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,~:~ '"- "'l~"~"'~l~,o~~, (~i~i I ~'I'I:.~''. ..... ,,,,,~,.~,,~ ...... .,.. - ~ ..-... ".,,~;~,.,, • . • .' ,I~,,,~:, -"" i" ,t, " ::I,; • . -.., ... "~. ., . .. . . • -4 f~ 0 r} o cl .~. .-i 1-" i 1"3 3- ,--I M ,'2', M r~ ¢11 0 M 0 Q P ffl --I 0 o. O~;LSlzO00§ --,. f,~ ~C: ~,=1 r" a • --. I::/ C: ,. ., , • . . ,_ :-..-~:: ,. --~---"Q"~"-~" .o, Po .~.,,. ° ".,~,,.. .¢ o~ ~~.:?~,...: • ..: :' .'..':~
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l °. f .'! -7; z.~.. ?. °. ~ . .' "~ T -£.I "~ .:. _! I. 2. 3. 4. ~." 6. 7. 8. 9. I0. II. 12. 13. 14. . . . • .. : . ,.. SUTL DISTRIBUTO.R STRATEGY "I . .:" .. ,.: MISSION STATEMENT EXECUTIVE SUMMARY. SUTL BACKGROUND eRomcr , o0o .' , ... , SUTL EARNINGS GROWI~H 1993 -1994. SUTL / BAT DOMESTIC MARKEr INV-r.STM]~NTS SUCCESSION PLANNING PERFORMANCE RELATED AGREEMENTS TRAINING AND DEVELOPMENT SUTL PROJECTED SALES PERFORMANCE 1994 - 1999 SUTL / BAT EARNINGS GROWTH 1994 - 1999 . CONCLUSION .J: • • •-. APPENDICES : -."v ° | _! . o-" '1' • .% :! A - TAY FAMILY TREE B - SUTL ORGANL~ATIONAL CHART C - UII (MYANMAE) ORGANISATIONAL CHART D - ANCO BROS (CAMBODIA) ORGANISATIONAL CHART E - SENG LAO (LAOS) ORGANISATIONAL CHART BATCO CONFIDF~NTIAI. - CATECOR7 l: ~ll.N's'l~COT ~, TOBACCO LIT[CATION. (.n c~ (z) O .(.,-I ",4
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.J • .; - .... ",~OKJ.VSIJ.I'I ODDVBO.L VJ.OS3.~KII~ :I A~O53J.VD- "IVIJ.K3(II~NOD ODJ.V8 . ..o ~f.. . J .-~.~... 3 r r. T, :-:- L" -.~ •, i I) a) o • b) 0 03 DISTRIBUTOR STRATEGY . 1~5 - 1999 .4 MISSION STATEMENT To maxJmise BATs markn and profi~ shares of the Sou~Ea~r Asia / ~ Sub- ComiaeE e~on besiae~ t/a'm~ tbe m~c effu:kez dLma'buzm of our aact re~iomt la-t~, ~ of sub.4:hanaet ~, Dew Free, GT), to cmur c~mm. This will be w.tfieved throaSh iavemmat in mainiag aad developing out' cli~bumr, eStabti~a~ pedozmae~-reisted allreemem and. via ama~ysis .of trade ~..~, moving profit from the dism'l~cm chain to ourselves. .- .; -t,. . "" . , . . .. . .. ., lt~ eZ SIJ'I'L • To be BATs prcfen~ d/sn'ibumr for export =ar~cs wich/a S.E. Asiz/Indian Sub-Cominen~ To be BAT's preferred cEsu'ibumr for land routes into China. To be a secondary cliswibutor for sea roums into China. Volume Ovmdl volume growth is expected to rise from 7,484. m~oa in 1994 to 8,725 milli~n In 1995. a ~ rate of 16.6~. By 1999 sales vohmse is expecn~ to grow to 11,714 million. The key volume brands hs 1995 will com~ue to be 555 (44% of total volume), W_dton (18%), Viceroy (10.5%), BHSF (9.6~) and Lucky Sn-tke C9%). BAT CTA Growth Overall CTA is expected to rise from £41.0 mi/fion in 1994 to £45.0 million in 1995, a growth rate of 9.74. By 1999 dfis will have risen to £62.0 million. The main saarc~ of CTA in 1995 will condmae to be China C39.44 of tmal CTA), ladochina (27.84), SUTL GT (13J4), Myanmar (I1.54), and Duty Free O'.as). F..arnin~ Growth SUTL's gross earaiags ue expec=d to rise from £I4.0 million in 1994 to £I5.2 million in 1995, a growth ~ of 8.$4. The main source~ of eaminss will be ~cr.hina (36.44 of to~ Euaings). China (2¢.64). Myanmar (21.04), Duty Free (10.24) and SUTL GT C8.0%). Z SVt'/JI..DOC ... .- • ;'-~ :: . ./":. k: Y • c~ 0 0 ¢.~
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SUTL DISTR~UTOR STRATEGY (coat/nmtt~ou,..) e) Key Dm.Um~ ~ Strms~s To ~ BATs furore CTA growth iu these markets ~ the risk of Tay Cha~ Rye's demise by demanding a firm succession plan for SUTL and ktam~ ,mmdw dm'U~oa, To ms~ in me trmtni ~ ~ of SUTL's ~ manaSeme~ in Sin~4m~ and mRk~ ~ k Mytmmr, Cambod/a and [,los. Th/s will be ,chiev~ throu~ me implasmmdm d me "Compcwt MmaSer" series for all mMdk / ~nior manalpB as/ specific ~ pmsrams fur key in~vidu~ 0Vlilimn Tay, Tim Lats. S.K. Koh). All ~ cmcs m be borne by SUTL. To umdm'tMa~ Pals 2 sad 3 of the "Compatil~ P.d~" scales wkh field forces in Mymmsr, ~ mt l.,m. To compk~ ~ maiym a~ SOTL's msq~ t~ mrk~ md usde chan~ and raxmlallmi neasmlT altau m r/tmallle dime ,dmx:xiv~y. To esmbnm ~mmd~ m~mew Mee~s wire SUrL Smior MmSmm w dismss lmy Islam slid qllue atom plato. To M~df7 aad implmmm suitable Corlmr~ m~,~, for key SUTL amnlZas mt mae~ pmma. 3) SOTL SACI~OUND Duri~ rise lle 1950s, lndonmi~m tradas hum the Rims l, lands were zcSular vislma to Skj~imm m balm" coa~ n~n, mdmd fish mxl c, ol~ bc~ms in exchm~ fur cilmuum mt tobscco, b'TC lmt ,ppolnml 7 ~ for m/s busimm, homma dur~ th, Indmm~ Coa~mmxm 1963 - I~, m~se dlsmqmmrs w~t banla~x. A yaung ~ ship chand~ named 'ray Choou Hye 4,cided to buy out these disclbutors and formed smopun Uni~d Tobacco I.~ tk fara~naer of the SUTL Graup of Companies, Over dine, basal m Ta~ Clm~a H~'s ,bili~ m succeal ia uew markets. SUTL was given mzlborit~ by BAT to export to A~hanislm~ Bmlgkd~u~ My'anmar and Indochina. Howe., the only formal Nlreeazat c~m~um to be a lemr seat by I).A.T. in 19113 ~ disa'lbuttm rights for 14. d~y flee markm in $.]~. Asia and d~ Indian 5ub..Coadmm. As "ray Chooa Hye's busin~ prmpm'af, his family was required to provide the ~a~ resources. ~ffa:dvely, 4 sons 01ous, Antmr, Philip and William) eccanz involved in the day to day ~ading wire customers whilst 4 dauSlmu's (Steplmie, Liza, Jim/ mi Pose) provided tkc ~e back-up. "l'he Tay ~aily tree is eudi~ in Appendix A. O C:D <=3
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~t 7 .r, b o'r ? -,L % A t. • -", SUTL DISTRIBUTOR STRATEGY. (comimmtlon...) The fu~Iy hu .liale in coaunm ~m-, from dz father. ~ ~z ~m ~'e diffcrc~ in education, pcrsonalicy and mamgeme~ skills. Heaz Ths eldest, with a poor education. Sl~'m rooKof his fife u • sh~ e~gineer. technicxt and manageriM skills. Curre~y responsible for Indomsia and $inl~pore Duty Free. Poor relaziomhip with his father. Believes should be the natural successor given his birthright. ., . . A ~ ~ay man, ~ ~ ~ with t~Se-p~, c~r~.t~, respons~lelfor inn ml I~ssi~. ~ly low-key markm for SUTL. L~e. inu~!~, in the lms'm~.. Has no .arabian of b~.ominll a su¢:msor. ..' TI~ best educated with an ~ MBA in ~ ~ Ia~d~cmally, r,l~ briill~ I~. lacks-basic comm~rdal skills. ~ ~ ~ for SUTL but unable m deliver. C~y responsible for New Business l~-velopme~ which is focused on Viemam. Good relzionsh~ with f'~her. A cmporm man and co-favouri~ as successor. Detested by his brothers for his exn'av'~ance and being a playboy. Son of "lay Chooa Hye's second wife, W~ is the closest in pen~mIky and commendal skills m ~he father. Shares his ~'s old ~mper. A u-~ler wi~h good entrepreneurial skills. Currently r~'ponsible for Indochina. Has matured considerably over the last few years. W'dling to learn. The hardest-worki~ of the s~ and, by far, BAT's preferr~ choic~ as succ~sor. However, he lacks the confid~c~ and desire co be overall responsible. T'nc final pia:z in the SIEFL family jigsaw is "ray Choon Hy~'s unofficial chin wife, th~ m~-gctic and talanted lanet Ho. Janet's b~ was as a clerk within Sl~crI,, who caugh~ Tay's cyc. A rclatioas]dp blossomed b~wecn them which catapukcd her to a high~ posiuon within SUTL. She is currcu~ rcspoasibt¢ for My'~mar and China. An cxceUe~ trad~ with good PI~ skills but loatlzd by "lay C'noon Hye's family, who remain suspicious and, to a certain extent, jealous. She has li~e furore in SUTL on the demis~ of h~r patron. SUTL is a financially solid company. Turnovz~ in I993 amounted m S$3~0 million with z~ ope.ra~g profit of SS29 million. TI~ company has ao debt. k holds a currcnt bank balance of S$.S0 milton. Tha~ are plans co 1~ the company in 3 to 5 ye~s on ~ Singapore Stock ExchanlJe. .o ./. O O O ..e I BATCO CONFIDENTIAL- CATECORY I: .~II'NNESOTA TOBACCO LITIGATION.
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:J ,- , 4~a.'. Z ,j =. ..t.- .-,:-~:" :..~'+.~,~,,... ..... ..... .... ' .......... "'"" :'. " "i'.. "" SUTL DISTRIBUTOR S~TEGY (cm~tin~0a.:!) ~,-~- - • . ,., , . i.. • . ~o~ ~.Mm)~ s~a~ ~ ~d~b). ms. ~ tobacco ! PMCG n-~Rn~. At "ray "Cha~ ['.Iye's.r~ium~ Aim: Smart immedi~y embarked on an imm, nal maly of SUTL's ~ "and prunmss, so as to propom recomm*~-~-as on the fuan'e ~ of elm company. "rh/s study was m become known as "Project 2000". TI~ ~ fiz~lings from ~ study arc ~ b~ow : ObJ~:ttve .. TO revigw, the. ~is .t~ng :,~'knmis~on. ,sx~'~m~ dect~on-nnk~ proc~_s., business • ' . .. .-,. : ,. !:. -. :..,,:,,.; ., SWOT ~.vsis °.°, , P~ation of owner a~ compan~ x=-umzi,a ~m zun.qu.~*ur~ q~( Rapid response mhos It~io~ Focus B~ FMCG u'ading Level of customcf service On~¢tunRies ...i ,. s." Off, mission C~ons D~u~ao~ ~aa~ Con~o/ Skills Base Inmmal Dissm~t an Tobacco High Offshore Risks Owner's m:zptauce oftlz need for evoiudon.~ clmnse. Divcrsiflca~m into : s~ Dows~ ~k~ S.E. Asia disuibudou New world class FMCO princip~ Consolidate tobacco su'enzd~ ~act Internal st~ion High risk cxpmure F~lure m meet princip~' ~as SU'FL's ~ ot:q~u~W ties in developing t broader business hue whilst safz~ ixs crztkio~ tobacco profit stream. The ~ ~ is SUTL itself. SUTL is a service indusu"y company. /~'t'ZtLDOC .. . ' "./.', • .~:.~ • l.i . ~..!, ," .i::- ...~ • ¢~'~.",'. :i~;~.. :la . -k .'!' A',,' • ,4" . O Q ,..l:i. c,;,,, {,.,,"l BATCO CONFIDENTIAL. CATEGORY I: MINNESOTA TOBACCO LITIGATION.
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.. ~.. ~-,. . . &-f .J _i d.'- ~?. . a~. f. SUTL DISTRIBUTOR STRATEGY (coatinuadon...) .- • • -.',~ . ... . . - SUTL must zktn~ and re~.~ is~msl stmmma~, p. swrx. m~ inx~uce ~ ~m'mms and ,m~zr,~," mscipmzs. SUTL mu~ inaodu~ ms orpn~dm~ zns:mrc focu~ on clar prorg 'came mpons~i.~/and accoumbil~ on ~ lines of commmd. l) b) c) On reccivixql the zpprova/of "ray Chooa Hye. Akc Smart ,,mnnpted m ~ the n~.css~ ,cs~om to move., surL forwmd. This was dmp~ d~ usmd obsmc~ snd fruscmions p~ b~ a fatally comping,., whil~ rJl~, k sci/l a .loag way to llo, A principlm oe. r=pom ui -m t a= c= 'ou.or = P.x 'vc Commiaee.. . :.: " " .* ' .,:_ ' .* ... . " • A main board was" esud~lished in early 1994, ¢ompming of Tzy Chooa Hye, ¢I¢ four sons : Hong, Phi/ip, Arthur and W'dllcm, and rhr~ noa-execudve dire,~ors. A ra:x'uianem drive was ~ m add exm:m/profm~,ionMi.an r,o d~e company. A Madmd~ Dircca~, Patrick WortS, was appoinasd whilst 4 - 6 od~c'r mana~rs ~mfitcd ex~rnally. ~) ~v) v) How~e~, th~ ~n~e to be some major ~jes: Aacmpu to mmbltsh • u-,asu~hip in ~e name of Tsy Choon Hye l~ve umuc~ This would have been one mesas of gxmrzmeei~ some form of com~u~ for S~TL pos~ - Tay Choon Hye. An mnnnpt to promote William T&y md Artluur Try az board leve~ to be accotmmble for SUTL's mb~co and non-tobacco acdvir~m ~ly i.e. a clear signal of ~e shordiz for a ~r. was ~xwazxal by l-Iong, ~he eklest so,,. Aazmpcs m bring key playe~ ~ Ene in tex~s of ~ business disciplines e.g. monthly r~om, trip now, minu~s of mc~in~, ~ etc., lave proven to be ~, principslly because ~ have I~e dmire co r, hzng~ their working pnr.dces or have noc bccn given any training. The financial msx~cmenx conu~ls a~ inadequs~ for SUTL's cxpm~ting business. lvfmmseaz~ resources ar~ insuEscica~ and lacking in skills m enable their ~v~iflr~ion plans whils~ como|idadr, g their tobacco activkies. BATCO CONFIDE.~TIAL - CATEGORY h MIY.~E$OTA TOBACCO LG'IGAT]O~'. .... . •,• .. Lrl c:> c~ cD J~ U1
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4- •f .y • •• ,i:i • .... ," . .:..~, #~ '. • . :, SUTL DISTRIBUTOR STRATEGY (Coatinua~0n...) ., ..(• , , • •. . , 5) (a) o. • . • ~4;" t "'~" ' ::.'"~" ::" "" " .c,I . " i~..." N~, u the f~toW~ aam ~ahy.;ca~a~e, :strr~. ~ee pet~ since 1992 has.b~m in~ressi~¢. Based on cuz'zenz.l~t, esdma:es, sales volume will havei~. $3~ .widdn 3'years. " ., : " . . .. • .- % By Market /¢..~ ." ~. ".,.'~o" q I; China cout/s~es to be the mzjor vo|ume rnazket for SUTL despite • projected decline in sties in 1994. China accoums for 45% of SUTL's coat/ volume. Indochina has enjoyed the fasu~s: Browth within SUTL's rn~ke:s, up 94~t over the 3 yean. This is due prizciptlly to increased demand for ~$5 in Viemam. My~-~r experienced a dramatic increase in utles in 1993 bt¢ with a sigaifica~ price increase on Lucky S~.ke in late 1993, dsis has levelled off in 1994. Nevert~te~ r~e outlook is ~ely pcsidve. Slsipmen~ to the Indian Sub-Condnem (STJTL GT) have beets progre~ive, pardcularly ~o Afghanistan and Barqlladesh, wkilsc Duty Pree sales in the ISC and Asia-Pacif¢ region have also flouri.dsed, up 45 • since L992. Over the correR~ondin8 pedod the mix of busi,",~ has also chanBed with a reduced dependency on GT and more focus on Domestic and Duty Free. This provides more security for both SUTL and BAT in terms of risk exposure. Wh~ GT will continue to be the dominant trade c,~L over the next 5 years, k is anticipated that by 1997 total Domestic and Duty Free volumes will surpass GT votumes. ,m ? sttf~.llo¢ BATCO CONFTDIENTTAL - CATEGORY I: MINNESOTA TOBACCO LITIGATION. ~D C::3 C3 J~
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i ! .t -3 : ~o~ ~ ...,.- _~.'." " t. -?9 " ".~T - ~* , !.. -. .. SUWL DISTRIBUTOR STRATEGY. (continuation:..) (b) Rv' B and " '~' " ~ " f:'5 •. • ., ., • .. -.. " • SUTL Sales Performance "1992 -'i994 ,.. • . ,.. ,' ";-. ° • • .....* t ,.. T~',.: .::.~oiio of ~r~---~s .Ls ,~ve: by 555 ~=:e.ss a~i ~ ,.~ke:s ar~ ae:o-,-.:s "or =L.mcst .~0~ o~: SL'TL's sa!=s in. 1994. k is pr0gr-.ssive L= C,Mm. L'tdcx~",L~. Myazm.~- and C~¢ !SC. t,T'he second !~rg=st bra.=d is Hiitor,. which is ex:!usiveiy soid ~.tc ChL-.a. Vi:=:oy kas de:'=ioped co,'~ide:ably in th= i~: few .ve',,"s. Ag--;-a. cxc=y: :'¢.r w~,xa.'~al sz~ in My~ama~. "2"ds brand is driven by Cb~. "Fat .¢~:.-s" ~ro'.,,'L"..~ .::-.mium brand is BHSF which h2s expefierm~ sp~",c-~r gro~-~ over -:2~-,, l~s: .: years. I',s pe, aaiptl gro~'~ has come from Baagi~-,sh. Pa.kis~ znd Mya,-~.-zr. Lucky Sr, ri~ continues to be ",he No. I impomd b:'~d in Myar_-..zr. K=m is .~= only brand to show a decikne. This is due ~o .~",s brznd's e... t :..J / ,-. ..-" ~,.' °~t~. • i • ...:..~." r .) ( ., .., -~': ~o, ,t I P~WL~E.DOC BATCO CONFIDE.N'TIAL - CATEGORY 1: MI.N:NESOT..k TOBACCO LITIGATIOS". tJ't O C:D Co
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-i?: :. ._.# - "~'. %: "2-?'. • .~.,. r ~o ea~. 4'" ° .qf ," sLrrL DISTRI3ErOR STRATEGY (continuation...) @ By Market m S~ ~ ~ I~ " ~4 it'm0l. $L"U_'s gross :-._n';.ings On BATs b"~L~=sS have ."is;.-. 5era £!2.2 million in 1993 :o £'4.0 ..-,..iilion m !994. I.: ~ ;.~,po.'---a'. to no:" ~ u".~-s= fig,.~rvs at= ~r~ss, base"~- or, buying and selling ~c~ ~nd cx=~.ud= "-~," foiiowmg : SL%~apore :-t;~-d O~-: ~V~r:b.O~L'.: S~E~.*..S/P.:'.sions ,S-~nefi~ Oveneas'Off]c~/Distribution C:m~aaies ~Myanmar. Thailand. Carnboa~'-. L,zos and VL.-mam. Fr¢igi~ ex-SL~gapore (wb.:re ;FFii:~bi:) Ooods in=.,-.rx~ High ~r=dk exposure Bad d~u PR pa}~n~ms Despim the sales remover of ,..he China volume. IMoc.~,m is ee main source of earnings for SUTL accounting ~or 36.4~. This refl~rs the lower risks aaached to China. which is ~ cash business. Both Myanmar and SUTL GT st= also significam sourcm of earnings for SUTL SL'q'L~.C~ BATCO CONFIDE.~,'T[AL - CATEGORY 1: MINNESOTA TOBACCO LFTIGATIOb'. • .f. • .°~, • .,-; ?-. ,.: ..~ .-:. I•L• !• "% C~ 0 0
Page 13: 0500045740
"jr. =.: .,. .i "t ¢: .•.•.• ..i 7"3 STJ'rL DISTRIBUTOR STRATEGY (contmuatiem..) 'n .... ... gU'TL 1 8AT DoMr~sTIC MARK"KT I!NI~J~'rM~'NT ov= .= 3y'= 'boa su'a. =d = == domestic market= of My=~=r, Czmbod~ and Lao,, ' FoT SUTL, the i£.=mmt ~ ~ =~my rocus.~ on c~az~ i,-=mr~ r=our¢= to establish the tmctmm7 ~tnmnm= to d=vel.op gemtmi¢ ditm'imtitm for BAT =rod other principals, SUTL, with it= Local ptcmert, hat now established 3 domestic distribution companies: Mymmtar : Unittd International Lid (Appettdix C) Cambodia : .-U'~'CO Sros (Appendix D) Laos : Sang ~o" (A.~peadix E) ,i In+ter~.s of fftmn=~ ~;==t=m thumaa mota¢~.~ watict¢=, o~z~¢~ ] wzr=homi~g . space, comomer svsm:m. •letal cos= =c). we '=timate SLrI'L io ~',ave ~om="tit'.td the. ..... . - = . following ~ over ~¢ last : ~ .,~ year, (£'000) ~ ~v...2 ~ t oo._..~ biyazmaar 0 200 1.~0 Cambodia !00 3(30 30C, Lzos 0 50 1C,0 Tot.a1 100 L-30 .:$0 I. Above fi~res :eEe:t specific invesw',em on ~e tobacco di~sior=. ,.t Above fi~== ex-.=ud= : (a) my=sisera in D~. Fm retailing in Myar~ar anti Viemi.m. (b) head office sup.~c m SL,'L=apo~. SUTL's iavesm-.er~ would be =xpe~t~d to ~ from £0.55 million in 1994 to ".'(3.$ milliotx in 1995, maialy = a r"Jult of distribution exp,xmion pit.,'.s ia Mva,,mmr and Cambodia. Deperadgm on the =gablL@,mem o~ a BAT ffV in Mya.,um¢. throe cos= could =caiam much fiarther. During the pe."iod 1992 - 199~. BAT's investment in these markets has abo risen sharply m temas of M/M expenditure a~d selling e~: (£'ooo) ~ ~ biedia / Merchandising BAT 720 952 2.122 B & W " 0 1.200 1,334 SeUing Expemes 780 1.050 1,4-¢2 Total 1,$00 ~,202 4,898 This refl~t= tim in.sufficient ieve! of brand support and r=o~cts in 1992 and BAT's commitment to address these i~ut~ over the period. tO $1dr~l~ .~GC • ;.,, .(. i'-", C~ C~ 0 L J1 c~ BATCO CONFIDENTIAL. CATEGORY [: MLN':~'ESOTA TOBACCO LITIGATION.
Page 14: 0500045741
I ][. - t. 2.. t. • 7. _..... ~... .,..:.j .. ...~. fT ~. 5 k~ .:! ~e .:.'~ i/ .I, ;'i" .'. ~- !:' . SUTL DISTRIBUTOR STRATEGY condnuadon...) S) a) b) d) , "tit" . BAT's invesa~es, is expe~l: to ~..e'~frorn £4.9 million in 199~,to £7.3 million in..' . 1995, indicating, fdrther co~en~, to brand suppon (+52.6~) and mark~. g resot~-ces (-,-40.6~ ;"' " ..... "J :, SUCC"~ION PL~n~t~C :" " This ¢onr/nu=~ to be the key issue f~kng SUTL. Given the ill-health of Toy Choon Hye, the imer-family rivalry and no clear ntcr, e~or plan, what will happen m SI/I'L on the dembe of the father? We believe that if this ,~hould happen within thc- nex~ 2 years,, then there would ee a high .risk of (ngmentadon in~ ~:param compa.,~ies. Despke the i,~e~e:donl of•Alec Stuart rod-t~e, nor~vedkcctors to broke: a~amily .a~z~eemem,. it is urdikelv that :his can. be. ~d,h~ev~/given "the hldividunl aspir~om ofthe sons. A major loss would also be the d .epanure of Janet Ho. ~ho would.bdpro.'v~ded ~or in Tav's will. BAT's pia.-.s a~'e"~, ~o~io~ : -: : , • . .- , .{ : .. . .:. Ir . ; • • Approac?, ~'av Choon Hye and AL~:-$:u.~c ~o ~iscass ~e suc:ession .'¢s~e. giventhe high ~sk exposure of beth BAT. ~ a princip~. ~ SUt-L (Q4, 1.994) ladi~:e BAT's prefe.'~:d ~oic= as a successor. W~.:.-izm. ~.d pro..=.ose a ~miag ! deve-o.~men~ plan fo~ ?,Lm over ~ne .-.ex~ .~ yea,-s. Should .'ray Choon Hye objec: "o ~i¢ pi~m. ¢e:o.'n~.end a moEus ope.'~.'Jdi (tr~smp etc). following advi=e front Pr,.:e Wa~e:ho~e ! B~;er McKe-.-.zie ~o hold -~.e company coge~.er ur, d~r "h-. ~enenl s:ew~r~?~p of/dec. If the:- cominues to be ,'.'~ce.'~m~ on the issue. :~ =.=~ate BAT's =cn+mgen~" plan in .~re~a,'~cion for Lhe ,;~orst scer~..,'io, The .~...u--.cn~ cominge=-~" plan would be as follows. Should ~he :c,..'np~y fragmem into ~e hands of the ~rothers, e~h with a large sh~e o~ the capital, only William would be willing, to conuaue operating with BAT an a r.rading basis. Tha others would take the money and i~ves~ elsewhere: prope,'~.', Fmanc/al ,'narke',s etC. 1trim Ho would be willing m coraiaue o~ra~,~g with BAT for China ar~ Myanmar but, dependem on her inhe~m'tce, m~}" lack the c~i~l ~o establish a r~-~ding company. She may s~k parme."s..as regards Duty. Free an,-. Afgha.,'dr, an GT. ~ could be handled direc~ly by BAT. Thailand DF Singapore Ship S~or.'s India DF Bangladesh DF Maldives Domestic P-~kis~a DF Sd Lan~ DF Nepal DF B~ DF BAT - Direc~ ex IDS Warehouse, Singapore (For tax reasons, STC or IDS may be required m ship. invoice and ,:o/lee:'; Tr}de Markedn7 BATUKE Duv/Free ~am SLngal~re I! BATCO CONFIDENTIAL - CATEGORY h MINNESOTA TOBACCO LITIGATION. ..f.' Ln CD Cp c.D
Page 15: 0500045742
.o .;~. - . -L i-. :". ..... -~,- ...~L~.'.~.:~ .... Sln'L DISTRIBtrrOR STRATZGY (conda~.lOno,,) .,. • MarXr.m Myasnmr GT China GT My~mr. Domestic vie= OT Cambodia Domestic Laos Domestic Thailand GT Cambodia DF Eaos DF ':, A~ GT Indorasia D F '~ • lanec H0~ .'x :IDS W~re.~L~" s~r~ore William Tay ex IDS War~house. Singapore A . . ... .: • .. '-:via 'Oubai ;~, - ' ,. -. . . !- Sh.T Lnd@r.:.,ia mcmm , Domestic team Singapore / M.vanmat BATUKE ..... Dom~tic ~eam Singapore / C~_,nbodia • BATUK?. Dem-..stic :e~.,n SL-.gapore BATU-K/. Du.~" :.e'- :-" - Singapore / . • : -~. • ~ . : |.-. t j. "2. .2 __.~" .i :.y T , I vi-~_'zmm.. DF BAY Vie_--.~.'a BATUK.~ Du=." F'-'-* "2.~"Z Shouia the k,'y players. WiiiiLm ~.'.d "a.n~ show no; m:.*:*.st L~ --~r~u~.r~. ":".-'~'r re.!afionship with BAT. it ~ ,.r.:::cipa:ed ~'m: their -"',.s:ome,'~ will ~'!ac." erd-:'s on ~',.-" IDS w~elnouse hn Sin~po~. T'ae IDS consignmenz w~enc,,-se ~'., signifi~fiy s~'e~'~,'."-'d BAT's .~osition Io~tmicaily should mcc-.ssion be:oree "- problem. However. "-'..'~ ".~.-. ,,~.or~ "-.,,-n. BAT must actively support Tay Choon Hye md A/ec Sr.~an whils~ SL'TL unde:-.akes ",his process of orgargs~ional chang.*. p~RFORM_~'S'C'~ . ~[ATI-ZD .~GI~FV_M~N'I"S During the remainder of 199~ ir is i,'.mnd~l m for:nalise our ::iadonship with SUTL in k_--y mar~ m ~mbl~h l~ffcmmn~ ctite:m by. which BAT can measure their ¢ff~dvene.ss as a di.~.ribu:or. T'n~¢ will also provide rcmssurmcc :o SUTL as they invesc in domesr, ic disu'ibu~ion in Myamm~, C~T;oodia ~.d Laos. We will be utilising the new distribu:~on a~;..-~m., em model prepared by Legal D~a."m~cnt and Trad~ Marketing. Domestic We are currency plannins to n-.godazc l~fformznc~ - reded agr~encs with SUTL's subsidiz~ disczibudon compa.~es in Myaara~. Cambodia and L~os. Thrse a m'~men~ will only apply to duzy paid imporm. As ~.me subsidi,~" compani~ are being supplied by S~.~I'L in Singapore. a side leuer to SUTL will reflect thLs. Howev.-r. the agreement is wir.h ~,he subsidiary, and n~t 5UTL in Sia~pore. ,s .o 0 0 r'J BATCO CONFTDE.NTI..% L - CATEGORY h MI~'NESOTA TOBACCO LITIGATIO..',,'.
Page 16: 0500045743
-K. .8 :, • ~f , . rT~r. - .. b-~'TL DISTRIBUTOR STRATEGY (cominual~m:..) w. .':. a) Over L'~e next few :.'tars SU"~- will con'mue '.~ expe:'ienc.* "~,e ~k'~,'~cuk c''m,-'al -~-~g~ one womd expect fret.., a u'ad.: deveioping ~t~ ". professional r-'~., iCG disw.~utor. Mzny e.,..pioyees. :a~c~lari.v f~,"aiiy, will fee:. ;:nsec-,re ~a defe.-.~ive agair2t ,.be inc.-e,~.sl.-:g dema~:~s of their :#,,'.cip~ds, e~ec;Mi.v BAT. N-los: .:" ~",is fear ~ &,'iven by not possessing ,~e technical or tr, a..-2.geriRl s~ls re~uL-e= ~o t.mde:->..~ ~eir prm:i.oals' ne~,.s. BAT ~ces not wa.'u SL'TT.. m iose some of ~.cs key str".n~Lhs. :':.x~..e!y =nc-e?r'z:'~---'ial spirk, customer relations ~d ,-cold res~n.~. It wan~, SUTL m build u~cn its m'en~.hs and deveio~ ~ skills r~uired for a modern F~CG distributor. SUTL's waining needs are simpiy overwheh.,in~. Although SUTL inten~ :o -:mic z high-'evd Persorh':el / Tr~ir~'~ Manager in I994. this ~'ill be insufficient co :over all its n~,.ds. If BAT expec~ SUTL m k.,nprove our marke: pefforr:,ance, we will have :,o support SUTL's ~'a/ning and deveiopmem needs m the ~ort :e."m...~'. :osts should be agreed md borne by SD'TL. Managerial SldUs Mint of these can be covered by 'The Compemm Manager' series. It is inte=~td m request ~ssistan~= from Wills Australia to provide a number of training s~..-.inars throughout 1995. "['h~e shoul~ basically covet the followin_~: t . • Teamwork • Negotiation skills • Presentation skii~ • R.--..ort • E.-....pioy~ skills t3 "."o , BATCO.CONFIDE.NTIAL- CATEGORY h MI,NNESOTA TOBACCO LIT'[GATION. o w ,L i . L
Page 17: 0500045744
i s a .; ! " ... -.r . i", • , "?.:: .. . _2-~.-~ -<. "? ...'" • . • .... . • • . ..,..-~ • . ,.> . SID'rL DISTRIBUTOR STRATEGY (continuation...) b) H) (a) t ..... .: ~_~.~:.. • Tedu~d SI~ .:. "-', . will be provided dependent on individual needs within SUTL but particularly ;- ~-' for ~e key l~ess idem~.ed withinthe orgamsadon. " :~ • T.r~c Mark=~ .. .... - • Fmanc¢ for non-Finance ., • Consumer Markcdng • I~ILS ~ m Q~, 1994) • PI~x:lu~t Kaowledge (Pl~ed .m (~ic 199~) ;" ,. ', Duty Free RcutiIL~ :~':: .... . ~ .....;.. F.~:~. . :~-... Tbe 'Co~.."re idg¢'..-@rics ana .'P.~.~¢ipl'.s of DUD." R'.-'ai~' .Will b~ :: ..... f;" " im.ol~z¢~"~ !99~ "=,~,~99.5:' J:o.r d'~ "re." "~:~." r.... BAT wiU~...~.~.'*...t0.'.~p..:~i'~,::....~.~ .:i:~;i'" :" . .... ,.., : ..... .. ....... : ..... : .... Th/s ~e -nee.d~ to.~.~.~..~u~.e .. u~z~rtdy~,,,::.. :...,.:: .'. By M~ " " SL ~--3. Projected Saim Performance 1994 - !999" ~ ~2sir I.a71 t.~7 ",g~ • -":~ 2.213 : SUTL's sales pe.ffor:nance is ¢xpect~ co g~w from 7.$ billion in 1994 to 8.7 billion in 1995, an Lnc~ of 16.6,-%. By i,°99, sales will have r-.a¢,"~-~ II.7 billion, an incrmae o~ 56.5% over 199a.. The k.-y areas of ~rowth will be increased shipments to China and distribudon expansion in M vanmar and lndochina.. Clearly this level of gro~'th is signh~.ant compar=d to c'~',"~:nt volume. BAT's major concern will be SD'TL's resource requi~mem to manage and sustain ~is gro~ over the next 5 years. t4 $L, .".~I.DGC BATCO CONFIDENTIAL - CATEGORY [: MINNESOTA TOBACCO LITIGATION'. ¢j~ c~. U'I ,,,,_
Page 18: 0500045745
~:t" -,.. "C- 4;:".. "IP .' • .~, " "~'.. • .:..: ~.'." ~.¢. =',~ ".'.. "~: ~..~ "-~/ . ,T..# -. • tt. S~I"L DISTRIBUTOR STRATEGY (coadnuatlom..) Co) (a) ~."rL ; BAT E.~9~%'T~'~ GROXt'T_ ~ !~4 - !9oo $LrI'L _eL .,'TL :.~.--xti~. Growth !994 - 19.o9. Based on ¢'arrent for:casts. SL'TL's gross -.amingt are expected to increa.~ to £15.2 million in 199.¢. an inc~e of 8.5 % on 1994. The main so~ contim~e to be Indochina. ChL~ and Myam"...=. On :m'rcm margins. SUTL's caJldngs will rise to -"2 million in 199.9. I$ BATCO CONFIDENTIAL - CATEGORY h MINNESOTA TOBACCO LITIGATION. (. ,i ." 4 • /1.4. ,' C~ C~
Page 19: 0500045746
,t ".j. '~ "..'..- o~ ~ : :/ . ;J. i i ,;i ~...i • o r SUTL DISTRIBUTOR STRATEGY (comin~ion...) ~) ~) .iv) Co) BAT ~ to ,~pP.men.v~he following polezes"zo ~ ~his yOS~h and reach a more equkable profit .~¢rfor-~m~.tela~omhlp: Comple'.e fl~ ~u~lysis of SUTL's margins by nmrkec and by channel and propose an improved system which r¢fi.~.~ risk. performa~¢ and invermne~. Amend r~ ¢x.~r~g .-v.~g~. sys~cra from i pcr~nmg¢ to a fixed ram per ¢me. This has the effc¢: of cap..~ing $U'rL's margins. % la~az(~u~ p~' ¢:.a~ i~ "-he ~ff0r~e-r¢iw.ed dh=ibudon q~'~r~ To r~u¢" ~-~rr.nt :r~,L~ ~O'~L'--ZL from ;.~ days ,~x+~'~,-ehouse :o a c~h-only ba~ed system; .'r'Ns ¢~y. ~;.~j~,e ~..-.~.14. ~d =~r~,ins ;o r:fl~,, .-his; • - : . ." .,',,::..~?,!'.: /. ' ~~ "'~" ... ,. "',~. " .. .:' ~ ." " ' " ;:~" : " %1: ! "" ~ : • " = - BAT " .... .: ". .... . • o ':" .......... .;:'i~ .... - ~+. • ('- . . BJ-tT =.atmn.~s t, ro~lh loo.;' - ['9o.o. ~. .. :AP .'JP BATs CTA is :x.:.e::.'.': to :~se from £41 ;million !994 m £45 ~oo in 1995, a grow~ ,-'ate of 9.7%. U~,'er .~ Plan pcried. ~ will rise co :.~2 million in 1999. [:~.spi~ ~ ~.'-~-'= of ::n=ac~ ,,-n~nufac,'ure for 555 in Viemmm lndochina is expec--d to ¢on~i~u:e me hi~:-_.st CTA per .,mile over r.he Plan ~eriod followed by China md Myam=--.°. 13) CONCLUSTON Sb'I'L is an cx=acrdlna;y cus;cmcr for BAT due to r.he complexity of rn~kcts and lr~de channels, the sLz= of :he sa~¢s volun'~ it ¢ontrob and ~ shape of i~ ownership and w.a~ge..'=ent. As a company, it is experiencing sign/~ cdnu-al and organksafional :~.~g; d:¢ to the increasing demands of ks pfincip~I¢ for mark;; developrner.- :.~. S.E..~.sia. Despite ks progress o~'er "~.- I~st f~w years, the I$ BATCO CONFIDENTIAL - CATEGORY h MINNESOTA TOBACCO LITIGATION. ;" ~.~. q' :., (..':'l o (~ r~
Page 20: 0500045747
a £ .>-.. .-/ -~.- • : o ..--r ,;.. ..'1- - ~./, ::.; ¢. I i':. • r. ":. : , " .,... -,.. g:. • r o', t- o . SUTL DISTRIBUTOR STRATEGY (coadaumioa...) ?,.- f • .! i~ .... (a) co) (c) J. :41 .I %" .,.,. BATCO CO~NFIDE.~TIAL - CATEGORY h ~I[~'NESOTA TOBACCO LITIGATIOY.
