that most smokers think about, and attempt, quitting at an earlier age. [pp. 32-34]. A number of quotes from respondents reference their smoking habit as an addiction. [pp. 33, 35, 36]. At least one

-9- respondent, however, distinguished between physical and psychological addiction, noting that the latter poses the real challenge to successfully quitting. [p. 35]. The study itself concludes that "[i]t is likely more difficult to break the ritualistic aspects of smoking than it is to overcome the physical withdrawal." [p. ii]. The report as a whole, however, purports to acknowledge the addictive nature of cigarette smoking in numerous places. S[_S_¢_g, e._~., pp. 34, 36-37]. In reviewing one reason given by respondents behind unsuccessful attempts to quit, the belief that one could smoke just a few cigarettes in social situations without reestablishing the habit, the report notes: How anyone can actually delude themselves this way, having already found out when they began smoking that this is an illusion, is testimony to the amazing human ability to rationalize about anything. This "just a few" business is actually a surrender to addiction while trying to save face for an interim period, to pretend to oneself and to others that addiction is not present, which is nonsense. [pp. 36-37]. The report theorizes that "the start of a real trend towards successful quitting... would eventually begin to accelerate of its own accord." [p. 37]. The report states that effect on athletic performance was the most commonly voiced reason for quitting among the successful quitters interviewed. [p. 41]. In reviewing comments on the experience of quitting, the report indicates that the "discomfort, nervousness and a sense of withdrawal and lack" reported by respondents was part physical and part psychological. "The smoker must learn not only to do without the pharmacological effects of cigarettes, but also without the physical act of smoking. After the first few days away from smoking, it can be tougher to continue to overcome this ritualistic aspect than it is the physical one, once the body has adjusted metabolically to living without tobacco." [pp. 46-47]. The study indicates that environmental and social factors, not psychological withdrawal, are the major cause of failed attempts to quit [pp. 48-53]. The remainder of the study addresses brand selection issues, but contains no discussion of advertising or other relevant issues. FDA REFERENCES: A. 60 Fed. Reg. at 41330 & n. 118

- I0- Tobacco advertising plays on [adolescent] feelings and exploits . . . adolescent vulnerabilities. As one report, created for a Canadian cigarette company, stated: Starters no longer disbelieve the dangers of smoking, but they almost universally assume these risks will not apply to themselves because they will not become addicted. Once addiction does take place, it becomes necessary for the smoker to make peace with the accepted hazards. This is done by a wide range of rationalizations. [p. ii] COMMENTS: This study, like the others cited herein, was prepared by a market research firm, an organization not necessarily expert at either addiction theory or scientific research technique. To the extent the FDA reference implies the study was an effort to "exploit... adolescent vulnerabilities," it should be noted that the conclusions of Project Plus/Minus were based on comment of smokers (and quitters) aged 16-24. In its theorizing on addiction, the study makes little distinction between smokers in the high end and low end of the age range. Further, Project Plus/Minus, unlike Project 16, did not deal in any way with tobacco advertising. Like the earlier project, no mention is made of advertising as a reason expressed by smokers as an influence on the decision to begin or continue smoking. In fact, at least one respondent volunteered that "I did not start smoking because of advertisements. It was just, I did it." [p. 25] B. 60 Fed. Reg. at 41332 & n. 146 [Discussion following Project 16 Reference B, alleging that cigarette manufacturers know: that they need to direct advertising at young people; that, once they become regular smokers, young people find it very difficult to quit; and that most fail in their attempts to quit.] [T]he desire to quit seems to come earlier now than before, even prior to the end of high school. In fact, it often seems to take hold as soon as the recent starter admits to himself that he is hooked on smoking. However, the desire to quit, and actually carrying it out, are two quite different thing, as the would-be quitter soon learns. [Quote also repeated in part at 60 Fed. Reg. 41672 n.348 regarding market research reports to tobacco companies on inability of young smokers to quit when they want to.] C. 60 Fed. Reg. at 41670 & n.339 566GE8850

-11- [Tobacco] companies.., understand that many of their consumers would like to quit but are unable to do so. [Citing, inter alia Project Plus/Minus, p. i.] D. 60 Fed. Reg. 41671 & n.346 Market research documents also show that tobacco companies have conducted research in quitting behavior and have documented the reasons why people quit and why they fail to quit, despite a desire to do so. [Citing Project Viking Vol. III and Project Plus/Minus pp. 41-51] COMMENTS: The study makes no mention of advertising as a motivating or recruiting device among young people. Although the study explores the difficulties • cited by these respondents in quitting, it concludes that the psychological and social factors are much more responsible for those difficulties than physical factors. The study overall demonstrates that reasons for smoking are a complex mix of factors. To the extent the study is cited to demonstrate B&W's "knowledge" of the difficulties of quitting, it would be helpful to know why ITL authorized the study and how it was or was not utilized. V. DOCUMENT: DATE: BY: FOR: Project 16 October 18, 1977 Kwechansky Marketing Research Inc. Imperial Tobacco Corp. SUMMARY: Project 16 was a marketing study conducted using four discussion groups of smokers aged 16 and 17 in Toronto and Petersborough, Canada. At the time of the study, the legal smoking age in Toronto was 16. See p. 32. The study notes that, while social pressures against smoking had increased over the preceding decade, teen smoking remained constant or increased. Noting that "how the beginning smoker feels today has implications for the future of the industry," the study sought to "learn everything there was to learn about how smoking begins, how high school students feel about being smokers, and how the foresee their use of tobacco in the future." [p. 1]. The researchers encouraged the groups to discuss how they became smokers and how they felt about smoking. [p.2}. The participants were also shown a series of advertisements for both tobacco products and other products and asked for their reactions. [p.3]. The majority of the 97-page report is taken up by quotes from the participants. The conclusions reached are fairly mundane -- the major factor behind youth smoking is peer influence and the desire to be part of a group; the "forbidden" nature of the 566628851

