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Intermediate Management Trainin~ Course No. I0 9th June - 8th JulyT 1960. Production Problem llI Group 'A' Our primary consideration in all three territories was the obvious need to manufacture a filter cigarette as quickly as possible. For the purpose of this exercise it was assumed that we have no previous tec,hnical knowledge of filter cigarette manufacture. Our lack of knowledge prompted us to proceed in the following manner for each territory. I. Factors for consideration in designing the cigarette were discussed. 2. Matters which had to be decided within the territory were determined. 3. Information best furnished by Research and Development Departmont was determined. 4. Information b~st furnished by Millbank was determined. TERRITORY 'A' I Factors for Consideration a. How best c~:n we expedite tile launching of a filter cig:rette? What will be its specifications? b. What zechnical ir~o2~ation on ~nchinery and materials will be recuired~ c. How do we cbtain a furthar analysis of our competitor's brand? d. Is health u real issue in consumers' minds? e. Has the local publication received much Attention, and has there been any follow up in other media? f. Do smokers want psychologicol satisfaction of complying with health issue but still dezire their old smoke? g. What is the goner~tl attitude of non-filter smokers toward filter cigarettes? h. How does the smoker of a filter cigarette differ from a plain cigarette smoker in his smoking habits? i. What are consumer comments on the draw resistance of the filter. J. %',%at are comments on taste, and how does tho filter affect taste. k. mr: thore any g~noral eo:~plnints or favourable comments on the competitor's cigarette? i. How do filters fit into th~ oxelso structuru? m. Arc there patent rights on filters or filtur processes? n. Hc~v will filter manufacturu nffuet production costs? FiL~er cost v~rsus Eob..cc~ cost? 0 0 rxD <ZD

- 2 - - • II Local Decisions a. The conp~titor's brand is zn 85 mR x 25 um cig:.rctt,- with a 15 rm Estron type filter and a 19 mm. cork tip with Ver6o paper nnd zn American type blend. b. The health issue is n vital factor in that the medical survey findings hzvc had ~" considerable impact on the local populace. Oth.r media h3vo commented on the survey but have not expressed any views. c. There are Indic.ntlons of arual he-:lib scsre as evidenced by the sczrlng s.-.les of our compo~itor -_nd the marked switch from. pl.-.in to filter. d. Consumer research shows that filter smokers have conuented that the n~w brand is too mild end too dry. Others have com.uen%ud that the cigrrette lacks taste _nnd is hard to drzw. The most fnvourable comr.unte .-.re on length and appe-'.rznc e. e. The competitor is inforrinE, throu,,zh clever .~dvor~ising, that his cig'.rett2 h~s certain health advnntages, but is m'.kin~ no direct he~-ith claim. f. There ~r~ n9 patents uxistin@ on filters or filter processes, ~_nd duty is IO~ ~_d v~.lorum. g. Smokers ch niin6 from pl~in to filturs smoke E~oro ci~-.rettes. However, butt lengths nre icnger th~n on plain cigzrottes. h. We will pr::duce ~n B5 m~u x 25 mm cork tip cig-rctte with -.n • . Amjricn type blend which hzs a nicotine ~,nd t?,r c~ntont slightly bel?w com.~c%ition and, if possible, below ~.u.,ric'n br n']z which h':d high r-tir4s. Our cignrett~: should not bu ns mild nor ~s dry us our conp~tit:,r's. For psychc!ozicrl re-sons the fil~cr will be no shorter th:.n our ecmpetito.r's, lor~er if possible. Ill ~;:?.tters for Rose-.rob ,:nd Development n. W~ trc fcr.';-rdir~%, by air, s-.mpl~s uf our eomputit~r's brmnd for d~tniled znnlysis. b. We -.re ":isc sending s.mpl~s of our own clgzrettes, r::g and l~r.f for similnr .