Page 21: 0500045748
o ., ...... ;. ' ....... "~i :~:.,~:- :.i. ; I:!~'~Q ..... ~:.~:...: '"'~" "~'~ • ~...:~.~ /: ~...~-; ,'... ~ ...... :~,..~'*. ~?,..... : Izl -I t3 o r~ o °.Z ..-I r" 13 0 .~. MI ,.-I ,-.I @ ffl -t I WIEE_t TAN IIWEE KI-IENG I ~ON~ TAY TEN@ IK'Hq(i PHILIP TAY • ~111| I|IR TAY TAY TENG JOO DAUGI ITEI'~ LIZA rAY JINY TAY SI"EPI-IANIE IAY TAY FAMII-Y "FF~i.~E WIEE.Z . LIM HONG I(IAW I- ~Olt~ I~1- I'EI't TAY WILLIAM TAY I'AY "11-N¢'J ¥1;.W DAUGI rrER i (~ I,';AI.YN "1A'r (110$1:) • ~ - :. • o, • %,." " , ",~.- ... . : ,;.- I JANET HO Appgndix~ S(NIIII:E.' C.SIIll V~4~3(I.II ~ ~lzZ~;lzO00S -. '... • "."
Page 22: 0500045749
.. li , I ~I'+% ..'¢ +! • "°. • . . . . w ........... • ,...,,+..+...°~_ .,:..'% 'll~ I, Ii :.' --. . .-. W ), 0 I'I 0 I:I 111 I- A M 111 0 ,< ".~. M 0 .-.I ,-4 0 0 if) -I 0 I I ~ "1 AY Malaysia Thailand indonesia Phlllpplnos ! +w su.,., I IlusbosB hvelolxne.I ARTI IUR IAY Cilaimti, TAY CI I001111Yl~ I G01mlal Ma.allur N.EX ,ql I~,uI r Fkta.ce Mmkellllg IS,U, I EQ I'AI'IIHZK VVI'ItlI~ I I I I I I +. Admkds~ralloll • ... A.N. 01I.I~R -~'1, S.K, K['II I AN C)III-II Myanmar Viulnam IIAInlY I PJKI. h.lla Pakisla. Bangladesh Sd La.ka Maldlves Afuhmdola. Nepal [lhlllall l'llll II' lAY IISSII llml WIllIAM lAY JAIIETIII'I " ^.II.I'I,'IIII_:R" {::.ilhllill;i Chlli;l S.!noal)oro I-;II)S I)ldy Fruo ".. "'t J Commodltlnl Ouyln9 Appondlx B ,~1: +... M~rketlng _ , 5~vlces , " . T lOllll~l. ¢.IUIII11111111 .- --r .,...+.. • -;~;,, :...
Page 23: 0500045750
.~,I. -.I CI 0 0 0 M M r I -.t M 0 0 l, .~. M 0 ,--I ,--4 0 0 r" 0 ,-.I 0 ~z L~.4 MYANMAR 5ARES • DISZJIIIIIJIJQ~ Apl~ondlx C • .-: .,....-'£,,.~ :. - . -., I DF I)EPT DIRECTOR/GENERAL HAHAGER I .... ....... i ............. CONSIIMER GOODS IIEI'ARTHENT / LIQI IOtlsLIoLI) FOOtl • I ..................................................... I ..... I (]OOi~S I II:'VEIIAG Rt Uur it) • ..: .~,.' ~. O.~/ ~ t, O00~ • .. ....... ~. ....,.....~
Page 24: 0500045751
I~t,,,JI " , ,, . ; .- ...... ,,,,ll.,~b,,,,, i, ..i, ...... : ~---,'# ! - I,,:.t I.. '" !~ ;:~"' ~ " '"'.-~'.;]!~. "~,',i :...- i ;i , • ,;6.. ".~. " ' ~.... ¢i ),, ,,-I O r) 0 2 0 {11 > I ,--t M 0 N m 0 --I ,-.I 0 n 0 fl > ,-I ?e. ANCO BROTHERS CO. LTD. I iiii. I^~,~,'"~ ~"-~ ""^~" I l FolxJ ]'ek Mull | I I DIVISION 1 I J SUPERVISlOR (~) I I J TEAM LEADER (2) J I ! ~ERC,i~NO,~. (1) I I I I :S~ES~N (8) I J ,CLEANING TEAM (4) I CIGARETTES DEPAR'rMENr I I SALES MANAGI'II J "l'iui I.eol5 I J I DIVISION 2 I Si!PERWSC.~'(I) I j TEJM LEADER (2) I ARSIS'rANT SALES MANAGER J I VllCalll ,: ,: , ii m I MERCiiAN[i!SE~IilI , J , ::,~:;.,...'.: ." .. I I SAI-ESMENIB)I I (;I.E#Id~IING.I.EAIvI(!!);I j. : J i IIAIJE MN1KI'TING REPI.1EsEmATIVE (2) I i WAREHOUSE rl SUPERVISOfl (1) I [-- JPROVINCES FLY SQUAD J ..... , i- I J MERCHANDISER (9) I I~71gI~000~7 :. ' o . ",.. ,.. ~. • . ~: ,.-.",~,.'~,..~>~'~@~.,~.i,,!,,, . ...... : .... ,, ~.~
Page 25: 0500045752
l=l ). M rl O 0 c~ --I l- e -I M 0 X; Y. M 0 -4 0 0 ,--t 0 °'""" w"~%e"" .ll :Tt '°'°~'J'. ~:' "* "" -~ . .. 1,1..r "'~'~. 'I0 b lUII t I :~-.,_~ ~-.,.. :. , :,:"...',~,,:,;,;~;- --:,~-... ,...,~. IJ ~mkE LAOS ORGANISATION CHART SENG I_AO COMPANY LTD I CI iAIltlVlAI,I Mi 'h~nl.~l|L I i PAK ."IE I I ~.^~R~,~ ' / I ASSISLII~T I • I ICIGARETTES SAI.ESMEN (2) ! JGENERAl I~NAGER M~ B.Ipnl M~ 119,~~ I I I 5AVANtlAK! lET ! MANAGEn ~ k) I I ^s J,., .... / u^~r,~, l!l__l ?,S/SItO00S :°.. MANA(;I'I~ "-"-1 Ivb I,~u It~xm IIp l '": I AS~;I.5IAN I" MAI~AL;IEI~. I I~l-~k:Yuu • • I"" ~'" "}}.; -" I . ViE fJTIANI". I -Iv .. I .... _~w~:n _ ] ~N'~e~c~HSt~t~. I I MN~GER(ll . ~ I' HDU'E!EEPING ,,| I "-- '~i Ii'Ei~IVIS~£1 Ill " l" "~3" ;~" ' ; I I,_: .,-i~, ....... ~_,: ;~,.: / I i " • ~ . ' J" GIiARDS 12) I l--:il (~m._: (:i l...l~i( ( i)---Tj . . ..... , .......... ....~: :. ', ;.~_ :',.-.. .~., , . .¢. , =. °, i.1
Page 26: 0500045753
BATCO CONFIDENTIA L - CATEGORY I: ,MINNESOTA TOBACCO LrT~CATION. ....... T ~ . "
Page 27: 0500045754
il.~,p#,F . - ...- .~.~.~.~.I~ {#~.,% ....'...,. i- • o ..... ' =.L,,~,,~ .... . ;.. :~..:,~ i ... • :;L e t ....~
Page 28: 0500045755
.o :r -. .-.. ;.:-." ". ° I.'- o.. 5.. % :t " .4.~. -°., • ~.... 4.aL .- ,.,. --7~ "r L" .4 __" .:; " . --.i:" V 'i. "' CC: / N. .~, " ' .. .: . .i.. Rmbimwdd D.J.Mdm M.Bsk~ P.N.A. FROM: Andrew Oqtepn DATE: 7th Dec '93 RE: Trip, Notre- Indfa 29~b Nov. to 2nd Dec '93 2. Detamine thc level ofint~st ~fr~tin I~tel chsins in cipnae impm~oa md promot/on. 3. C.ndn first ksad knowledse of ~c market in orde: to inp~ in tlz -India ~- 4. Rcvic-w l~ss of cur Comulu~ in ~ ~ l~Ci~ s~I penemuion of bands in the msrket s~.ordinli to h/s bri~ lnd~m law forbids the impom~a of~y .!1 c~sumer ~ Certain cxccptiom m specified, but c~pr~a is nm om ofdwsa TI~ de~miti~ of imported end subsequently boxed, but this is ~ fi=s(ole. Hotels m foreisn cum~ Smaasins emaprises whose ~urist ~ danm~ ccrtsin consumer SoodCbmsds no~ wsilsble in Indit due to ~hc impoa As tourism and fmcisa cur:e~- sane=don is dauned impomat m country, tbcy m pwed special i=pon licences which m usai~o impoN tnu~ of~oods, mostly food items and Uquor. Therefore houds pmscat the only curn~ official way ofse~ cii~'ues in the country for sale oa tl~ domestic mm4cct, albeit hotel shops, ben and resmnnu. Ofcours, tlz Du~ Free business is official, but arrivals purchases are meant for private consmlxioa, md not for sale outside the bonded area, likewise ~e navy business. • None of the hotel Stoups vi~ted, the Oberoi and tl~ Taj have recently or evcr imported cigarenes under this mechanism, according to the pmpk I met. .(- j." ,.. 0 0 0
Page 29: 0500045756
~ Ir . • .. -i . ,. a', L t'.'. 2 i ~.:. ~.. "i .... . ........ .---- :., ..... .. ,.. .. ..- .. : .- An cilzatCs on tbe dominic mrkct st= a ttWC: On the psck.;ts well as oh tU fo.~. ofKlvcx~'S~'.kmludi~." Eq~S. - • • v • • moving quickly towtrds hamMimion of thc atsrket end om cffm would be the ~.of tl~ ban on consum~ goods. This individmd ~t tlm dds muld happetr at around the stun, time tt the ntxt budgtt - Feb. ~4, md M ,dvis~ ensuring that cigarettes weft not seleetcd to be handleddiffatnd7 Le restrictzd or excluded. In the tl~tt ~ visited ~t tlds trip md ~m the work dam so far by Our consulumt it is ¢lem" tim: st) SF2K and BHSF.hsve high levels ofdistn'butioa in ~ o.fdm four ~.... citi bei ot i whmtor Sm, e b~ls ~ndt ~s well distn*btaed, but'~ no. oth~" ~brand iS any d~sm'bumJ.. ' , " ,- *, .,'" dism'bution was nttumlly less, but SF..FK is without • doubt tim most popular importedlxand. Distn'butiott was in $0~ of the Outlets visited, with BHSF and Marlboro st 1~. Etch outlet stocking SF2K seemat to but • regulsr customer base, with a higher proportion of stick sales than in tim major c/d~,. ©) The source for the atsjority ofthe stocks in the maim is very dc~mitely the various India Duty Free outlets ('mini Ntvy), wi~ tlmut 90% of cod~ obs~'v~ being *E" marked. The expatriate workers in t~ M~ are mostly from the south which has not been visited yet, except for Mtdrm. d) In my opinion this rtprtsents • very, vcry efficient md effective method of supply and currently appears to razet the demand Ic,~ct for the brands. Thett is practically zao risk from customs as tm Ix~dcrs havc to be crossed and the tntde maqlins are very attngtiv~ So it is an appealing business in many ways., mp¢ci~d~y what compared to the low and controlled mm11/ns on local brands. We do not seem to have s supply problem in this market ~om the market study completed so f~r, md I doubt very much that the rmult will be different o~ completion ofthe survey. The signs arc that volume growth will come more from gamating demand than from distribution incrtascs, at this point in time. W~t needs to be borne in mind is that the laxmium end of the market is not that buoytnt and appems underdeveloped, even for local premium brands. This tmd~ is ~% bidis. Them was no evidence in the market yet of any of the three sepmat¢ shipments made to the Gu[fand destined for this market. o: , :.... ~. :'.~' ."4 , . . . U~
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it "~ .J q~ .-. ,'. m --.. ...° 0 0 0 l~um Reeomm~dadnns snl~ A~'tton Mm'l~ ilbzr~i.s~io~ This needs to be. c, value~l at the sppropdmz ~ by those most familiar with the Gown'mneat polJcia and "dL,,~n in such matters. Arc PMI currently pushing the issue and what effect will t GATT dad have? Obviously any significant d~Jopmmm in this rzsazd will supersede all other efforts at developing this business. Adfoo: AI~P to discuss W/th N. Davis. O~cia/Xmp¢~ Achieving official imporuuion of~ trials should ~t high ps~ri~ ~ it willihelp ~e~i -timise ~ ATL sCsividzs mxd also enxhle some promotional w~ m be done dkecdy wids our ~ c~numca. Our Sl~:K mrS~ group tend to b0cia/isc:s~ 4 & $ ~/r hote~ The "Available in Duty Fr~" cov~ for cx-~.nsive m~ia cov~ ileed~ tO,~ vey csref~y ~ as it ¢tu euUy become antaS~ ~ ~.-in draw sneution to the source of market supply, which we would rath~ did not come under scrutiny. Leg/timatc imports through varmus hotel groups is defe~n'blc and provides another source of'cover" for our brand building plans, and a promotions/platform. As the houris groups have no real need to undertake the laborious usk of officially importing, and it ~s a real has~, rm told - ad~pate funds will have to be set aside to incentivis¢ than to do so. In addition, sssmn~ that this goal is achieved in one or two hotel chains, a BTL budg~ for prommionzi ~'~v~fies and Horeca materials w~l be required. Action: AO'R to discuss sad a~ with ADGP, IMA, ~ for inclusion in "India Plan" proposal Mar/~r s~pLy As no~d above., 1 beUeve there exists in the currern Duty Free method an e~cicnt and effective rnedmd of supply which has the capac/w to cxpmxl with demand. The:e a~e very many other sources, the most siip~cant being carry home fi~n ~b.e Middle East. I do not believe we wLU be tble to expend distribution by attempting to find other access methods, which cannot compete with these relatively risk free methods in any case. If tbese were to collapse, there would then be a major supply shortage and the riskier methods would be worth ananpt'mg. We are not in a position to conu'ol the end market destination of such trials sr.d we risk upsetting other markets. Recommendation: Suspend attempts to supply ex UA~ quay side. Market Management. If the proposal to attempt official imports is accepted, I beUev¢ that the combined efforts of the Territory lb~mager in Singapore and the Consultant in India can get this rusk done. However once achieved, the requirement to then implement a promotional calendar and a Horeca programme C3 C~ c~3
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~P ....~ ....... . .... .-.7- % / P i. -f" _- ..," ..#" -/ -w " .,..~ •. L .i o" . 4 .. • . • ~n qui~y 0verl0ad ~ sysumL At ~ miet ~ ~ ~Uc,~ TM and more ~ would be r~:lUimi. " Action: ~P to cIHsc~m~ms with AM srm~po~ rid. mm aUov,ucim for addlflomd manpower costs is mid to law '94 #re This assumu that 1he mar~ ¢ontinum to be mamaq~ on the g:ound by AP RBU. ~atutory V/'IW. If we attmn~ tlz official ~ ro~ we win mint to ~omply wi~h Iocad rt~qda~m ou VH'W m packaging..bise all Ioe.al brands ~ camry the VHW rimming oa bo~fl~ adv~fising apd~timlmc.k imp( a~! on eos) wc n~ to mabtish w~ we ~.go~:t0 @,un~,~ ",~. aUable fix ~ty Frec'adverxisingL- ,. ~ .. . ' . . • :!".': -. :i.~'~ " '*'.' i Action: To, be dis¢'uss~ at "ltmd~. Plan" meeting oa.gtb Dec. Andazw C~Re~m Attached plm.~ find current market prices. • d.~ • i~":
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..p.- . :, - GTC Chancellor 20's NOTE: • ...... 07112/93 India Market 35 - 38 32 - 35 35 - 38 45-50 35 - 38 Pn'cos • '..~.~.~ .. Rm. per pac~ 38 - 45 35-40 38 - 45 50-6¢ 38 - 45 •Bombay 35 27 27 24.3' 12:'~5 '.9.3 26.95 22.56 38 29 29 26 13 9.85 I. 29 24 27 29 - Marlboro Lights commanding a premium due to very tight supply * Little variation between 4 main cities in Intl Brand Pddng - The Duty Free Retag pdce is $10/ctn, equivalent to 29 rupees/peck - Rate of Exchange £ : Rupee = 45 -. ~.,. ;. |,. "t ,r O Q 0 /"M
Page 33: 0500045760
-~,~i~'iil¸~¸,¸ :i~, ~!~I,- ~. O,::)Z,~#O00C~
Page 34: 0500045761
~ BRITISH-AMERICAN TOBACCO COMPANY LIMITED BRITISH-AMERICAN TOBACCO COMPANY LIMITED TO: U. Herter B Bramley f.~ ~ r" J Rembi~xewski ~ I P Adams P C O'Keefe ~Xt~ ~'~ R Cameron .a~ T Every-Burns / $ Winebrenner, B&W C R Green Jr, B&W, JaparL/ CC: K Schuyleman FROM: Mark Magnacca DATE: 25 November 1994 SUBJECT: Japan Review with Mr. Herter- 2$ Oct 1994 The objective of this note is to provide the minutes of the meeting on 555 in J'apan on 28 October I994 with Mr. Herter. l~ev" Issues The rationale for the launch of 555 in Japan was reviewed and agreed recogaising the influence oflapan in the Asia-Pacific region The proposed mix was reviewed and agreed subject to the performance of the mix in the STM. The conflict of'end-market management prior/ties and IBG priorities was discussed and the need to support 555 in Japan at the expense of non strategic brands was agreed subject to market research demonstrating that 555 has a chance to succeed. The need for a contemporary 555 pack design based on the core attributes ofthe existing design was agreed as necessary to achieve the brand vision for 555. Indicated Actions ~vd~ fco - The existing 555 family must be optimised as per the proposed Super Lights design and tested in Taiwan following positive STM results Action: MFM to schedule quantitative paek research in late Januar7 1995 with top-line mid February MILLBANK IGNOWLEGREEN STAINES MIDDLESEX TWI8 IDY (J'l C3 CD O O',
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. Based on acceptability amongst the existing 555 franchise (taking into account age profile), the new design will be launched in Japan. Action: IBG to recommend roll-out $rrate~,y for ~isting markets by end February Regards Mark U1 C~
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T BRITISH-AMERICAN TOBACCO COMPANY LIMITED 4 M~rch 1994 SECRET Mr 3 Winebrum=~ Brown & W'dlimnson P 0 Box 35090 Louisville Kentucky 40232 United States of America Dear John SE 555 - JAPA/q Attached please find the rationale for testing the SE 555 brand proposition in Japan. Obviously it is up to you to assess how it fits into your market portfolio and we can only provide a pmpective fi'om a brand point ofvitw. This is, however, s typical case where eventually we have to take a Group perspec~ve on how to build the global value and franchise on a brand as opposed to "catering for a portfolio" from s local market only viewpoint. Please note that SE 555 is already conu'ibuling well over .f~O million to the Group and hence is one of our most valuable assets. The key is for us to create a presence in Japan for this brand because o£ the growing importance Japan plays in the Asia Pacific region. As you know, stature and health of a brand is critically intlueoced by who smokes k and if' a brand is seen to bc smoked by Japanese we create • strong syuerW with the fi~nchise growth in the region. This is because more and more Japanese travel the region and are seen as a group to set "Westem/Intem~onsl" standards. ..32 Q Q O Ox
Page 37: 0500045764
-2- A direct link can be found in Taiwan, for example., where Mild 7 is • key competitor of SE 555 and where SE 555 manned m pew. This says two thinss (a) that SE 555 can compete with Mild 7 and Co) one of the best de.fences is to ~ck them in thek home territory. The o~ issue is that we believe SE $$$, with its whole mm'k.etinz mix, could have an appeal in Japan and that our link with Subaru mif0u help. In terms of UK/B priority, SE 555 is clearly more imporumt to us flum JPS. However, product and advertising mix need to be adapted to the Japanese market and that is where we will need your help. Best Rsards PS: c¢" The k~ reason for my v~sit to Japan is to meet with Subaru to talk about the sponsorship but I thought it would be a good opportunity to meet with your people and have a look at the mm-ket. T Whitehak C R Green S M Osborne | D BrmBJ.ey P N AdAms C~ ¢j't ".4
Page 38: 0500045765
PROJECT,., TYPHOON STRATEGIC RATIONALE The objective of this note is to klenti~ the brand own~s strategic nNiomle for the proposed launch of 55$ in Japan. Bac'kt, roz#~. Roll of 33,f i# tat BA 7~o Portfolio With regard to 555, there ue two relevant BATCO's 1994 markmiq objectives: "To improve the quality of BATCo's volume mid market shm~ by ~ the Group's share ofxhe premium priced seipnents ~ in particular, ofthe fast~-Smwla| I~ segment in order to build value share ahead ofvolume share" "To achieve progresz, lve inczeases in BATCo's share of the world [FB s~pmmt ... to over 14.5% by 1996" 555, as BATCo's and BAT Industries largest liB, and u BATCo's only global trademark is to play the lead role in the UKIB portfolio and marketinS resources are to be focused bel~nd 555 in Asia and in new opportunity markets. BockTrom~t. Bro.d P/ms The brand vision for 555 is to become the leading IFB in the Asia-Pacific region and to become the largest UK]B in the world. The brand objectives for $55 ate to ensure the continued momemum of 555 among Chinese consumers, to broaden the franchise to non-Chinese consumers and to grow at a rate faster than the IFB segment as a whole. Razio,ale for Protect T~'oho~: The decision to test the 555 proposition in Japan is consistent with BATCo's marketing objectives and the brand objectives as outlined above for 555. In addition, there are three criteria that every opportunity matket for 555 is assessed against before any resources ate committed: i. Consumer Driven Consumer demand is built through investment in image building media and supported by mainstream diun'budon The Japanese advertising environment presents a wide range of media opportunities that are not available to the same degree in existing $55 markets. t.;1 C~ CD tJ'l
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2. User Driven 3. Synergistic A sncondary benefit is that the 555 Suberu World Rally Team is exploited by Subetu in Japan in a variety of media and tlu'ough dealer based activities on$oinlg throughout the year. There must be a pp or need within the territorial ponfo5o so that 555 is providini increanental shue and not m'b~inl existing BAT share. The role within the local ponform must be determined by B&W who are territoriai reapom~le for Japan. However, 555 would appear to complement the B&W portfolio st a higher 250 Yea proposition tarseted at a sEshtly older qle llroup (25-35 years old) than B&W's gent 6rag. The positioning difference is also clem'ly defined by the communication mix (see mtached copy strategy). The integrity of the mix must be maintained. Whilst there may be t need for supplemental communication material to introduce the proposition, the copy strategy, the key product benefit and the international campaign must be used. The 555 packaging will not be chanjed to suit the Japanese market. The SEFK pack will be made available in selected outlets although the drive v~ant will be 555 Supefl~,hts, a 6 mg variam. The low t~ selpnont accounts for nearly 50% of the Japanese market and hence we are tarlletin$ the key segment where future growth is expected. The 6 mS pick that has been developed for the Japanese market maintains the core desian elements of the parent and will provide the basis for the 6rag variant in other 555 markets. All brands sold on the Japanese market have been adapted to Japanese taste through the use of a charcoal filter. The product that has been identified for the CPT uses existing 555 blends (modified Virginia) combined with a carbon patch or a charcoal fiher. Again, the product identified will form the basis for this delivery level in other 555 markets. The initial qualitative research has identified that the existing communication materials do not provide a raison d'itre for the Planet device. Given that the existing campaign was developed for markets where 555 has high brand awareness this was not unforeseen. There was an understanding that 555 is not an ordinary cigarette and that it something unique. Therefore. there is a clear need for a launch campaign to establish $55's ¢J3 C3 O .gu. O~
Page 40: 0500045767
pedijp'ee. Al~er the initial launch period, the iniemutiomJ sJppon prol~jzmz will be used. The bender to 555's perfozmance in its mistinll nvu4cets is tim sims the sophiSimdon ofthe Iapanese nuu.ic~ it will raise the overall quality ofcomnmicaioiz devdoped for 555 for new markets.. From a struesic perspective, the launch of S$S in Japzn will rzinform its rqiional presence in North Asia. The launch wig place $$S in competition with Mild 7 in its home market. Currently, the Tziwunme market, 555"s hUlieSz domestic nuu'lcet, is beinl~ penetrated by Mild 7 where it has the laqlesz SOM ofimmufiond brandL !. (~zlitative research of launch campaign includin$ pack variant (April) 2. CPT or'proposed blend (ApHI) 3. STM ifrequir~ posl-qulStl|ive 4. Test market (location to asreed with B~W, Q3-Q4, 1994) 0:.~ s ~T'F.~q,,r..M~Ut K,T'Y Pl I00.~ 0
Page 41: 0500045768
555 COPY STRA TEGY KEY BENEFIT STATE EXPRESS $55 is a superior quality international cigarette that delivers a smooth and satisfying smoking experience. ILEASON WHY 555 uses a unique blend of Virginia and Oriental tobaccos. BRA.'~D CHARACTER/WORLD The 555 world is timeless, maintaining a contemporaq:" outlook whilst respea/ng the traditioas of the past. The mystical qualities of 55:3. transcending cultural and generational boundaries, bring experiences that are out of the ordinary. PROPOSED SELLING IDEA Transcend the ordinal." and exl:~ence the essence of smoothness. Smoor~hz~e.ss. Above all else. (English translation.) DESIRED RF.SPONSES (199.t) "555 is more up to date Ihan I realised" (Existing mtrkeu). "A smooth, superior qmdity international cigarette with an established pedigree" (Near markets). 199¢ Ln 0 0 0
Page 42: 0500045769
, • 23 Februm7 /99./ EXE CUTIONAL REQUIREMENTS (1994) Note Whilst the copy strategy for the brand remains consistent, executiomd m:luimmen~ may change from time xo time as the brand progresses and market ci~'tmmances change. Sometimes. ~ advertising campaign needs m be moved m. given a new perspective or sense of direction. For 1994. the basic executional requimmenls of the creative expression of the copy stram!iy can be sl.m'm~sod as follows: O,.'er~l approach: - majesty, power - big sense ofscaJe - prestige Specifics: - blue coiour coding - curvanne perspe~ive 0 0 0 i.;':
Page 43: 0500045770
JAPAN AGENDA I~0- 1700 Subam T~ca [menmimud Im~BATCo 19o0 DiMes ~Jh STI Saturda7 19 March 0800 - 0930 1000- 1300 1400. 1600 1900 Br~ul .~minl B&W/BATCo $$S's Role in Japan - BA:W/BATCo/BSB . Rcsarch Issues - Packasin| - Creatise Direcr;,on . Propo~ .'daLc~ls • N~xl Sttlu SS5 Global Ulx~t© • SMO B&W JJlpan Upda|¢ - P WeSS=I Dinncr- All i Flmal Sayo- To be ma~nmd STI 3-Ih40luawu Mhaka 'i'd: (Of0 814) 2233 71148 Fax: (oi0 114) 22.1;3 Vl~a~ m ~ amNm~l i • m, Hmel Sc~yo - TBC BSB Japan Shibaura Square Bwldinl 4-9,,2J Shilmum Minalo-ku Tei~-o lOS Tel: (010 8133) 455 4123 Fax." {010 8133) 453 9633 BSB Japan Venue Io be con~nnecl by BS8 Japan Distrib,tio,: J Rembiszewski D Green P WesseJ C Shiplee M Magnacca S Osborne $II01 l~ni. 0 O 0 U'I .~j 0
Page 44: 0500045771
17:Og B^TCO F]N~CE DEPT. 1714 ~4138! -~ ~1 ,/.'..22FEBS~3 I~"~'LXI FAX JAPAN Mark..et Development Nan, ,¢ P Godfrey J Greli0r] U~ O O O J~ (.n -,,j
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]bacuttve Suaumsr7 QkJectlve Bandgrou~ ~jtu~ 0pdom Two I~ oeeu oead to be ~ood h any fua~ dr, daSnmas piano ~r rite ;epenua uurkot: The Ira| u~ visl~lxy o~lPS earl ~jo k4 mhmmt v(8 t~oecloeiq ~h8 ~ • dvi~b the KL, aea~'. ~'~h wudd ~oz ondy 5o in hu wttb ma:lwt u~l~n 1~ wo~dd impro~ d~ ~md~l mmm as dn~ bruai. 14ustSeaU~ of ~ bu~ttt tt,~l be no~un~ to qti~olnt i doahaUd azu muq~ if n lid n'llalJa of" IXud hu~ ~nlGty iJ ~o bo ~oslbalod, nM mev anaol iJ m bo moroiNd ovar ]I~T~D bm~b h Jn~s r~ C~ C~ J:b r%9
Page 46: 0500045773
r~=. i= V~ If:l] ~AI'CO FIN,VICE DEPT. 0784 ~45389 P. 3/23 • 1~ ~ I,, yw 5, Vol=,-t olr:l?oo= p.= (Tut 4% S.01) • ¢amd=~ Fdt ]lmk..~m I= ym' 7. V~m d4:lOOm II.L . Cub ]L'uk.4~ in).w' S. Yolvm, d'~OO= p.L (~.1~ 4% S.O.L) • ~ ¢uk ]l.'tib.evm ia year 9. Velum o( 440~ p.L • ~1 ~.tm~t[ Lm ~flmm dV,r lO,~m =rlO%m~l,am d'~4So=i=.=. ]lJmmm,,*dlUu== ,;,,. 3 U'I C~ (,.rl -,,,j ..,,j L~
Page 47: 0500045774
I'LI:L 19 V;:l I/:lZ ~A['CO FIH~CE DEPT. 0784 tt48389 P. 4/23 Secd, m I I.o) hr.Jqp'oud 1~1 15191 ~ UtJ4 1iN ~ IJP)"/ A~t ]rat y/rot 1kit 1vut lJ'lezt le/ut ptmm) )~ 339 110 332 334 33S 336 1.1 0.9 0.d 0.6 0..5 0.4 0.3 Dommb • ~ 2?3 272 Z'~ Z~ 3"/1 270 'loud K3.~ 83.0 1114 81.1 $1.1 80.| JO.4 I~NX'ZUl S4 %loud 1ti4 imlm 5t 40 4,1 64 Ill 17.0 i?.d 11.2 18.7 19.2 19.6 ' bdud~ ]Kulbom whi~ [J Ik:suod to Tt'Z~uz~ I~ 1~) X~ )ru~ra 1qms b ~e 4th hrpJz tuber.co mukK ia tluJ w0rid. 8rid majo ~ro. 2 m tm-um riper 2) supp.n ~ n~e~uJ ~o im ~;.u/v, ,~nn; ~w. z'~ is t muzt er 1.1) ~ Trmd, .ToudmRk~ • Teui mtkN ~nd impm't sh&e ot'nwksz vn']J mmbme to linny 8t z dwzeub8 rote O O O J~ I,/'1 ..,,j
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FEB. ]9 93 17:13 B^TCO FIN~CE OEl~'. 07.84 q48389 P. 5/23 . Znpo,u am ,c~ d dWmm u n~ ram,co u(,uiy .9~lmWOm k rime bend ~ u ~TZ ~ldP ~nd~ kmmo . x~n ~ po~m pm ~ oq.m~ dkmm~ 1,4) Top !1Domudalmpurud ]trends 19IT ~ ISIS In0 llnl Dora.tit (limp[,) )~ld Seven N 12 80 7| 69 64 S.O.~(%) 341 2s.! 2S.S 21.1 21.1 19.5 )4d Se~t l.i~ 43 40 31 3| ]S |1 S.O,M.('~) 13.7 13.2 12 ILL 10.l 10.l Swu S~m 91 29 II 241 2T $.0~.(%) 10.2 9.3 9 L| 1.3 LI ¢4i,Jtm' )~ 0 3 14 I? 23 27 $.0.)4.[%) 0 |.| 4.4 |.4 6,!) U C~k J41d 19 II II II 17 ]7 ,I,O.~.~) 0.3 97 9.t 1.~ S9 9.0 IImpomd 1,187 1118 ISL9 ~ 111t)1 Ullrl ('Jm~,w) S.o.~ ~) ~3.8 22~ 31.4 31.L 19.9 Iu tom )~md (~ur.~)~ 4 9 s s s S.Ol(%) L4.4 12.2 10.7 10.2 g.9 9.9 Pn.~lm~ 2 9 4 S S $ I.O.L(%) ?.| 7.$ "7.1 9 9.1 9.1 P~4o,-m 1411111:8 2, l l 4 4 4 S.O.L(~) 6.3 l,l 7.6 7.5 7.1 7.1 3 3 l 4 4 4 S.O.L(%) 9..5 I t.2 ?.1 7.2 6.1 u CD CD CD tn tn
Page 49: 0500045776
L.'~:B. 19 93 IT:IS BkT¢0 FIN~¢E 0Eft'. 0784 1148389 P. 6/23 l.s ) ~lql ./duw e~ ibm IamNk is IJNI? ~ ~IB INe H S.C. 3J$ 3~ 271 :~ :rJ3 31m Jlql I~L lOP[ J IS I~ MAT MWOT A~ds , Imq~ ,~dl|dkW nWadmm • Maw brmd rd~.e - PorUblio v bSu~ ~mds • H'mlw Ix~l m -~~~ - ~ ~mamd h' dm tdlh .ml~ I'..L ~or :Oppen,,~,~ 4~llm,~ dmrku/nllmm . P.oiZ N- IK~.. Fod~ • SSJ A~/gAk wt~ ~d~ • Xm lk kmi~,,~ :'rlkrmu -r..~ ~u • hapom v doma~,mds 0 0 ",,,t ".,.i cr',
Page 50: 0500045777
~E~, 19. 93 I?:L5 BATCO FIN~C£ D[~', 0784 ~48389 P, T/23 '1'~ k~, wm,1Mw k me/limn 0mnrm or ml~ us: • lmM'mk 2.1) llrwl Mix ~S l(am, llhdt K,L. ik~ • i mdm ~y 3.1.,') ~Ut~d ~ Opdmu ,1M XN r.~mu.. lima • idles • mlebuum :..v~ leveb m~ du IIm~ ruth mlll~ llidl~Jm kids Id ~hm 0 0 c~ U1
