Tobacco Documents Online

'ECRET ::::::::::::::::::::::::::::::: i:i':"" ============================ PLA!G<IIIC ASSU;,'~PT]O,~S AND FORECAST FOR TIIE PERIOD 1977-1986+ FOR R. J, REYNOLDS TOBACCO CO;IPAI~Y TIIE C-E;;ERAL BUSII~ESS CLII,IATE ................ THE ;O~ACCO II~DUSTRY AI~D R. J, REYIIOLDS TOBACCO COi,',PANY THF RESEARCH DEFARTI~E~I A. GE~E RAL ......................... [$. SI.',OKIIC~ A;~D hEALTH ..... ' .............. C. REGULt,TIO:,~, lIXAl]O!~, ETC ............... D. P~Alt I.',tJERiALS A'<fl PP, OCESSES .............. E. PPO[~UCTS ....................... F. I~,~ SCE[.I.t,::EOIIS ....................... 1 3 3 3 5 9 I0 18 CX 35-A Research Department Hatch 15, 1976 RM036397

I, THE GEI~ERAL BUSIIIESS CLI:.'ATE o No sudden change v;ill occur in the "system" or business environr,~ent in which ~.~e operate, i.e., there will be no catastrophic pestilence, disease, ~orld war, revolution, major depression, natural disaster, or the like. There is a possibility of renewed warfare in the Hid-last probably again accompanied by a petroleum crisis, As the present "under 35" age group becomes the dominant po~.;er group in our society, the new personal and political values of that group will exert a more predictable influence for change upon most aspects of government, society, business, morality and foreign .policy. The changes vhich occur are not expected to be favorable to business. However, this large consu~.~er group will have needs to be satisfied In terms of tobacco products. This offers us a large market if we ~re sufficiently astute to identify those needs and desi~cn and sell products to ~.eet them. l~orld leaders of ~.orality, sucl; as the P.ope, will exert great influence to p;odify the perso~al mopes, and consequently the civil and political values, of the present "under thirty" ag? gro~?. There ~.~ill be a stron~ s~.,,ing to~..'ard vholesomeness, integrity a~,~ decency ~.,<qich w~ll affect the consu,~er outlook and product exFecte- tions of this group. ~rice, quality and durability ~.'ill beco"e more ii~portant than fad, fla.,.~boyant fashion or sex appeal. The "consumerixm" ~ove~ent will ramain strong, and the ability of consu~ers to objectively judge the quality and utility of pFed~cts may increase, Product labeling will &ecome ~ore definitive in te~s of co~?osition, date, hazards, and the like. Present socio-legal-governmental trends will continue. Conce~n for "social justice", e~viron:.ent, energy, population control, and product safety will re:.~ain high. CovErt, mental regulation of al:ost all aspects of our society will increase. ~he energy shortage and to a lesser extent other material shortages over th~. next decade will cause a change in world economy and politics a change in national p~iorities and life style~ and increased cast and difficulty in doing business. Concern for environment will remain high a~'.ong certain Stoups; and although energy ~;eeds ;vill finally out~migh environr,;ent considerations, th~ environmental groups ~..,ill continue to fight and delay, These influences v:ill continue beyond the projection period and will intensify as energy needs and environ- merit consideration exert a greater effect on the average person. = The U. S. standard of living rill not i~crease at the rate of last decade. Tl~e a,,,oJ~t of discretionary income v;ill de,crease. lhe r~ain squeeze ~ill be on the p;iddle economic class. RM036398 CX 55-B

I. THE GEIIERAL BUSIIIZSS CLIHM[ (cpnt'd) 9. 10. 11, 12. 13. The health consciousness and technical understanding of the population, as applied to products, will increase, Prlce-wage-profit Controls i.dll remain a possibility for at least several more years. Coping with the business cycle will remain difficult, The profit squeeze will remain a major proble';~ unless periodic "pass-throuQh" price increases are competitively feasible and allo~.;able. Due in large part to political tan~pering with an economy already under real stress, it was Ion9 thought that the economy k.;ould cycle bet~.:een hi.oh une~plo)'ment and high inflation at about 2 to 3-year intervals. Hoverer, it is appai'ent from recent experience that this idea should be abandoned. For several years unemplo.vn~ent and inflation have been cycling tog.~ther. As a lO-year average, inflation will probBbl.y run at ebout 8~ and unemploy~.ent at about 8%; i.e., politicians will continue, in election years, to place more emphasis upon full employmer, t tha~ upon price stability. Also, for complex reasons, the government is con,nitted to a continued policy of i|~flation. A key factor in the control of the economy's vigor is the decreasing birth rate, Even at current levels, every facet of the juvenile mar}:et may expect to be depressed. And only a few years beyond the projectio~ period looms a ~ar~edly reduced generation of young adults ~cho will need consun~er goods. This ~ay provide a built-in cooling of the econon'.y, leading reynard less inflation and specialized areas of unen}ploy~ent. More and n~ore evidence of financial mishandling by cities, states and national governments will leak through to the public in the Irmlediate future. The root causes, such as overextending in ~.~elfare programs, abuse of expenditures in such programs, corruption, ~vas~.e, unwise and expensive experimentatio~ :..'ith educational programs, and unnecessary services will become more evident to the public and will elicit strong response and possibly backlash. Considerable irish.ability in F, unicipa1, state and federal spendiF, g policies and progran~s ~vill result, with attendant uncertainties in taxation outlook, cx 55-c RM036399