-.n:~lysls. c. After -.n"lysing our cumpetitor's br-nd -rid ours, cnn you supply us i.~uedi~tely with n filter which will permit us to produc~ n cigarette _'s outllnud in the attsched copy of ou~r local decisions? Also included is ,: copy of the locsl publio-.tion, please verify the results on the Americnn blends. d. From e;ch rng s.-.r:ple £or~'~rdcd you, pleeso supply us with cigarettes, complute with :ppropri~.t~ filters ~nd ralevsn% infor~]::ticn, so that we m-'y c~:rry out smokir~ tests ".nd " decide which we should m-.rkut. e. Plcts¢ _~ivc ". c~mpl~tu c n.-lysls of all le.".f s~mples shipped. f. Pl~?.sc s=nd 1,000 cf u :oh proposed filter in order that" they m~.y b~ :v-ilnblu for future experimentation. At :ha sam, ti'~, ",'~ would .'ppreci-te your s_ndi,%g us the followinc infor~.- t ion: I. Should .'.'o b3 requir_'d et :: l:.%or d-to to fur%hor reduce O O

-3- t~rs and nicotines, ~:h~t type, or typos, of filters will give us the hijhc::t possible filtr::tion? 2. Forward detailed information on all moons of lowerin~ tar and nicotine by one, or a combin.?.tion, of moons. 3. Recommended cnsi~s ~nd flzvours to achiev~ taste of present blends if excess filtration produces inouffici~,nt or un- pleasant taste. 4. Once we have decided on the best ciz~rette from the group forwarded us for smoke tests, ~nd should we doci~e that it is too mild and/or dry, what can b~ done to overcome these undesirable qunlitius and maintain the same filtration? 5. We note that one American brand utillzcs a recessed filter. Whnt function does this'recess' perform ~nd wh~t are its advantas~s? Can an ~iI tobacco filter with a recesced end be ~.nufac~ured? 6. During ~smokir~ t!1~r~ is a considcr:ble build up of discolour- ation on %h~ filt=r end o£ the cig:rctte which produoez a bnd t~nte when touched by the tongue, c:.n we compensate or d,crecse the cmount by stopping the st'~in further inside the filter? 7. Should we consider cultivuting locally any typ~s of l~af p~rticu!~rly suited to filters? 8. C~n you ndd a gr=de or -~rndcs of lo~f to gi ~ strength ~nd charzct~r to ~h~ smoke, to compensate for usu of high percentages of low tar =nd nicotine leaf, end not increase ~ar ~nd nicotine con~ent of ovcr~ll blend? 9. Tl&-ase forv,::rd g.n~.r*.-i in:orm.'~tion on cignrotto p~.p~,r znd tip~in.~ m."teria!s .hich might be n factor in affecting smokin," -%u-.liti~s of ciczr~tte. i0. Whzt filt#r tosting equipment do you consider wc will require? Please forward dot'~il~d inform~tion on equipment, testing proceduro and cost/:veil::bility. ii. Wo are presently destroying our Burlcy stems because they give zn ~acocptuble smok~. How c~n wc neutrnlizc those and use them in m filter cigarette? 12. Upon rcccip~ of thu analysis of our local ic~f gn~des, how do ~c m~tch them for imported ~rndes which wc wish to sub- situte in a blund? IV Infor~.tion Roquircd from Millbank a. What Rddltion~l m=~chincry will we require to produce the cigarette outlined in the zttach~d copy of our local decisions. P!eas~ supply the following details. I. Cost nnd earliest dclivury dztc. 2. :,:.,inlcn:nce .~:nd opera.tin'.'. Instructions. 3. Jutllne drnwin6s listing floor spncc required and appropriRto inst llntion time. 4. ~_r~cnn=l ~v=ilbiu for inst. llation and trtining of !oc:l personn~l. Cost? 5. !'orm .! ~ffici.nc.'," . rd ",;': sta-~es ~ftor 3 ~,~onths - 6 months - I y...r. 0 0 r~D t.#n, fxD !