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r~. I~ ~ 11:11 ~^zCO FI~CE OEP~ 0784 ~48389 P. 8/23 TMs is wtmt the mmmt Co. Plsa i8 bued upon. The flmmchds ~dd, opdm m B)Wkhdrsw tbe/PS S.C. vuimm on s plnmd bed8 md rqdsm WMt'rm ~ vu.imsts. SE~ to be lmndnd with S$5 SpedM Ujhu to fbl~w wc, dn pmmt option is zvslumd ia xczion 3) Z.l~) mmar~ ilaquim~u A muemr, d ~ pmpsmau would rand to ~ Impbmmud to ewdum my Bmum brnd optiom br~wt mniq out ttn ~S K.L. txR (rumreh hu bern amldmd m tM, o~oa) .~ ~lp tm otmlmmlm~,mu~ ~ Jnl~ k oM~r m ~ rd~a ~ dlve~ ot comuamn ia hpm. Th, bnowin8 ~ would be mquk, d fbr dn Iwnch of ;P$ b£dd flwour H.L. md slu~. r~d qu,ntsdv, mm~ to dmanin, bmd visbirm/ • STM to test Imn~ p,ckss, nd provid, quwtiuuiv, dm of'brad pot,ndd (~, would dm indude the Speci,l IliUm vsri~, rammmmded hue of 4oo) • S Mild Fit,your • Test market evslusdon • Qusntitax~ 2.I.S) Source Of Mmsufscxur, Thl I01~ |III'~I IM'll~ IP~ op~ Kilo l~Idl tO k iFVldllltld ~II tlllqlll oP+ I ~ murca of' ~+ in ord~ m reduce th, Idlh co~ costs of' brmd, murced ou~de the ~ 2.2) M, nnlemat of' the Business Tbe options for the n~l~t of.the :rspm,s, Imsimm s,re u Mows • WldLa cominuinl to u** Sumimmo u our ql,at md H~m uth,~.w, woukl r,quk, ,dedicated SCAT mdns f.orco to m'vir., tlw bwinm. "rbm mm din,, opdo~ ~or dk~'t aw,qlm,,z or'm, busim,~ !) Appoint n'u mmW bm,xl ;,lnm The emimted con of.dds opdon would be : -Ofllm. Sh,sro orb & W of~m,. Atom U,O~ amm3mtion (bu,d oa ada me) - P*cksl,. Betwems/260k snd £400K to bese • ~ (Bued u IBM Imdpt fiSuru] :) .4~m~ m, mml~ ~I Sudm - The ,mima:ed cost of.thh option would b, 1,120k (This iacludns tntvel) 3). IJtiliJ~ T. Iv~/to ms, q, flu Imdmm float Tm. Tlb oi~ would mqulr, m, qq~ointmmt of, Ioc,l comulunt to luad~ tl~ d,y m d~ trees (Who would report to T.Ivey). whilz T. Ivey would pm~ w er~ mb mzl handle M| discussions with Sumitomo. This option has been conddered before but wu re],cted in liSbt of the work Io8d in TMwsn. • "/'be nstimsted cost of this option to include the sppointment of'We con~t 8rid tr, vel would be ilOOk C~ C~
Page 52: 0500045779
Pt~. IV. W It:iv ~^FCO FINANCE OE~T. 0784 q48389 P. 9/23 ' D)~m~mJ m ~d~ ~Jmm v~ k~ ~ & W Zf BA~T wm m ~ ~ ~, dm andm~ mp mm Im ~ q4~ a ddmml mm~mm m mmqp BA~ imnm ~WmZqi h,,,i ~z lx ix,m~ m n4j, m~ ~mM amr amn INdmmmm / ommd. ~, aadvidee vAdu d~ hpum u~ ~ k amdmnd dbmee mw~ efSN au.'ket. 8ectioo 3 3.0) Evaludoa of ]such Options &t) lassozudo : ~S K.I.. ~dam • ~dm~ omm~ puame ~ ml mmb KZ. poduadq s,~b - lahaa~ peuelp ofh Tradn~ wd m addJdei] mvmue hmdu land ,A~ dze ram5 ft~ 1"~ m Y'~O C A LI.~ imum ;- mail Wire wezbl smem #. Z.1'~, Into'ram ~ B.4,~ CDr lm~ d~ tm h Jm[ m dim m ~). • Oom-'~o m~l~ ~ tom ~kmo,im ~ m,w.mll Imzl imam . k,,Z,k~ e,, Zad,,,,,Z,= :$SS - Bull .po~ ~t 5wudt tw dn bmb mlbsd Irm~ b Sw l"v nd Duty flu nbo - c~luan o. ~t ome~m,~ pmmal b, ~ aimmd ~iSon 1~ ~ AT%, q~d in ~q~ .Wbi~,Je~ dram Sfl Inod~ - Ttu em IX~Pmidom ~~ nhmdd a$1xd to hpm mm~ .6 ,~ r.~,."~' ,~.~ '~ .y', 't f,,.~! O Q Q ",,I ,,D
Page 53: 0500045780
~bB, 19. 9~ II:~J DATe0 FI~E DEPT. 0784 q4838g P. t0123 -;,-N.~ ~u~S~~~~w x~k~,~.n mmdmn, mdn,m) -~ 9S -kkj W ~ ~ i~ kIem ~ Oro ~ d~rm~d), mi ~ ~ s~wludwv~ D~x~m . I"~ Smo om t~ Immb ml ous ~,mkl ~ • ~e 4mmr I'Wjo I Onlm aemu .Irk Imlm k tkim io ~) lr~ mm nmmmu 4"l~, d'dme mmul mdd~ Imnlam v) 'rhU m~ me~m k S4.1e~ d~ wal hpmn~ dlWm mlm cTZ'~ ~w miK mulb k dn, m,dlmi~ ~ mnn mmlmm Im I~d eovmp : (~'y d chu'bjom awr~ ul ~ ~S : %)~Uai~ S.IL ~ w~.~bI I~ mq.lmd in mma~ w ~I?~,r~ *I~o ImplmIm~daa~ ~ dw c~ :l.~) XNUm / Mk"d |;rod ki ~i~~~~~o~~ 0 I0 0 0 0
Page 54: 0500045781
r~.. I~ ~ II:;~ BkTCO F]~C[ OLP'T. 0784 ~48389 P. 11,/23 'L~ M~n ~ul~ ~dnl~ nad~a~'~td I~ na~ m o m~mm u U ~n pu~,ma~ . A'r's..T.V. tJ~m~/Ou~mr. • Zamlm ~'.X. mVq Imams ~L~ IS:~ TL~SWAFSmOm~L~ Tim Ilau~d m,i~ hm I~1 m Im mJa m b Im~ CI~ mll~, dm a ml~rimm ~'~ mm'~. Tim ,mm~ ,dot~ ka ~mm m W~ a ~mm~ mmlmlm ~mmra 10 ~mrlm~. Z~ mmF~ Im 1ram m~ m im~lmm aM ~ jm~llmou a ~in wq~ lxmum d'~ ~FU~ ~'~1~ dm ~BaI~. Th, umm~m~ ~ tu~m bm u~ m Im~ O~ e.oa lm'm~ m mu?mzl Imtm, :Vm~ To ~em, kl~ ~J immm,~eoo VM~ m.'o~pnk.~ • rim ~., ~'mkmm ~mmml, Im~madm V~,~i~ mimlmd m a m~ d YI0000 per mum mad ( tl~ ~ ~mt TJLL lad to !~ f~ ~ LiShu. lldlcW p~y ml~, YS~0 ~ m~b~ ~mm~t v~ jm, m ml 0m~) bus tot ~ p~pos0 ~ m~s. • ~S ~mkl ~ m~.a ~ Imo ~be am~ udva~ d'~lCs ud On em b bu~i . S|J wmald in~9~ be m~,.a N lmO '.M mine maker ~'~ldC~ mdm, m -TI~ dmz ~Cs ~b0 ss~dm m mppm s mira m d~ ~bs 0 o o
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• ~ kern mmat dm~,,, bmm h. dN mmlm. dV)d~ ot.M,~ ~mld ko nqulnd t~ uqmn,dum,-h,, ~ 3 ~ :Sd,am 1"ram m.~l mmm mmmt w~m t~ pIm mxt m b..4 m mF.qmdm am mmiW bdnjtmal m dll ~ W'S emm Itspa~n~qp • 06m,, ~ B)Coa l~,o~Xo :Dixnl.m~ ~p m 2 ~ ~1o 2210 1 )~loa ))lJ ))15 • s~U~ll corn Omm e.~) sso ZSo • .ATL 15oo 12OOO JTL ~00 IS00 • 1",,,,,mdlq mu m bed u kima Cost d2"~CO V),4C8 tuatxd f~am~&W • ll,flOk Cruz o~ t~oo indq~daZ aim: maazm- m Toed ,. ,D.~,lm ¢') tO Yea' F, sm:t., Bmkdm~ ~mdlz t om~L~mt~, Sssm~ ~ ba~tm,ad wi ova~mr~t . tt 0 0 c~
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r. 13/23 D) TmJd~ $~ °o The ],b,mi~ lmskdo~ klml~ ~., ~: Je$ . ]~ limb.ermine4. VdmedL1~ lU~/a 14ffit $.G1) . C~ |mb, v~ i)~t S. vmm otL1Ma F-- (k t.S'~ ~LOJ.) sss Im~ . h~ tln,dr~,vm b ]mr S. Vd,m ~ |,lam F.s. (~ 2"A &O.T.) . C~,ll.-mk.wm ',, ]mr 6. Y~ ~' lIMm lu. (P.~ :LPA .tO.L) -XMI LatenMdlnse (d'~def tO)'un o(~PA Sed~on 4 4,0) ]b.:om~d~doo The MIwlo~ Is Ixm Ixml ~o~ dmk ~ ml~ ml ~ dx I~l~lx4q~ ~u~L ~m~l I~ w,,,~m ~ xn~ox~l jxqlmx~ e(n~E~ w kl~ ~ Ix~d C~ C~ 0 ~r~
Page 57: 0500045784
IllJl]~ll) IJllII~Oll DJ~'ll[ s,qar~ AI,I. ~ J~UNUll IAJ~UlIIIY lls4 I "~ ~Ak'r nJCIl~ l£~JdL ¢~IIIIICY m ac~ NIT I~ lPJCl-- rle~r ¢~IT4~L~_I I~i)Ii lllil l~Jlo I ToIrAI. V~IWA M.E I~'C~IZlII~II I'I w, Iu1r AI. l]a(lll l~t~llrlmlulll~N @ aw @ oT~ii |Ill ll.ll IIJH II~ II.II II,II IIII ll.lO l~i llJ~ ~IH 11,171 ll~il II~II )*~ll II.INI ll, a~ I~i)I II/ II~I~ (111o7¢i) II1.1]~ 17.nl~ ~ ~ II.iI ll.'TJI.I ~I, II, I ~11.1~ II,III I~ ~,,u~.~" ".'~'.~-r |,II I~II I~ I~I LIlT l.ll~ Ill I?I Ill I 111 II III lU III 11-I II II II (I,III 1171) pill tI~1 I11 i~II l,lll I,Iii l,ll~ ~,.~ m.~,~ ~*~,,~ ~.~m '~* ~m ~ ~ ~!,*~ ~ D,m ' I _ IlI.IQ ~=l'll~.~l"~' ~ p.l~l~__ IIII.21~ .. 14I.lll I~4..II~i~II..II'~ ll.l II._I~I'. J r-,. 0 c'rl :.-i .4li,,. Iz L IzO00 i
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lULrlIICJ~" ~ e YnlnmmN[i iw/lr Vl~61naw,~13 II~l)Iswt'. .Wml' ,o"m Jlql #ut~i~ 15DIa~mIL. m ~ J~mD ]J IIL~4 't~0,a$ ~6 tff..~P YIr.Ag, qJ ~lg.~t]lllP W,,IdltAe ~[ldJLJJ N j.uJ LAD N I.'Jll IJet 4.llu ~ t4N gl~ll ~n~ pe0 gm~ ~ k~t L~cn, a.mqu o$(4 t')sl. I Jl,j ,~mm I]D, EO 0..3~IB ILII~00,11 1~8 |1~ N.qL~II~ IqP,,SW~ __1 ~il ~ I~m J~m ~m Lm ~ J.JU &el 4|o 3d~ 3i NO ~ ~ ~ ~iJ ~ ~JC (- C "-S 3; ~8 ~'v ~X S LSI;'O00S
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I ~UPAM J~&N JA,~dUAIlf I~ I IAIIPA/I I~D IKr'jkUl_ ~ II YFJUl ~AIU~ ~AL ~Jl~cy ~ ll+an msr41j+ r.lUO~ a~'lllllUrl]t~414ZlJ.m TUT,ILI.OI~4S ~ II (Or~ NET~Tm Im C0n~mI WMI FOB 41 IPlX 141111E lXYlrAL 3~m )Jm ibm +Jw ~ )~ I~M lJm +Jm 17.14 It.l~ It,~4 II,1~ 1'/./4 17.~PI I?.N 11.14 I/,'14 17,74 Ill 1,13 llI lJI l I I • II I.II I U I.II I II lom LeO 1.m IM 3LI3 311 |m 3~ |~ tam I,~ I.~ I.~ I.N I.~ 1.44 I.~ 1.44 I,~ Om III ~ ~ Im O~ ~U I.m ~I J.40 ).+~ J.49 1.49 141 ~ 1.49 )-40 |.41~ 1.4P KII 14.I~ H.ll MJI ~U KII 14.11 14.1~ ~J| ~ 1,JI3~ Ulq I1+,,~10II.,IQ4 19.?'/'JU M,I~ l,J..,llI M,,3141 M..llO l~ I~ I~ I~ l,~ Ias I~ lJO I~ Ia~ l~'u*;.-~,~ m,,~ u3, ?.]41 n+Xl II,lel 1+.~1 IltJI4e ~Jq]) lll.llllt ~ O.14~J I~I t.~ ,5 81..~O 11.14+- ll~ '~* "I W~ aIll I l,I l.l ~ )6 I1 4O tit I~ )JSl 1.151 411 ~N 411 I~ I.~ ILIlel~ 14 ~l ~ l l m l ~ I----~---- 12 45t 4 ) I T L-r3 c~ ~3 CX) C~ 0 -v-) C~ Fr2 I'v'l CO 9t LSI O00S
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M m~i~uR~m InlVm UUI /, lll~III 1flF.~'/ ~]ia4 WI.6.1t! vidn4 'Vll61I'! ItlF..MllI WEIdltW.AltllIIJllI ISIF1 I~I~0IC fl IIIClAIIlI \~ I1P~q ~l~.lr4 11.114 11.~11 II.'m 8W.II |T,1N I1 I4 ItN U,m E]FIIS~I" II Oll~ll IKN40e I.~lIl'IiI~ : ,' ...... ~ L liJ4..iI ..IP~liilIl G'.'I~ IiJllI' -n4ii~.__K.ui ii.~l iqlj~aJllJ.ll - U./,.JO "In.dural illmllqixlr iml~qU~ltll, IdIIr I ~| ~ I~ I~ eo~ I~ | ~ I~ )~ I I I i I " ~ II |~ II sin, I m m. el IIi m iI 11 l~I ~d~ ~ I~ ~ ~ ll~ ~ ~ IV~ "-r t"l" C~ OC C ,-'-2 C~ L"v'3 .-) C~ CO LSLS#O00S
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ILI IJLM4~ Ul kq~UQtr I.&~P("P t),ffl~ I&.lUOl InmI, kJdl,s]e lUt~i,Iy Im JAW~ r~ - D~ ,. f NI~ DiVQIC'Z I'l~a~ I COgT~'IU-~ gin VAII~mLIi 1~1A L ga~40MITIIInNB III mk~l i eJ4~:i:F IDOIBll[[! lUL * 91~i£e, 118" I~11111/1~ n~cTxaN' IIQnrImE I ( II wWa~ lg~m~ Cjd~.ti m l'~lMIlll I~ai m1411L~ gJN~ ill lil~fl i~llit dLM O~l III 0)111 llll IUi I~11 41.III l .-I .!.~ c~ o t~ ,t- o (3t (.~ 00LSI~O000
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ml~a~ mmlOL JdaJDOn" #AII~ ~ faswa~Ir iI~ a~v 5mq4D iR inlc ~ tbLX,~ IuurY I~U~I Td.Anl ~! VISAS) ~4 ~P "al~adls 'wt,uy ~e ~ ~mvnnx~u lelCTm~ ~lr.~ ,,.,,.rim/ c4drlr,.,~ Jll~'V c,~s~ rmK |CAAll fEOW iui, llo~r i~olam IMiUiZ* ~lA0np I~d" b~m41UlIi ialo~T. &I~mJUHOmCN. Sd.r ~,unn 'll~'~dJUn~l~" (.~ f.~ liD C "-lr C L"v" .,'v" C J~ c)O
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I'IN...ll~ nlRAJIII IiquuucJk, lr enu~xT ~ cwr,,ak0 IJt, IPJUal R'II 1£. |d~AI4 I~I~/UIW 111'14 IUILI'~Li IPlUIIJ~SJl - Ill ~*l[dUII I~lglV~m2 ~mJnbmlg uBNarL~r I1~ o | | L~m~Cq~ tm~ $,ml L~ StaR, $mtl, t,lItl, l,II ~ l, mal, a~M.1gINl~Imh, LOCAL cuu~ IL(D II IL'T IIII~qHX I~L'I IPII~C~E~m, IJI M V ~WlNn~ cu~ammm.Lm OIUU4~IIT~ iiu/iKmr IIUDU,41/TIII~ t m ~Aulw I~,~! "~/JULB!11JuI) WAam4 ,ntwm,.n Ir41~l,~ I"uAI ¥1MIIIIMLMg IlIL~D 1NddLI.g| .... lots twQ,+ .... +tM, Into+ zwn oama!.. pO, wm ~ am ~ ~ • • 41 • • • Ii 41 D eve.J, ~p+u4 • IJ.N U N Id g~ J,U~ ),L! glul qLIj Wm ME Ihm.UI ~ .n ]b~ ills | ,,I q~ ....4~ • 4 4 4 ~,. i 4 4 nn~r ~L~ nu~ ~ Wmunc]e~ ~r ,.a I Jmp i~IIi~ luul l I I.I'II It, mql I~I ~ lUg,miller (salll",j C.l.nn"rlLI. ~ T~ WNI ,-..,m~t~ t..l~,l ll.4.g,n ~ ~ _ w~4~t I.Ns ~1.4~11 '" L~ ~P+,qps '"l..q~s !,+41 ~m0 L4mal 06Z O00 C D,:. c= .I::,.
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~ I,C, JAIP~IN J~AJIY Z~ IA,ill~ Ay, anln.a~u~ I ~ m IIII~RGI I,I~ rapt" O~/IDUI IEA I~ NI~/~mlZB) I~I14C IPIDI, II~DLUm IPDLST 71ZAJI3 ZU)'~,U/,JJ ~ nOD C~LIJ TAX l~P~ llZOlqnnAL lJ ~ 14~,~,kliO [ ~lllJ i.ld6 fill • ¥~UlO Yr.AII VI,AiI VEAl) ~4 YP.41nts YIE.~IL6 ~A.Itl W.AI8 YlSA]ItI~ Vl~tll YEAItt iil IJl q} e e o o • o • 4J i|,14 IJI.H 40l Ill I~li &tll 410 4 |CAS]4 p,,,m) 1.7-,~ ~! YI~NOINO I~W/I" 14~AA4]~FIL O'rUUII Ym c~ C~ O C C ='i L't c h. r~ 16L t/O00
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18-Feb-t3 Vo~Lu~t4t G'ZV C].F ll~P~La/Mer~og -~am~ILaz~ Net Net Contrn P~od~an Cont~n to Ad~ln 3APJ~N DaN 1952 1993 1994 1995 43508 418.0 421.0 125. (I 489"7.8 5490.9 5530.6 5583.2 .o .0 .0 .o .0 50.3 53.Q 56.) 48'~?o I 5440.B 5477.6 S$3G.I) 2435.3 2612.? 272),9 ]1147.1 2462.5 "J82B. 1 27S3, 6 2679.t 1372o7 1537.4 151J2.7 14~30.3 o0 .0 .o .o 1049.9 1290.7 1170.9 1049.6 29Z.~ ~81.) 711.5 740.0 397.7 605.4 455.4 301.6 °. 1996 ]997 432.0 439.0 567S.1 57b-/.1 • 0 .O 450,0 64.0 5£115. L 5703 .O ~I)9S, 3 3.1Sl1.8 261S.I 2544.2 ILGTgo9 17~9.8 .4) .O 9)4.9 816.4 "#I14.2 l~]l:'jl. 7 150.7 --lS,3 i ++S ,iJ "I
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PF.D. ~ :lo II.~Iv .P31.1[ I~AMI~ 911~PAP.X ]1 ll.PllS..ID 1~1:41,,I, IDG~2.5"~K: PitOn ~l~JC'rU]u[ C(¢.v.~GB ]~T]S ~'Y;G PJIT. CoNI, TAX ]L4~O NS'r CONm LoC.SX¢. ii. 31,1~I. RB'TAIL PRICS (JPV~ I CO~rS~T~OH TAX OH HAllO D4]'OAT ¢~ I~lU~CR ¢ONSUMF'flON TAX O~ D,IPO]~T NATiOnAL TAX ~ATt.IICJi PP.lCS NOTIONAL {~{{4~{T NO'~NAL ~Ol ll.£tS IX.,4c:z sc wlm'J I~ ~],IL 1510 I~ IlO t~.O0'l IO.OOS 10.~51 ].ms 3.ms L~s ~ms L~os 3.0056 ~,oos 3,oos 3.oos 22o 22o 25o ll,O00 ll,OCO I1L~1 1,100 I,I¢0 ,3,~ 3,1~IS 3,1~I IOl lOl 1 II 1.14~ ft.ldt3 7,1dl IO 1o 13 9 | 12 2"/2 2"72 3"JU 3,12~ 3,1~ LIml ~.,I~6 ?..,l'Je 3.332 1.4 ,1.5 0 0 0
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Page 68: 0500045795
ADGPI44/fb ISth March 1993 ~rU Hater }~nallins D/rector - Tobacco B.A.T. Industries Plc Windsor House BRITISH-AMEKICAN TOBACCO COMPANY LIMITED P.N.K Once again, I would like to *pololl~ for what probably was • misladin8 discussion you were exposed to in Korea and I tldnk it is imporumt to avoid the risk of your beinS c~ by inaccurate facts and filp~res. BATUI~ was established in Korea at the besinnia$ of 1990, and with hindsight, with the wrong packaging and blend. This was identified ,round mid 1990 and correcdve steps were put in morion with the launch of two B & H Special Mild versions. KS and lO0"s HI. - in January 1991 u blended mild products. The management of BATCo Trademm~ was lumded over m B & W soon after the end of the first qmtr~ in 1992, as a result of a negotiated swap of re.spons~ilid~ involving Korean and Ta/wan markets. 1991 is therefore the most reprea~mdve year for the following figures: KOREA 1991 •ilSF Bil lb'T IW'S BIISM |m~M 10G'S TOT,~L. 8.0 22.7 46.9 83.8 161.4 Total Mereb Snend (£900'sl S~d [~ 26T.3 395.7 2.6 101.2 42.8 330.5 73.9 372.7 386.6 1200.1 ]Dealer PnJmo P~ Memh (£000'sl 72.3 72.3 109.8 109.8 364.2 82.88"0 4.Y;*" ** Includes Dealer Promotions. RIGO O;;t¢! MILLli*.~.g K.~owt! Gtst~ SvAml5 TWI8 tOY F,x 07,44 4$$ 000 Ttttx 17)8415 II.~I"TO0 G TILIPXO.~¢ dTg4 460 400 A ~*lvllln Ot rl*l ll4T |*.otsY|tl[¢ GILut. P |~,q.o41i%qL,v|l~ I% L**~*i~*t*~ -~o 74'474 f~rl Q Q O ~d ~O
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Unfortunately, I did not lmve the above information with me in Seoul and was dlmld'ore unable to dispute the US ~5/mili© fiKm~ thrown on the ruble. sards. ~: P N Adams - Mlilbank 0 0 C~ ~r~ ,,0
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Note to : BENSON & WEDG~ IN SOUTR KOREA ,4~ J/;{req V~s,'w" [ D As requested, I have prepared a summary of my ~mdenmuJiag of the situation. 1. During 1990 and 1991 when ]hkH was looked a/~ by ILA.TUKZ, volumes and support levels were as follows: 1990 1991 . Shipment Volume (runs) 81.0 161.5 Support (£'000) 2.117.1 2,006.4 In May 1992, BATUKE's business in Korea was mmsfen'ed to B&W. The es~mated volume for 1992 is 43 nan. BA'rUI~ had shipped 32::m up rmtil May 1992. The reason for this may be:- & b, Problems around the ~nffer from the BATUI~ importer to the BJl:W importer. Overstocking of the trade due to • significant trade promotion which was withdrawn at the time of the management changeover. . As a rcgflt of the fall in volume, B&W have reduced the 1992 support budget. The sum is not known. However, BATUY~ have spent £1.Tmn on media and merchandising support of which £0.3ma was media, £0.45mn vending and £0.95mn promotion. Total in-market stock is $3.9 am. valued at £577,000 (at 1429 won/£. At the current rate of 1200 won/£ the value would be £687,000). Of this 13.$ am. was manufLeU=ed in February and may still be usable. A further 35.$ ran. stock is held in the Tabeknatie wazehouse in Antwerp. This is February, March and April manufacture and, barfing 0.$ can. February manufacture which had • manufacuak$ fault was usable but 4 ran. B&.H International had • weak tobacco aroma and must be considered suspect. The total value oftbe Tabel~,_tie stock is £327,000. The total stock value is thus £1,014,000 of which £400,000 has been provided for. [[ In my opinion, there is suflScient doubt over the usability of the stock and the II level of ofP, ake to warrant increasing the provision to the full amount. t~ O C3 CD ~D
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. 5. . Johm~ ~'i~ f~'~s d~ ~W are ~bie for the stock in Korea. No doubt ~ScW would have a c~He~mt view, ~¢QL~ly w the ~ stock was ~valmt m 4 months dm-~on on 1991 sales voices. B&W have budgeted s volume of 101 m~. for 1993 with • mppm~ budget of USSSg4,000. This is ¢umly equal to the conm'bmion as that value i.e. thaz is no /nvmunent in the bumd. However, B&W have asked BATCo. (13. Sbspkb's of 29/9/92 to lohan Prim) for addi~onal funds for support. The ~ is for • rata/slxnd s~mlar co Dunhsll and Can/~, curacy $2 mn. per roman, lohan bas not responded m this request. It has always bern ondegstm~ that B&W should trea: this brand u dzeir o~ BATU]~ gm no nqppogt for B&W brands in Taiwza for example. BATUg~ did waive its 20% nml~ for • pegiod of one year, to bc reviewed st Company Plan time in 1993. B&W have subsequently taken on, as • dism'mnor, D.S. ~ the focmer BA~ agent who mu giva~ a significant ~ paymmt for the mmismion of his dism'bu~on conwact. No recovery of the ~ paym~t was made.. There is a deposk made for the lease of the office of ~310,000. There is t possibility that the landlord m/ght not repay the deposk. The probability is not considered high and therefore no provision has been made. I am sure that Tony Pcrcin can g~ve you the detail behind this brief sunmmry which I hope you will find useful. P,/vG~/110 25 January 1993 co: A.D.O. P~n'ein D.S. Jones CD CD CD ,,O O~
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66Z£17000~
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P.N.A. ~'*~ 24 FER 1993 BRITISH-AMERICAN TOBACCO COMPANY LIMITED TO: CC: Mr J Payue, Mr R Cooper Mr N Davis, Mr P Adams Mr RK Beck ( FROM: DATE: SUBJECT: P M Green 22 February 1993 KOREAN TOBACCO & GINSING DIIET PLANT (i. It now appears that KT & G will def'mitety be purchasing a DIET plant later this year. To substantiate this view, please find attached a cutting from The Korean Herald, dated 15 February, which was kindly sent to Technical Services by B&W Korea for our ifformation. Distillers and W H Dickinson have recently been out to Korea for discussions with companies on the supply of cmtain items locally. It appears that KT & G will be writing their tender document based on Distiller~ SlmCifications and this will put our consortium, BAT, DistilMrs, WH Dickinson, in a strong position to win tim contract. A nund>cr of points hav¢ been raised by Brian Horwood of Distillers and will nce.d to Ix: discusseck- Io Who will sign the contract betwctn KT & G and our consortium? flit is BAT then it wgU be necessary for BAT to nominate Samh~ as their official agent for the project and that will have to be done before ttm tender is published. Previous thinking on this has boca that Distillers, as a major supplier of the equipment, would Ix: the official agent and therefore sign any agl~mcnL 2. The strategy of the pricing has also bean raised as the tender will be in two parts - technical and comammiaL Oistilkrs' cottcra is that if they pass the technical part the commercial decision will Ix: taken on the lowest price. Ifthis is the case DistilIers f~l that tl~ will not be the lowest cost, though whether Airco can actually match tim cost when quoting on the same basis, Le. two impregnators, is sormthing that will have to Ix: considered. This point will have to b¢ discussed as if there is only one company who actuary meets tim tecimical criteria, pricing, though important, may not have such a high priority. 0 C) 0 u~ 0 0 REGENTS PARK ROAD MILLBROOK SOUTHAMPTON 509 7FS
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I would be most grateful if you could let mz have your views on the above issues so that we can arrive at the best strategy for d~ling with KT & ~. PMG/pad/Feb/078 ... O CD O c~ O • L
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f • - ~ Ikm~blm .~m~mkzlk~ mt ~zm~.-: • Z~O dSmd m,l ~ "~ ~7~, m ~ ~ zm~mz/ . .; "h ~m ~-~, Zmms v~wd~~ ~LM mmdmom ~ "" • ...bw~_ _.~m~. whml, mml~ dm~m wo~ . • . .: .- .... . . -. .... o. ~" .~.~ "- .~" 4/ . o 0 0 co 0
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o C) C) 0 ~n 0
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NOTES ON VISIT TO KOREAN TOBACCO & GINSENG CORPORATION 21/22 OCTOBER 1992 P M GREEN - TECHNICAL SERVICES Circulation: Mr N D'av~s Mr P Adams Mr J P H D Payne Mr R K Beck C~ 0 0 O0 0
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KT & G CORPORATION KT & G is a state monopoly with 95% of the local 85 - 90 billion cigarette/annum market. Imports are restricted by heavy taxation. The local market is predominantiy Virginia cigarettes with either double or triple charcoal filters. A Budey toaster has been purchased (" 1991) and blended products are now becoming available. New brands being launched in 1993 axe King Size and 100ram products at 7rag and 1 ling levels. KT & G is scheduled to be privatised in 1995 with large local companies (Hyundai, Da~woo, etc.) considered to be lilmly purchaseq's. It is planned that after pdvafisafion ~e cigarette prices will ~ be Government controlled. In pr~ar~on for pfivatisation the KT & G Re3earch Institute is moving from the control of the Scienc~ and Technical Department to the control of th~ Finance Dcparanent, who already control KT & G. KT & G Research Institute ar~ currently trying to find new customers outside KT & G as there a~ fears that if KT & (3 is pfivatised they would be disbanded. Relations with North Korea are still frozen though there is a view in Korea that on~ Kim H-Sung passes away the country will rapidly move away from its Communist principles. However, the threat of invasion by the North is still a concam and civil training, in case of an invasion, is still carried out on the 15th of each month. KT & G have apparently made contacts with the Chinese and there is optimism that as the region opens up relations between neighbouring countries can be expanded. BACKGROUND KT & G currently have GI3C plants located at each factory to produce expanded tobacco. Due to the pressures against using Freon, KT & G are seeking to rephim their existing plants. In the absenc~ of a mon~ environmentally friendly gas for us¢ in the G13C process, KT & G have moved towards DIET technology. KT & G were first approached by Airco and Philip Morris, both visiting separately and apparently operating almost independently. KT & G's initial idea was to have a large cantra15000 lb./hr, plant with DIET being then transported to the factories throughout the country. BAT were contacted in March 1992 by Timcorp and Samhee Trading, agents based in USA and Korea respectively, with regard to supplying a DIET plant to KT & G. As KT & G is a Government body, dealings with them have to be carried out through agents. Initial requests by KT & G to BAT for a total technology transfer agreement to enable them to manufactur~ DIET plants locally were met with a polite refusal. Following this a visit by KT & G to view Malaysia DIET facility was requested and subsequently approved. A positive visit led to KT & G reviewing their proposals with the new idea of having a number (up to 5 plants) of smaller DIET plants 1250 lbs/hr, located at different factories. Proposals were requested and sent to KT & G Qfl 0 0 0 LJI (Do 0 2
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D for one 1250 lb./hr plant for a total supply plant. On receipt of the proposal a visit was requested to discuss the possibility of constructing certain items locally BAT's delegation to Korea consisted of: P M Green - Technical Services J P H D Payne - Staines B Horwood - Distillers B Caxtwright - W H Dickinson DISCUSSIONS The discussions were held at Taejon where KT & G's headquarters are located. From the discussions it was apparent that KT & G would like, if possible, to build a plant of their own with technical assistance. Airco have apparently refused to even consider any local build and their stance and that of Philip Morris has not been well received by KT & G. To reduce the overaU cost and give some KT & G some locat works, a brief outline of what could be purchased by KT & G was given. This outline is to be formalised in a new tender document for KT & G's consideration. None of the key items or their manufacturing details wilt be given to KT & G for local supply. ICY & G questioned the necessity of a recovery system as C02 is eurrentIy a low cost gas in Korea. BAT's position on the need for a recovery system was given in that it is a technical requirement of the plant and needed for environmental, reasons. KT & G have to discuss with the Government the basis of any proposed contract. Current legislation requires that any contract is awarded on a tender basis. Often the tender specification is written in such a way that only one company can quote and the contract moves to a negotiation basis. To tender for the contract an official agent is required and Samhee, currently acting unofficially with BAT/Distillers/Dickinson, will be submitting the official registration documentation for consideration. As Distillers are the main supplier the question of who registers with Samhee and the legal position need to be investigated. The patent and legal situation with re~ard to supplying a plant to Korea has already been investigated. KT & G and Distillers have been informed of the patent position and their legal obligations, as advised by Legal Department, Millbank. BENEFITS TO BAT. Other than a straight commercial benefit (5 - 7% of_- £5million) there are apparently no other straightforward quantifiable benefits in supplying DIET plants. There are, however, unquantifiable benefits in that BAT could be view~ in a positive light if Korea opens up. (Philip Morris and Airco are currently viewed in a negative tight following their response and contacts.) We have been advised that linking increased imports to any agreement is not recommended. It has, however, 0 0 0 4~ 0
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been Imown in va.dous other countries in the region for technological assistance to have a positive impact on sales. B 8~ W International have an office in Seoul and they have been advised of all the development+ and came to the meeting at KT & G, PMG~ Technical Services. pmO/p,dm~s 27 October 1992 (.n C~ C~ U~ CO 0
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~09£~000~
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D "~9. ,,~w{cu.o.~ P.N.A. j,.. t~ VISIT NOTES - MYANMAR P C O'Keeffe - I0th-12th November 1993 GENERAL ~4.o~ Distribution of 555, Ben.son & Hedges and Lucky Strike was good in both ~ ~..~Jo,,-- the retail and the wholesale trade, stock was fresh of August/September .~. 1993 production. Available in the centre of Yangon on the transit market .)f~t~ ^-12 were B&H Lights (new design) and 555 Lights and 100s (new design). In . ._l,k.,,.~~'" central Yangon retail audit shows LS - 38% SOM, 555 - 15% SOM and Marlboro - 7% SOM. In Mandalay BHSF is estimated to have 10% S.O.M. P.M. have not started any activity so far although a merchandising team has been recruited, and its supervisor trained in Malaysia. Price: 555 - ACTION POINTS Product: - The launch of 555 Lights offers a significant opportunity to widen, and make younger the franchise of the brand launch planned for 1994. Action: L de W - N/A. Communications: All communications will seek to have a "Community Benefit" built in e.g. allowing the Council to use a percentage of our outdoor sites for cozranunity messages, Lucky Strike Bus shelters. TV......2 BSB Indo-China/BATCo will review the spend plalmed for TV in 1994, to ensure that it is superior to Marlboro when they enter. The new TV/Rally fihns will ensure wear-out is not a problem. Action: L de W/PG Lr7 O ¢:z) o CO 0 I