- 12- product also provides dome attraction, as does concealing it from parents. Smoking is also used by teens as a way to pass the time, and as a social prop or crutch. The study finds that most teenage smokers begin "serious" smoking at the age of 12 or 13. [p. 12]. While defiance of parental authority did not, according to the study, constitute a significant factor in starting, the subsequent conflicts were found to create familial hostilities that might not otherwise exist. The study also indicates that some teens "regret" the fact that they began smoking. This regret stems from the fact that smoking has now become a habit; that their early belief that "they could experiment with cigarettes and not, as they put it, 'get hooked;'" that "they are in a distant sense concerned with smoking and health;' an that social pressures made them feel "second class" as smokers. [pp. 65-66]. The study indicates that over half of the participants wanted to quit 'someday" and that some had attempted to quit and found it difficult. [pp. 70-71]. (As the focus groups were limited to current smokers, those teens who had successfully quit were not represented.) The study indicates that the failed quitters interviewed return to smoking for many of the same reasons as adults. "It could be a time of stress, feelings of depression, seeing others smoking, and so on. All of these things and more conspire to break the quitters [sic] resolve." [p. 71]. The section regarding teen attitudes concludes: Smoking seems to feed on itself. The adolescent treats it as a thrill, a part of breaking away. The teen is "hooked,' admits the risks, but smokes anyway. Barring a drastic shift in adolescent attitude, or drastic governmental action, smoking will be around for a long time to come. The cycle seems extremely difficult to break. [pp. 81-82]. With regard to advertising, the study found that most respondents viewed it "as always self-serving and often false." [p. 87]. The study characterizes the respondents as "cynics about the glamour that they perceive advertising is trying to link to ordinary products" I[~.]. The study contains an anecdote of one respondent reacting negatively to a cigarette ad which she interpreted as attempting to make cigarettes look "glamorous." She responded "how could it be? They show it one way and then you walk down the street and see some old bum puffing on one." [p. 88] FDA REFERENCES: A. 60 Fed. Reg. at 41330 and n. 120 [R]esearch conducted for a Canadian affiliate of one U.S. cigarette firm focused on the need to attract young consumers, stating: 566628852

- 13- Ads for teenagers must be denoted by a lack of artificiality, and a sense of honesty. Attempts at use of celebrities * * * do not seem to really click. If freedom from pressure and authority can also be communicated, so much the better. [at p. 97]. The bulk of Project 16 appears directed at a fairly innocuous discussion of reasons youths began smoking. The effect of advertising on that decision is never even discussed. The decision by the researchers to include a discussion of teen reactions to various tobacco and non-tobacco advertisements, however, may be construed as demonstrating an intent to reach the youth market. However, all respondents were of legal smoking age. More importantly, the study concludes that teens react cynically to the glamorizations of "ordinary products," including tobacco, in advertising. [p. 87-88] Information on how the advertising conclusions, as well as the report as a whole, were utilized would be helpful. B. 60 Fed. Reg. at 41331 & n.145 Cigarette manufacturers are also aware of the difficulties young people encounter when they try to quit smoking. Studies prepared for a Canadian affiliate of a U.S. cigarette company state: . However intriguing smoking was at 11, 12, or 13, by the age of 16 or 17 many regretted their use of cigarettes for health reasons and because they feel unable to stop smoking when they want to. [Quote repeated at 60 Fed. Reg. 41671-72 & n.348 as part of jurisdictional analysis] C. 60 Fed. Reg. at 41670 & n.339 [Tobacco] companies.., understand that many of their consumers would like to quit but are unable to do so. [Citing, inter alia Project 16, p. vi.] COMMENTS: FDA attempts to bootstrap research into "difficulties encountered in quitting smoking" into a conclusion that cigarette companies knew that nicotine was physically addicting, a gross oversimplification. The study as a whole indicates that the decision to begin and continue smoking is a complex one, largely driven by factors of peer pressure and social comfort.

- 14- VI. DOCUMENT: DATE: BY: FOR: Matinee Marketing Plans 1971 unknown unknown Imperial Tobacco Corp. SUMMARY: Generally deals with plans to capitalize on Matinee brand's low tar content to increase market share, predicting that high tar smokers will trade down as health concerns and social pressures increase. FI)A REFERENCES: A. 60 Fed. Reg. 41688-89 & n. 384. A report by ITL also focused on the importance of developing low-yield cigarettes that address smokers' concerns about health, but that nevertheless provide the desired "physiological satisfaction": "A cigarette that delivers physiological satisfaction, yet is low in T & N, must surely be a major objective and represents an R&D challenge." COMMENTS: FDA cites the report in the midst of a discussion pointing out tobacco company research seeking to maintain levels of nicotine in cigarettes while reducing tar (a concept actually tested to consumers with little positive response in Project Day). The instant report discusses ITN's desire to market its pre-existing Matinee brand emphasizing the low tar and nicotine content "in a positive manner in relation to smoking and health considerations." Report, at 2. There is no discussion regarding manipulating nicotine levels, and tar and nicotine are never distinguished within the report. FDA contorts of the use of the word "physiological" to have a medical or scientific connotation not contained within this marketing report.