-4- 6. Recommended training programme to achieve effic ency and wastaie goals. 7. Advisability of U.K. training for a member of the local staff. 8. Convertability for different filter lengths. 9. Modifications necessary to maker and cost of modification. I0. Modlficntlons n~c~ssary to packing and wrapping machinery, and cost of modifications. ii. Recommended procedures for hnndlin~ rejects. 12. Cost and availability for 12 months supply of spare parts for r~comm~nded machinery. Normal delivery time for any spare p':rts re-ordered. 13. Compl~ta speciflcations required for ordering each machine. 14. Operational "hints" which will minimize the initial difficulties w~ will experience with thu machinery. b. Materials: Paper, Filters, Cork Tippln~ and Adh~siv~ Samples. i. Full ordcrin~ specifications for ouch. 2. Cos~, :.vailzbility Rnd how ship,pod. 3. Main supgliers and :tltern:~tive sources with comparative prices. 4. Zp~cia! s torcg~ conditions r~com~njnded for uny of these materials. 5. Primary difficulties that have been experienced with each material. 6. Formul- usin#s for c::ch m-:torial when the m" chine is opcr':ting r.t"90% efficiency? This is r~quired ~.s a guide for costing. 7. SubsZitutes for the~o ~torinls. Who supplies them? Whet are costs? Please forward sanplbs for testing. 8. Cnlcul'~ted formul~ woicht per 1,000 M cigarettes for individual filters, paper, cork tipping :md adhesives. c. List of filter processes and novel features which we should try to p~tent. d. Information on history of filter movement in areas simila~ cr ~ost sinil r;'to ou9 ov'n t rrit~ry, Includins 66~p ~y nd'c.f.tition -.ction nnd results. e. Would it b~ advlsabl~ to send n member of our staff to study filter manufacturing processes? f. At what stage of filtur vcl~me should we consider the possibility of manufacturing filters locally? g. We will require a suggezted list of m-nuf:-cturing records and qurlity control informr.tion considered n~cessary for filter tip mnnufacture. h. Assuming we c~n influence our compotitor's actions or policy, wh~% ~rG points to ~void in filtrntlon and filter manufacture? m O CZD m ok.)

-5 - TERRITORY *B* I Factors to Discuss a. How best czn wc expedite the launching of a filter cigarette? What will b~ its spocific:tlons? b. What t~c|mic~l information on mc.chin~ry nnd supplies will we require? c. Why are filters becoming fashionable. How ~trong is this trend? d. ~hzt --re consumer commcnts on dr.~.w rozist:.ncc c~.used by filter? e. What ~ro comments on taste nnd how does the filter affect taste? f. Are there ~ny ganorcl compl~ints or fmvournblc comments? g. How do filters fit into tho oxcis~ structure? h. Are ~h~ro patent rights on filters or filter processes? i. How will fil~or munufacturo affect production costs? Filter cost vs. tobzcco cost? j. How dc~s Th~ smoker of z filter cignrctt~ differ from n plzin ci~°:z~ttc smoker in his smoking h~bits? k. Wh:~t is ~h~ gcn.r::l fortitude of non-filter smokers tow':rd filter cig, rcttes? iI Local D~cisions a. Th~ comp~titcr's brund is nn 85 nm~x 25 mm. cignre~tc with a 15 l.mm. Estron type filter, a 19 mm. cork tip, V~rgc paper, and zn Amcric n typ~ blend. b. Consumers stnt~ thnt they nro unable to distinF.,ish n marked its:to diffurcnc~ b~tw~en filter nnd non-filter br::nds. Most filter smo!-ors co.mm.nt fnvourzbly on not getting tobacco particles in their mouth, but some complzin of the s~ain and bad tns~ when ~hc tongue touch.s the filter. All smokers comment favournbly on the length and the zppearnnco. Some few smokers who tried the competltor'e cixnrettes during their introduction hove r turned to th.ir plain brnnd bcczuso of the differences in the draw. Filter smokers smok~ more than formerly znd the lengths of disc rd~d butts are greater. c. Our competitor is pl~ying up Zh. fnshiennble zspect of filter smoking ~nd has hnd phcnomunnl success. d. There- are nc pztcnts oxistir~ in filters or filter processes. No duty is l~vi~d on filters. o. W~ will produce -.n 85 m~:. x 25 mm. r~cess~d filtar cig-.rctte with -on Am~ric n typ~ blcnd. Filtrntion should b~ -t a minimum. The ci6:~rutt~ should bu full fl:'.vourud, e,zsy draw- ing nnd h-v~ smoking qu:liti~s ~qu'tl to, or b~tt~r th:,.n, our pro:sent Zop pl:.in cig rctt,-. If possible, th~ tipping should b~ whit~ v~iV.h two g~old lin,~s ::round the lo':;~r udg:_,. The cigmr_tto p".pcr should h vA ccmc nov~l aopoct to t-k. ,?.dvtntng~ of the currunt "F':shion F-.ncy". ~,';~ fu.l th-.t "Reps" p~.p~r might npp_:! in this type of m::rk~t nnd give addition.%l uniqueness to our now v~nturc. 0 CD t3~