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Sponsorship: The sponsorship of Golf in December for 555 is the first activity of this kind in Myarunar. The associated "Beauty Queens" will ensure appeal to the younger male audience. Outdoor: The change to MIVlT Technology for outdoor will mean 555 is significantly higher quality than any other FMCG product in the market. Future outdoor developments will try to avoid being rectangular and break out the Planet symbol. Action: L de W L de W will explore further new media opportunities i.e. Clocks in public places, buses, neons, street maps etc. PO'K to send photos/videos. We should seek to make each key media brand specific. Action: PO'K Cigarette Dispensers: Now that the market will have single management we can abandon the individual Company acrylic counter dispensers for 555 and LS, with one of each placed in most stores, and throu~ Graham Shackell develop a unique shaped dispenser for 555 and Lucky which will incorporate all own (BATCo/BWIT) and competition product. Only one such dispenser will be placed in each store with the brand choice dependent on the retail classification. Action: L de W Sales Promotions: IN 1994 initiatives will be developed to begin trade and consumer sales promotions, probably linked to the launch of 555 Lights. Action: L de W t:D o o m CD
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P.O.S.: Various generations of 555 merchandising/P.O.S, are in the market. These need to be replaeed urgently when new "Planet" materials arrive. Greater use of imagery, and not just logo will be included - higher quality Acrylic/Vacuum formed material is needed. The "Shop Kit" branding approach developed by O. Shackell is fully endorsed. The storage of P.O.S./Merchandising items in market to be drawn off as required should be implemented a.s.a.p. Action: L de W/PG PO'K will provide photos of large bar lighters for Tea Shops. Action: PO'K Distribution: The retail census is underway. Due to the very large number of shops with very small cigarette volume, and the limited number of outlet types, locally the retail classification will be more sub-divided than the global standard, but be capable of being reported as per the global classifications. Action: L de W BENSON & HEDGES - ACTION POINTS Product: - The role and potential of B&H will be only in Mandalay and the north of Myamnar where the brand has a 10% S.O.M. Sponsorship; - The developmem of "Golden Tones" is on track 0 0 0 oJ
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LUCKY STRIKE - ACTION POINTS Product: There is a need to swiftly introduce Lucky Strike Lights to pre-empt Marlboro being perceived as an ilmovation. Action: PO'K/L de W Price: Following the significatat increase in price earlier in the year taking LS for 45 Kyats to 60K, the brand has shown remarkable resistance, and is on a growth trend again. Once annualised volumes again reach • 700 real aJmualised file CI2: price wilt be further increased, and so on consistently until parity with Marlboro at 95K is achieved, always seeking to maintain vohune at around 700 ran. Action: L de W Communications: TV_._~: BATCo will review BWIT TV plans of 3 spots per ni~lt for every. day of the year, this may well be excessive. Action: PG/L de W TLSS will be exploited more via TV to reduce the "boredorn/wear- out factor" given such heavy use of TVCs. Action: PG/L de W Otitdoor: LS will also transfer to MMT teclmology, mad seek to break the biker out of the rectangular shape. Action: PG/L de W Sponsorship: Luc de Waegh will seek to develop local "Motorbike" related spo[~sorship activities. Action: L de W O o c9 P,O
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Dispensers: A unique shaped dispenser will be developed for LS as for 555. Action: GS/L de W New Media: As for 555. Distribution: As U.I.L. open new offices around Myanmar, Lucky Strike will be file drive brand in distribution terms. VICEROY - ACTION POINTS The brand has been recently introduced in the market and has low consumer awareness, poor distribution, and has not communicated the price element of its offer. Luc de WaeglffU.I.L. will develop a Brand Plan to overcome these weaknesses with distribution focusing on New Town/Secondary Urban areas. Action: L de W TRAINING U.I.L. is investing quickly and significantly in its organization, but what we have is basically raw talent. In the short term, Minh Tut lacks knowledge of basic Merchandising Principles and Practises. It is proposed PO'K seeks assistance from MTC or BAT HK for an experienced Merchandising Manager to go to Myam-nar for 2 weeks to work with Minh Tut. Action: PO'K o 0 o co J i
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Luc de Waegh will produce individual training plans for Min Zo and Min Tut, which will involve overseas visits to BATCo Operating Companies, as all their experience is currently purely national. Action: L de W DISTRIBUTOR M ANAGEMENT Luc de Waegh will calculate break-even volume for the current U.K. proposed smtcture. Action: L de W 19.11.93 Distribution: J Rembiszewski P N Adams I G Hacking S M Osborne H Niedermann F W C Combe L de Waegh P Godfrey G Shackell PCOK/378/fb £,,,-I 0 o o {3o I I I i I
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f c J1 C~ c~ 4~ ~j7 ~w~o
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((,,..: OPERATIONAL ISSUES ,,.Outstanding Issues (TITLE, TAX. LEGAL & WAREHOUSE AVAILABILITY) resolved =.Warehouse Running Costs agreed =.Capital Expenditure maximum requirement and financing costs agreed P.Secudly Review completed and recommendations accepted ~.Modus Operandi Drafted, Appropriale Tax & Internal audit recommendalion to be incorporated ill final procedures SUBIC BAY PROJECT UPDATE 30 March 1994 OPERATIONAL ISSUES ~ (Continued) " SBMA very bullish abo~=t SUBIC prospects Require IDS to sign lease agreement ASAP Detay may' result in offer w=thdrawal IDS w41 only sign with approp[lale commilmenl !rom B AT ~, Refurbishment can start only alter lease m signed •.Warehouse refurbishment completion targel end June
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o 0 0 oo
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+ ..... BRITISH-AMERIC&N TOBACCO COMP.A.~'Y LIMITED TO: P N Adams FROM: A D G Penin DAT~: 7 January 1994 SUBJECT: Philippines P.N.A. ..o .. " .. ~,: 7001 Please find ~rached, as agreed, the report on the Philippines marke: and r.-commendul action prepared by Nell Lovet~. A D G Per~2 • ° t,~l• .-'.~:~ , ~-'~" . ,.~,~- ~,- ~ ..,.~- ~,~, ,,'-, ~ ..,~ STAL~*[S ,~lI1)DL[SF2( T~'i$ IDY C~ C~ (.,"1 Co BATCO CONI:ID[NTIAL - CAT[GORY I: .~II.'~.~[$OTA TOBACCO LITIGATION. RA'lr'l~_n d~,,-,,m,.., s,.,.~;u,,~ ,se ~ .... d,-,,m-,
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PI-~IPPINES - A DR..~rl" OVERVIEW & RECO~O,E.'~'DATION 1.0 GEb/ERALBACKGROUND The Philippines economy continues to perfonu poorty with a s~ power crisis being ~enr.~l by d~ ¢oum?.. m[ • IOnll-lenn Imlul/on is not in sist~. C~P is forecast to improve fi'om 0% in 1992 to + 2% in 1993. In.ion has subilizd E !~. while the trade deficit has incr, sd to • projected USSS.3 billion in 1993. The recently derqulsted Philippines Peso is projected to continue its dmdumJon, while foreign debt will increase. T.',e {~znt is uable to cot|ca revenues to m~ budget tarSms, although inv,,merit in education's infi'~ruc~cre is anticipated, and urFndy requirea.. In summing..', economis;s t.n~ ".he p~:lte sector are ~essimisuc ~out rne~hm term improvements in the e::nomv. Exchange Rates ('as at" 19"': USS 1 = P;sos 2S.9 I-]XSI = P:sos 3./ hs Sag = Pesos -': 7 i:. POUT-,C.-XL ".\,-J "_-OC'.,.~.I. OL .,-?_OOK The R,-,'aos a~-minis:.-,.:icr, was eie.~.ed in 19~,: with a;.:::~rna::!.v ":% of :~: vote. It continues to be :ociced 2,." s,:,.'~dz/s, corruption, and s;c,~" ~ie:.isior..-..aicing..-~tte.'n.~ts are being r:..z~e to bre-Jc.~own iRe ."~. cnopoiies. A count~" of" Catholic{. :he Philip.tines faces i spiralli:i 2.4% ~.sins bir'd','ate. The P.hiiippines has b~n a.'..-e:te~ oy a se:'ies of ~tural dins:ers in the past 2 years while the ,-xpulsion o£ the L~$ forces in $u'oic and Clark has opened new opportunities by establishing new due," -ee and expgr, mmcessinF zones..qspite the 5mrnediate adverse L.,. economic e.'Tec:s. ~ ~.,..-_- o-c..'~..,.~,.c ~. Underempio.vment rather ti~.n unemployment is ;;ii; a major issue facing the Philippines 1.3 SMOKrNG .~VD H~.a..LTH Although Philippine smoking and health and adver',isini laws curremly remain liberal, proposed restrictions for hnuary 199,1 introduction are : i. 25% health warning on float / back of packs - side ..-anel ii. 25% health warning on all advertising materials inckgcting TV iii. voice over health v,'arning on radio iv. pre-scr~ning approval by Board of..t.dvenising. O~ O (:3 i ,,,0 BATCO CONFIDENTIAL - CATEGORY I: .'tIINNESOTA TOBACCO LITIGATION.
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A separate biil ,"iris t'or :~e complete ban on cisatezze •dvmisin8 but this is not e~peczed to be passed im,.~ediztely. These would be in addition zo smokJnB bans on znuzspon, in public ano government buildinss (except desilp~ted zras), bans on zdvez'zLsing targe:ing to people under 16 or uszle o£ famous people for endorsemenzs. .~ 6hal proposal is expe.'::.ed to result in reszrictionz intensiE/inll ~ • window for "['V/radio to be no more than 3-$ years. The anti.smoking lobby hzs intensi6~ its e/Forts in recent yeats with limited results and is expected to increase zctivizies. e7 n ~.~A~t~dad smokin~ incidenc-" fiExu'es are not ~li]able but it is estimated dutz there are ~J~w" 14.3 ,'hi]lion smokers, ot"~E!ch $~ ate 25-j4 ~ats old, and who smoke an zverzBe I - ' of 1.~ ~cks .oe.- ~y Sw.cking is more prevalent in urban areas, ted trends :OV,lzds Iowe.- ~ocio-e:onomic ~z:;..'~ Women smolcin.~ incidence is estimated be~'etn !:- The ?.~iii.~..:ir.:.~ "~'~. ~. c-::~_! void,-,,e wzs ~e; .~i~Eon u=i:s. ".n incr-~.~se oz" O.S~, ove.- :~.~'.. O~:!=.~ ~;ur,-s ,..'-" :t!ov.' i.'.~.:s:.'.." es:im,zes o~"~e:v, een ".~-I00 billion '.:r.l's. :~.e :~!~'--.'.--:i~.i ~.e:-:" non-re::.-.:.'.~ oz" ~ies z.or ~.x =u~oses. ~no transit. The o~,_i ..~'I~,,,.. t~ ~X ...... ~0 L.~., -. ~0~.¢ . .~ De, ~,~.r ~ ~ , ~__5,~[~ • • ....... s no ........ mpo.-~~weve,-. ~zrio ,us tzxes anc ~...es. ......... e ,, .... m~. ~. _~hi'oi:i-'¥ o~'-be ~q~ ¢~ lezsz douote~ ,.h .o.~ ., ..... , " . .... ~ . ' , l~,~ :::::-':s. wr.::- ;:e :n:~~ouna U~SO..~7~er pack omv. . • ,.:.,';L ~ , . . . \ --~'-~..:_ - , - ~' ,.."~ ,~ * ,. - ,,'~ ~ ~,. • , M~jo: in:e.'...-:!:.-.al zo,.~:z.-.i*.s PN~ z~d ~ are both represented in the Phiii=pines. $'~'~"~ "~ un~e." license :o La Sue~.- z-d For:,.:ne Tobacco .'espec:ivety, and both I~ve ~.zd long ,~o ~J"~'~'" ze.,-n ~ela¢ionsr.i:s Roth-z.-,s owns a 64% conzrollin~ interest in Sterling Tobzc:=, "~ t~,~.~~. o v.'hic~ took oxe: Columbiz ~'oo3c:o in ~he ezri)' i~80s. :.'- P P,.ICI'NG There are a.=prcx [4 di~',e:e.-.: price points in the domestic duty paid n~'kel, which are 5l-3~ ," ~'~. caze.~onzed i.-.:o 4 segm-..'.:z: premium, hi~, medium znd low Shares L'e listed below: Pr.-~mium ~!:5"*) e- ~ *~. $.5 Hi.~h (TIO-14) ~r- ~" 4.1.1 .Medium (P$-9) :¢.~. .15.9 Low ~.z<) 9.5 0 0 (,.$1 CO I'%) C~ BATCO CO~FTDF..~TIA L- CAT~'GORY !: .~11.~'Nl[SOTA TOBACCO LITIGATIO,~. ii RAT{~n dn~zzrn,-nt #^,. Wut'~ ")'~ I,,,-- 4aao
Page 94: 0500045821
The high and medium ~tegories will continue to dominate the market with corrmm~ shitting from low to medium, and from medium to high. u s 6anczion of impovements in disposable income, as the economy improves. Fonune"~ac:o has enjoyed discriminatory, pri~n!l ~ on "Hope', • "Champion', trod "More" clar, siEed u local brands lUtving • "~SS~.'td (Av'r), while Marlboro and Philip Morris were clzssiEed u "imported" payin l AVT. ,as cilarette taxes are levied at the first level or" sale (i.e. to distributor), Fortune has e.~zblisbed, a nurabe: o~ dummy marketing companies, se;.ling at below mzmuftcturin$ cos~. to avoid ¢:.-.side:able taxes .I,~, ~.. ~ ~ New le.~slatic.-, p~sed in Juiy 9,~ has ~,,Jiy .~'~sefd the loophole, with all inter'national ~rzn~s b.-int taxed at 5 ..-eso or'~:,~c~'.e'.'er is re:eater F_xisting local bran~s ~zh a =ec~are= wholesaie ~llUe of' ~ ~er .,-z:k or gx'e=zter will pay 45'1, or P3 whichever !s ~ig~.e:. and iocai tra~e..'narks wire • "err'areal wholesale value of less that, P4.S ,_r'. :~.z.'~e.~ =~o,,. A ~o,0 VAT !s z!so. ;*-'ie: :- :~.e ex-fac:o~" price .Major impii:~-::.-~.s :." :.'..','~" ;z~s _:., • :ha" new e.".:~antS a!ii pay the mLximum ,a.x .,2re ',vi'.~ie dis:~ur--_=:.-.~ .-.ew comTe:!~!::'. Fort:.-.." is :;;.--..-miy negotiating ~,ith ",he e,~'.e.='~e-: "~ "..:~ : :o.'=.pr:-:se =n :~...',:.,-." .-e::z.~s~.~:2non o~" Hope. Ci~ampion z.'~c .Mort as i-:or:..-.-z~cs. :~.e:e."c:'. ,..%c% or .c .,.~ :--x ~voui~ be appiied, which wo~id sim..ificz.-.:~y L-..:~:: ,"~. :.-.err ".'oi,'.-..e ,_.~d ".fie:: :.'.e p~cing dynamics of the A -andztom 2:°, i-:.'ease in :~: floe: .:r.=; :'o: :~.e ,~e:~z;ecl wholesale price has also come into t.-.-:::. ;~!:n a :L.-..'.e: ~r.:.'.-ase of-'0°= siated ,or 1996 Modest man~'a::'.~re:s -#.c: !.~ increases are .'.o: antici:ate,d '-'.-.:~i 1996 t'~th the excise tax) increase, an~ ag,.in in ,.995. gkis le~isia'ion ccntinues :o contravene GATT and zn~/ inte!l..-,~ua.l pre:.*=y .-.'ghts agreemen~ between :~.e Phiii::ines and USA and some tax]l equzii,'ation is ,..'-.:.,.~a ~ . .,, ....... .. ..... t:n... :he ;!an. .a.D VALOP-~M TAX C~ P) OLD Winston KS 3 5.t 5.00 Hope IOOs 3 07 .~.00 Champion KS 0 70 .~00 Philip Morris IC,0s 6 I I 7.,33 Marlboro .~..;.1 6.40 RET.-LIL PRICE (EST~ OLD II 13~ ~fC 1 l 13 ,,re 6..~ lO-Ii 15 IT'but ~'~ c (undermpplied and up to 20) 13 15 ~'Zc. q.y Q Q BATCO CONFfDE.'VTIAL - CATEGORY h MINNESOTA TOBACCO LITIGATION, ms
Page 95: 0500045822
2.4 SEG~fl:N'I"I'RE~'DS i) Menthol The market is predomimzely menthol (70%) due m the high m':low nicotine come~ and hil~ menthol additives ~kled to local Philippine tobacco. ;Non-memJ~ol volume has been steadily improving and is an opportunity segment for the fiJmm, especially amongst young adulu nudes. ii) Stick Sziel Indiv/duaJ s:ic~ pur:~',~ses ac:oum for between 50-7~/, of ;o~ sales..-Uthough consumers know the.." pay a premium for stick purci~,.$, the:.." do so due :o daily bud Remry =ons::aints. or :~. don't wish to share with ~ends. Stick prices ~nge from P] for hJRh .~:e.g produc:; :o 3 sticks for P2 ~'or the medium produ~s. The top 10 brands a~.cou~.: ."or ,'4% SOM. The top .five br~m.ds are nation,; bnmds. ~md 1il o~e.,'s more re~or.zi!y sc*.:ve~ T.-.e $.~ m.-.. s,-:.--..en-..-:::-:-,~ • f~,.',, z.:prox .~4% 50.M. and will _z;,.duaiiy ira:tore., due to incre~e: ::.-=iz~:v :'." .~.r,-~en:hol KS brz.~s in both me:!L:m zn~ ~.!_~. priced se~e.-.;s "Une non-~,.en:r.o~ se.zmen: :s ¢iominate.~ by hig~',.~riced produc:s, ac:ountin.~ for 71% SOS, wi~/ie the men:hol se.~ment is comroiled by" the medium price (50% SOMS) and i~gh (31% SO.~IS) A ~racua] shi~ from mediu~ to high price~ ~rodu~s is :orecas~. USI~ &: Fii:er cigare::es zc:ount for zpprox. 93% of the marke: ~nd will ,~ar$i.'nally increase dunng the plan while native (brown) cigarettes, which are sold in the provinces, deciining in share. v~~) Packa~in~ So~ cup accoums for over 99% of market due to lower manufacturing costs and apparent consumer pre.rerences, no changes are foreseen. (,n c~ C~ C~ (j'i Go BATCO CO~FIDE.~TIA L. CATEGORY h .MINNESOTA TOBACCO LITIGATION.
Page 96: 0500045823
vii) US type dominates. Virlin~ ~ brands are insignificant` ~th representation limited almost entirely in DP nuu'km lo Dun~ill, Craven A and some transit I duty free package in free markets. 2.5 The Philippines distribution structure is a multilav~ed system, which passes "Ju'ough up to 7 levels prior to the consumer purchasing the product. T'ne :hain starts wi:h :he .=..anufac:',,lrer ~,'ho sd.ls to the marketing I dis:.~bution co-..';z,~es oP, en lower ~i'~r. :os: :o minimize ¢x~se foxes (which are base~ on ex- factor pr;ces) T'nese marke'in$ companies sell direc~ to rmailers, v~olesale.,s or a ¢om~.ir.ztion of both WhoiesaJ;rs (estimated 60.000 nadomdly) control a v-~ ma;o~ty of th=- market, zn¢ ,=:: usually Chinese controlled. Th~ sell to the Morn and Po.~ i~.,~-sa~) stores (.~0% zf saies, approx. ~0,000 outlets), on selling to sidewalk v;.-.c::s ,.'1~ ju.-..pbovs ~.'-::~ of sales). T'ne final link is consume.,'s who usuMly p,.:'r:~.ase ~.~" :h-" s~ici< A =--.~.%~ ~re.-.~ -,as "re-..-. :.'..- .~e:~e.'.-', of su=,ze.'~,,arkets and department nores, wF-::..~;n s:!~ ~-: Io~e: .:.':.:.'s :~.a~ wholesaiers, in ~o:h i~¢~ and cartons. These s;~:-'s "~,ii :cn:i,'.ue :~ ~,e:ome z mor~- !report.ant channel as ~her cx~aJnsion ~hrc;--.~cu" ~h,- :cu.'.~.-.. ~::;:~. z-d :~.', rime is now -~e for invesamer.t b v :he !.-.dus~. 2.5 ~IA A.~'D PRO~,ICTIO%" Th: ?~.iiiopin:s ci_~re::-. ~,..-~::: is v;~.. iibe:ai in :e..-~,s of freedom of adve.,':.ising and prc~'ion, in .~-,"~re :'-.,-rs :-v,.,~,. :~.e go,'e.--.,me.'.: is .--..tooted ~o si~ni,~can:t~ tighten a~ve.-.ising iegishtion. C~:=:.~t soend in me ?hi;i:pin.-s is primari~ which re=resents'between 70-$0% ~f~otaJ exoendi:ure at USSI3 m~iion in 1992~.'tis low ex,-';.~i~'-re is cue m low .-..~-~ins and inm~p~j,~e .'ne~~ TV spot: $1C~0~. h is an~icioat=-d ~ha: expenditure will esca~ture years due to potential adve.':ising restrictions ~nd the entry, of competitive new brands into the market, although this will have to be tempered against a low profit llencnuing mark¢'., where mam:facturer price increases are infrequent. B'IIL ac~iviti~ within the indust~" are very sparse, and an.v new entrants could make significant gains in the trade marketing area if resources were well foc=sse'~ and manaLzed. C~ 0 C~ ~n GO BAT(~0 (rONFIDE.'~TIAL - CATEGORY h .MIN~'ESOT..~ TOBACCO LITIGATIO,'~.
Page 97: 0500045824
\ .3.0 COh~.~TITION 3. I FORTL .'N'E Fortune is • privately owned corporation ¢omrolled by Lucio Tan, wids imens~s in Asia Brewery, Philippine Airlines and Allied Bank. Tam ecem Sns( intlumce over government officials and tobacco Vowers to maintain • commanding 69% SOM through a variety oi" ura'air and d'scriminanin$ laws m rsvor Fortune. Fomme dominates :he menthol ses~nent with Hope 100s in the high selpeem (14.9% SOM), Champior. KS (Z2.0~'o SOM) medium ~em ~ Liberty (3.1% SOlv0 in the low segment ~','z .~s no re._-resemation in the premium menthol segment. Fortune has strong :e..-:esenzation ~r the hish non-men:hol se~.m with ~ license brand Winston :.: .~% SOM) -:~,ieving a 3~ CGR in the past $ .ve~u's. and More Premium (5/'% SO.~I~ in :he me~!~;m price range which ~ also ecperienced significant .~'owth. Dependir.c ~.-on "he o,'::ome of negoti~ior, s with :he tovemment, all major Fortune brands o:~.-': :~,~n Wit:sic..-. will ~e adversely ,-'T~t~. O.'.e of" .::-~n~s ~::e.-.~::.-.s ~,a~ 5e.-n its dis:,~.ution ~'ste..'n. which oper,.tes ~wo under distinc: S~-.'.~.'[~::es : ." ::.'. :'or :~.e higher F.~:ed Winston ; Hope. anc ,.'the: :',.edium i iow ~n:.-: .~'~re C-z.-...~ion. 7onune's "C.0 strong salest'orce is the ia~st in the !ha-St,":' .'-:-une ~:i:::.-s bo'~. whoieszie ~d direc: re'.~il channeis ~d c.~'e.-s no :~.:~_~ler :!~::un:s ex:.':: po.~: :ia~ed :~.e~','es t'or :.,.rge accoun's .a..~0 plus .-..er:~,,..~:!.~:.-.~ ."o::e -:.~: ~=.-~iements tr.e sa~es,orce .aJ:hou_c~..--:=~.-.e ~u;.::-~ ,.ii ,-..-ior l:ranr~, a -:'S*o SOV is conside:abi.~. Iowe." tl~m SOM. :r.:::--,!%~ z !o,.~ :..-.vest=e.~t spend. Major emphasis has bee.n ~i~ced on .-~u3L. ~i:h Ih::-. ~:::~-~ i~. :::ziier consumer promotions..sponsorships, or point ot saie maten~is '.','instons s:'.-:ing in 1992 w~ 1.3rd th•: cr'Marlboro, ho~ever ~r.creased ~.~I~.:::,-:.: --.-.::~::Z:.-'~ Sources :-~:-_,,,,,,- that F:.-.une ~ic:ates M&P spend for R JR products, with ~ having litde i,: z-'. it, out in:c .-...'rke::r.g strategies, other thzn supplying z media pool for Wins~or. Fortune .~ .-.,z.ior we.<.,cr.ess is ~i'.e lack oi" a~::~.ority given to his managers snd it" recem spec-,~la:;,:.-..,0out Mr T'.n'S ill health are t."-e, longer term stra|egic ~irection may be e.~'ected. La Suer:e is a privatei..." owned company that manufactures, markets ~cl disu'ibutes under license from PMI: ,Marlboro and Philip Morris ,Menthol 100s. La Suene has also recendy launchea. their own limited but largely unsuccessfi~l produc~ range, despite ..'ressure and I::Otests ,~rom PMI. U'I C~ CO r~ J~ BATCO CONFIDE.S,'TIAL. CATEGORY h .%II.N.NESOTA TOBACCO LITIGATIO,N,
Page 98: 0500045825
. .~ ..:.. P~Q maim,lns tight comrol and supervision over all facets of ~ business from raw materials importation, to primary and fabrication. PMI also I~ve developed a long term farm programme to improve the quality of local leaf throush Universal. I~ Suene is the Philippines second iarsest numuCi~urer with a 20% SOM in 1992, althoush share has decreased m~nally in recant years. La Suerce controls the premium segment with Philip Morris (11.5% SOM) but could be vulnerable should new ~trams or continued excise tax increases lute.., the rezag pricing ofthe brand. Mxa'iboro commands IO.S% SOM althoush a mau~nal volume decn~e in ~ im b~n caused by Wins~on's ~ price sdvsmage and aggressive TV advertising to Msrlboro's target consumers. Volume is ~l~ec:ed to rebound as ".he non-mm~thol segmen: expan.%. L'- $cerce dis:ribute thor.; -,~p. ducts :hrough a company em,,,~-ed saies:'or~ who sell t~':~u~h whoi.-salers ~T~nis salesforce over the put ve~dv~seiv ~,e~, ed :he ~n ot Marlboro o"C"~aonally re=.ues,ns hstner pnces than hste= :u-n$ scoc~c shor',,.ges ~:. La Sue.-.'.. and pociceting the diff',e:ence. P.~n i'.,.s c:nsidered t.-..-~.=,.~ating i,z $~e~e ~ ~istributor c~n~ng ~o a system more in ~i.~e ",~.:~. ~'or:.-ne, • ..-.~ :i-cs is ex.-.-::-~ :o oc:=r ~thin :he next :wo )'ears. 3~,:;: .~fcri~oro anti Phiii." .Mo~s s:'e.'.mhs are in ;~.e ur~:n are,.~ :v~-~. s~.opor: ~.v i~.-..~oys ~,~,o .~.aice hig~.--: margins on PMI .oroduc:s :~,an ::~.~e:~'o:s. ~e :o a ~i~h c--s:=.~, e: -~e.-.,,.n~i. o~nc !oyait.v ".no :~.-. ent re:zii prici-g ?~fl $OV a: 3 l% is considerably i~i~he: than their $OM wi:h Maribcr~'. SOV I$.-~% • -'.d is the .¢,os~ suppo~.-d i~ranci in :he maricet. Extensive TV, radio, ouc of" home. s~onsorshir.'s, pe..-n~en: and zem.~orary point of sale ~re .:eatur,-s ca" .M|u'lboro's ~.,~-icetinS programmes, h is anticipated tha~ P.~!] ~ll inc'eue :~e'~r A&P spend, escecially ~'or Marlboro. .~.,: ~ ......... ,.., La C&mpagna's is a local Chines-Filipino family company. ~hat concen:,"azes on low pnc;d cisare:~es, and has a virtual monopoly on the "native' or "bro~,'n" market a~er purchasing .-Uhambra who only manui'acnared native cigaret:es from Sterling in 1993. La Campagna's current technical expertise and equipment is limited to low quality produc~, with some expo~s. :"~( • • - • 9 • La Carapaces combined market share ss a.S~ SOM ('9.), but increased volume will see this .~'owin'bY't'6 over 5% during the plan oveR,ins Stedin8 Tobacco La Camp&ign capkaJizes on the establishment of marketing companies They. have close ties to Fortune Tobacco for machinery, and leaf., and follow Fortune's stance on ~!I indust~' issues ~r~ C~ C~ Go IqO BATCO CONFIDE.~TIAL - CATEGORY h MI.~ESOTA TOBACCO LITIGATIO,~. OA~ff~A -,I ... -- . . -- -- -- A -'__ tall a^ ~
Page 99: 0500045826
Product ran te is fragmented v,ith strengths in the provinces, selling throuLzh wholesalers and distributors, while marketing is practically non existent. 3.4 STE~G Sterling is ~% owned by Rothmans Ausmdiz and c~rre~dy operates one plant in Manila, leasing all machinery and premises. Sterling have this year c~called a liceminI zmmlemem with £I'1 for Mild Seven and have injected ~nher capital into the business after sutT~ing a US~.$ million loss in I.°91. A i~rice inc:'--,se taken ;.n .92. has seen Sterling's SOM decline from $.3% in '91 to 3."% and :his ~.as resulted in a do .wnscaling of the factory and redu~on in stz~g lev.-!s. .. Steding's mre.-..~:h lies in the low priced r~'~..ment, while hi!~,'premiu~., pro~;:.-.s lr,'nched s~:~..~s Dun~,ii] and Peter S .wvesant, have either failed or bee.', v, ith~-zv,~ ~em mark;:. I.'~i.'ss ~:.::.!-£" " ,. :~n ,~eveiop some new hig~,:~remium trademarks, thei: ;:mz_ :e..-~.bj ~ciiity :,., .... ..., ~itio,,i,-.s... . ..... is ouest!onabie. ,f .p,~. .~'~-----, T:zr.sk i,~s ".~-. ::uehiv_ . estimated voiume~f" 2.0 oillions or just over :..-o; !.. ;.:.~= ~_£ ~.~.~.zzes ..-.".'.:;. from 3 "+i~.-,ent s~'~ces: i) 3"..'sonti :.-z.-.r: into '~.'e markets' ex officiz~ duty fee retail outlets. ~ciii'z:*e~ ~y :~e c'.'r'.znt pers:-~ ,~utT..~'-.e allowances system in operation. The most import,.:;: .--,.~.- ou-ie,.s bei.".;: i.~ Mlniia "..nd more recently the establishment of numerous =u:y ~ee shops in Su~,ic 3ay. where allowances are open to abuse and personal duty .~.ee is :-n on :I fairly or~;nised basis. Marlboro. Winston. Salem are the main [F~'s o+intere.~.. aJtPzough tee;; is ~irly ~tensive range ofbnmds available in fi'ee markets inc'uding Kent, LucK-...~:.'i.ke (both B&W. ex Singapore, duty free and ex Japan. and US (Jomestic ~c.-., Loriilarc'~ and Au~e.'ican Brands) $E55~. Benson & Hedges (BAT ~c PNII) and ~S This transit is az relatively low o~,~ke levels given end ~ -zrke: r-.t~i] prices "-: .~ times t~ese or'domestically produced product ii) Leakage =."product in transit for re-export. This is mainly centred on Manila. and is focussed on Marlboro. although other brands do appear in free markets from time to time. iii) Organise~ :,'znsit into the Philippines, mainly throush the south, via MaltDiz. Sabah, Indonesia. Brands such as Champion (menthol) manufactured by. Hongkong Tobacco. as we!! as Mar,rooro ex US benefit significantly from this volume. (Jq C~ O O CO O~ BATCO CONFIDENTIAL - CATEGORY i: MINNESOTA TOBACCO LITIGATIOn.
Page 100: 0500045827
Examples of" free market keudJ Pdces (per 20) witnessed in Manila in December were u follows: SF.555 ~'K SE555 Lm SE555 I00 I-T~kon KS SC K~z DL SC K~t KS SC - P3s (DF ~k) . P20 (GT su~ ET. EQ.) - P"-0 (Cl-,inz/[~ DF szock: EU) - P. (OT.D3)# { P~5(GT) fl . Matiboro KS SC - P)~ Marlboro KS Box - P35 Bdshz KS SC - P:0 ( Chinese brand, probably lezlced in transit) Capri - P38 U'I U'I CO BATCO CO~F"iDE~"i'IAL - CATEGORY i: MI.~'ESOTA TOBACCO LITIGATION.
