Tobacco Documents Online

• Products for the late" 80's and the 90's I. Introduction This paper seeks to explore new product ideas and to identify situations where those ideas might be converted to a co~nercial advantage. The new product ideas have been obtained by three procedures:- CollRtion of needs already expressed Assessment of opportunities identified by brainstorming and other creativity technJqnes Normative or extrapolative combi'nation of active research areas and existing technologies. The ideas have been evalumted against the performance of earlier innovations and the present s~a~e of the ~obacco industry. 2. Thc Tobacco Industry 2.1 In the developed areas of the world the tobacco industry_ is in a state of advanced maturity, having reached a stable market penetration. In some countries, the social attitudes to smoking, the legal constraints o~ product performnnce and on cormnunication. ~nd the econolnic recession, have caused a dall in sales• Superficially, this is consistent with the status of an ageing industry. However, until a real competitor Zo tobacco emerges the total market for the products of the tobacco industry is likely to be stable. Within the total market, individual brands and companaes w]ll grow and decline• 2.2 In countrles az an earlier stage of economlc development. the total industry is in a growth phase, driven by the increasbd spending power (*~ the population. 2.3 Overall. BAT's strategic position is ~ s~rong one in tha~ mature industry, but the con~nercial position of individual companies within BAT varies from tenable to dominant. 2.4 The next phase of the industry could be expected to be one of pyogresslve ageang, where & modest decline in sales is Coupled to falling profitability as c~gareltes degenerate ~o commodity status. However. there are several factors that may acl to slow ~- or even revers[~ such a dove]o meat, among them are fresh insights , as to he,:, s oki. . oher smokin a.d ,~ ~ssue ~h~ arr~%0] of a da ect conpet~ior to t e in ustrv s ,$ i~ products could Insplrc a i~urrv of lnnovatxon to flght off the ~i~

/ 42- 2,5 yresh f~stghts have allowed empirical produ~Z differea~ ~iation %o thrive in the processed food and %he Casmetics markets; the smoking and hcalt~ issue provides positive ~DcouYage fo~ product re~uwena~lon, and %he Current lack o~ a competitor g~ves time, l~ Dot ~ sp~r. to ehKnge. 2.6 Thus, there is a conflict be%wee~ the agein~ tendency of a m~ture industry, with its emphasis on higher units, standard products 2nd Cos~ s~v~n~s~ ~ndth~ requirements f~ rejuven~tion, w~th ~s emp~as~ on flexibility, p~odu~ diversity, ~nd invgsgmen~ risk.