- ~) - III Matters for Rosonrch and Development Th~ following -.re thu s::mc as Territory 'A': c, b, d, o. c. After cn~lysing our computitor's brand ~nd our blends, cnn you supply us i.mm~di~tely with _~ filter which will p~rmit us to produce ~ cigarette as outlined in the attached copy of our local ducisions. THE following nr~ also the snme ~s territory 'A': i, 2, 3, 7, 8, 9, i0, ii, 12. Questions 4, 5, 6 do not npply in this situation. IV Required from Millbank Same as Territory 'A'. TERRITORY 'C0 I Factors to Discuss a. How best cnn we oxp~ditc the luunching of a filter cigarette? What will bc its spccific:.tions? b. What tuchnical informttion on m~:chincry nnd supplies will we require? c. How c~n we t~ke ~dvtntngu of the filt.r to usa grontor quantities of our harsher local loaf? d. ~hnt are consum.r comm.nts on d~aw rcsist~nc~ c~uscd by filters? e. Wh-t ire comments cn t~st~ nnd how do filters affect the taste? f. Are thor. ~ny ~cner:l compl.lnts or fzvournble coz~nts? g. How dc filters fit into the excise structura? h. Ara there p-~tont rights on filters or filter processes? i. How will filter m~nufncture ~ff~ct production costs. Filter costs vs. tohncco costs? j. Whet is th~ gonurcl ~ttitudc of non-filter smokers toward filter cigarettes? II Local Decisions ~. The comp.titor's brand is in the hiLhost price c,~tcgory and is :n 85 DAn. X 2~ mm. cig:r~ttc with c 15 mm. Estron type filtcr, a 19 mm. cork tip, Vclin paper, ~nd cn imported Vir~ ini~ blend. Govarnm.cntnl conc~ssions to now industrios in rcstrictud fiolds h vc enabled him to import tobccco, filters ~nd other m-teri.ls duty froc for the next two years. Thcr~ h~:vc burn no ccnsum,~r complaints ~bout ~ny feature of his br.nd. b. l:~ith~r health nor filtr=tion =r~ major f'~ctors in our market. c. Through clcvar competition ~dvortising, -. certain "snob 0 "'pp~!" for filter smcking is dev~loping. 0 d. Th~ m rk~t is presently 60% Virgini~ ~nd 40~ Vir~ini~/~ir cured. Local ir cured tob.ccos are w~ry strong ~nd harsh, r~o Our goverr_m~ntal ccnc~ssicns h~v. expired nnd we rmst pay

duty ".~ the r.-tc of 20~ .d vo:le_~'cm on "ii m':t~ri Is utilized in our m:nuf :ctur~ ,:nd 50~ on tob-.cco. '"o must ~ct thu mnximum % of loc".l air cured tob~..cco ~nto the highur priced c".tcgory which is prusuntly 1OO% Virginie if we ".re to con- pete. Colour Is of no p".rticul-r conseq:lonc~ wlth ". filter. Smokrs ch-.nging from plnin to filters tend to smoke mor&. Howuver, filter butt lun~ths ~ru hnbitu-:lly longer. e. There are no p tents existing on filters or filter processi,~. f..~e must produce -.n ".cc&pt-.blc 85 mr.i. x 25 mm. cork tip filter cig-.1"ettc with - blund of 55% "iF cured ".nd 4~ i~ported Virgi':in. The filtcr must bc 15 ::~m. ":nd its prlnnry function must be to rcmov2 the hrsh teztu of the loc:.l le.:f, with efficiency n s~cond-:ry considcrntion. %¥o do not wnnt a 'fruity' or czs~d flnvour and must h-.vo the b~ttor natural ".ttribut~s of %h rob cco to pormc-.te through -~ur filter since th~ pure Virginia t::sto is ste dily losinZ ground to the blended t::st~.. III M".ttors for Resu':rcll ".nd Dov~lopmcnt The following ".~.'o th~ same ::.s T~rritory 'A': n, b, d, e. c. After nn~iysin~ our ccmp&titor's br:nd znd our bl&nds, cnn you suFply us im-modi'tely with z filter which will pjrmiZ us to produce "~ cig r~tto ns ~utlin&d in th~ ":tt".chcd copy of our loc-.l d.cisicns. The followin -re ~Iso the sznc ~s Territory 'A': I, 2, 3, 7, 8, 9, lO, I!, 12. ,~u_stions 4, 5, 6 do not zpp!y to this situetion. IV Ruquircd from Millbnnk S~me "~s ~erritory 'A'. Chairm-n N. Moore Sucrot~ry J. W. A. Sv_nson Chslwood, July, 1960. (481) O cxo Cu-.