~cynolds l(,~,~cco Co',.pan~, ~nd (b) 1he ~esearch ~ep~rt~;~nt hos bce~2. (.r~.~ed ~s t~.:o separate sc.ct~, ~::..in.~p~st ~ssuc.s of Pl~,'.~n3 Assut.~ptions ~nd Forecests. I~s f~r,=~t l.~s b:.un cha~,qc.d for the" pre~.nt ]h#~,l~,~:~ esc.u~.~t~ons end forecast for ]t,e lob;coo Industry' - ~O? for 197~-~9~ ~re p~r~11e~.:'.~ere ~ppllc~ble, o~ the sar'.e F~o s:ith co",',~nts c.n tl~, .~o~s~ble rc.s~on~e of_tt~e [~esearch~r~c.E~rte.er, t ~o the assur.~p~icns affecttn9 forr,,ot ~ :o so~ r~;c't~tten ~n the text, ~rticu~* t~ Ferscn:,~l tn olher de ~rt~ents of the R~se~rch Pe~:rt~..~,t's ~nvo~vca',ont ~n t,e sit~.~,s fo)'ec~st for the 1971-~9~ p~riod. t,s the tec~,n~cal ¢~.'.?lextty of the ..... :.r: crtuntties for basic re.search ~;;su~ts and procedur:.~ develo~d in l)=~ic rc'c.arch., frc:.~ )'ears will l.e u~il~zed at an Increa~c.,~ level. .Projects ai~.ed ~t effectln9 ~:~jor ~hort- ar, o Ior,9-ter~n c~:;hasis. ~~l~tcd, a~,d ti.e like, ~:ill crease as th,. size., product lines, Scientific co:,~lexit7 of the tobacco Dcvelop:;~r,t, Legal, ar.,~ oLi',er t,~.rti~,c.nt to rest.arch i, ro~r~r:s. RM036400

Research [k,k~,r;:",ent v;i]1 be Ir,':ol';c~ ~:: P, JR-I on r~q'~,.,~t (probably thrc.~gh IFi<. CX 55-E RM036401

II .~",. ~.,' ~CO I,,. J:ql',Y H.;3 i{ O. Ill. lie I',L5£;,!',(.I1 ,,~ " "' (0 B, SpOl:~nq ard Ih'alth 1. ll;c. sCiehtif~c (ontroversy over the all(.ged l. (ff~.ct~, of s:.ut.~n., c~, ~,~ neatU~ of the S~ol;ing-health.research da:~e on a c(,llaborctivc l~s~s by Cc~?~ny, indust~ and ~rlvate or acade:4ic groups ~411 ~ ~he ~_esearch~~l to ~~ an~ £~ssibly v~r~ous ~~' studies. " ~ . Research related to the sn,oki~,g~health controversy ~.d]l continue to receive major. ~hort- an~ lor,;-term e;r, phasis. l,~.:a~eness vi]l be ~alr, tained b; Roseate! F RM036402

Anticipation of th~ nature ol the specific selective st, eke co:r,~onents alleged to lle harr.,ful t:ill develop,n~nl..o_f e_'..~ro~ri~t~ anal~vtical effects, etc. RN~036403

RM036404

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.C; ._ .rLe:~ulati on, l'a×at Co':~p:~s i t ion, I;,~ nu f~,c ture, .ed.',.~,,)~t_i sales a~"J use of tobacco co~ under incre~slng 9cverr.,.ental . .~:.~ 1he ~.o~rol (~ow-rnn¢.nt ~;a~ sot i, etT, t~::~::~e ]eve~s for "tar". nicotine, c~rl,~o n~ho>:ide, and other co~;,onents, ~y ~es 1~ tn tnc~o,~o6 t~x~tion o~ the ~#~:itk, to IF,',edi~to]), r; ~co tar .~.~..~e~]s of m~3oP brands t.h~]e ~nd t~?;.~to of such govern~,nt oction riot' Uc. &dvanc~d by. tho it~rodoction of ~; "tar" proo~cts ~uch ~ the ~n~ the. KOl.~ t;hlch det~onstr~te f~os~:~,~i?~' of ~o~.~ "tar" ci~c.~tes. ir, crt.ase,~ becoming ~:;ore FuoItive ~elet(.d to the alleged health of e~c..h product. l,~gi~:~v(-s or a~ulter~nts an~ (oloranis of lhe :~tC !~y extend its s,,~,c, ke er,~lv~es incl~B~;::::~::~:bmponents in ~d~itlon to"tar' ~nd ~i~ine. Carbon r,onoxi~o end ot~,~r 9as-l,-ha~~ coa~pur, ents ~re the next lit:el)' ~,o~:,~alvses for these oth{.r com- ~(,vc~'t~s.t~. tn~s c.xtc.ns~on of ~nal~'ses t~o~ ~E*ff~e s~n~ultat,cous oc, tc-rnnnattons ' of v.:~(~.s entit~os; e.g., ,at , nico- tin~ c~,~i~on monoxide, &rid n,tric oxide ::::::::::::::::::::::::::::::::::::::::::::::: I',esc.orch services to ;.rovid.:. inforr:~ti' to combat suci~ regulation will be pro- vided on request, Rest.arch ~,'ill provide techr, olo9), to enable such reductions to be accon~plisi:.. 3. A~:a|{.ness ~:111 be r:.~intair, c.d. 4. A:.,'areness ~dll b~ r~mlntalned. Anticipation of anal).ses reo.uired by t!,~ FTC ~ill I,e o cc, ntinu~'~s ]%search ~. Ool, ar Dr, ent function. ~ RM036406