Page 101: 0500045828
MARKET DYNAMICS PHfl.IPPI~"[S DP IN~ PRICING PER PACK (PESO'S) Ac'ru~ Ac'~ 6.CIX,SL, J¢2"Y B R.a~'D S,'STY'L.F.5 FORT1J'~ - In )4~ i~r P~ (P=,o's) X.K)PE 100's SC C~Jd~ION iCS SC W1~'TON KS SC MOP, E KS SC D,'T.~.~ I00"S SC LIBERTY .~. lOftS $C NA I LO 13.0 NA 7.5 10.0 NA 11.0 13.0 NA 9.0 I 1.0 .~A 8,0 10..5 .~A 4.0 4.0 - in Ma:kc" .=-: P3cic ,='..sG's~ ~tAKL.~ORO KS 5C .~A pF'n~ MO.~$ IOn".- .',,"=.~ -~C .',c.4 13.0 ;~.0 15.0 i".0 - Sh:pmcnt .~:." M :S'~ .V,.adU.~ORC, ~.~ .~C .~A I.''0 .~A P.~..~P MC:.=.R,1S L00'$ .s.~.~ SC .~A 20/6 .~A .",7 S.~:.~X'T ?E~ .'vl : DECL.~..~D WHOL-$AL-7.R5 PRICE Url C~ Jb, U1 CO CO BATCO CO~F1DE.'~'TIAL . CATEGORY I: MINNESOTA TOBACCO LITIGATIO,'~.
Page 102: 0500045829
PH2I.~Pn~ES DP I"N-,~ PNCING To~ ~ Volw~ To~l ~ F~lt~ Brands To~ Brown FOKTLr/~ (SOM %) HOPE 100's SC C'd.M~iON KS SC ~'i~STON KS SC •" MORE KS SC Er'M~41= I~T ME."; t00'S SC LI3ERTY ME.~ 100'S $C L-~ SLOE'TIE (PMI} (SOM%) .%L-~KLBOKO KS $C W.U.~ MOPJ~S IOO'S ~tE.~ .~C MARKET DYNAMIC3 1~1 1~2 i~3 .~CTI..I'AL AL'lr'U~ ES'I" 66.OOO ~.~0 67,00O 61,1110 61.11,,I,5 67310 4.620 4.6.55 4.690 6.1.8 68.6 69.0 16.8 141,.9 14.0 11.8 12.9 ! 1.9 8.4 9.6 10.,3 3.? 5.2 6.0 ;9 3.8 3.7 :.7 3.1 3.0 !T.5 19.S 20.1 9.5 !0.8 11.3 ".6 3..'5 8.1 U~ C~ .b. (.3"1 (~ ~D BATCO CONFTDE.~TIAL- CATEGORY h MI.~,~ESOTA TOBACCO LITIGATION.
Page 103: 0500045830
PHZLL~PI~$ DP 3.M&P SPEND (U$S.000) MARIC['T DYN~MIC'S Au-nJ~ AC'ru~ EsT FORTU]~ 5.313 6,176 6,'/9.t of which : Media 4.712 $.351 6.114 : Promot:on :531 61| 679 HOPE ]00"S SC l.l~'/ UL14 2.017 o,t ~vhich : Media 1.680 L65| !.$16 : P~mc:lcn 187 1|3 202 C'~.L~.~ION KS $C NA .~A of w~ch : Media NA .~A 450 : Pro,'r,::.: n .~IA .~A 50 Vv ~'~. "$TON KS ,~C .'50 ~9 934 oz" ~ hlch : .%1e,~;~ 600 '~T9 ";47 P:o.-..::::.~ Lc0 ~,'0 IST LA .:-~.:L,~ iV:.'." ~.3~6 ;.051 ".$6 l e:',~n]:h : Med:3 2.-%~2 -~.035 3.646 " Pr:-..: :::.-. Sz.~ :.013 t.2I.~ ~'~=,~.2ORO K~' .:C 1.T$6 2..~99 2.ST9 o~",vhi:n : Me::-- 1.3-~0 :.799 ..1.9" • Pro.-r ::::.-. .:4" 600 720 ?.:---"_~ MOIL~.~ /.;$ ~E.~ $C L.$13 ;452 1.7:2 oz'~hl:h : MeCi,~ ',.L35 ,089 1..307 Pro,-,,::::.~ ;15 ."63 .~36 (3O BATCO CO~FIDE.~TIAL. CATEGORY I: MI.~.~ESOTA TOBACCO LITIGATIOn'.
Page 104: 0500045831
Philippin~ Arncnc=n Blended Bnu~-s ~Quamt~ ! Mark=t Sham) Phons Tree and Mark~ Sitar= Se~'mem I Menthol II)O*s MS:4.~.'% Pn=mium Pri¢= Pri¢= (4.1. t%~ Me~!um Pn:: (33.9%; Lo~ Pn:.- [9..~o.0+ (L] PM ii (S) Pail Mail (F~ Ho~ t+Pj Salem (L) Cannon i l(S) Bo~linz Gr~.n (F'~ Ch=mpion [m'l (F) Mo.*.- I[F~. C,~nmpion InL'l J ' (S~ L'men I [S) Nh=.or (F') -Zvc.*.=r~:n (O) Lokc (S) Stork t r"F) ~.oss t'O~ C.lsmo (0) Kin~mwn (0) Kin=s~n ,(O) Double A~ (0) Kin~pons (0) Fm=.dorn - (?') Wimtr t'F) Jackpot (0) LA (0) West Virsinia (0) Las Veps E Kool (0) Valentine (O) S¢=t (0) G~llo (0) Bo=on (0) Miles (0) Man-~ls (0) Gr=n Lane (0) Social CI.b (0) Bonus +o~ ~,,=~"~ Menthol Kint Iv~:23.$% I Non ~ MS:30.1F& (S) D~tt~ll FIE (S) D~tl~ll 0-) ,~utbom I iii i tF:.~ Hope L=.'~ (L) Madbom/L {S) Winlldd 0"3 ,~ld S¢~= (S) ]I=II Mill (1~) Wilmon/L (S) S=~ Sum; L (L) For~u F~ ~ ~m=~ (1=~ Morn Inl'l ~F's Monu'e=l (0) Con-r .?; Champ,on ;F', C.~mpmn L~ IL~ (S'~ .~liiier (S) .:=: (F) wcsLmn (0~ Am ~lend No. 1 (O) Na~'y Club (0) Boston (0} CMner (0) L~s Vcps t | i j (0) Fre,~om (S~ Stork (0) Las Veps E Kool F) Fortune T~m,¢~ fO) Olhcrs L,m C~ (=rl co BATCO CONFIDE.NT1AL - CATEGORY h .~II.N~E$OTA TOBACCO LITIGATION.
Page 105: 0500045832
TOT..~/.. MARKET LBN$) MARKET 'I"P,.D~S l~2A 1~3E M.$ ~.0 M.A.N"~TACTUR[R (Volume 1ms) FOKI"b,'I~ 45.6 .16.2 LA SI.)'ERTE 13.2 13.$ STERLING 2.1 1.6 LA CAMPAGNA 2.6 3.2 OTE=.~ $.0 2.5 TOTAL 61.$ 67.0 HOP=. LUXt'P,Y ~'1 100(F'I"C) 9.9 9.J, CH.~.~IPION M K (r"l"C) 8.6 8.0 ~L~Z~.BORO F K LLS,'PM) 7.2 ,'.6 %%'~5TON FK (FTC.'R,rR) 6.4 6.9 PHILIP MOK,~.I$ .~! 100 {L~?M) 5.6 5.4 MOP- PR..=M INT tFTC) 3.:5 4.0 CF_.t~.~ [NT M 100 (FTC) !5 2.5 L~ER.TY .~! ~00 (P'TC) :.0 2.0 HO~-" L~,'~.'RY hi K [FT~ 1.9 I0 ~L:,.~,C N! 100 (F'TC.~ 1.7 l.J OT'~.~ 19.! I .'..'. TG':.~. T(~P T~_-N "9." 49.3 TCT.-'.L .', L.a.~K.~-T 65.5 6";.0 Jb U"I BATCO COHFIDE.~TIAL - CATEGORY h MI.~.~ESOTA TOBACCO LITIGATION.
Page 106: 0500045833
SEGMENT SHARES BASED ON TOP II) ML=~,L"THOL 69.2% 67. i% NON ~[E.NT'rIOL 30.$% 3Z9% lO0 ~t 45.'P/0 .$4.3% 15 .%%! 54.3% 55.'P/'o P.t~..%l (14 P'~') $.$% 8.1% HIGH (10-13.$ P) ,13.1% 43.6% ,~.D t5-9,$ P) 38.9% 38.11% LOW (-~5 P .e, <) 9.,5% 9.6% 79.3% .'S. 1% 20.~ 2 I.~P/e _~h3r= 9fTota! \tcnrhol Mark=t PF~I {:a P-) l:.3 :2.0 .~_GH ,I0-13..¢ P) }O.¢ ".0.,4 ~f=.~ .~-9..~ P) 49.3 "9.8 _,.A' ~ :'. :=..~ P & <~ .': .'.9 ~!;.-.:noi Sha~ of Tot~i .',.laric=, F="~?.% tL.~ P-) S.-= =].1 "~H = 10-13.5 P~ ::.i :0.J, LOw ..:..= P & <) .~.2 -¢.3 Share OfTo~al Non-Ntcmhol Mark-*: p!~.xI (14 P-) 0.0% 0.0% Ia~GH ( lO-13.~ P) :1.3% :0.6°/. ~) (.~-9.$ P) 2"..~% 25.4% LOW ~..~ P & <) ".:% 40% Non-~,fenlhol Shnr= of Total ~t~rkq, PR.EM (I~ P-) 0.0% 0.0% HIGH (I0-13.5 P) 22.0% ~.~ ~f=D (.~-9.5 P) 7.6% &.3% LOW ~,a.5 P & <) 1.3% 1.3% L,rl o U'l co BATCO CONFIDE.'~TIAL - CATEGORY h ?,II.'~NESOTA TOBACCO LITIGATION.
Page 107: 0500045834
]~ECOMM'E.%I) ATIO~S l i) BATCo should not .-n;e.~n forint] enz~ imo the mzzEez. BATCo neither have the brands nor ble.',ds, which would probably need to involve conzxz~.'z mznu~'zure, or the Ionsevi~." of in,eszmenz re-.,.uired zo achieve a reasonable return on any mazketing inveszmen;. Wen the reiztively low pro6zabili]i~ of the market. Any 3ATCo ' inves~me=: "~ e'.'id ~i~,-:e z-endon in high prioriD" marke;s. Even ~itE ,. more II a~prop~z:.- ~;z.'.d pc=foi!c. B&W have turned :he opportunity do~,~, due to :he hiGzhl[ "~(' ent~' costs zr.= .~x:essi~~.~'. !onsz pavback pe.~od - /b:J. ~ ii~) ~ATC~ s-ccic ::~.:,-.".:.-z'e on deveiopin,2 visibiii~.- and voiume :~.rough the ~:,-," fi'~: sho.':s. :: -::r',c: .-e.'sc:al :,'ansi~ volume into certain key ~'ee =-..ari<ets like C~inato~,.-. ~:" ~'E-~-~-~ T.: z 5egree this is aiready being achie,,'ed, zs ,~istribu'icn oz" SE555 i.-. C~.:-.z:o~v.~ '.~~ .z:od. However, whiis: o~ake levels were :.-zson~:ie. i: -,v~¢ re:o~ec :~.'-: ~'E-~-~ 5 z~:-z::ed only oid a~ed Chinese consumers. Cc,'.siderzd:n could be howe'.~.r..% ,..v,.-. :c :-"" ~OS / consumer oromotion~i zc:i-i:v !n "his zre'- prexidir.: .ez---:!:'. !ss::s :::it be addressed eg .a.dve,"z, ising of :ons:-e." prc.-..c:ions _~ ~ = : ~" ~ ~ e : ': : l e : S T ~ : S : Z :" : e ~: ~ h e r pursued with DF -znagemer.: ,/ iii) "There .v'-s sc.-..e :.".:"z-.s: it. ~e.'.son &.~"~r'"s...__. . T'p_¢ :rzdemari;s. .':: ex~ioitz:~cn wouid .'..'e.." :." :~. g;-.'e: ":-war,is,'~u'v, free sho,~s., znd shcuid no; ~::"- ~I :.--": inmally. ~c.-.. :.-.e .~.':..~.e ":::as of SE555 iv) .~ :~".-, .".':~- shc.=s :::.':s:m :he main semi-leEzi dis;ribuzion me:~.:-~ ope.'. :o us for penetrzt:ng :-., bee m-..'~ce:s, a higher level oi'e.;T, on in widening dis~,ution a.-.d increased s:e.-.C !r, cu:y .=roe oudets, in the areas ofPOS, si~nage. ~'on ?toms. would be re~uire~ Ce.-.zini.v. a re.-.. br~ef'ioolc at distribution at a smalt numL'e: o, DF outlets indicated mcre :vcrk ~,-e;;d to be done. (,31 O O (,/1 ~O BATCO COnFIDEnTIAL - CATEGORY [: ~II,~.~ESOTA TOBACCO LITIGATIO,~.
Page 108: 0500045835
• . , " ,..~:.,.,'..?,;,'.'...~. ~'~ .... ,',': "~:'," 2 " • t','" ~ • • • ..,. ' • I"'f ' .. '..::..) , o; 5oon45 3
Page 109: 0500045836
Z~ MAI 19~5 NOTES ON VISIT BY $1MIM[I R[M'B[SZlrWSKI TO vIKrNAM A~rl) C.4~IIODL4 (.~ 16th - 21st May 1995 VIETNAM Overall our outdoor presence is very su'ong and SF.555 looks to be the only national brand with a market share around i0% and growing. Key is to manage the price which currendy is too high and to enhance the "liveliness" of the brand via establi~hi-$ 3 eventS, uplpading the in-store presence by use of thematic outers and via line extensions, Le. l.ights, Menthol etc. Specifically: The local manufacturing unit looks clean and well managed but we are years away from a J~'. The locally recruited staff look enthusiastic but will need proper induction to BAT, products and brands. We should use the representatives via information leaflets e¢. to commmmlcate product qualhy and other image enhancing issues via the trade to the consumers. Extension of our Sales Force initially is key to maintain our leadership and to launch PGL. We should review pack and stick designs of MIV and GT. Especially if we want to launch more brands we need a common qnallty/manufactur~s seal i la Nesde, Procter &: Gamble or Philip Morris. The stick should be neutral to allow the consumer to find out the quality without any bias. Right now imported 555 sticks can be differentiated from Made In Vietnam sticks. • The product and pack and stick look excellent and the ends look even better than the Southampton produc~. The Trade Marketing and Distribution issues are very similar to Eastern Europe and we should su'eng',hen the exchange of information between these markets. The material needs a more consistent look and the quality must be enhanced (different blue tones, ashtray of low quality etc.) Horeca is a key challenge and we should use the China SE555 discotheque architecture as the blueprint for Indocbina. PGL is promising adding a full flavour red power brand to the smooth slightly esoteric positioning of 555. We must improve the reputation and quality perception via the "maker of SE555" for PGL which will ensure fast disu'ibution and trial. In-storc pack checks should be resu'icted to one variant per store to avoid our Representatives promoting the MIV vs. import debate. C~ Oo Or~
Page 110: 0500045837
• We should bring in a Brand Man•get FAST. CAMBODIA Overall data looks s~rong with price sky rockzlin6 as • result of shortage indicating very sa'ong demand which needs to be s~sfied in the upcoming weeks. Overall presence of SE.~55 not n~flecting its leading share. Mm'lboro and Mild Seven look sm~nger. We are not leading in in-store and outdoor presence. SUTL cannot manage our business S~lteSically. They should be limited to physical disu'ibution. We should build up our orgenis~on i is Vietnam. • Dam like GCS is available but the mm~Jement seem not to work with it. We do not really know who our consumer is and the source of business. Price is inconsistent within the range (Lights sometimes below Filter King) and of up to 50% above Marlboro. We are at risk of making it inaccessible especially to YAUS. • We need a small team on the ground to manage our business and our posit~on. • Lights should get more focus given Marlboro Lights success. This will be difficult given SUTL's volume focus. • PGL in~oduction should be planned together with Vietnam "s!,'nergising" the material and lessons fi'om China very clearly. There seems to be • high upside this year and Regal (without inserts) is already on the market and well •ccepted. This looks very promising for the Regal project overall. • We need a plan for June - November m exploit the potential of 5E555 via big promotions. The Rega/materials should be heavily used during the next two months. We should consider bringing the Rally drivers to Indochina etc. 22nd May 1995 Distribution: Board File/Barry Bramley/Paul Adams/Patrick O'KeetTe/Russe[l Cameron Lrt co
Page 111: 0500045838
.,.. ,+~,:+ :£++ ,} i~¸'< ,+~ +;-,~+.+~+ ~i~,,~: +, ~ ~S~+~,!~,~,~ ~ik: 500045838 ...... ?.+O+~ .... +:i+++~i;
Page 112: 0500045839
BatMark BatMarX Limz~[ is a submdi~ of B-A-T Indust~es p.l.c. CC. b\'t- .~ P.N.A. 2 4 AUG 1995 22 August 1995 Our Ref: BAT Viemam Limited/Gen/F.J/ks BY FACSIMILE O0 84 8422(~7 Mr John Barker G~eral BAT Vietnam Limited Tccasin Business C~atre c/o 243-243B Hoang Van Thn St Tan Binh Dis~ct I-1o Chi Mirth City Vietnam o,.. ,rip .~¢ Y Dear John BAT Vietnam - Future Action Many thanks to you and to Graham Robertson for a most interesting and productive trip. I thought it would be helpful if I were to record the matters we discussed and confirm what furore actions were ) Lieence A~reement Between Ardath Tobacco Company Limited and BAT Y_tcmam_LimR~ On the question of royalties, I spoke m John Dick at Fr~hill on my return to the office last Monday and he agr¢~ with me that we should stick to a royalty of 5% of the Net Sale Price, as defined in the cur~nt draft [icence. This was in view of the fact that two officials at different departments of the NOIP both say that NOIP's approval is not required for contracts between two foreign parties. Consequently, there is no r~striction on the level of royalties permitted. As [ explained at our meeting, BATCo f~is strongly that we should not set an unwelcome precedent by deviating from the Group's standard rate of royalty, which is 5%. However, as we discussed, it is possible that there may be problems in remitting 5% as we are uncertain what view the Ministry. of Finance may take, particularly if BAT Viemam is not generating a profit. CD 0 CD CO
Page 113: 0500045840
-2- John Dick does not feel that we will be disadvantaged by going for 5% now. If the Ministry. of Finance were to object to 5% we could subsequently amend the [icence by reducing the rate of royalties to reflect what is pcrmitmd. No time would tm lost doing it this way. What is vital is to appoint an authorised user of the STATE EXPRESS 555 trade mark in Vietnam as soon as possible. This is important to protect our ~'ade mark registrations and will also enable us to take action against the blatant copying of our STATE EXPRESS 555 pack design. I understand from Amanda Bradbccr that she has sent a copy of the draft licence agreement to ~Iohn Dick so that it can b¢ wanslamd into Viemam~,¢. Two versions of the licence will be signed, one in English and one in Viemames¢. It was agreed that Mr Vien at Fr~hill will translate the lic~ce into Vicmamcse but that it will be choked by Anh Thuy To at BAT Vietnam. Amanda has also sent you some revised wording to reflect changes to the arbitration clause and one or two other clauses. Once you and Graham gobertson have approved the licence it can be signed and recorded at the NOIP. 2. Action Against Infringers Please could you let me know whether Fred Burke at Baker & McKenzie in Ho Chi Minh City has contactc~cl you yet. It was agreed that we would use Baker & McKenzie to investigate the source of the infringing STATE EXPRESS 555, PR.hNCE and I-IB cigarettes. May [ suggest that you and Graham Robert.son have a meeting with them so that you can give them the necessary background information, for example, Graham tells me that PRINCE and are being produced by Vinataba. I suggest that once the [icence between Ardath and BAT Vietnam has definitely been registered with the NOIP then "cease and desist letters" should be sent to the factories producing the infringing cigarettes. Graham Robertson has already made a personal protest to the Minister of Light Industry. He will keep up the pressure and hopefully the Minister will exert influence over the Tobacco Association who will in mrs con~ol the activities of the cigarette factories. If we find that the infringing factories do not comply with our request to stop manufacturing and selling cigarettes in packs which infringe our trade marks and copyright then we will consider taking administrative action through the NhMB (Marketing Management Bureau). This would also be handled by Baker & McKenzie who have some experience of this area of work. It was agreed that we do not wish to pursue taking civil or criminal actions through the courts at this stage since there are no precedents and the implementation of the law is very. uncertain. Lt~ O O CD L,q Co C)
Page 114: 0500045841
BatMark -3- 3. Cogyrifht Registration I am pleased to report that our agents in Viemarn have already been instructed to apply for copyright mgislxation of all important labels belonging to the BAT Group, including the numerals 555, the PLANET device and various monograms such as JPS and B & H. I attack, for your information, the labels that we have applied for. Additional labels arc being sent by Brown & WiIUamson di~ly to our agents. These relate to the br-,mds we recently acquired from American Tobacco. BAT Germany has also requested a few ext~ labels. We discussed arranging for publication of notices of our copyright registrations in the "Nhaa Dan" newspaper. Graham said that he will investigate the possibility of doing this but advised me that there may be problems in obtaining approval to publish such notices from the Minister of Culture. I would be grateful if Graham could keep me informed of any progress. 4. We discussed briefly the new BAT guidelines relating to trade marks, particularly when negotiating joint ventures. These are attached. Please note that the copyright in all material designed for BAT Viemam should belong to BATCo. This will maximise the benefit to the BAT Group. [ shall be on holiday from 25 August to 11 September but if there is anything you require please contact my colleague Paul Nicholson or Amanda Bradbeer. Thank you very. much again for making my visit so enjoyable. Regards. Yours sincerely Encls. cc Paul Adams cc Paul Viner cc 8enji Kemball cc Graham R0bertson - Marketing Manager - BAT Vietnam t./'l O O CD L.rl CD
Page 115: 0500045842
BatMark Bat:,[ark L;mt,.ea :~ a ,u~smiar.: ,(B A 7 :naust~s :~.l c. 18 August 1995 Our Ref: Viemam\Copyright\PGN~jlw By Courier ?nVff~C,O 53 Nguyen Du Hanoi VIETNAM For the attention of: Le Dang Tho Dear Sir, Re: Registration of Copyright in Vietnam Please can you urgendy file applications to register the copyright in rbe labels listed below. The label codes given alongside each label correspond m the code on the back of each label for identification purposes. Four copies of each label are enclosed for your convenience. I. To be filed in the name of British-American Tobacco Limited EMBASSY label - type l EMBASSY label - type 2 SILK CUT label HOLLYWOOD label J'PS label BARCLAY label RUBY QUEEN label P.~LL MALL label HILTON labe[ CARLTON label - ty. pe [ C.~LTON label - type 2 NEWPORT label VICEROY label BELMONT label BELMONT "wave" design BAT l BAT 2 BAT 3 BAT 4 BAT 5 BAT 6 BAT 7 BAT 8 BAT 9 BAT 10 BAT I l - labels to follow BAT I2 BAT 13 BAT 14 BAT I5 Contd.....: 0 0 0 r~
Page 116: 0500045843
BatMark [nvenco /2 . JOHN PLAYER - signature JOHN PLAYER GOLD LEAF label CAPSTAN label K00L label KENT label KENT CASTLE device CAPRI label HORIZON label LUCKY STRIKE label LUCKY STRIKE LS/MFT label BAT I6 BAT t7 BAT 18 BAT 19 BAT 20 BAT 21 BAT 22 BAT 23 BAT 24 BAT25 To be flied in the name of Brown & WiIliam.~on Tobacco Comoration La~l Code BELAIR label BWI ° To be filed in the name of BatMark Inc. GPC APPROVED label TRUE label MONTCLAIR label TAR.EYTON label MISTY label .~MERICAN LIGHTS label AMERICAN 100s label B1 B2 B3 - labels to follow B4 - labels to follow B5 - labels to follow B6 - labels to follow B7 - labels to follow To be filed in the name of Peter Jackson (Overseas) Limited Label Code DU MAURIER [abel PJl ° To be filed in the name of Benson & BENSON & HEDGES signature B & H device BENSON & HEDGES label Hedges (Overseas) Limited Label Code B&H1 B&H2 B&H3 , To be flied in the name of Ardath Tobacco Company Limited Label Code 555 ECLIPSE device A1 555 PLANET device A2 STATE EX2~RESS 555 label A3 STATE EXPRESS label (without 555") A4 SL .-NBURST device A5 Contd ..... O O d~
Page 117: 0500045844
BatMark [nvenco ,' 3 . To be filed in the name of British-Ame6can Tobacco (Germanv~ GrnbFI KIM label G 1 HB label G2 . To be filed in the name of Henri Wintermans Si~,arenfabrieken B.V. La l Code CAFE CREME label H 1 HENRI ~S label H2 . To ~ filed in the name of Souza Cruz S.A. LaSt Code FREE label SC1 The addresses ofgae companies lisz~ above are as follows :- British-American Tobacco Limited Millbank Kaowle Green Staines Middlesex TWI 8 1DY EN'GLAsND Brown & Williamson Tobacco Corporation 1500 Brown & William.son Tower Louisville Galleria LouisviI1e Kentucky L't'NITED STATES OF .~MERICA Bar.Mark Inc. 1500 Brown & William.son Tower Louisville Galleria Louisville Kentucky I.;~'ITED STATES OF .a~'vIEP.JCA Peter .rack.son (Overseas) Limited Windsor House 50 Victoria Street London S Vv'l H 0NL ENGLAND ConEd.... 0 CD CD CO
Page 118: 0500045845
BatMark [nvenco /4 Benson & Hedges (Overseas) Limited Windsor House 50 Victoria Street London SWIH 0NL E~IGLAND O Ardath Tobacco Company Lindted W'mdsor House 50 Victoria Street London SWIH 0NL : ~'X~GLAND British-American Tobacco (Germany) OmbH • Alsterufer 4 D-20354 Hamburg GERaM.ANY Henri Wintermans Sigarenfabrieken B.V. Nieuwstraat 75 5521 CB Eersel NETHERLANDS Souza Cruz S.A. Rua Candelada 66 20092 Rio de Janeior - R.I BRAZIL During your recent meeting with Eiteen Jenner in Vietnam, you advised her that a discount in your usual tees for filing copyright applications would be available owing to the volume of application we would require. I therefore trust that you will stilI be able to offer us such a discount on this occasion. Contd .... 0 0 u-I (.I'1
Page 119: 0500045846
[nvenco /5 I am s~nding a copy of this [et'ter to you by tax, although the original will be sent by courier together with the [abels for the applications which should reach you by next Thursday, 24 August 1995. I would be gramful ffyou could confirm safe receipt of the couriered documents as soon as these have arrivod and in the meantime, plc~.se let me know ffyou requi~ any fm'daer in£ommfion in order to proceed with the copyright applications. Yours faithfully, PAUL G NICHOLSON ~d~ C~ C~ CO 0",
Page 120: 0500045847
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Page 121: 0500045848
if HILTON ,~ ................... 0 0 0 Go
Page 122: 0500045849
Newp )r[ I @ryr :~. 0 0 0 Co
Page 123: 0500045850
0 L~ CO C~ C~ C~ L~ V ~,~. ,.~ca t t F L~ ~
Page 124: 0500045851
L.s./M.~.r iii '11,111 ~rl 0 0 0 £Jn £rl
Page 125: 0500045852
BE, IR 500045852
Page 126: 0500045853
GPC APP~OV'~D B2..- ¢D U"I ¢..rt
Page 127: 0500045854
du Maurier I ~i,i~~ i!~!~~, iiiii!i i!iiil 1 Grl 0 0 C~ 4~
Page 128: 0500045855
1 ~'~g~ BEN$ON & HEDGES O 0 0 .gz
Page 129: 0500045856
FREE
Page 130: 0500045857
L~ U') L~ ~00~0~ aO ~$3~dx3 3.LV.T.S ~ ~,~. "~,:~:.':~ ~'~: ~F LONDON
Page 131: 0500045858
F.; : ~ ;.: ~~ :.. ~.:.i-i i~.-:::t: :~:-, ~S~SlzO00S
Page 132: 0500045859
6S8SI;'000S HENRI WlNTERMANS H2.- HI
Page 133: 0500045860
r:.J. 0 oO £ : rdDvtz~ "o.~ _ _ - _ .. | _ in _. ,..J _ n. . "0"~) ,, _ --- _ • .~_ . . _ um I : _ " .... s .m~G',L"V'G : O~
Page 134: 0500045861
tomB,. ~O ¢0 U') U'l ~'m[ s¢~,/.-~ ~ snuodzoo =. tnmgm W uqmltm .o
Page 135: 0500045862
N CO ,q. U') ~mG! n "4D ~mJM lie Imfl~4N p~Tm~ml ' pm,'f • .p "T ~mmm~ m ~! ~ ~SlS,/~ dl~. q~m~! '~;
Page 136: 0500045863
BRITISH-AMERICAN TOBACCO COMPANY LIMITED l Ith March 1994 ~,..j Mr. P. McPI~I, Singapore. D~r Paul, Please would you up-date me on the lead times to producing $$5 cm • ~ basis in the Sligon factory. I know ~ this is not our c~nmt l~m or indeed thin~ng to[lowing the trip of Sir Patrick to Viemam, but it may be • pos~ility. What has prompted this question is r~u I was ~ with Ma~ W~b on Wednesday who telLs me th~ the shortest lead time in Ilmin8 materi&Ls to Viemam for production is tour months. The critical path appears to be pa~ matemds, Have we not already ordered cylinders for the printing ofthe $5S packasinS mat~ snd it" not should we do so? Please may I have a quick response. With kind regards, Yo~nceRly, P. N. ADAMS C.C* Mr. N. O. Brookes Mr. I. Remb~ Mr. M.F Mr. I. C. D. Manning • .. :.~.':. .- .. • ,. .. - . ~ , . % U'I C~ 0 J~ U'I O0 O~
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0 Mr. J. C. D. Manning (Sinppore) I/~ ~~ With the removal of'the ~ for US brlu~l "m Vietnam, i~ approprizte ~d urgent that we include ]M~W brands in our plcqning for Vietnam. Tom White.hair has agreed that we should do this, and that local nanu~ of Pleue would you ~dre~ this new opportunity with ursency and respond to me by the end ot'Fdoruzpj with your plans. P. N. ADAMS © C.C, Mr. hi. G. Brooke4 Mr. T. E. Whkel~ir (B&W) Mr. P. McPhail (Sinszpore) MILL|ANIC K;~Ov'Li GiK|.~ STAm|I MIDOUI$|I TWill IDY FMZ[ OTl4 iS| 000 TILII ZT)|41S B,T1'O| o TILIlPIIONI 0TI4 4Q0 400 A 41t~lll[ll Of TNII BAT INlrl~*$fllll 01K~P |~¢OlIqNIJ4TID IN LONIIrO'N NO "~4q173 Jb U1 C~ C~ Jb,
Page 138: 0500045865
llI~iTI$I{-AM E I~ICAN "~OBACCO CO~'P,A..Z~w~f LI~I IT]~D FA~SI~TT .~ Comm~u C'~,: JOcnr 8 q~=-~. M~ny thanks. ~u~mbeFrOlu : f JE~ ~c~ y 1 Phon~ ~ ~-L~.~_~ ~o ~-~ i~-------'------I TRANSMISSION REPORT _HIS DOCUMENT WAS CONFIRMED (REDUCED SAMPLE ABOVE = SEE DETAILS BELOW) ** COUNT ** TOTAL PAGES SCANNED : 2 TOTAL PAGES CONFIRMED : 2 *** SEND .~w No. R~.MOTE STATION START TI~,IE DURATION #PAGES ,~IODE i 1 SINGAPORE G.q 7- ;.I-9,-[- 16:23 l " 19" 21 2 TOTAL 0:01" 19" 2 NOTE : No. : OPF_3~ATION .NLMBER 4-g : 480(1BI-~:5 SELECTHD EC : ERROR CORRECT PD : POLLED BY RE~/OTE SF ; STORE & FORr,.',.RD R[ ; RELAY INITI,~TE .%IB : SI~.X.D TO ~,IAILBOX PG : POE.LIXG A RISI{}TE ',IP ; .',ILLTI-POLt, I\G RESULTS ! CO~IPL~~FED 960O G2 : Gfi CO~BIUN [ C:".T I ON RS : R'F.L.A~I S'rAT I ON R~I : RECEIYE TO ~,IF_.'~iORY (.n c) cz3 c) Lr/ co (j'l
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Jq ~m C~~~1 • o 0 Q L ~. -- ". ~.~. ". .. \ D
Page 140: 0500045867
BAT II'~ES .4~,~. ........ ~ .................................... °° ..... • ......... o° .... .o° .......... iiiiiiiiiii~iiiiii~iiiii~iiii~iii'~i~iiiiiiiiiiiiiiiiiill .~ .................. ° .............. ........................................................ °.. ............................ ..~ ....... ~...~..... ~..~...~-.. ~...~...~ ........ ............... .~.~..-..~.~ ................................................... ................................. : ~1~...~ ............................... iiiii iiiii~)iiii-~~iiii~i~i~iiiiiiiiiiiiiiiiiiiiiiiiiiiii .............................. -....,,,.,~...~...~.~...~..~ .... ...................................... ~..~..~..~...~..~ ...... ..................................... ~....~.~...~..~.. ~... ..................................... ,,~ ~~(~~- ~ ~~:r.~~. ~,n
Page 141: 0500045868
............................................................................ , .......... ................................................................... ~o.. ........., ......................................... ~ ~~~: ............. ................................. -~~~~~ ........................................ ~ ~ ~ ~!~ ...... iiiiiiiiii~iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii ................. - ~ ~~ ~ ~ ~:r- ......... .................... ~ L~" d~,-f" ~~ .... ? ..... ~ ......... ~ .......... ,o ............. , ..... , ................................................................. t.$'t O~
Page 142: 0500045869
B.A.T (U.K. and Export) Limited #10-06 SANFORD BUILDING, 15 HOE CHIANG ROAD, SINGAPORE 0208 TEL: 2255500 FAX: 22.55582 TELEX: R.~6451 BATUKE BY FAX/MAIL TO DATE Mr. Paul Godfrey - BAT Staincs 26th February 1993 FROM Ong Meng Chai NO. OF PAGE See attached SUBJECT BRAND BOARDS Attached are the updated pictures of the [ndo-China/Myanmar Brand Boards you have asked for. For more accurate picture of the market. I would suggest you refer to the typewritten copy. Best Regards, ONG MENG CHAI OMC/tss ErlCS. 0 0 0 Lrl co (3", ~O
Page 143: 0500045870
VIETNAM BRAND BOARD RET~L PRICE 11100-16000 DONG i| 8tOO-! 1000 DONG 51OO-8000 DONG 5000DONG AND BELOW .... ~A.TUKE SEFK S,E INT A$SOC, COS. PALL MALL CAPSTAN LUCKY REG DOMESTIC CRAVEN A SAIGON WHITE HORSE VINATABA VIRGINIA GOLD P.M,I. T,E.I. DUNHILL INT. OUNHILL MENT DUNHILL KS ..... RJR. __. .....OT.H~S ...... JET HERO WELLINGTON OSCAR FINE JUBILEE SOUVENIR UNITED DULICH M'BORO BOX M'BORO SC M'BORO LTS M'BORO 100= WINSTON CAMEL OZS O00
Page 144: 0500045871
LAOS BRAND BOARDS RETAIL PRICE ASII;OG. PE~.p #c~ .............. R~!U.K~ ................ COs.. ................ DO..MfS~OC. ............... ~,'M:! ............ Z~.F,J,,,., ............. q:~:..". ................... ,J3A ............... o. !,.E~ ........ IPREMIUM) SEFK M'BORO SC KS DUNHILL INT'L WINBTON K,S. MILD 5EVEN 610.800 KiPS DUNHKL MENT BHSF OUNHILL KS ........................ ° ................................................................ T .................. , ........... ! ............................... ! ....................... ,.*....,! .............................. 4 ........... ,,,...., ........... ; ....................... , ...... dlMIOI CAPSTAN A" HL WAVE BENTLEY 400.600 KIPS JET .............................. ! ............................... t ..................... , ....... ~,,.., ......................... t ......................................................... i ................................. .,....,. ........................................ , ..... ILOWt A" SC 400 KIP5 A* WHITE AND BELOW VIENTIANE LEM THONG EJI~tJ~UIE.J~IE : Kin8 l~S,4aSD 1 " L ZSSI;,O00S
Page 145: 0500045872
CAMBODIA BRAND BOARDS IPREMIUM,I 1210.1800 IMIDI 7dO, I ~® RIE[B |ECONOMY! 460- 7~O RIELS (LOW~ 460 RIELS AND BELOW A~OC, .... -".~L .......... ~P.% ................ ~!£ ........ P,M:I~...._ -~!:~-J; ..... BEFK LUCKY REG M'BOROBC KB~ DUNNLL~T. DUNHLL MENT, S.E. ~T. KENT KS 0UNH&L K.S. EMBASSY LUCKY FCTK M'BORO BOX MARLBORO 100 M'BORO LIGHT" CRAVEN A RUBY OUEEN CAPSTAN • .,,. MONTEREY FORTUNE VR;TORY LIBERATION NATIONAL MEKONG 70U~ONO .---L.J:&_.-- WINSTON K.S. SALEM LIGHT BALEM MFTK CAMEL F&TER MORE FN.TIE R YSL FUTER ;YBL MEt,J THOL IWI~STON MENT I,, .~, HUNTER MONTE CARLO ......... ~! ....... MILD 5EVEN FE'/E BENTLEY L,i WAVE OSCAR HERO JET UNITED IOQS B&M FCTK 0811 FCTK TIGER FCTK EAGLE FCTK STATESMAN FIRST ROYAL 5MARTBORO PAR~51EINN~ GRAMMY WELLINGTON CHUNG HUA PEONY ~J~(;I~IOJE-FL~TE : ~Rt~; ~sooluso I 8ZS lTOOOS
Page 146: 0500045873
O MYANMAR BRAND BOARDS W3 r~ oo L/3 C~ RETAIL PRICE PER PACK 80 - 90 (5KISTICK] 75 - 80 (5K/STICK) 51 - 51 I4K/STICK} 43 - 45 |3K/STICK| :38 - 42 (3KISTICK| 30 * 32 {2KISTICK) 25 - 30 (1,5 - 2K/STICK} BATUKE JPS BHSF 555 5S5 INT. EMBASSY KS ASSOC, COS. LUCKY STRIKE FILTER LUCKY STRIKE 100s AMERICAN CLUB NO, 1 (STCI CLASSIC IlTC) DOMESTIC OUYA EXPORT DUYA 'GREEN' P.M.I. M'BORO SC KS MONTEREY SC tOOs MONTEREY KS SC T.E.I. DUNHILLKS i LEXINGTON R.J.R. WINSTON MENTHOL HUNTER MONTE CARLO GOLD COAST • J.T.I. WAVE CHINA TOBACCQ .... XIN XING WORLD PEACE C) C~ EXCHANGERATE :(UNOFFICIAL) AUGUST tSg2 ,, KYATS 110/1.1501. ; IOFFICIAL} KYATS8.12/USDI
Page 147: 0500045874
IzL~S~O00S i~¸
Page 148: 0500045875
BRITISH.AMERICAN TOBACCO COMPANY LIMITED | TO: II I I I II B D Bmml~ CC: F N Adam, ,I' A Bark,r B C Bm'mw R S Cameroa D S Joim P.N.A. IS MAY 1995 FROM: B J Kamban DATE: U May I~)S SUBJECT: Vkamm. Smuts l~poM i mummrim I~w dw lamt imsi~m omom'uiml prolrm in V'~mmn. 1. Msrk~ Perrormamce Salm oI'MIV product fm'Jsm-Apn~ i~ ~m's 90milliom, 60nm~m~budsit. SMmM Ms.,~ dropped m 2 millioa due w the pre*TET Imdi~ in F,l~mm% dn ndense by 0n ~t/mri~ or'20 millim ~ amslm~l md I~ls GT "sl~mmm st .vm,r axt. SotUm~ ofGT pdcm impscu~ m dz ndmve sppmJ o/'MIV pn:,:bcc A mommy Saks Opmliom Plmminll ,ram lms bum umblisbml in Skqlapo~ m msum II~mm" mongmdcm over volume~ As a mu~. sm~s hart Imm mduad in dB mark~ pci~s ha~ firmed Md MIV mira m~ ~ Mm~ m dam saim for May m~ almmdy 10 miilm ld mira am ~md m mnmu~ m 30 m/iliomtnm~ for k ng ot~- ~mr. This is a:tuiv'daz m pmdua~ oa om shift by V'mmlm wMs ao ~ l'lz ham'y Ires mmmal ,mum/ woduq. A4pmmnag Ires barn pyre m dday tlz ~ ~Rmp/pn:ducg usm'l md Mzy in order to m Oz wriz.o~'of'~misbod goods. GT w~iumm arc ~y forecast m mmmin im lim~ wi-d~ C~a~. Pb~ bu~ ~bm is bell ke~ undu m~-w md ix is ~ O~ O~m~ my b~ s mudl upsid~ du* ~o mired ~ ~ 2. lrmmsciM Performance On • syssan basis, the PBITICTA ~ is, tb~ st'vis~ BATCo plan wu £1.3.0 mi/lioa. This includ~ profits ~um BAT V',cmsm, the sMe dkx s~s m~l GT. Our Immt mt~suz~ ~or tbc 1995 is £5.9 millioL ~e nq~ve varim~ of £7.1 millim bein8 aun'tmtablc to: • mdumd MIV volumm 022 mln vs a mq~ ~ S~O miUim) • ~ Jowu. dm budsmd im,o/ce pri= (8.200 DmS,,s 9000 VmV • ~ difren~ tmsis ~ adcu~n8 ,:mmmv~:e mx • imbrued umslu~ mq~dim~ due m d~ mind m u61i~ u'~ spend nmmrv~l ax d~ ~im~ of *1~ m~dom m ;he BATCo plan • his~ ~um budp~ ov~ - £1.6 -£1.3 million - £1.2 millim - £1.4 miilioo - £1.6 milliom MILLBANK KNOWI~ ~L£EN STAINT~ MI~D[,T.S[.X TWl8 IDY (.rl c~ (.n
Page 149: 0500045876
:...-... :- ;. ' • " :.: .=.::." ~:-L~:.'-'.-.:.::.: -'--.L ~:'.:,. DRAFT Note to the Chief Executive's Commlt~e m.~.T.z~..---'c,,.% .~ .". :-:-- 4. j'v This note is to update CEC on the Calm of nogotiati¢rm I=eMen EAT ar~ " ~" V'~au~ and to recommend a revised ¢;xrse of ac~on aml Woponal for submission to Vlnataba. ~'. "~'.A,'..,(. ~ I,,~,'~. " , 1. IACI(GROUNO - COUNTRY '~" ~' "~- (. ;,, .., Vietnam his a populmi~'~ ~ 71 million IDOOplo, growing it a rile ~' 2% p.a. ,~. ~.,,~ ~ ~1,,.~.~_ ,% ~"~ 987, after forty years of war ~ lv~l~ yoI"~ of re~mla~o P_.tm,~,-,ist t~lo, ~o Vio~amose govommo~ i~'f~l~q~l ¢n a pm¢IU ~ nIllcnII ~.__ .--- rec~s~,'ljction, rec~nising the nled for induitrial nlodernilltton In¢ assimr~J~ from foreign invest=rs. These mN~dS have inc,lulcl wi¢, '.~,,, ~emiss of, ~ha Soviet Union wN¢~, had been VieL~am's Ioa¢ling tracir.g "* ~,C I • • :at, he;. ?. ~ ,.~.? ~./_,~..:,. • ~ ." WP, ii=: :sing unclanrcevslc=scL in maJ~y areu, Vietnam hans ann ai=ur.d=r.: SUl:.=iy of natural rescu'c~s, a l~ignly ecu-,,me(: an,:l ad, a¢taola iacc~r :o.'-,,a a,'~¢ has acPliove~ GDP gTCW~ in excess of 8% in 1992, ,~'ec,lm¢ "c :"e 7. 7".A~, ;,-. 1SF33. inflation has ~Je~n r'e~¢~ and ac=ews to be staoilising at a::,'c.zi~.,a~.ety 16% per annu~ and ~a 0c,'.g has staolise¢ I~alns: .'J~.! ~:il;~'. Feting.': mvosxors, paru~,~larly from As,I are acLively seeking investmen'," Cl==C~,~nitiu in Vianmam. Several meier ~ri',isi~ MNCa inc~udin; BI=. Cartel ICI, Shell, Metall=o:~ Unaievar. Trafalgar House and Courtlulds have invostec c" are :n U~e process of nangotia~ir.g !nves~mants. T¢ =ate. ¢~e :¢ t~e US eml=argo. US companies nave IDesn ummte (o invest in Ihe counU~/, ait.~,cugn US re...creun~atNe cfflc~s ana business ~iscussions are now permd~ec. It ~s Ixcec:s¢~ that Pres:c~erA Citron will ,'~aily lift ltlo emblrgo in the autumn of 1993 .,vnicr, ;s likan~y to be followed by considlfel=le US investments a~'vity Ina ;l'.an substantial ir~,ew ~ cL~rvolopmln, t fun~s from in~~l egannc~ans. In dle light of this. high Iove;s of GDP ;4~th am cu~mtly forecast woll into (" ®, f o :.o.~,,,~.L/,L~ /..c, I, 0 0 Cr, BATCO COMf'1DE.~'TL-~L - CATI[CORY I: .%II.'V..~ESOT.~ TOBACCO LITTGAT:t')M.