3- Reconstltution pTocesses Expansion professes ~t~m rollers One o~ the major in~Qvations w~$ the developmenZ Of ~ gQod quali~y CUt roiled ~tem, which reduaed ~bocc~ usage by 20 25~ and s~ved some i~ of ~he cost of ~ c~garette f~lllng. S~ml]zrly, t~b~cc~ waste u~illsation pr~esse~ (PCL/PRT) can sa~e a further 4~, whilst DIET may save 3-12~ ~d c~e~e design op%iun~. ~sage o~ ]~bo~r h~s b~n drastically r~d~c~d by fast high c~pzcity maahinery and ~he genera] ~ule is ~hat process i]]novations ~uc~ ~osts. 3.4 Because o~ ~h~ high ¢os~ ~ deve]opin~ new machinery ~d the ~ev~1 year lead ~ime be%~een ~n ide~ s~d m~l~n~ I~ ~ork, most ~ %he ideas that will be seen in the m~rket p~ace up until ~9~8 ~re ~]re~d~ b~ing ~orked ~n. F~beT~ore, h~c~use o~ ~nce~in~les ~s~o~i~ted ~ith long lead ~im~s, new products ~liring simu]%~neous in~j~r ch~n~e to ~lore th~n on~ ~r% of th~ process ~r~ unl~h~ly to be seen ~ c~m~ci~l]~' ~t~uctiv~ b~ ~na~ers o~ ~e~hnic~l innov~%ions, ~l%hou~h there m~y we1~ b~ strategy of loosely-coupled ~equen~ia] innovation. ~.5 An unmis~al~able trend ~n Comm~ci~l cigarette~ h~ bee~ ~he progressive r~t~o~ i~ %he Sy~t~y of the ~oduc~ (a~comp~nied by an Increasing aomplexity u~chJnery %o m~ke it). P]aill eig~re~te~ ~e m~r~ ~;ymmetzic~] thnn ~ipped; p~in ~ilters are more symmetrical than ~ual or moulded filters; ventilation hol~ ~dd ~ f~r~r ~etry~ Ther~ i~ no r~on ~D believe tlli~ t~end will ond soon, bee~e ~rc1~o (]~i~neTs ~Ii ~o~nu~ %o seek n~w ~y~ o~ ~e]e~ting old ~d n~w ¢ons~rain~ to be~ter IJerforman~. 3.6 A~iot~er obv~ou~ trend Js tha~ t~wa~ds lo~cr Smo]~ de~v~ri~. p~rtJcu]~%e m~t~er. The momentum of thi~ t~'~nd ~s ~l~e to customer ~x~ectationsI to advertising and to external pressure~ discussed b~w, It c~I] b~ exp~ci~d t~ t~ke the s~l~ w~h%~ av~r~e %ow~ds or int~ ~hi~ ~'u~t~n ]~w %~r" se~men~ o~ the ~ket. B~t ~]lat ~i~? Can prod~c%s des~gnod to d~l~er !e~s than on~ mil]igl-~n (~he microgram ~ar league) he satisfying for a large pr~p~rt~o~ o~ ~moker~ th~ ~l]Ilwi~ tbo trend ~o aonti~!l~? Wi]] the trend ~];Ltte~ ~t ~t ~ro~nd 5m~; or ~±ii i~ revert %0 around 10-~Smg? ~.7 T~l%in~ now to othe~ trends not ~i~hiu %he ~ontro~ o~ %he ~ndus~y, ~b~ prlm~ sour~ of external pre~ur~ iG ~oc~o- politic~ in~lll~nce w~rk~ initi~!]~, on th~ sm~ki~ ~d h~]~h ~ ~ issue ~d s~bseq~en~ly, oli the ~oci~l a~cept~biii~v of ~hem smoking habit. Re~triction~ h~iv~ bee~ place~ ~n m~i.ll~ s oke d~liv~ry, ON ch~l~e~ t~ ~n~r~]i~s (slno~ling m~te~1~Is ~11d ~d~tIves) and OLI comrl~rci~] op~l&~ons. '£u~J*in~ th~ tide ilg~in~ s~oklng m~y be ac]Jieved ~JI'o~gl~ ul£r~-low i]~liverI, ~roduct~ a~d ~e~-d~cip]ine wJlhin %h~ industry, bu~ the irra~ona| p~r% Of %he an~J-~moking lobby can invent ~resh ~bjeetions and, i~ ~he d~ve~o]led w~r~d ~t leas~, there ~i]l be p~ent~ of p~op]c ~%h ~e oI~ th~i~ hand~ ~eeki~g ent~r~nnlent f]-o~l ~i~mol~n~ ca

/. --4-- i >( activities. 3.8 A possibly more serious problem could arise from frustrated environmentalists with the public s~rvice, L~ter this year, the UN will be puhlishing a survey of the efforts, results and data collected by environmental protection agenales worldwide. The survey wlll assess the magnitude of relative costs of ignoring environmental issues. It concludes that barriers to progress are not lack of technical ability, but human, economic and organisational constraints• Dr. Holdgate, Chief Saientist at the Department of the Environment, has safd that pollution by cigarette smoke is ten times mor~ costly than urban air pollution in the UK. Attacking the cigarette industry is seen • by the bureaucrats to be simpler, quicker, more co~t effective and more beneficial to their image as the indispensible defenders of public well being, than efforts aimed at changing publlc attitudes and institutional behaviour. • • 3.9 TcchnologicaI trends that could dis~u~'b the e~onom~cs of cigarette production have been discussed elsewhere*; biotechnology, from mechanJsed or factory farming to cigarettes made of a fermented soup, has been widely discussed; but one potential co~ncrcial competitor has been largely ignored:- The pharmaceutical industry in Europe and North Aineric~ is facin~ a m~jor problen~ as patents run out, Importation or local production of drugs to be sold at prlces related to production~ costs will not provide the profits needed to keep their drug • innovation activities going as costs soar and opportunities • decline. The pharmaceutical industry has the skllls, resources and above all, the incentive to enter the mood control business in competition with smoking. It may find the entry cost worth-¸ while, and may fund the early stages from profits on drugs for mehtal health. Entry, If it occurs, will be slow and may be I suitable for a joint venture. 4. Needs 4.1 Produc~.s, whether new or old, cannot survive unless they s~tisly a rang~ of diverse needs. Not considered here are those common-~o-a]] needs that are indupendent of the nature of the product; such as avai]abi]ity, freshness, reliable quality and freedom to choose• Iz the present paper, needs imporzan~ for cigarettes are considel'ed under three headings:- ,,~. . (a) Needs of the customer: ranging from those of the :~ - individual consumer to those " :~ of the aggregates of indlvldua] called the market ~ '~;~"~l,/~~ '~.~ (b) Needs of the suppller ~ ,,. ~ ,.;~/~: (c) Needs of society both social and legal. "•7~ :~.:'~:~/~,~":~''~ ~"~'="~"