10th May, 1960 INTERPtF.DIATE MANAGE~=~ TRAINING. ~O ~TION PROSLE~ t~ Filters are mostly used in countries having a high standard of living. They are an expensive and late development of the cigarette manufacturer's art, and as such have therefore appeared to the greatest extent in countries where the cost of cigarettes is high. This refers to the cost of blend and manufacture and not so much to the cost of duty and taxes, Since, however, duty and tsxes may be levied sometimes on the weight of the tobacco in the cigarette and sometimes on the whole weight of the tipped cigarette, not only the ¢elative costs beb~een filter and tobacco may be important but also the relative weight. Filters are seldom added to cigarettes, since that would increase their length. They usually replace tobacco, which is tself good filter material. Consequently, the first effect is to substitute one filtering material for another, which may be as good, better, or worse, and the second is to change the pressure drop, or draw resistance from the value of the original cigarette. Attaching the filter requires special machines or attachments, and the extra expense of operating these may become an important factor in deciding on the l:ngth and diameter of cigarette to be used, since this extra expense will remain the. same regardless of length and almost independently of circumference, The length of the filter plug itself is dependent on mcny things, but mnlnly on the difference in cost between tobacco and filter, and, in the case of high filtration, on the pressure drop required. Countries ~tth a high standard of living are also highly developed countries in v~tch it is natural for inventions and discoveries to be protected by patents, so it is probable that many novel features of filters and their methods of m~nufacture will be affected by patent cover, and this will have to be taken Into consideration when one is thinking of adding or changing filters. The following three cases cover the majority of filter enquiriess casEx The health angle predominates, and it is natuzal for a zace to begin to achieve a cigarette with very low tar. A filter Is an obvious way of doing this, and the object is to use a filter with the highest possible efficiency. CASEH There is no health angle, and, in fact, no reason for using o filter other than that it is beco=ing fashionable end you¢ competitor is getting good sales by using one. ~hethor the filter is efficient is of absolutely no concern. r~'j

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- 2 - CASE III Filters do emphasise points of distinction in the smoke, but in general prnbably do so by masking C he more obvious flavours. It is not long therefore before it is discovered that heevierp cheaper tobaccos can be used with a filter. The emphasis then is on the use of such tobaccos to effect economy. I now went you to imagine thet you are menufacturers in three 1~rrltories which hitherto have not used filters, but are about ready to accept them. A competitor has launched, with clever advertisement, a brand with a filter and his sales are soaring to the del~£ment of your own, plain brands. l~at are you going to do? And what help will you need in arrivlng at the best solution, and where are you going to find it? [n t~rrttory A, a local medical survey has attempted to connect increases in human ailments with the national increese in smoking, and a local publication (like Readeres Digest) has concerned itself with this, publishing tar and nicotine figures fc¢ the local brands and comparing them with the figures for U.S. cigarettes, which are lower. In territory B, the standard of living is advancing reptdly, people are becoming more conscious of filters being used in similar territories ~bro0d, but there is no health implication so for. Territory C is like B, but has a surplus of home c¢ovm leaf which Jt would be economically desirable to use, but which is normally acceptable only up to ~O~mixture with imported good quality Virginian tobacco. This is your problem. In each cese, to set down in order of priority all the information you would l!ke to have. To discuss the factors you would take into account in designing the cigarette and the filter. To indicate those Batters you would decide within the territory. To set dew1 the queries you would wish answered by a Research Department. To set down the queries you would wish answered by Millbank. These three cases form the bulk of the filter queries reaching Mlllbenk, and so it is right you should give your attention to them. I am aware, as I am sure you ere, that we lmow far too little of the answers to the questions you will raise. Nevertheless, I am very hopeful that your consideration of them will be useful, not only to you, but also to the research effort of the B-A.T. Group cs o whole, by indlcattno whet are the most important filter problems needing solution, and by bringing to light difficulties of whose very existence we may now be unaware. C t~r- Y