Page 150: 0500045877
, 2 BACKGROUND - CIGARETTE MARKtT The tmal ¢lganme market il asC'nimd m 38 bn p.o. and Ls expected to at me rate of 3.41(, p.o. Despite th|8 predic~ld rapid growth, the total market is still smjl reletNe to the Ix~4111tl~l ~ ~ II hJ~ hlvel of R¥O L'11~1~lt ~ corlsumirs. Vle~ il b'lld~gl'llilly i VlrwirlJl (llarkeL l~iJ~h them is an inc:~Ising interest in US bianded cigani~as. The ,ow ~ ~,t.gory (below 30-40 cpe¢ I~:k) currently ac~u~ for epprmdrna~y 67% of total ~ but, ~ in='euing di~mble inr~=me and ampioyman¢ ¢l=r.ctlunities, the trend is to trade up. There alre currently 27 C~gltrettll flctoties in VJetnllm. Of these four are cwned ~y ViP, autl~a. (x m organiiltion nine.ling to the Ministry of Light inc~usVy) and hive a 71% market sham of IocaJ pmduc'Jon. Two inCepanciant fl=or+es ,ll=resant a fur~er 12%. Vinatal:e effec:ively c=rm'cis all P,o ;nae~encen, t fac:.=ries through licensing, anc many may be ¢~cse¢ t=c,,vn Cue tc inofflceP.¢'/In~,/ct' non ;eyn~nt of taxes. C;gare~o ira:ores we:e banned 8 yem ag=. Smuggle(: sales int: Vism.a~ :,re :~.-r~.~ly estimate¢ at Ipl=rox~metoiy 7 bn I=.L althOUgh loner to a ¢.oac~c~.--wn in lSSO. (when all smuggling was virtullly eliminated for 18 months) it was in the region of 12-17bn p.o. It is very =rc=a=ie ~a~ the iml=crt ban will be maintained by *.hi Vie~amase gcvemmen: ;rresOec.:ve of, the liffir.; =f the US 8m=erEo anti in'espe=:ve ~," lny US prellUrls (wtlj¢:'l will be more muted unoer ~,".e ClintcP. ecm~r.lstrar~on) wi'1,ic.-I may be br.-'ugnt to beer. In ~ie mgan:. Vietnam is in a ¢~irer~ ~uauon from other monopoly markets in the ~l~ior~ s~,.'l as Jacan. T=awan. K~'ea an(: T'nailand. }n that it is actively seeking foreign inve~s ¢c man, ufac~re ;indue', locally. If !t su~',~=Nx~ in this initiaUve (end intematJonii man~,~ac~re~ Ire snowing ac:~ve intere$:) further ~'ecX ¢lmvt~s on smuggling ire pr=l=aofe. Vietnam currently pr=dur.as I~l=mximtely 35,000 mnnes of leaf p.o., and the opportun~es for devek~rnant and explnlkm of the crop, Inoklding export pQtirlUal, 8re Iflra¢~ve, pirtk:ulelty in the South. In conjunction with ~, BAT has been conducting leef trials Ind the pmliminiry re,~ult$ 8re J ~ ;,~.~-,~.. v{ e-,-~" ~'M~'. w,.<. (,n L.n CO -,,j -,,,j B.-~TCO CO..NFIDE.~"I"L.~/.. C.~TECORY 1:.~I'I%'~,'E$OT~5 Tc)n~cco LITIC.~T:O:~.
Page 151: 0500045878
......... -":':: " :":: "::" B.~.T. TJ~D.~-"G,=L. I;L'=T .=. J-,'".'" ;~'.'..:= ".:- ~::~ :..-. .......................... 3. BAT RELATIONSHIP WTTH VINATAEI~ Through STC. BAT has had a ¢omnlef~al relltJolllhip with VinaUIba for five years, =jpplying equipment and cut rail, ~ Woviding miiumc= on brand development. This acuity generates m USDS-7 millions net profit m'mually. Based on this relationship, during 1991 and with tim at:lye encouragement of the Prime Minister and otl'u=r ~ of the VieVmmmm government, BAT entered into joint venture ns~;otlltions with Vtrhttal=L Historically, the co~'~y has Nan ¢llvid•d into U~ree regions, North, Central an= South, with the South having the most potential for development, both from an inclustnal and agric,;ltural persl:eCtivL VinaUm =mpom'od to favour a ¢lsvelol=ment scamgy for the toba¢:= industry which followed these geov-niphical ¢ivisic~s. at.o: indicated ~ it I~oposed to find tttme international par',~er,J wire eac.'~ being all•came a r~lion for manufac',urir.; and leaf develoomer.t. Vinstal~a's and ~e Government obiecs-vas for fcre,;.-. investments are to ¢~eveic;: leaf grow,rig (to inc.'lOSe agricultural eml=toymen; a~.(: to pr:viae im;:c~ sui:stitu'~s and ex=or~ earnings) and ;o ac~'~ieve ',t',e lOCal manufec:ure ~ international quality producUI (whictl t,~ey believe will nail= them eliminate smug;ling, I major i:,=liUcal issue). Eariy .IV negctisticns with Vinataca ¢overtm • veriety of prc ccsitior.s ¢~;a :c Vlnataca's ur,=a.".am,'~ acc'.;t Pt=w to na~.=le and str~ur• foreign invas~,~e~-. By late spring 19S2, Vinataoa~ position mg•rding BAT became c,'earer ant nag=re•teens ¢.entre= emend ~e bull•tag of a new fee',cry in the South on a 2.= I1•¢,*;b'e site at Long Binn. some .0 kms from Saigon. where there is air=any a GLT ann storage =uilcings. Vinat~a stated ~st ',ha Smg:n 'am....'-/ (l=reviously cwP.e¢~ I~y BAR would not be inOudea in the JV am: ~at BAT st'.oula in¢lu=e in its j=rol=csa! the early manufa~..ure of SEa.=5. Following these developments and after discussions with the Chairman. an early warning note was submitted to CPC (copy attached) proposing a cautious, Iff~ged investment ~ wiU1 an SMD unit only il~d progrmming over I five year period to l,"m building of • new ~ ar¢l a PMO. Vinataba's ¢ontnbutlon was to ba two of its mdsting brand= whk:tl would provide invn~iate sales of 1.5 bn p.a., togmher with the Long Binh site end the exJsUng buildings. The pmpocal envisaged total oapl¢ity of 7.2 bn I=.a.. wl~i¢~ woula I=e me¢~.ml by Year 2. U't C3 U'I CO --,4 CO B~tTCO CONFTDE.N'T[AL. CATEGORY [: .'.[T.NNESOT..~ TOB..tCCO LrTIGAT:Orq.
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,.a.T.z~¢.,--~.~. ~ P. 5/2T . RECANT DEVELOPMENTS As part of a E..q'cpesn ~-'~egatlon Mr. IIr~ku vil~d Viemam in late April an¢ met • reenter of unim' Viatnlmtmm gm~nnm~t offk:ials Ineg~ing the Ministers of Light In~jstP/. Trade and AgrloJJtUrL The everllll impress,on gained is one of a (=:~mtry cgmmitted to Jrrvtstrrterit arlg "~llingto I:o Maptable e~.d flexible In enlutng the 81J¢.~-I$s ~ ~.i8 :cJJc'/. This impress~c~ was fur'J~ir ennar, r.a¢l in meetins;8 ~ the Britilm Aml:asu¢cr. He gave full sucrc,"t to ~.o view that Vietnam wimt~ed to enc=urIQe fcrei;.-, ir, vesL, ne~t ~y MNC~I Ir.d would not suc::xnb :0 any eltly p,'Hsum :c (:.ce~ its ~c=r tc importa1~cn of ~garmtls. He emrnasise¢ ":eer, c.,-=,,=us ,~'re =~tndai cf me Vietnam ec=ncmy a~¢ ~s :enef~ts ~ =sing earzy cn ~e ;~un¢. A :ege;a::ce :':m ETC a~: Miss Jct~r, sc,-, a~m;anie¢ Mr. Brccxes ar,¢ ~S ::~.=.-::.':'/'~ras saxon tc ,--,eat VinatacI :(: m-coors. aiscJSSiCnz. The ¢lieGstlcr:, will v4H~ well mclivld by ~u~lza=a arid the.Minls~r o: L;,;.-,t ;r'~szr'/. FrczTI tJ'ze ~r.A'ul it was ~ear 'J-~it SAT ~n'.aJr.s :~.e ;ar.".e: ~ ~n: ::~ere~:a fc? Vietnam,, :r:vi¢~: we ca~ -sscc,-,... ": :~s ~cver~,.~,.er'. a~: Vir, azai=s's ¢=~,c.~ms. Comnetit:r ,Z¢Ovit~ At var~:'~s :i~es :ur.~; ~e !as~ ~ years VlriI|l ~ IQU~'t! or ~l~ a;::::ar.'.s¢ :'/:='.er ::mi(;.~ investr..z i~¢u¢ir~; 8oilers, G~¢~zrn Gar~n;, ~.¢ Re.,mares ar~, of late. Philip M(xrig Ne~gtlati~s with 8oilore ;,-=1 Ggdam Gareth; have not prm:mKled an4 Remmans lava a preliminary p~l=osal whic~ irrmives ~e 'rhang Long ~ In ~e riOl'U'L near I-air, as together ~ leaf dtvelQpfl~lnt ~ GLT plarlt. However '~e m¢st recent lind significant development involves PNlip M~I..i~t, l preliminary meeting with VinlltalNI a few months ego followed by same surveying of ~ ImIS ~ey nmJrnecl ~ a firm proposal c~ ~a 3rd ,'day. one day al~ ~ departure of trm BAT 4elegat~or~. 0 c~ J~ C~ .~j 8ATCO CONFIDE.~I'IAL. CAT£CORY 1: .',11N~:SQT.~ TOB.,CCO LITTCAT:O~.
Page 153: 0500045880
a.A.T. Zt¢., rC..~ ~ .". ",:_T ' ,~..r.,) ! 0'~" The Philip Morns pr~p~lai can ~=e lumma/~ed as follmvs : 1. PMV will ¢OflrJ'8¢: VinataCa ~ manufacI~al MuUxm=, using 1CC% impotlH ¢,d rag ~ matld~a, u~ nlacPmery legr~ by PM! and under total PMI supw~iaiort. PM would di~-ib.~e • e cgarettee, utilisir~l ~atsl=8 dilml~di~i in pitt. . Msn~.oro will be I¢ld It ~ Dang, li¢lil~Jr~ tlttow ~e ¢~rr. em ~sit ~¢o of 13.000 menmy usiMt~ ~ gov,~am to eiiminam smug;ling. Fur~emm~, PMI stared that they h8¢ r,o ir~lrut in pctlts for |~ least five years and ate willing to bu~t marxe! ~are. F.MI wiil se! ;:= a .~JJl :oaf ;~1~; prc~;,"amme. I~,0 '~oo~: ::' at ;e;s: 11 2~% in¢-;sicr, ¢f Vigulamesa leaf in PMI IO¢=lly ~ar'.;:a¢ure¢ ':,rL-.cs.~, F-.:~:'~i~; ~'.e :',rP.:~; :f ~.',e emca~o ?MI w~JId negc,Jate a .~/to ~s set ;;: w;t~,*, 2 :r 3 years, ~c c=nstru¢ a new fac:::ry. Follcwin; ;".e mee~.in; wi~ Vinltal=L PMI mClumKed a meeting w¢~ :,~e MiP.ilter d L~.. Incusa'y which. Mte a/l'at~g~ im~ in Ha~,ci am.= rlS;.,'~ ~r .'rill "ilIIIIS Capable',. Vinataca :mile STC ;mme¢:ilte:y to; ,el SAT ;(r~,.--'w of ~ese devli¢¢me~s. Mr. Yt~ ~ $~'C visitoct Vin|l~l~t amJ wte given ==eP. ac..~ss (:~ a ~n-:iclam:ai balls) ~ ~11 PMI pr~. =~li. From P, is ¢liscJss::.".s i: smer;s¢ ~at as ~.e PM i:moosal meets a|l ~e Viers, grease govemmert'l ~,¢,~ am.¢ 10r4; term ex~ec=mor,.s (it :e.,":~,.s ¢f locai man~ac::ure of international IXllndS. curtailment (If Im, ug;fiP.g, 10rig t~ ,~,, inveetment at~,¢~ leaf .'lvelooment for expoftl and Io¢~J sul:~tu¢:n), ~e Govemmem is vow lupponwe of it. Futmerm,,r.re. VInataca will far.~ ~'usure fr=m the Minigter m, td from PMI to ailccam the Sou'J'. to U~em unless BAT matcP, u the PM! dlr, ~ly ¢=mmi~ng to the oluly local manufacture of SE555. U'l C~ U'I CO CO ~. B>,TCO CONFTDE~.'VTIAL. C.-~T~CORY I: .~T1~'N£SOT.~ TO8.-~CCO LrTICAT:O~.
Page 154: 0500045881
• ,G,,/ , o. ..,:...-o;- .- a.,~... :.'~D.I_~G=t..:::L-'=T ~. 7i2T Clearly, Vinaul~ sees the PMI IX~,mml u ~ Ice leverage over BAT m imp•v• b c~'rent offtr. HovMr~er, II~ Prql~ "learn believes ~ V'~ ms it~tf 88 ~ in ~e d~t ~ BAT ~r the is••stance given ta it by STC over me years aml ~ prefer :c ¢=nctua • .IV wi~ BAT in the South if the govern•ones ~aGations can IDe met ISSUES REI...~TING 1'O LOCAL MANUilAc'rIJRE OF 1811 The urly local mar.,'fe¢:lau of SE=..55 ar~ Gthar.rru~ intsmmo~J ~8r:cL) has I=een mmd Dy vNuma to ~e me key "c • JV in Vimr:em for ~¢me time, • r.¢ me reel:onto of ~e Vietnamese ;or .e~..m,e~ ~ ~0 PMI r, ml~sai c:.-.~ rms ~is. $.~'5.~ is Ge meier smu;;te(~ I=rar¢l an.c "..tot iS P.¢ ¢¢uC: ~! .'.as a :re•enGels image an¢ tails pc~e.+.tial in :~e ::;,"W. =,~,- r, as :•sism-.c a~;.~et~; :G mam,'fac:'..;.°s -~5-= .n Vie,.-Ju~., .¢;e i=¢~. :: ¢¢nca~s-, , •¢¢u*. ~e acilit~ ~: soil "~.e orar.c Is a !ccaily ,,--.It~uf•Cure¢ :~uc:. ~.~. ;~, :,'.e .=¢eSl¢le ;,~, ~8¢: ¢f a ;i¢1rl¢8 Guts:co Vietr,~-,,,. ' / s~u;;:i.~;" ',race. { Tr.•-=c-cam., •Pout :P,o Imility t¢ marks! lc=ai~/menufec~ z~5 i~ Vilr,.nam ,-.: ima;• c~",or ~',an • GU~l~ imp:~od pm¢~;~. BA, CO ~ad requmge¢ that NED s~oul¢ seek a v'~e year Fenod I~fcre togas manure .¢~o. du~,r.; ,,~tc;-, time ¢~;arm'tls woul¢l I=e imp•rOle and the IP, rlm.¢ I:XP,.J~tl~ using the recamly Ceveiopecl into'national campaign to lsmoiish in image ind~t~ar~em of its _'~(:-9 Ac:GrClingly, the renitecl promotional opl=cn~mitils aveilal=ie in Vietnam can ,~ ; ~'~" ' otliy t::e accessed once the bfln¢l is locally mlmUfllc~Jl~. L. , ~'V ~ "1w"_ ~,v,''( Vinetabe ~ eccs~Jd tl~ ell IoM and ¢~,or materials for Io¢81 prcduCJon of c.m~ /, ~,. 555 can be impormd and ~ BAT can control Ill lsl:~¢~ of the '~l#~.r-' manufacturing and distribtNon fx~con. NED thermos believes mat ~ ~J~ I~lncl can be inh'~J¢ld on • ¢ontrtdlN bnis tO dlterminl Gweumar t."-~L I/ - a¢~ll~ll;ility. Local IXP.¢lu¢~m on 8 limited front will hcwevar ~ a.~ U'J Co per•StOol l=eornotionel activity to 0•gin on 80mecter front. CO B:~TCO CONFIDE.~fIAL. CATEGORY r: .%~INNESOTA TOBACCO LITIGAT:O.N.
Page 155: 0500045882
• :. =../2" There is • mutual inlemst in ensuring that ~ ;r~'~luc~on of ~ sue=seals. Mr. Thw (hue of VV, ataN) has saia U'm he woul4 suffer "loss of face" if it faJlecl. U~to4 IocaJ procluc~n of ~ i• merVom me only way to meet 8ATC¢ Brancl Group's clesim to promme ~e brancl on ~e new inm, n~cnal plmt~'m, end mem~ ensure its continued pruencm anti aevelopment in U:,e markm.A8 regarcls extemaJ imam, ~ is i c=ncem INn Vi~rnese F,~,z5 could be illegally exposed to other rotator•el, notably C.~imL However as a licJnca would exclude ~ and ml ell ~,~'e would be duty psi=, e:rcof¢ll will be unto'miler=a•. We oldm•te • 10 mille cue of=..55 manufac:ured in Vietnam would be US$4F..O e,dy psid ¢m~npared to USS 2(0 for DNP produ= in Hongkcng. The pecks ,4xJl¢ be ¢tearly ~ "Made in Viemam" (or equivaitnt) to ;invent any ~nfusion :n ~e Viem•meu market grid '.¢ icent~, the ¢dgin ¢f the ¢~garl~el shoul¢ 8r.y una~.~.or;sed ext. :.'~s ,,b B. C=nc, a~ .',as also been excresim: ~at ;ninon; I :ics.-.ca ,r, Vie,.nam wc~;i¢ eltl:lJs~', ~ ur;wllC¢l'~,l ;recadent :n ~e r~;ic,-,. :ar.ic~ariy !n rel~on ,.¢ Chit,• ant t¢ India. However tP, e situa:icn in ee¢.'~ ~•r,(et is ¢iff~ an.¢ ;,t is ~ 1. "~L :e,ievec ~•: ee=-, sncuic ~e ~ec :r, ~s own -,e:.".~. ~n C~*n•. ~e:e ;~ ~- 1 -~.:.! ¢ :JrenI ;ress~;ri ~:n BAT ,o ,'nanufa¢~r• .~ i¢caily an= ~m.=¢ns are i ;"" berm|tls-J. The Vietnam ,IV can be c:istln;uisne= .'r'¢m !rcia. iP. ~at .=AT 'N(:UI~ ~,e ".Re '~,a!¢."ity 5~tnll~olaer ~: will ~n:,,~: IP.e ~llnufac:',J~ eP.= [NB~ ~.sS cisc~sle¢ ~lese issues ,'~lly w~tm ..=ATCC. an.= w~:lst !ATC0 sUi! )} ~ave sc.-,e c=nc~ms over :P,I i:~:csal. :,"my ,*,ave ¢¢, ,,-~ ,r~,,e¢ ~,~at ~ey wlil // succc,-. :: if CEC 0el•eves ~,m a JV in Vie.,-.am !s • <ey :¢.:e¢:ive for ~e Jl Gr'=uc.: 7. NEW INVESTMENT PROPOSAL A new Business Plan has been prep•tee on • "man<at u.c" Oasis and is available for review. Outflne of New Pronoul BAT will pmpoee to Vi~ataba ~ establist~Nmt of • mlmufacturk~ aml leaf devetopment joint vef~a~ it I~e long Birth site. Ir, tlally SMO manufac~ will sterl in refurbiat~ecl w~ whilst a new fac:ory is ~ built. The new flc~'y will have Jrl inJtJli ~ogty 16.1Jbn ¢~garlltlel but ~ IK:~o to e~. and to 221:n plus if ro¢luirod. The .IV will mJnufec':ure under exck.mve U'I CO CO CO U'I Co Co 8ATCO COI'~F'IDE.YTIAL - CATEGORY [: .~f1N~ESOTA TO9.*CCO LITIGAT:O~.
Page 156: 0500045883
a.,~.T.z~.:.[;,';. ~ ~. ~/2.T I lance ~ of YinaSWa's mdstlng ~99ut selling brands, "Virmtaml" ant ,'r~,.~n" (v~.z~ together have Wee of al~ro~namly S.2 bn p.L) an4 BAT ik~ncs4 brs~¢s. A f~ll leJ development programme will be estei~iimlc to s~ort ,.he JV s man~act~ru, to ;roy/de ~mp=rt ~ am for ex~.n. All in intrim mini.sum, whilat the ~ In being nlfu~she~ BAT will e~al~ll~ • sac:nasty ~nit ~ Saigon far, ory Co convnence rmmuf•~um of SE=.5~, Lucky Su'l~ (when me US I.~tm3= ;i 51~N) and c:ne or more ~it~cry II UK;B and USISIk Marketing T~.e re•meting .+orwcast .~aa ~mm :ev~. on oorumrv~live assumFdcns cf ¢ar ca©+tl ~.-.sumptlcn and GOP ;towth, I~.a on equally cormmrvltive ass~J.~. ~cns r.n :ran(: devalCl:me.-.L As ,~,er~cna4 In addiUcn to BAT br'ancs. ~a .IV ',~II mar,~a~-ure ~.: ~il ,'we ~ ~nataba's malcr l~,an(:s so as +.C :rovidl ",,~,S iV wi~ r.'~,'JcaJ vl:l~..-.e lilies ~,-, the elrly periL'l:. On l~,is :iSiS ~l ,"~'S rrmr~e: snare is :eric•st :: increase from a.o.orcximat~y 15% at ~e ¢~:so( :C only ~.% oy ~'ear :C. F~,;: ~ltsiii+ :." ='.e ;,";lli::3C .-nirxi: :lvi:¢;meP, t art.: ~.e J~'s sales fcrecasts ira ¢:ntaine¢ :+~ S~..-~e¢lulee 1 arid 2 aBaC':ed. Phases for'ha DeviSe croon: ~f :he PrOFOSal : :~ase ~ t,¢|l;imite¢~ 3..4" "~cn~hl~'~ • Nogmiate ant :c:ain gcvem~en~ ac:,"¢val tc JV ¢=nvac:s ant estac!is~. JV. MaJ~ prepannicns in S~Jgon fac:cry for ~ manufa~'ure arrang~ents an4 prepare SMD e~Jipmint. Phals~ II {~n's 'i to 2~ ~.-, . .,;. 54,~,~,. ,T, 1,,j.,U: - • Irmum o~--~ ~ ~r ~ (c~dty appr~ 'i.2bn ~amttu p.L cl~d~e siVit) ~ 8,~on tsau~f. C~,n~~ } of UKIB ¢atlg~'y II ~ and Is loon Im intmnagon•i / q~,dity atamm~ls have been ~eve~. commence eorm~ l rnanufac:we of ~& C~ C~ J=~ U~ C= Co B-~TCO CON1F'1DE:>'£L*.L - CATEGOR'r f: H1.~.~I~SOT.~ TOO.~CCO LITICAT:O..~. Ill | IllJl~__ J__ _
Page 157: 0500045884
~.'=. ~-~ "~: I~, .,.l" .:..-'. T. ~::::'.-.--:.-.:l--" --.':-~" ~-"-. Io m/~,'bish existing wlmr.cl,ml bulldll'lgs Ill Lcmg Blrl~l as temporary fa=ory and ie.stlJl 6 maX~g and packing lines ({Iplcdy lil=WOxin'41t~y 7.8 bn dga~e~es l~.L) eltimato~ 8-g mont~, followed by :- commer.cl li¢lmcad manuhlC*.uro of 'MnatabW and "Tc~kglm". # Sligon ind "~,~:/=" i~. " Ccmrnerca ¢=nslru¢:i¢.-. cf a new PMO and flc:~ry (PMDl~idy It I.,~¢ ~ ,~.,, c,- ! of yolr 2..~¢ fair/maw at year 3). J ~ ,. Uc;taco exist~P.; GLT ::a~ a~,d initiate full leg ¢levelepm~t ;r:;ramme. P~lase III 'year 3 O.."~#qt=|". ,.,r ~m=ie,~cr :f ~.e new fac:.:ry. !mnsfor soc~nc~m/equicme~..: f.-:.-.. :~e :emma-dr/fa¢=.-t it: ?lit'lifter install aclditic;nal 5M[~ c:mmens~ra~e ~.*: ~m :~-r..~z ".e..--.an=. A ns~v G.LT. :;ir~.. wdl :e rimuirKI ~.. yalr4 Irt~ ~il .~uil¢i~.; It: .P.$:al:a:icn .,vl:; lls=...--..-...-.anc~ ~n Year 2. Leer Oeveleomem .-,"no I:¢ter,:ion for :rc.-",;c:ion ¢~ ;oo~ quality leaf - bcffi FCV Im¢~ Dtarley. l,~,: . o..,v-.~., ':or *..¢:~ ¢.e JV'; =wr, :eK;'.;irlu~..er~.jI and exco~, - Ira ;ood. Prc{:u=icn - • a:: ~.,-v.;.}" ~m ;Focnl:r; are esmmat~ to ,n~'lmae. for FCV from 14C,0 tcnnes in year • tc • 12,90C ~.c.'.,',es in year 10 one for Burney from 500 tonmm in year 1 !¢ I ".?0C ;n year lC. Canital F.zmenditum Tatli capitol expend|~l for the ,IV is pr:jeclad at USS100 millkms over ~e plan pared (USS6,~.6 millkm in ~o first 3 years) - U~¢/3.7 millk:n f~ I~.e c~gl~tle fac:ory and US,~QS.3 ~llion f~' leaf clevldt:~,nlnt. Full details am shown in Schedule 3 Ittachecl. U'I C3 U'I CO Co Jb, BATCO CONFTDE.'~I"I.&L - CATECORY h .%{I.'~N1E:SOT.~ TO8.,CCO LITIGAT:OI~.