% 4.2" Both the customer and thecompetlng suppliers have an interest in new products. For the customer, the new product may fit better with self-image, life-style and personal taste; for the suppliers, the new product may give an advantage over the competition within a given price segment and if the new product makes negligible new demands on the production system, so much the better. Most new products fall into the latter category, the principal variables being:- Coloured cigarette paper (brown, black, striped) ? New printing on pack Change of cigarette and filter length Change o5 diameter and shape Sweetened tipping [ Ylavoured filters Blend change Flavouring/casing change Ventilation change Changing such variables to create altered perceptions and images of products is the standard activity of product development and market plsnning. It is supported by a substantial technical effort by BAT and its suppllers. For the purposes of this paper, such products are considered conventional, even though they may have yet to be designed! 4.3 A list of needs was Obtained from existing documents and ~rom consideration of the situation of the industry. The 15st was condensed and classified into sets according to their ioport oetoth 0o0s orortosoc, ety Oi graml ,o classifying needs, none were found that were of importance to the customer and/or soclety that were not also important commercially; although several of intense commercial importance ~ ' were of little concern to the customer or society. Thus, all . the needs shown fn Diagram 1 are of commercial importance. ! 4 .4 The list of needs arose from considering conventional smoking products, yet it fs interesting to see how many of them , i: ~re already met by chewing tobacco, whose customer is not a f!~ri,:! smoker at time of use. Existing smoking products (pipes, cigars) have advantages in terms of some needs, in comparison with current cigarette designs. Even if the list is incomplete and lacks some detail of the many contributory needs, new products emerging as :i~!ii~!~ commercially important during the next ten years can be expected to offer improved responses to several of those needs. The conventional smoking products (para 4 2) will tend to emerge i~::2~ from the LO-LO cornel" Of Diagram I, whilst really new products }~i! ~ :" : will tend to emerge from the } I-HI corner T ese two rou~es may :~ "~' be dlfflcu]t fo dlst]ngUlsh when new products emerge ~ro~ the ~ ~: .... ;:~, c2galctte Industry ~Ild are alined at the clgarette marke~.:! The :~&2~:~:[:~ ~:~!~i ~'~ two routes and ~ew pyodlct styles cou) d be very different "if ~ ~9~

4.5 Trends and needs interact. As smoke deliveries have fallen, a greater proportion of the tobacco is smouldered away to give sidestream smoke*, which is both environmentally ii~i undesirable and wasteful. Nicotine deliveries have fallen too, i~ and if smokers seek nicotine, there must be a lower limit to the delivery of nicotine by an acceptable cigarette. The need ii~ii~ for nicotine will be in conflict with the strategy of driving towards ultra-low delivery cigarettes in the hope of taking the cigarette industry. New types of products will be needed , 5.1 There is clearly a need for an effective, low cost, low i ,; delivery cigarette. Low cost means minimising the quantity and cost of ingredients and the cost of manufacture. The obvious route is to roduc~ the size and weJgh~, hut this may he resented by the consumer, especially if tax is a large part of the purchase price. 5.2 An alterna*ive is to reduce weight, but not size, through increased filling power. which is only profitab'le in certaln countries. A high percentage :, of expanded tobacco in a blend leads to cigarettes which give relatively few pulls because they are short of fuel• Current attempts %o increase the number of puffs use a low porosity, slow burning elgarette paper, which causes a decelerating smoulder, and a tendency for the cigarette to extinguish puffs• What seems to Be needed is a cheap fuel to keep the cigarette ~light during the smoulder period and a good quality tobacco to be burnt mainly during the pu~I. J 5.3 Sectioned cigarettes have been proposed, hut their ' ~ effectiveness tends to de~end on each puff being taken at the right time• 5.4 Annular cigarettes are a much more promising design. The outer tobacco annulus b~rns during a puff to provide ma]nstrealn "smoke, wbilst the inner annulus of mere fuel smoulders slowly and steadily producing little visible sidestream in the interpu period 5.g Carbonlsed v~scose has been patented for such an inner core by Philip 14orris but Philip ~orris has not claimed all possibilities p~,~tly becanse of an earlier pa~ent from BAT. + . ~ ~ gaseous products including carbon monoxide, tend to increase

w , --7-- ? 5.6 Tobacco stalk is usually wasted, yet it comprises some 50~ of the weight of the tobacco plant. Hildly carbonised stalk might well provide the bulk of an inner fuel core material. What little smoke the core produced should be compatible with normal cigarette smoke. (Heat treated stalk has been patented by Philip Morris as an ingredient of reconstituted tobacco sheet.) 5.7 The core material would contain fuel, filler, binder and adsorbed flavours. In one variant, it would be extrudable, and might have an external catalytic sheath to oxidise carbon monoxide. Existing knowledge of cigarette making machine and their modification to produce annula'r cigarettes provides a sound basis for development. Cost savings should be between 7~ and 15~. . . 5.8 An a]ternatlve route to ~n inner core would be to fold a strip of paper-like smoking material (e.g. Cytrel and/or PRT) by drawing it through a suitably shaped die. 5.9 The amoun~ el nicotine delivered to a smoker has fallen over the past 20 years In the 1950's it was common for the new smoker 50 feel sick in the early days Of the habiY, but reports of such queaslness seen to be less common today. Perhaps smoking is ]e~s unpleasant to starl today than ever . before. The remainder of this section is concerned with smoke and especially nicoline as the "const~ed product". 5°10 However, i~ does not necessarily follow that today's products are less satisfying. Heavy smokers develop a tolerance towards Dicotine ~p to eighl times greater than non-smokers. I~ ~here is a relztionship between Yequi~ed nicotine intake and nicotine tolerance+ then the nicotine ezztering the smokers of low delivery products is more effective on a relative basis. ~'~' "~. Simple proportioning ~gainst traditional products would suggest ~ tbat the lower limit of delivery zo smokers seeking a nicotine effect wou]fl be 0.3 mg. 5.11 At a tar/nicoline ratio Of 12, such a c iga]-ette would be + in the ultra low delivery category at below S milligrams. E~en- lower tar deliveries would be possible if the %at/nicotine ralio were lowere~, but experience has tended to show that such clgarezzes are rejected because of burning sensations. There appears to be an upper limit for the nicotine concentration in an acceptable smoke 5.12 Nicotine could be diluted in smoke psrticles by an material of non-tobacco orlgin (e.g. ~]ycerol propy]ene g]yco] Whether the market or regulatory nuthoritJes could accep~ such a discrimination of "tar" and "non-tar" in smoke Js doub£f11].

--8-- C .13 In the longer term, it is conceivable that nicotine effectiveness might be reinforced by other agents that are not drugs in their own right. Perhaps by retarding nicotine • metabolism, or by increasing the efficieno~~ of nicotine transfer to receptors in the central nervous system, or even y conditioning the receptors themselves. Conventional pharmacologlca] tests are too crude for studies in such a delicate area of psycho-pharmacology, where developments must be considered as a pacing technology leading both the microgram tar league and ~o products competitive %0 cigarettes Using nicotine-like substances. GR&DC ought to carry ou~ connecting research in this paclng technology, so as io be likely ~o both hear of, and appreciate the slgnificance of external developments. They may even eliminate any need to inhale smoke to achieve satisfaction. 6. Products Suggested through Creativity Techniques 6.1 In 1980, three ~eams with four members each, were se~ up in Gn&DC. They used brainstorming and other techniques ~o develop lists of possible products. The lists have been collatPd, classified and condensed to produce Diagram 2. 6.2 The items have been allocated by the writer to the BI/LO boxes of concern in Diagram I: firstly, according to their initial intent and secondly, re where the> are likely to be seen if they ~ppear on the m~rket:- Initial Purpose Market View i Concern HI 8 _7 I g ll l EO Smoker LO 15 0 3 8 LO lIl LO BI Concern to Society If this assessment is eve~ approximately correct, the bulh of innovations developed for co~nercial purpose and aimed at consumer will receive a wider socio-politica] ~tlention and some will be subject to direct regulation. 6.3 The items in Diagram 2 have been ~ssessed i~ terms of:- distance from BAT's eurren~ business investment in manufacturing and marketing distance from BAT's current kno~ledze and technol¢ t~mescale to fruition ~nd chance of succ potential return

---

---