Page 158: 0500045885
',~.7. :.=. "~=. "':~= :..&T. INtIJ~l~:. ~'.::: ~-'.--. n.A.r.~m.~r~a, c~..- .:. !I/E" (vii) 1. ~NANCIAL ANALYSIS 1! Business Plan RmmeJal l~,~l~ll(m,, ~.'~.C..,.,ua / : The ,"~=al projecUons d the pan have been Ixuar~ ~n c:nsmm USS mr~,,,s. A summary of key figures ,'ram ~e I/an is shown below. Sales Vck;mes: Ci;amt:es (bns) k~f Ex=:ns (000 tcrms) Ne: Tur:acvsr ($n'n'ls) Tra¢in; :-~t (Stuns) ~.,'~.it A~,ar Ta.x (Stuns) Ar,'~:~tac:s .-'AT 7C% ($m,,-.s; Ne: Trac~,-.; Assets ~Smns) Net Shartr, o|¢sr'.; F~.',¢s :$n'~.s) Tra=~,',; Msr;~. {%} RQNA (,%) DeCVE=uity Ratio (%) Year I Year 2 Year 3 Year 5 0.8 ,,41:'~'~. 7.5 8.9 1.2 (~/" 1.5 4.5 17.3 sz2 78.0 lo3.e (o.s) (2.3) ¢2 Is.4 (0.e: (2.4) 4.5 13.e (O.a) 0.7) 3.2 S.~ Year 10 12.B 11.3 187.7 47..=, 38. ". ! 4.:. ; 2~.C 47.2 77.e Sa.a : CS.:. Net Tunl0vsr increases in total Dy 15% per annum from year 2. i 17.; ~.0 67.1 8,4.B I ":S.3 (31 (~" 8 18 ! (31 (l) 8 1S / 12% 10% 13% - J This mainly ~ • IFov4h in clgm turnover of 13% per annum, (yews 2 to 10} benef~Jng from • volume inmm• of 9% per annum ~ improving mix. Lesf uporm w~ fer~:~t, to ¢~mrmm~ from Ym¢ 1 and by Ymr 10 ere pn:jec~ecl to represent some 14% of the ,NC's total net ~. L,q J=. U'I CO O~ BATCO CONFIDE.'~r'rIAL. CATEGORY I: MINNESOTA TOB.~,CCO Ll'rlC.-tT:O~'~.
Page 159: 0500045886
--' ........:''.:: o:'.'.- .,::.. 9.~..'.:J~D.LIr.,,.,% ;:~'=..'r.:. I~7 II C=nservativeiy, no real pnca incrmisis have been assumed, either fcr c~garettes or leaf, over the ten year projec= perioct. Average net ~mover per mille for the ¢~lretlo i:usiness in Year 2 is $ 9.3 ant iP, c"tasis :c $12.6 tW Year 10 mmefiting frcm the bend to IFB's. ¢ontdbt~on as a ~:ercentege of net ~nover in-eases from 11% in Year 2 to 2B% in Year 3o ben.fll~'q .from me requc:ion in leaf Ir, d mini 'kit sits' fern STC. Cc,-.triJ:~..~on mar~n fui~ar Jmpmvel to 41% by You 10 I::enafitJP, g fr~ :n~'easid ualge of whom leaf in all blends end local leaf in all i=le.-.=s exca,c: ;r, tematiomli brands. Average ~fpu'eae c:m'it~l~5 per mille is estimatic at U531.1 in Year 2, USSS.O in Year 4 and US$.~.6 in Year 1G. F;xec and Semi.Vsrizbie F.:genees increase ~cm U$SE.2 millic~, it, Year : I... USZ2S.S million in Year 10. (16% nr. :umcver~. Tr, e :rc~c::ei :ac:.:r~ are' Ccmmur:,ica~cn $¢en0 (US38.,¢ millionsi 5%" ¢f ¢.~;aret:e .-,8'. ::,..-.cve, !n year 10): 0eC,'stCa~cn (U$$8..~ ,~,iiliorl in y~r "~ 0); Is::;- ::sis (U$32..• .'nilllgns in year ;G. I:asia :n ¢,;n'lnt U$$ wage rates f:- ,-:.i. -,;,-, =.:~:a,',;u); an¢ genera~ ;r:¢:~cr.. a¢.,"ninie.-'adcn ant .':',ar~e~r.; ¢:s[s :.:otellir,; US38.5 millions in year 1C) Cased on STC'I ¢=m var~;ecl in lir, e wi~ 0¢c,..--..:n v¢lurP, el. In ec:¢ittcP, Tgut. fill ~ IllUmed Olylf.~! "; fro,,-, ~e--r -." a: a ;e~,e: ~ US31..: ~iilic,-,s :er srn-~. I Tre0in(;I P.,'oflts .--: $5.2 miilicn are fcrecas~ =y Year 3 ar.¢ ~',ereifler are ;:rc;e.-':.e¢ ".= n.--. ease ."y 33% oar annum to $47...= millet,'. ;n Year 1C. T,'a=:r; :r=.,~;~ r Years I ant 2 are -.:, ,'ully ::..-. " : ' '," ;'.erac t .. 'P, csi " "-"-" S, ,C'~VP. ...... Year 3 :r~var:s wr.e~ :no JVC assumes a "s;eacy siam" ~ositJon. P:ofits in Year ~ are essentMIJy only tr~si generaulci from the c=ntrac: ml~.~.fa~,.:re of own IFB's whic~ are a pre-requisite to the estai01ishmont of the JVC. A~mcu;;l~ I~ts in Ye,.' 2 benefit ~om me inc:u~len of Ik:ar,.~l menufact~l ~, ~ of ,'we Vinateml l=ran~, these ant in very low marg~ and it is not until ~eI ~' PMD is opemticnai in Yelr 3 I1'1M tPlue mar~ths can be irlo'mlud to a morn, ec=aptable level. $herer~olders Furns assume 8,'1 equity injoc=ion of usdr48.S millions over the first ~ree years :o meet forecast capstel expenditure rlmuJremonts. BAT's U'I ¢:) U1 CO CO B.~TCO COHFIDE.'~TI.s,L. CATECOR'( l: HI.~'.~ESOTA TOBACCO LITIGAT:Oi~.
Page 160: 0500045887
• V.-'.Y. 2~ "~ |. A. T. ~ID. LFd,-I. |3 mhanJ is estimated to be USSdl~.ll million. IIUfficlent tO meet fmlcast hard c~rrency requirements ~er ~a same perlocl. BAT's smmd~ng in me ,IV is #umumed tm ~m 70%. 2. Js~iect Evaluation The j~r'ojoc'. Mas been evaJuatect ~ a cti~ cash flow ~ The Wc~ec: casYJ flows have l::em'J clJlc~.~:te¢ ~ UIo ton year period lit 20%. if BAT wm'o tO acquire, say 70% of tim ,,IV arid c:allmit US1148,8 mUlicns in capital expenditure ta cm~. U'Js sherel~lclir41, then the IXqe~ value waul¢l De as follows " Value cf 4, 00% ~ :he .~/ E Viiuo c~ 7C% of ~,e 62 olus: o',~er net :cerat~r.; =..AT 'l:,ws (mya~:;es. T~,~ ,'ass. S==a: ~s-J, "C ~: OiS~ul~eC vaoull BAT ~quity inle=~:n Mill' Thus tl~e l~n:jec IR,~ ,s ~n ez~..,t~u of 20% ~" The --ova avsiuatio~ ¢:os ~.¢: r.¢:ucto the not ~ tax ~ to BAT arising from STC's in~-..o from 'd'.o su::;y of cut rag and wreRltng nulmrtals to the JV in Years 1 to 3. Ifl~u~lin~; §ATCo'| a~l=~JtJl~e I~% ehanl of ~.ue I:X~ts would incilise ~O nat value c~ We proje~ to BAr from USS~7 million to approximsmly USS32 .'niilio~. 3. 8enlitivitv Analysis A numlDer of sensitiviUos have been run run compadson tO the plan. Their effect on ~e net vsluo to BAT is as follows : ~.~I~T L.n C~ c~ C3 CD CO BATCO COINFTDE.'4TIAL . CATEGORY h )ITYN[SOTA TOBACCO LrTIGAT:ON.
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4 Whilal Will ~.pilal eXl~mClturt for ll~e tln¢ five ~ was ~ at approximately USSS0 toni. only USSI0 mn was ~ IW BAT with me l~1~lrlcl beirlg s~,~:lld from ~ joint vm's ~ 1114 loans from BAT. This I:~;¢sal was rslsC•d I~y VinatBC• in summer 1992 t~" I~ folklwing main masons, A. BAT's capital injiP..Jon Of US$10 ~ was said to be "dedlmty'. B* BAT ~a sm,~r~ umlsda~n;s fr=m Vinsums not to snm' Into • JV based in Ssi;=n fact:ry wire a~y ~ ~ and this wu s~tea l:y Vlnats~ t= be un4u~ ;-mm'i¢ive w~:l ~. C. V~.ils: BAT J~acl ir~cat~: ~'.m ;:'~¢ula. in clua c=urse, c=nsi=~' :co=; ma~.~ac:'. '.re of. ~5. BAT hat rlf',~Id ,~ cam•it to • licor~ca. ¢=n1,,mii'¢iii .ql!S~|C.'lli'tJD wJttl STC ~ll ¢.¢.~nu8¢. J,. C,~MMENT3 ON ORIGINAL BAT P.qoPGBAL BAT's ~ $-=2 ~,--'c.c=sa| wu ~sc:~veiy ¢~v~m by. ~e financial res~air~s ,'.¢s¢ by C~¢ liP..i ;t~.; BAT'i in~tiai ¢:m,'~tmw~.t t¢ U~SlO mR. In tl'.e li;.-.: :.~ ~.e .---r:, st: mltP.¢',..1 :f Irs~ylis ~ new ~JulJn, lll ~'OjIC:S. ~;S IHff:S iP, lC:::¢rlltl l~(: IP.{~,'.s;,~:I.~.:, F~;r~.•rm.¢rs. ~t !s ~eiieve~ ~ ~.e ¢¢:¢.":.,lit~es ¢::uld I:e Gmlt•r U'lam ~%e maximum "2 :.~ o.a. :.lcscity srwsa;s¢ !.-. ?.~ ¢hg~nill prctx:s~i. In ~ese c~,'--,,~mstsncas, it was beii•v~ ~= be ~ lppmprtlt• to develc: • I:usiness ~ra, Ry I~,~l on • mar~l~n; ~ les~ng to • ~ ,Xl~mc~ur~ pllu~ I~d for U~I ~ U'iln to be tvll~auKI On tl~lt Ilrldit~'ll tll~rllrnetldati~l u tO Ihll Ilvlll of BATs c~IYnitrrllnt of IMird ¢Ijrrlnoy to ~.d ~e I=rOje¢:. This his betln done s~d is ¢~loJssld in 8e¢lkM 7 tlelmv. ", :~/2: U~ Co B:~TCO CO~FID(.~ITI.~,L - C..~TECORY I: .%rL~.~I[SOT.~ TOBACCO LI'TIC.~T:OH.
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" " ' I';~,L:'T.:.. :: .: .... ~Y. 2.~ ";~ I'::.T =.;.T. " .... "'" .":.:'.. J.A.'r.ra,¢.uc~:L =ur='r .:. I~,/IT 14 Inqllctl w Net Value toBAT UeS mi]llans Plm'~ NPV 27.3 Ir¢~ctJng STC's net inc:rne Years 1 to 3 .,4.5 Incnmse in Tracle Matins from 1.~% to 20% to c:=ver -21.0 pmmble higher dinib~ion 10% .,'educ~'k:n in Sales v~ume .11.4 Ce,~crate Tax rate inc-use frr, m 2a.% :0 35% -.11.2 10% rlKIu~lon in Ciganw..e Pdcls -5.9 4. Irn,,,a~ on B.A.T Indusu'fes Grou© (D U1=c:n c=nsoliaa'dc~ ~rCuO ~,rc~ ~ fcx'ecaJK to inc.lase by the amcunts ~cwfl ,'or ~e ,IV in ~,e flnanc:~l r.n:je~c~i mr~cNm ar.OVL However ;rcup ;rc.:,ts ,==ui~ =o aCver:ely a~hK::eo. :c an extent ~, a rlCucaor, ir~ r_.~-ri~: =,'c/its um,,e¢ =irecJy :y BATC: ,'P..m its GT =ulJmlss. An esttmm of ~e -.et imm~ is iltustrmed 1:mtcw Ne4~ =n ~e ,"c,lc~n; eesum;::c.-.s as .'w;v~'cs =.:.ATCc's GT I::us,~ess (a) w(~ ¢~am GT votumes .'."f I i:illicr, I:er a~nurn, vclume r~__~cr~ is Mtirnate¢ ~o i=e 297 millicns ir~ year 1. 343 miilicr; in year .= amc~ =.S.• millicr~ in year I 0. (b) EATCc ¢¢,mr:~:u~n of US$15 .,Jer m~ile, ~n~'vauvety assuming nc saving in ¢ire¢ ovemeacLI. All a result • (U8$ millions) add: 70% at'bibutablo PAT of ,IV Year 1 Year S Year 10 (0.4) less: loss of BATCo ~on on above usumpt~r,n (4.5) net impr~v~n~'~l in Group Prafl~ (4.9) 9.5 2e.7 (5.1) (I0.4) I 4.4 16.3 (j'; C~ C~ CO ,,,0 BATCO COMFIDE~'I'IAL. CATEGORY I: .'.f1.NNI~SOTA TO8.~CCO LITICAT:O~.
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.- :.:k .'~..~. ~.T "';:" 1T::'~.:.;~: .... ,:'..~,:: ..".~, D:."T. 15 (ii) Given that this il • 7elnfled irr4slmem ~ n6"l ~ ic:;~ition d In ~dsting I:usiness mere will be no 9oo¢'will write-eft,. (iii) Althou~ I~:al Ix.TmHnge are ~ for U~ first few ymz's of the IXZ#K: p~i~l, maximum debt is only prCJK~KI at USS9 million in Year 3. "rNlrlforo 111o G~I dalM/eql,lity r•bo will not I:o mlalrt~ly IffectecJ. 1. A~I't~II of JV ¢mzU'lctl ACart fr=m •gmJng t~te ,IV conu-acuJ wit~ V'mezaca. ~e centnlc:s also have tc ,,,z •prove4 and to some extent mif,~ ot ".'t-,~egotiazl¢' I:y the $CC; - • ;owlmment ¢:mmJttN ru.ccn~i• for I~,~w~tiSm, g fcrei~;r, ;,r:vesu'nent 8n4 ~mpriaing reC~een..atJves -~ yah•us Minis~eI. The SCCl approval carl take some c:,'tl;¢erable time e.;. 12 .-,,cr.,~,s. Hcwevor, given the fuji ."t¢.~i~; of Virazaca and ~e Ministry !t is l:elievea that 'J'4 process :¢ul¢ :e s~.l:s~at~delly sceec:e¢ uF. 2. $hareholcfing There is ~c limitItJOn ~f~ "J1,e fr.,rmgt~. ;r:vest,','~lr.t ;ew or, :~',e levee 0/a fcre~;,', :~ves~:,"z ~8r~mct¢|~;, alt,~¢~;;,-, .-,c,,'=,,a,;y ~'e ":reign it~vestor • ocean :I= acquire ~0%. 3. Management • Control Issues T~ere are o~ty two mar~gement bc~ies envisage¢ •.-#.or VJeu~smese law - ~e Boa~ of Dirtiest1 and an execJJve I:ccy ~..mpdsirtg a General Dim=or and Deputy General Oir~-':rz. Theft i8 no ¢=nce~ of mar~oldem meetings. ~ 6oa~ of Olrecors is ~ e ~lder ml~llentitivo body ~ ~le of the Oiroctots are 8 ¢~Ja ber~veen mareh~dera meetings •rid r~n.emcJive directors (./'! Co BATCO CON~DE~'TL~L. CATEGORY [: .M1.'v..NESOT.~ TOBACCO LITIGAT:O~'.
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• .+. )~?. Z! "92 ~T:29 :.A. ' ............. • " .~.:.~.:: .:~. :~)7. a.m.'r.xpm.~='.,m.. ~ .=. 17/2.,7 16 General. tint Del~dy Oir~:or General and C~ef,~:=unumL NI c'.her decisions requirt a 2/3, ma~,/. . The General Otrtc¢=', =uppormd by =el~W C, tm=rtl Direcmrt hanna day = Uy marmgemanL It is posl~bla to dale;ate .'o Ule G~enll Olrecmr all an=re ~i¢~ = not require unsnimily at Beam Meetings. Joint Verm.,'e ~rnrsc:s can prov~ that ~e fQ'eign inveetcr aic~4 =an nominme the GeneraJ OJrtc=r ~ his ~ must t:a unanimously apWov~l. By virtue of su~ • I:mvisiofl an0 dslegadon cf full Cowers to ~e Ge~..er'ai Oirtc:or. I~l foreign invemor mr:. l~'ac'Jcal terms. =r":l ¢=ey t¢ =ay manlgment of the .rV. T~e Vietnta'r, ase snarer¢icsr will. as • qui¢ =m qtac .-.ave ~e .':.;.'.~ '= nominate me ;irr, Cog;.'/Oirtc::r Get, era•. A ve.~. roc.-~.~ •mer.:..--.er~: := "se ,*¢rei;n invest,-ne~ !aw ,~as h.'Never womKenec ~'la situate:,', :: 9omO exter, t in that if the 0eputy Dirt=:: Ger, eraJ =lea;tees w,U-, ',~• =K=icn.s ~ ',~e O~r~¢=r G~n='=. ,=,e =a~ m~;uest the =:.reveal,-.; .-'I' a .=car~ Meeting t= .~view the ma~ar. Ar~,c~e, recant ~aP.;e :-:vices ~at if, on rralt~ltl .'t~;;irir.~; ~.".ar~..:~=r/. ~ere ie • cae¢~r..~,x ~- .=.=art: ;evei. ~e mater ~ ~.e .lfm¢lK: "= aroitrat~on, wr, era :,~e &,=drtucr, panel ¢=mpriNa a .rtCfllu,-.1.,atwe frcm ea~ s~anmclcsr ~.d a recmsantltive cf ~ SC~,:. Th,s -'.earns ~at. in su¢,'~ cases. :~.=. s~arenclcers effac:.Naiy have ~uai vc:es at lr=(trati¢,-,. 10 RECOMMENDATION CEC i= request•4 to not~ • i='=pcal to neg~lmtlm w~ ~ ~ ac~eve n manufscCudng and M~ development JV in Vleffmrn in v4Vc~ BAT will irtvelt • sum not exceeding USS45.O million for a share of ttte JV of not tess than 70% On the terms set out aoove. ~IE'I" 5 (Irdllt verlion as at 18.40 on 25th May) U'i C~ (./1 ,,,O BATCO CO:NFTDE.~TI..XL - C..xT~GORY h ~fl'.'v,.'Vl[SOT.~, TO8.,~CCO LPI"ICAT:O~.
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VI£TtlMi JINqlT ~EIIIIURE . 'MI.ES FOFI[CASTS POPUlAnON lUNII moaqUlmW onoW~ I%1 oop omommm i%1 TOTAL UamCk'1 lure) mume~ onowm ~,1 ¢OIMUMPIIDN P~II CAFITA t~ll;[KlilW~Alnmm nu Imwe eku llSl.Tllhcl4: -ummm41 -Lv.d mlnuhdl~ UNlm (law UUElZ reef UtI~NfPscJ4 : -unmeml -Lar.d mmudlmkeo LaMItllw ~11 a~ us~ml,mmI: 11!! 7J 2% |% NUg 4~ YL~I.I P+242 25L 1% 37 44 451 Y~..SR | 73 |7 2",I. !% 341114 4% YI~RI 7535 7",6 413 ~tO 4% 711115 3% 42.11 4% Y[AR! 741~ 2% 6% 4"1 8O 4"4 Y~M! 2% 6% 4~I II 3% Yr~7 11.56 2% I% 41 41 3% 8,1 II I'M, 41'18 3K 141.5 3141+ 5% 4130 355 115S $% SO74 97 S17 521 S)7 Sll 5|0 504 5711 S7| till SIP I% I% l~ 15, 11~ ~ 11% 11+11, I11'11, 12% 7M 154 S% 6% 6M 5lL 5% S~ 4~L 4~ IM I q~ all ~ 4lL SIS 4% I~ IlL 1% 15% a1% ~11% :+85(, ]05£ ]1% 31451, ~MI% M% 4M~ 12% i]+l& 1 I% IIP~ I'lL J~4, I% ~ ~% 411L 13% 14% 1651, 16M 2156 23% 26% +1% 314N, )4% 45 11% 141% 4J'~ IG~ 111% 1141, I~% ~ +% G6% £4% 13lL 1851, 56% f~5% 535k M% 41% lie + 41"1 4*1 +,+ Ii'I 113 p-- • I IJI r" 1+'1 P| IlmlllMIA11OII ~ |If+ ~mmml -l~r,d aum/~lure La~(I~U~II.I1 md USlO.3ea~]kl: -tlr, ii alWUbl4Um 26 0.4 I).4 42 49 3141.1 3.1 217 0.41 tILl 4.7 $5 IS.It 25 3A 2.4 I:I !o+1 4.S 15.111 25.9 &l 2,5 13 I1.1 42 1.6 IILI 2O5 4.4 24 l.l 1~.I 39 11.2 ~141.3 ~4~3 4.1 3.3 3.3 14.4 4.1 10.4 ~m3 L1 2,3 2.| 141 3+ 12 1 ~ISJ El 2+4 17.1 11 13.4 ii.4 31.4 ILl 3.0 3.11 ILl 3.S 15.3 14-I 1.1 ~I.0 4.1 31t3 I0 11.3 14.4 )41.4 i.".- I'm1 +t+l :o IIl~mo llEO4mlltmn'Alntm~ VOtUUfl mNSl ..U11T~ • -IJK TM~m 1415k O4 37 1 3O% GIIr G% 12 37O 5O% 91 0% 20 315 7.0% • I33656 21 3~.2 11+% ~1t.$'14. 37 40 1 IO0% 4.5 40~ 120% 111.0% 5,6 40.g 14S% IS.SV, 119 II IPI~ 14.1~ 70 414 t3.5% ll 41.1 -llb 11% ~o% 23~M, ~4% 2~P~ 21'+I, ~ ]21~ 34% 31114, Fk 325t, 3)% 34% 1~% 36"4 31% 31% 3M6 401t, 4t% +~d~ PIIs~ ~K 4I'M, 4451, 41% 31J% 3~% $~t% ~ ]I~% 23% P_AGllIIIFt JlC~q~A'n~LVl~_ Ulll~+ilaml -HI. 41.7 ~rl 61 10+1 11.1 12.8 13.1 I$3 1811 ILl 4G Flkl I~.0 12.1 134 14/ I$6 1117 17.7 1117 1137 2111 ~ 10 7 ll ) II I 11 $ 14 41 1541 14.1 I]1 12.1 11.7 -I Z6 )SPO00
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VIETNAM JOiSff ~ENTURE - SALE6 FORFCAST8 :_s_ss" TnxJesn VOL _mJeS(M.mL: -- .w S~F.S ~ lUHSL FCTK ~H) I'lL L.STRIKE FCTK 20 HL t,W8 CAT 2 FCI'K 20n0 FN, VHr~T,AO, A, FCTK 3OIL 1.00 359 4:)6 O 60 6Q 18 0,70 3Z4 61)7 ,t y~.n ] ~eAR4 .VF~__R_S 503 682 O76 109 S't~l 11S 075 1179 1.577 1540 1651 17Gil 912 1227 1369 1656 NOD 2O3 256 290 3SS 3O6 20~1 3"~tll ]10t 3141 44~ 1732 17~i t7~1 1686 uloo CXT~ IFClK 20 SC 0.~ 50e ~:) 7an e~s 10~2 .4s 12,1~ TOURISM FC'fK 20 ~ 0.20 3600 ~,.) 3055 3023 3047 3747 3663 3514 3424 jv LOC. ~.vm.ma~s 1OTAL ,IV SALES VOLUMIES 704 4S06 7S40 8tM 1072 II138 10304 11040 111~ 794 4S:WS 7548 lilM WI12 IIS~JI 15104 11040 11043 (.LIt C~ t=l 1340 ':: ~-| r-" [¢| jv~sw~ oey .He seemem.~ -sss-" FClfK d0 HL 12.G% 14 6~ 16 0% 18 OK ~O.(Yl5 '~"~.W ~i.li~i5 M 0',16 30.O15 L STRIKE FCli'K 30 I"IL. 2.0% Z5% 30% 35% 4.0~ 4.5~ 6.(Pi5 5.5% tLON~ UKIO CAT2 FCTK 20/10 I'lL 40% 6 (~ 60% 100",4 12.if& 14.0% 11A0% 18.W 20W ~/IINIATN~A FGTK 2G I~L 190% 16G% 15.0% 14,6% 13-0% 1Z0% 1~1.G% lO,~& 9.1~15 UKiO CAI~I FCIlK ~O 8C 21~, 2.5% $0% 3.5% 4.0% 4,5% $OIk ll)URISM FCIK 20 tBC 15 0% 15.11~, 14 8% 145% 14-316 14 0% 13.8% 13.~. 13.3% dLSa5 m 0.0% -'-4 t3,OI5 S~RE OF PREUW SEGUEHT SHAAE OF MFJ)a~ SEGI~NT OF LOW WEGHENT SitAHE Of TOTAl. II~IlilF.T 14.0% 16.5% 19 0% 21.5% 24.0% 2&W 20.0~ 31.S% 341.0~ d~,Sqlk 4 0% 2"J. d~ 23 0% 24,0% :)5.0'J6 26 016 2F.O~ 2a.O~ 28,0% 30.OM, I:) 0% 160% 170% 17 3% I)'.:~£ 17.11% 1~L0% I&:~ $O.~iL 2 1% 15.9% 16 6% t9 4% ~0.]% 21.1% 221% 33.1% 24.~k :;1~31~ Maim A~umpao~: a) Y~an 1- All II~A 1. kmedr,, ~ in 8aiffm facto~ ~mder cemlrad m~tctm¢ WHh k~d~aJ Kit Sets b) YeW' 2- Nt the ~rand0.~ "V~" and "~ilun" i~oduced m Ute J©fuabislmd whaoeho*~e in llm0 El~ndl~. "Tm~IMm" ~ cul r~ ~ by Vl~bi. c) Yea~ 3- New Pi~ ludv k~ Lc~8 Birth. Cul ~ m~ Ib~ kM' ~t~. d) Y~SS 4- t~'w Facb~f tcsdV in Lcm0 8k~h. NI SMID ba~lkred I~ tl~ n~v r~clmy. "u ct t ,! £69§1 000S
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V'LETNAM JOINT VZNTU3.E m.R.T..TJ~D.L£G,~t. D~"=- real m. CAPITAL EXPENDITURES SUMMARY ( USS MNS ) i i m A) Ctpretti Open.m: • Re£.spage in $,;ion • R~w~eho~ Lone BL,~ • SMD (S~dEon/L, onS a~). • Nov,, F~ory • New PMD Ylq 1 YR :Z YR 3 YR 4 YRS I I I.].4 26.0 13.0 4.S 2.1 .8 2.9 3.2 D 6.4 6.4 V~des/O~hm~ i ! ) Leaf OpentioaJ: • Up C--r~i= GLTtStoral|e , Nt-.v GLT Plant • Vehides/Othen c) v'i~,~z-ha's A.m" • GLT Plant • Buildings D) Total £) Ace. Tout 9.6 9.9 6.0 6.0 .S ,$ .2 ,.. ,,. i u &! 1.5 6.~ 2.$ 1.2 1.2 1.2 - - 5.0 6.0 ) ,3 .3 3 .z 2,.0 - - - 1.0 • - i 1.0 I ~,.~ ,6.o ~s~ 77~ ill 4.3 1.6 12 .: 4.6 1.2 ~ m ~ .,~ I 6.: ! II,.~ 12.8 D 1.9 1.4 1.4 16.I 00.0 Y.5~T~ OF HARD CUR.q~'CCY l~Qt.rI~.",~'~TS Cuss .~qs ) Ha.,~ Curren~ At.cumulated '~"p.~. I .2 I...vl:t~, ..! 17,.9, t 39.3 ~ 1.,,,,,,,3.6 l 1~9 i 32.2, I 45.~ ( 1 I m.A.T.= Commitment .,m 3 Vein of .Cap~ ) iI.A.Ta S, hm (USSmns~ B.A.T.s Shsn ( % ) I 12.9I 19.3 [ t3.6 fk.~ t 4.'/ ~ 11.3 .~4.0 I 5It,',' "/o.0 ! t ii i U'1 CD CD .¢:,, ¢o ~D
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B. A. T. I~. LE~l ~ D. ^o~,/C:~'-. 8ECRET Ex~ra¢~ of Minut*., of Mee~in~ o." the Chair:art's Policy Com=i~ee held an T~ursda~, ?~2~ May 1992. Rare=enos: M: Wa~m~on's no=8 of ls~. May 1992. T~s ¢P¢ ha=eel under ~e Ea=l~ Warning procedures t.~at ~.~, G=oup vculd procxed %= ne~a~i&~s a pOllible ~O121~ Vent~.%Tl in VieS.ha= in the toba¢=: businaex as se~ ou~ in M/ Vii:n=: i~ =c'.Ivel~ enc:u:~'.n~ :orJ!~n inves~:en~ an~ Vina:a~a, ~.he suave owned en:ar~rise, has a 70~ share af paz".nerz ~-= help develol: ~.t indus:=y, and ~AT is Vlna~a~ars p=afe:=ad ~oin= venture par~_~er re= man.ufac'.~ring and leaf develop=end, pa.~-.i=ular!~ in ~e ~=u~.h. ,".~..e ~ nOr, ld ~.ha~ BAT will seek a h=idin~ of TO/~O:~ of ~.~he venture vi~h ~.~.x re~&Inde.- owned ~y Vlna~a~a. Z'. was nomad r.~a~ ~he ~ovsr.-~en~ and Vlna~aba vish BAT ~= develop & Join~ vln~u.-s greenfield si~8 a~ I~n~ Binh, having rssis~-ed our effor'.s ~o develop ~l foz-~eE EAT fac~-:ry i.-. Ssigcn. As a rlSUl~, ~s "CPC nomad we wcul~ require either a lhe~lholdi.~ in the sai~on faG~:Ey, a fi=s% ~p~i=n ~.0 ~LTCh&le ~he fa~OEy, Or an a~=esment p~hi~i~i.~; Vina~aba f.'om u~ilising ~he fa:~oz-$ An ~ompe~i~ion wit.~ ~.~1 ven~ul'e. I~ ll envisaged ~a~ BAT's initial invsst~ln~ in ~he ven~uz'e would be approxlma~ely U$$10 million. Upon agree=en~ af the appr©priate btll~tll plan, the CPc n~ed t, hat i~ vould be preparsd ~o c=nsider fu~cher substantial i~v~l~=~lnt ov~r ti~e ~ ~,~l VIn~I~LTI, con~In~ln~ ~pon ac¢sp~abls :el:u=ne bein~ achi~ved. 0 CO
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25 "9~ ~, ~T. IN~USTRIES L~AL DE~ g. R. T..~D. I.~GRL P. 2~/27 {Sir Pa1:2:L~k Sheehy, Mr ETough~:on, H~ Wa'~:tz~on) tn ¢D CD tn Co ~D C~
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:..=.. T. i:::'.:.'~.'.~-'" -::.:.- ".,:.:T. ..q.m. "r. zr~. I_~G~. P. 2"-./27 Viemam is sc:iveiy ~.c~,"~8i~| fmo|p investment. V:.:m~t ¢d~ Stats or,nil mbb=o enterprise, which ]~s z ~% sitar, of ~, 36 bn m.urka~ ~ sm~| fore~n plnn~-s to h,lp dsvelop ~, ~u~r~ ~.d upl,'KJ prmLm:doo b'scJ I~ dlvelopau~ There zre attnc:Ne op,-~'~nkies ia Vitamin. which hu a I~INIXI~ apptou~ia1 70 ran. • , ci|~e~J m,v~-, (c~.,Tut pav~ - $1 p.o.) ia ezpr~ w dm~p alpidl? u is dl, ea:nomy in leaer~. ;srdada'iy in cbe w~l. Thecl Its i mmllml ~ms ~r le~' dove.proem. 5m.". ~ ~ sul~o lind tits devMopm*~ of ,,,ports. BAT Ls V|n~a'J pr~rm'rsd JV pro'ram' rot a~uJ~sc:ssri.~ zad led dsvdopmaz in the South; Bollor, is disc'.=uin$ a .rv in th Norm, sad Gudm*4 0mzn ta mmMa~ll o JV in the C~mtrzl Rqion. P~ md ]UX arm currmdy prewmmd ~ tmmsd~4 duo m the US emb&p (wbic,~ is act upec:m:l :n be ll~ b~ "~" ),w's US PrmJden~ Iduiom), whic.~ lives BAT z h'~-su~.. Vinz~ba ~Jrr~tly ~u ~ !s=:.tlu in SsilO= - ~e old .]AT ~ar.or~ nd tile old ]~:ms fac:=r~ - whic~ ~': ~c-~ in .~ua o~ sub,sznsiz/invur~.8~. BAT's imd&J zppmac.':, in oK~r := =~,.,ner.c, pt'odu=i:: u soon u possible, wu m ~t? to b~e ~m joi~ ve~rur.. :n th, old BAT fac~r7 [~ S~|cn. Viewms sdways flag? v~emt, ntl7 r*.#-'sa:l = glow BAT im~ml ~ do with 2m Sailo~ flickS; il il beiizved mlz I~ ~e l:vt.--._.-.e.'.: ~,~ V~.r.zr~:: '~llimzud.v "~ir.l ~ :~=S4 it dowo du4 ;0 ill dOwalown loc=:ion. As ~n Mira'native to $~dlon. bad~ t,~.o lOVa"..ma: wd Vi=sulba hay, told LILT ~, me JV should be z |r*.ae.~e~ .~ev*,cp ,~amt 1l LollI ]IL'I~: ~is [l i~ I1~|11 ,'~I~ l~t cll~,tre Of Sailon. is t ~ he~: ok, or. wbic.9 ire c:.--. -.~'t, Ly locates t tram! s,con~a~l GLT ~d some lc~c~ q~zli~ v,c~sm L,onl term, this is likdv m be z proflr.abl, ~ sc~xsjiczilv advsm~qemm position ~r BAT. but we would lik, tc *.~, the development ill sC,qlm zr~ our LsMM mmmJtm,nt should be limit~l to a smzll inv,a=m~z Ul m SM'~, which wgl be Ioazat i~ I/I, *zillinl LonI Bim~ buildinls, tolem,r wire th, minimum xmcmlax,/up-lrzdi~I of' 1~, ,zisziaI GLT. Co~ngy, k is ;rcpos.,~ '~z:. Zo Notwithsumdbll Vlomdu'! fOOl bdd poskioa o: the SMSu ~mr~, BAT mould ,eek a lsr~0s stuu~oldla¢ in dm facun*y, wlm ~, u:qublae ~ belnl mlt~flM by tho u'ms~ of amchlnm7 i equlpmmC it Is imlmSS~o at dtis su41o to livo my mi#l~le iadlcsdon ofths volu ofm, 11111011 f~imm'y (tam'ms csp~.ity 10/12 bn p.z.). If' we ~ to ad~we mdl a s~Lq, theo we 'm~ld seek l fl:st opdon oe ~h8 f~or,j iaths eve~ d~ Vh~Jb8 ever vKadsad w I~. hlmy Mat. w, v, mdd rapsk, inddbidms oa VImuba sdlta| S~Son oe doh| • JV based on th8 SdlU fmo~ wire m), mmpedmr. . BAT shou/d mr.~lish 8 JV Cmsspa~ with Vlnau~a m be owned iniddiy 70/1011 by BAT and 30/20% by Vinatabs m dwdop producti~ 81 Lm8 |isth. 0 0 0 Ul ¢3o B..~TCO CONFTDE.NTL.~L - CATEGORY h .~II.'~NESOTA TOBACCO LITIGAT:OH.
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f F.2a/27 ~o Vinmbz *ouJd mr4rilm~, m L~| lli~ dis w ~h, Iv u iu upiud mamkdon {mimull vaJue up m 14 ma} md IA7 w~mld ~ $10 ma dU~ll~ rem~vatioo of Co aig|q Ixflcltq, deJive7 of remndkimud SMD mxhimn~. minimum up-lp'zllnJ of ~e 011". provilioo of aool Smnl, tad hJi,~ w~r~I mpiud. [n order m zc.~itv. "PriorJ~ 1avesz~tm SUms', witi~h q~dUSm h JV ~r submnzbd uut iarAndve, i mi~im~5 to~lPt brvemne~ ¢' SI0 m 10 r~quirod. 4, ~'~ere would M d~vdopmac of~e lc~l lut cry, ~ ~r domm~ ~lUim~a~s ~1 mimqu~/y lud~/tot ,xpo~ am/~ p~rmm, ot ~ju mdmp~ V~u~u~a ha ~d:amdy offtrM to ozdu~Ivefy llmm m Ill, ~ c~o of ha mbd~ b~dJ, wlsi~ ~,,eram~ly hays a soda0 vulum, of wins ~, Im pJ. As ~ u pomdld8 dbr Jut~.vp BAT would Iksm, • local rqiomd bn~.d whelm volume ,bould imon rucl~ tlm m8 of DJs~b~:ion would inidadly be :~.ruu~ ~8 --bciq sp~m d bdlviduad wbolaadm. ~d ~iJ ~d ultimaxdy lead m ~h, mubii~mex~ cf • sopu'nx, dim~ciou ~mpamy in pro'man,hip with VL'u~Dz. • ) R~bish ~iltbI wu~o~ ;~ S.%¢ b) P**¢ndi:ioe.ad S.'M~ ,q~ipm,~t *.Z crucify 2~ m~ p,~ ~n¢ ~.y :mnth 3 c~, ~inimum n¢~ar~ .;It:do of GT.T. pl~s r~np d~ Cx~h ~o suppo~ initial wor~| ~a~.'i'.M requirome.t~ ~]oc.~l ~o~v~up wc~id ,~nd ~ny ~x~e~ requi~em~u) |,6 m 10.0 aS Ill IS In ),*at 2 it is envis~M din. out of2e JV'I owtt ruouruJ~md bonowinp, z simple P,M~ would be lmudld in mothe~ of lh, qudJti~l v, urgscxms. hbj*~ m me proflullfl[~ ¢' t~o ont0rpr~o .An'dle inv,Jma~ uld aplmlon uxdd ba mmidud labor, C~ B.xTCO CONFIDE.VTIAL. CATEGORY 1: .~II.~E:SOTA TOB.~CCO LITICAT:OH.
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I 2~ ';~ a.~.'r. :~,m.~,'~'~L. ~ ?, ~:'/~..', on Yauv I Mmluc:ion capita|t? of 3.6 ha, ~ no ~ ~ capacity or tlLpUi[|~t! Itltr m! imudlukm at' me PIWD in Year Z. pr.//~mr/~3r u~ly~ livu in IU ~.dm:linl }5l ~ a +ld pu),bar~ otberween 4 aml 5 years on IA'T"s SlO mn iavmment. Trading prof.s ate estimuul at $2 m Ln ~ |. rme.JJl IS nm lo ~ 3. A dlvid~ ~ of ?S S would be pa~all~o ~ ?mr ,$. Emmlum On be/n| liven m~ri:y. BAT Mmld nqmim wich Vinmk and lu~ m sip sits in/daJ .tv allure within 2,'3 ~nchs. IJ~ ~¢ ~ ~ be Icily imldmmtad. Iomnme~tc ~provQ ~ required ~ ~o ltJd down pmcJd~urm would m I ~ lalr, htI up to n ~rr,~ta ~ mong'u. In ord~ :o live ~h. 3V dze f&s~u pm~ible s~rt on liiIP-h~ ~Is ~4 i~ widl V'm~t~s, ~AT wo~Id ~.m~lia~ly m~mm~e~ runavuLtou ot~Io mmliaP/wimbousa und commlmcz r,,hat ~lSl)' of rs~lilJoaml autchiazry to sa up ~ $1Wi~, ~b would be oo ~e undm'l~dJflll ~,~.a~ if~o JV wore not ullin',~xily appr~,ed by ~e ~c~ori~u, tho machla~.,~, wo~ld ~o r~r,~rn~ t~ BAT. U1 J~. ~n B A.Trr~ Pt"iN~r~r-.,-~-t,
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~Y, 25 '93 17:34 B,~T, iNDUSTRIES LEGAL DEPT, mA.T,Z~oLE:C.~ r~:PT ~,25/27 to- 6 Philip Morris seeking permit US,breed Feed and ~baNm UaUO btllton - voulihly pmdu~s giant Philip ]k[or. five ~ the ireo~ m~tton- HI applied for • limnm to ai prochctof Vietnam. oimn • representative of. ~ bet kanwn for " • in Viemsm last week. MMtlxn~ brand dllz~tCu rlut application wax sad Mi~r lber, the O ,,Limd~ ~ PhfltpMorrls Uoup¼ bed sub•h- i ~nl• ~ M~ pt'uidertt ~ ]Nods and ]f~t~- ~ter llamas, goasram nw~ d~n h.ir of Bart~t enid not. tm i~em~L,~. reached for mmmept. US eoaaumxr pmdtu:bl Philip Morris i• the arms have ehowathem~l- i~ond Fonun. 500 U8 ~ eq~ to return to thb mmlum¥ after Bank or country of ?0 million, America Imewn to hey. el> but moat hmvl ~pt s law 1iliad for • mprmutntaf:lve profile due tn tm~ott o(l~t ho~ mtnm Decmmber,. .~ from US ~-q~vitts when WMh~8*.oa'-~wh= claim US in'JmnenJ loomaed lea oc~nond¢ era. may sell Im.~ive.|n Vie•-" barge sad authortud the aim. step. In wm cure, t~ US- ." ~tndves of at',. "bued muItlemtlone~ have .let femz crU~r l=mjor TJ8 ~:It•at. •~]httmd campanili firms have been men "in baHd |n ~h-Ilkok, 8In- 14tncd in the pMt week • am - Bminl;, G'ltibank. .~mrela and advert~stnlg .paw~rhomm ~¢~2ann- g~l~m, whom di~n~ in. elude ~oca-Cola, General M~ors. Giletta end Un~ver. Philip ~rrb ~nkn sewmth anmnl th, ~o~- tune 600 with 199~ mv, n~m of mar, the~ gaper, or Hong Ifonf to a~m~et~ the nmrlmL Ndther the ~8 embar- go nora Vlet~anmmt ban on trn~rt, d dgera~t~ I~m kept Phflll~ Morris dlt~l~.- t~ eft the'local n~t~t, "howov,~ -,mugiiq,d peeks ~f Marllm~ have be~ available her* ever eincat the war..,t.F~ 0 0 0 0 0
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mY. 25 "g3 17:35 B,A.T. tNDUSTR[ES LEGAL DEPT. B.A.T, rJ~.LEC~A.c~r P. 27/27 r i6 Philip Morris applies for Vietnam office wcr8 xzn in Hano|/n d~c put wcck 81on~ naadng aoe~lb C~i,l~ak, hous~ McCsms-lktckson, whose clleau lschxle Coca.Co~ Gum'~i Mo~x'~, OUca8 ~ U~. ~pu- ~u nu~mm h~ r.~n~ o~' 70 malloa, b~t ~ had b~ • low ¢¢ H~I K~i in tout out ~ mad~ ~ ~tu~ xdde¢ VNIi U3 O C~ O J~ t J3 O
Page 175: 0500045902
500045902
Page 176: 0500045903
• r~| c5~111 k ~1{.) i'I'P,,; (H. "~IEI.'I ;.N't ;. W~ t "~ .~' I :. &1" ..%Iri'f, ol'Vf¢'l",; V,. ,-I-~; ~ Pf q~.l:" ::~.: , .~ ~, ~ I I l~|ltr,~.RY 1993 l' .~" .a,:t.nt~': "|'%- ("h,>nn f lye (ST "l I .) I ) g i.,r,,., ,'~ l..} G Pereil'8 |' P. (;llrlni~l~h3m it \I l] |.n.:r~. ,i.~; A ';ru~..-t (51 1'; ('ol;y. P r}'Ke:.q'e Indi:i t ~.: ~, ! . -d.~ '-,-.-~,-:,.~,~,({ , • , (.'hh,~ ':1 [! x:ith "~;' ,: :,",,.~ }a l.,q;.,:,- : ....d::ty |.~.,id :', I,: ":.:., '!;-',~cd to BAt" r'~, |pd.chin:t 4. t)ll JVx. S[.,'T[. clearly ha~ .~ f;,,~'",qd in these marl, el. and can he ~:",nsldc"-" '~ |,,JtPRH,~.} I."'l .:;.., :;i'~. ~:%TCo ;.,ih'..?-~:~1,; E;le:'}'~':!~ • :, ;v;-i~)Mr L 6. 7. , [|'SI "TL set uP n;a[k~t::~;'ii~',r:l""l|i')n [~nnersb,p'-: ~; b.'l . ,~,:", " ", ~ould I.,,'k to SU]']. fi,~t :~ ~ l.,,,l:-,)linj DIlly P.~;d ~, ;;,- .~; tr~:mtsLict~.:r:TM. distributor bcc.au.'-e .~r~h~ {r knowlcd~ ~.nd ~,:i,",i.~, " arid it::. Flas~ i~r the in~l:r::ve, ne,,t ,ff SUTL ~ales anti t~,.;~;rHL::: ,.. ~:,il|~ Vr:tnam may be different bccat~se of the ser~inv;fic~ !': . l;OSsR~lc J V BAT .~c,:s a c¢~nent[ag of the relationship with SUTL in Ind,~ch,~ ~ and i~ prepared to t~egotiate comract~ tbr distribution with 5t:fl. p~tmer~t;ip.~ in ¢:sch coun[.')'. These contractswill be demamtin~ i,~ terms ut'perfonu~ce targetS. Although ~d', ton|tact would not be rot m., ¢ th,~n 5 yesrs, it could be renewed Ethe SUTL partnership can m:~tma,n it~ po.~dr, n ~.~ the best po~sibl¢ distribute, in the cr~l~tl%'. : '''~ "" ' SUrl. w,.,rr, bt~rrru-~! el'din cu.entsitu:Jfio.'z"On ¢ountcH'¢it and aB,ccd to. :'t ;si31~ BAT by pass|hi; on any information which became ~vaitaH¢ ,. p Ikt ~ ,~ Ada~.- a~re.ed that bUTt. shc~uld be able to pro'sue any cncF:iri~.~ |1,,*I' i[:-|'q'g l'h .:~Z.1,.=:| 'l~a' ~" "' IR .,,ere d~ipl,e,l tlwc'.tF.h F,~,m-n .'-;it .,.v ~ .,.,d :t..t ;:)n,,,_..,, = ,', 'i':" '" d~e I'~|llC p,,tts U'I 0 0 ",0 0 RM! ID:ah. ," :2 it) .I q)
Page 177: 0500045904
IIA ! l|Hl l'ISl I-.~ %IF~III('..~N I (111,%(('l) l"(P,,ll' ~N'V I t',,ll i !f" II (.'()l"t ! l,f ,~- ItMtlDr ith,;Z$ %1 II l,,x'i (J"i Q
Page 178: 0500045905
:tm r aIaLN!91~l-2~#,~12,87 ;. ~-,~ 07~448882.-~-.~,~ 889. 87a 0~+: .+';#' 8/ ".8 ",;IIlF.~IH, "xlFl'tl%t.~)'~. %~1% P'~('ll+l('l'~tll+llll 1).~ 2~.S'l) .%~1) ~'+~ I II l+l.t~Itl: %R%. I')'L5 l)r~-q,tlt. P N .X.d+ims -+x L'.I I.i It+re ,:n [) .~ f,.;t'+~ I' +,~ r',~q,,b.-l--,,+i R M It |)urlt','tl! 'i", (),+i I I.~+' :,e,,n+. !' ()'KI,+IT¢ J#Art hll,,l J;,,tll:l di.~e~l.~.+ the t,)'i,,:, ,li+,~+it,n ,)l'..l, riliPric+in t "!llll '-;o I lal,el :!.- :lit,, -:,;th I+, .x.-ul: , -~ I'4 I' P- ("tlnliill+.,l~:llll !;i ,w+,h,+t 3 p~ ;,fii!il!:'llil.~li "G |:+.-t, ii.g iltT+,Jtiil.it ~l,.i;t.,+ ,lnlt i'li,,lrihilil4+l, ltii,ll+l+ I li,il7 t+{,,+l~ +.+xi,:~li,; V,'IliI,+ ih,+'~e ~v-i+. ..... ; np.c,+l~..ltll+" ;,11 fiRst'i'd' +' tt,l~ a.~! t" +! t'-I ihv-y -:,l,,vbl:'d I~ tl,:pilll I-.,<l. I+lr fi)l~lihl3lill~ ;l ,lt.~:ll,'g~ lc, ,+l+ll~, , c I;f,;i,.l im.I flle,iil0r <II+,IHI~u,,,,~, ttlli'l.' il+,'~.l' ,+1' hli','t" lll, d'i; !hail r'l;," t'~.t~,,lil" hill ;i.~ ~.'PV," +'1~i p,p.;l.~it,Iv +'., " • II . l lli~l> eXi','ilt'l~- IlitlSt {el" 131 1{ tO pI;'+ ,+ 't+t't,+l'.12|'. ~S ~1~t beltl~ al.q+ t ,,i.: exlta ",~I.:+ Ibr+,l~h be!lPr di.+,t~,bli!i,,il !'+l~ " tll l¢ i!, St. I'1. w:il ;',,,t be' i~mxkled with ~,,,l,itill-.,i +l¢cr tt~o;,e a+reed ill :l~e ili+~.lll,g ",~illi AD(j[~, DSJ, ray Oti{++l,i I lye altd latter Ito on 2 ~;':', I'h,:.~,' a~e (itmxini0.t "die ;b I'll( 2,004 mn SE 555 (20 ctmlainei~inlth) 1,tt0t.'i roll Fliltotl (150m~Vn+th) .~(t<l mn Kern t:~ ¢ontainel~) It will ri'iliiil+ bfil.h a |tATCo anti ~AT China objective to if,lit,:-the Cllilles¢ authorities t'oi a dtity.'la,< r:,ducl'irm . tip. It was agreed that Duty Free will remain a viable channel Distribution is crudal to increasing voh,nc and share. Pi'iciug ;, a]-~, vital. We should endeavour to acttieve co,isJst©nt pricing acri),.g a!l Duty Free chanucls. The brands available through Duty Free should reflect market demand for different brands and brand variants. BAT China are requested to confider withdrawing Lucky Strike Regular. BAT China ar~" requested to pursue the issue of the source ofmanufactme or Vkeroy with 8AT HI< and B&W. ~ PKC' ~tl[ give his recomm+mdations for pricing, discounts and terms oftrade as soon as possible and, iri any event, not later tlian l.,,t April. .L.i~MEiD/alV25,$ 1 i.3.93 .+ • + •. . t,+ • ,:" :..'~- +.- QI I.~ OI IS PRC ,Lrl Q Ln f
Page 179: 0500045906
FRO.'~t: 1DA'I't~:: SI:B,/E('I': I) ,~ .h,nes .1 f." I) Me.nitlg r ,~I II D.ncsn |~ ~L~rch 199J NO ['[.:S ~. .o . [ ,.n~k.,sc ~; ,,.t,'~ (,f the meetiti~ ;~',~h S I(." =It S'rC on 23rd I:ch=,,:~..'v ['~' : Best res~ds R ~! U_DUNCAN [~x,g ID,'ald27 .~a • ,,7 "t ! .! ! ! (j7 :';-.1, ~:~ .-:../ -"'~:~ 0",
Page 180: 0500045907
": %,t.i~.- F M. l;k.l,l War;., I:.- I ~;~ ~, 4 1 ,n,'.. I ~ :; ".hl.,~,n!z Yap FS,.,,-Aim ,.PV P O'Kceff~: " - "[i,¢ - t.l,;. :,~ .,,,...ll,.d an,[ ;. tr ln~i! ~.'~I~, pr,,v,le ca(me;q: I;., " • hn K~ Bo,~ ~o °, ) %% hc:.~ it Iii~;, I.,:~..: ,.'~ ,ch.d --.I- ,I,:-, ~i:: ,., ~.. I,*1¢- i~ll[ l:'-L" .!:, i" ', Or ~1/ '.I f, l ~L!I "'m'lli~:iM p.';t'.q~ .,!i.,;i '.vii hiiv~> IO hi: p! ,:I,~_,-; d ~T(" :t..'e r..ni!d.':il ',h.il i'" ?i',.:ed , !1:.,!7 ~. ;'l t,l'le p~l~ iill~t !lll~l,i',ll"l.:lili~ /~. !l ;cllicV¢ "10 b,t f' ll %% lll.,.ll,.t COl'llprOilli-.I.'lL#. l~",l!,t . Or S~'7~;' f1," P.MD ~iil ope:-.m- i'~ll i ."l~;~t~ whh:h, li[lei .tlill;'.llil~ • .i.,,,,. !...I.; ,...;~..;-ilI tllv¢, .~lilili;i.- :i- -,.? ll,~, ~ n, ilt shi0~ ,if |'ll :It, i~. t, l t' lilt!7 I'(" ~ e, ~ ~d,e,l i,, review, extl~.nlel) cl,si !7 ¢ointili-ince ;vilh ~.-~i'[('l, q;i~'l) ~la::dardx. Ii I." I I( 1 :~,I:.V: I ® Processing ol'cut tobacco for C,lniht.~,.h;i arid Vietnam will he done t,.~ MTC The S TC mini faczoi'y will he ~II¢cl E,F non 20S pack varlalils The cen~m.nicadons on order voliiiil~:[ Ihr Ililion I~t,~,,¢¢n ~./cr TIN and STC ,~eed~ to be improved Tt:~. RI]I" will t:,ke a more acii',-: ,'Jle !e facilitate colnn, l,li,:a,,en~ ,,, 1'~3 a,,d ~,1! c-peci to be kepl ,n Ill,, Inop. Q~laliiy on Ililum will conlinue to be managed by D Creighmn a.~ Product Mannser for BAT China, ltMl ID S'rC feel ~hai Ihev have not b~. l~lly hd~)rmed on qu',dhy i~,~.~ J(-DM DaG,I t.'r~iEl~l~n should be hwilcd Io c(mlc to Sing,~pore by STC t,~ leok a~. th~ fhclc,9 and make an) lhrthe, recnnunendations for a) The inlprov~.nu-~nt ofconsisi,,.n~y el'smoking quality .. b) Cc, rr~c'tit,n of'any wrapplnB mate.H~l dlfI'e~enc~. Da~d Creighton will be asked to have product consumer tested in R.%IFIL) Chil,a to i|elcrl,,iile ~.hether Ihere ;ire any smo~ng quality diP.~rcnccs bctwce, ST¢' and BATI-IK manut~cl,lred Hilton; q ... -~ /" i .j -# .,~. ".~0 -.0 U1 0
Page 181: 0500045908
cO -~... ~t ,z i 1 ¢ | "t. : :; • ,l • :; • .:~'I; -" ~ ' • :. - .; "..~: ', ; - ~ "~ - i" • . , i..:-~:li ; .." . .:- . -...I, , • : "i. ' ;'I j'' :.'.,I ;~.s!: ~' "'1 "~' ,. -, "l:l,l-..t,i.~, ", ~-- " ~-': • :. -'. ['~.:~i,~lt:|'~Ol."lll~', 'i. ," ~l .:- .~.F:r~I;',;~"F~,"~.~I' - ~"~t" .~.~ • .,,, ~,'ul; :.~f Po!',l,~,: • • •, vt:" t~'~ ";~(I A.. ~.~ ~n'l\ ..i.i : ....... ' ~ Ji ..... ,. i ........ , ~,','~' I "- i ,- I~. • I -~I I , . | .. .; ...... • . • :., .: . .. o?, I i.
Page 182: 0500045909
606(~000(~ ,~-'.-~ ~--,~ =~ ~..,~
Page 183: 0500045910
°~ .... °..o ~ ...... ° .,°~., B.A.T (Deutschland) Export GmbH. ~,~ TELEFAX TO FROM 27.3.96 TO/toO- De~r I~ui©k, Mr. Pllrlck O'Klmlfl, IATCO, London H.A.Tomet Think you for the draft minutss on Flusshm Far East, whk:h totally relict our diScU,ion and ~o which we hive nothing ta add or to emend. Wl~ ~nd regards, H. A. Tornat CC: B. vln Groningen U1 C~ C:) ,,D
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]~,feetin, of BATCF and BATe0 Russilln Far IVaN ~am~url~ |th March ~99S .~tessrs. H.Toma| B.Van Groni|en P..q.Adams r.C.O'Keeffe The meetin$ reviewed the ¼sent devdopmems in the Russ~ cismme nuirkec ,rid their likely kcure imp~x on the business. Both BATCP and BATCo then presented the proip'eu made by each to date in the respec~ve regions ofl~ma and the' plans for the future." The key conclusions ~-i~n$ from the meeting were u follows: I.BATCo clarified that it fi~lly accepted BATCVs role as the company with ovendi respons~iiip/for exports into [~ai~mcl unde~ood thez all plans and activities by A.PR~U should be clarified and agreed with BATCF. 2.BATCo's primary interest is in opportunities for exports into Chi~and the desire to: a)Have available in the border rqions of'the Ruuian Far ~.~ the China brand por~'olio.u well as siEnificam Klvertisin$ and merch~Em| presence to reflect the strenlph of the brands in China to the Chinese traders who cross the border. b)The poss~ili~j to maximlse the cross-border trade into Ch~ c)Both BATC]: and BATCo recolnised that the potendaJ volume for sales o('[ntemadomd Brands in the domestic markets of the ~ Fir East would be limited due to lack of consumer purchasin$ power and the skew would be to~'ards low price intemetionaJ bnmds. 3. It was agreed that BATCo should continue to explore over the n~ three months ways to opdmise it's plans in the Russian Far East resion,~d then meet as~n to review final proposals with BATCF. BATCF at this stage.would prefer to separate the domestic market ope~on from the export I~siness, l~t remain open to alternative pmpomds based on the final conclusions of the BATCo investisstions. In the interim neither orga~sation will set up permanent offices, as the optimum stnacture remains to be defined. U'I C~ C,a'l
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To: Company: Fax No: Date: Comments: B.A.T (U.K. AND EXPORT) LIMITED FACSIMILE p.N.A. 1 ': MAD 1995 £_.~~. HANS TOMAT BAT Hamburg 010 4040 4151 3231 15/03/95 From: Phone Number:. PATRICK O'KEEFFE Fax No: ,0784 448652 Pages To Follow: 1 f Dear Hans, Thank you very much for the meeting in Hamburg last week. I felt the meeting itselfwas very use£ul, the lunch excellent and the opportunity to see you and Barend again a real pleasure. As agreed, I attach a draft one page summary ofthe key conclusions from the meeting and, of course, please feel free to amend as you feel necessary. I look forward to hearing from you. Best regards, Copy: P.N, Adams B. Van Groningen tn C~ .gab tn %D MILLBA~K IG4OWLKGREEN STA[NYS MIDDLESEX TWI8 IDY A M~fs~ of Dig B~1"~t-&~J¢~.~ Tos.~ccu Cosw~.-~" Gftm,1. L~co~J'o&~rr~ ~ Lo~N No. 2397&2
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Meetine of BATCF and BATCo Ru~sian..g~r l~.~t~t Fgambur2 8th March 1995 Messrs. H.Tomat B.Van Gronigen PoN.Adams P.C.O'Keeffe The meeting reviewed the latest developments in the Russian cigarette market and their likely furore ~pact on the business. Both BATCF and BATCo then presented the progress made by each to date in the respective regions of P,.u~a and their plans for the fi~ture. The key conclusions arising from the meeting were as follows: I.BATCo clarified that k fully accepted BATCF's role as the company with overall responsibility for exports into Russia, and understood that all plans and activities by APRBU should be clarified and agreed with BATCF. 2.BATCo's primary interest is in opportunities for exports into China, and the desire to: a)Have available in the border regions of the I~,ussian Far East the China brand portfolio, as well as significant advertising and merchandising presence to reflect the strength of the brands in China to the Chinese traders who cross the border. b)The possibility to maximisa the cross-border trade into China c)Both BA.TCF and BATCo recognised that the potential volume for sales of International Brands in the domestic markets of the Russian Far East would be llmited due to lack of consumer purchasing power and the skew would be towards Iow price international brands. 3. It was agreed that BATCo should continue to explore over the next three months ways to optirnise it's plans in the Russian Far East regio~and then meet again to review final proposals wigh BATCF. BATCF at this stage, would prefer to separate the domestic market operation from the export business,but remain open to aIternative proposals based on the final conclusions of the BATCo investigations. In the interim neither organisation will set up permanent offices,as the optimum structure remains to be defined. U3
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m ('~F"J f O ..f+.,~ a~. L ,I¢,,/... XU'e-'] "~-"'W -+rt,m'o- • ~.,-,~,,/ "'e..,~ ~'I~, - .~..,..,~-~,~ .~ i ++"I
Page 188: 0500045915
F~ ~, ~~. ~-~ ~. ~~ I, .~.~. ~" ,I~, ~jn ¢:D
Page 189: 0500045916
To: BRITISH-AlVlERICAN TOBACCO COMPANY LIMITED Date: FACSIMILE I HANS TOMAT From: Company: BAT Hamburg Phone Number:. . .,.., Fax No: 010 4940 4151 3231 Fax No: 0784 448652 03/03/95 Page; To Follow: Comments: PATRICK O'KEEFFE Dear Hans, As promised, I attach a proposal for the dra~ Agenda. Please feel free of course to amend as you feel necessary. Both Paul and myself are looking forward to seeing you on Wednesday 8th March. ~est Res~,/ /2d¢ Copy: P.N. Adams bffLLBA~fK I~IOWLEGREEN STALVES MIDDLESEX TWI8 IDY A ML%mr.~ o~nczBAT L','DUYrRI~GaocI" I.'~coaPo~.~l~ Lo.'¢Do.~'No. 74974 t.n cD t.~ amslt
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MEETING ON RUSSIAN FAR EAST HAMBURG 8TH MARCH 1995 AGENDA Roles and responm'bilities of BATCF/BATCo Update on latest developments in Russia All BATCF 3. Update on APRBU progress to date BATCo 4. Sourcing and Banderoles All 5. Brand Portfolio . Planning and control procedures All All 7. Pricing strategy All . Communication Strategy 9. A.O.B. All ¢:D {:D ¢Jl
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B. A.T. (UK AND EXPORT) LIMITED ( Replrc..entaciv,~ O[fic~[b 15 February 1995 Not~ to Paul Adams ~.,~,.~, cc Patrick O'Keeffe 2! 1995 Subiect: East of the l~ral~/Far East Russia - ITCo Brands ~'% As discussed, I enclose a photograph demonstrating activity by ITCo in FE ~ ~ @ (Vladivostok). ~,. ~ L .tl Classic was in a low level of distribution (5%) during my visit. Capstan not currentl'~~'" ~ " available in Vladivostok, but readily so in Omsk. ~ it was reported that ITCo management had recently visited the cities of ",~ Also, Khabarovsk, and Vl~livosmk. Grateful for any feedback. Regards NeU Love~ Encl. 300 BeAcx ROAD. #34-04 Tel Co~couss~. $1,'¢o^t~og£ 0719. FAcst~alt,F,: Z973596 TELZPHONE: 2985550 A Me~n Or. THe BAT I.~Dus'rRI~ Gaoue L'~PtA'r¢.o ltq I.~oo~ No T4974 t3"l QO
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616~t~000~;
Page 193: 0500045920
TO: BATCO Directors c.c. B.D. Brsml~ "~ !~"~'~J~'~ P.N.A. ,ta FEe ms5 End-Msrkat I~swa~hlm~an Anached, for h~omu~on, is an ~ bmzkdowu of~ ~'l~h~ ac~ou BAT Tobacco, as alp'eed by the Tobacco StratelD, Group. Tlds liz replaces the M~y 1994 5sc The a,rtached document L'uu also been sent to in BATCo I.'IO senior managers. GJ. Burgess 20~h February, 1995 B.~ No1209 t,n ,,.O r~ o
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OPERATING GROUP COUNTRY/MARKET RESpON51rBILITIES FOR pe AND DF PRODUCT : FEBRUARY 199S EUROPE (BATCo = J Rembiszewski) Opendq Orow Open,xi~ Group Opmwl~ Gn~p Respon~l~giz7 for gespon~'oili~ for l~po~y for Albania BATCF Andorn BATCo BATCF Azores BATCo Bdarus BATCF Bdi~un/Luxembourg BATCo Bosnia HerceSovina BATCT Bul!pu-iam BATCo Canary Islands BATCo Channel IsL (Jersey, Guernsey, Aidemey) BATCo Cmaua BATCF Cyprus (C, Teek)CO BATCo Cyprus (Turkish) BATCo Czechlands BATCF Denmark BATCo Estonia BATCo Faroe Islands BATCo Finland BATCo France BATCo Germany BATCF Gibraltar BATCo Greece BATCF Greenland B&W Hungary BATCo Iceland B&W Ireland BATCo Italy BATCF Kossova BATCF Latvia BATCo Liechtenstein BATCo Lithuania BATCo Macedonia BATCF Madeira BATCo Malta BATCo Monaco BATCo Montenegro BATCF Nethedands BATCo BATCF BATCF BATCo BATCo BATCF BATCF BATCo BATCo BATCF BATCF BATCo BATCo BATCF BATCF BATCF BATCF BATCo BATCo BATCo BATCo BATCF BATCF BATCo BATCo BATCo BATCo BATCF BATCF BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCF BATCF BATCo BATCo BATCF BATCF B&W B&W BATCo BATCo BkW B&W BATCo BATCo BATCF BATCF BATCF BATCF BATCo BATCo BATCo BATCo BATCo BATCo BATCF BATCF BATCo BATCo BATCo BATCo BATCo BATCo BATCF BATCF BATCo BATCo C~ ~O PO
Page 195: 0500045922
EUROPE (condnued) O~r~i.g C-toup O~umg Oro.p O~.~ Group R~p~nsibili~ for P.esponsibili~ for Respom~i1~y for Nonvay BATCo BATCo BATCo Pohu~l BATt'T BATCir BATCF Pormpi BATCo BATCo BATCo Romania(') BATCo BATCF BATCF BATCoO) BATCF/BATC~ BATCo/BATCI~) San l~u'ino BATCP BATCP BA'I'CP S~o~ BATCF BATCF BATCF Slov~ B ATCP BATt'7 BATCP Sb~n~ BATCF BATCF BATCF SF~n BATCo BATCo BATCo Sweden BATCo BATCo BATCo Swir.z~'~nd BATCo BATCo BATCo UK BATCo BATCo BATCo Ukn~¢ BATCF BATCF BATCF oq~m ~ be tha topombi~ of L,~.TC.. t'JJB&W, flnq~ iu linl~ ~ I~staL v.ll b~ mlxmibk ~r DP ¢q~m fn~ Cyix~ m L~mL O~.mnm:o RBU u ~ ~ invamue~ sad k~l bands. ('~Yur imparts of'inus'a~msul bnmds BATCF is ruspmsst'ble 'West of Ore Urals' ~ BAT'Co (Asia PucifSc RBU) is repomn'ble Fast of the Uml¢. tn O o O (oi ~o
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OPERATING GROUP COUNTRY/MARKET RE~KPONSmILI'FYES FOR DP AND DV PRODUCT : FEBRUARy 199~ (BATCo = N Dsvis) Openu~ Croup Opmans Croup Ope-m~ Omup Respo~'li~ for Responst~lit~ for P.mpomibilie/for ~ I~y=F.as Algeria BATCo BATCo BATCo Anirola BATCo BATCo BATCo Be~n BATCo BATCo BATCo Bbu~n BATCh" BATCom BATCo~ Botswana BATCo BATCo BATCo Fuo BATCo BATCo BATCo Burundi BATCo BATCo BATCo C. A~.an P, epublic BATCo BATCo BATCo Cameroun BATCo BATCo BATCo Cape Verde Islands BATCo BATCo BATCo Chad BATCo BATCo BATCo Congo BATCo BATCo BATCo Djibouu BATCo BATCo BATCo EgFpt BATCo BATCo BATCo Equatorial Guinea BATCo BATCo BATCo Erkrea BATCo BATCo BATCo EU~iopia BATCo BATCo BATCo Gabon BATCo BATCo BATCo G~bia BATCo BATCo BATCo Ghana BATCo BATCo BATCo C, uine~ BATCo BATCo BATCo Guinea-Bissa~ BATCo BATCo BATCo India BATCo BATCo BATCo Ivory Co~t BATCo BATCo BATCo Kenya BATCo BATCo BATCo L~otho BATCo BATCo BATCo Liberia BATCo BATCo BATCo L~bya BATCo BATCo BATCo Madagascar BATCo BATCo BATCo Mskwi BATCo BATCo BATCo BATCo BATCo BATCo Mauritania BATCo BATCo BATCo Mauritius BATCo BATCo BATCo Mayoae Comores BATCo BATCo BATCo Morocco BATCo BATCo BATCo Mozambique BATCo BATCo BATCo NL, m'oia BATCo BATCo BATCo Nepal BATCo BATCo BATCo l~ger BATCo BATCo BATCo Nigeria BATCo BATCo BATCo C~ C~
Page 197: 0500045924
AFRIC~[A (continued) Oper~in$ Group Responsibility for Investment l~.mon BATCo Rwanda BATCo Sao Tome & Pnndpe BATCo Sene~ BATCo Seychelles BATCo Sierra Leone BATCo Somalia BATCo Sou'.h Afi'ica BATCo St Helena BATCo Sudan BATCo Swa,~snd BATCo Tanzania BATCo -- Toso BATCo Tunisia BATCo Uganda BATCo Zah'e BATCo Zambia BATCo Z/mbabwe BATCo ~F mmqed ~..~u Psc~c R.BU Oper~n$ C.~oup P,,,npom'bility for BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo Opmans C.'oup F, zspon~Ui~ for Dz~X.F.zzs BATCo • BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo {..n O ,,,,o
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OP£RATI~G GROUP COU'N'I'RY/MARKET R~SPONSlBILFFIES FOR DP AND DF PRODUCT : FEBRUA1RY 199~ ASIA PACTIqC (BATCo - P N Adams) £.wanu~Ab~au~z Opmuans croup Opmans C, mup opmu~s C, roup Z~ispomibility for It.mpomibiZity for P.mpomg~'lip/for ZZZ.V.am~ Anum~ca BATCo Auszndiz BATCo Bhuum BATCom Bnmei BATCo BATCo Caroline Islands B&W China BATCo Cocos Islands BATCo Cook IslandsBATCo Ea~ Samoa (USA) B&W F[ji Islands BATCo French Oceania BATCo Guam B&W Hong Kong BATCo Indonesia BATCo Japan B&W KJribazi Islands (Gilber~ Phoenix & Banaba (Ocean) Islands) BATCo L~os BATCo Line IslandsB&W biaczo BATCo Malaysia BATCo Marshall Islands B&W Mongolia BATCo Myanmar BATCo Nauru BATCo New CaJedonia BATCo New Zealand BATCo Norfolk Island BATCo North Korea BATCo Nonhero l~riana Isl. B&W Pspus New C-u/nea BATCo Philippines B&W Pitczirn Island BATCo Russia BATCoO) Singapore BATCo BATCo BATCo BATCo BATCo BATCom BATCom BATCo BATCo BATCo BATCo B,kW BdkW BATCo BATCo BATCo BATCo BATCo BATCo B,kW BkW BATCo BATCo BATCo BATCo B&W BkW BATCo BATCo BATCo BATCo B&W B&W BATCo BATCo BATCo BATCo B, kW BkW BATCo BATCo BATCo BATCo B~W BkW BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo B&W B&W BATCo BATCo B&W BATCo BATCo BATCo BATCF/BATCo(') BATCF/BATCo~ BATCo BATCo
Page 199: 0500045926
ASIA, PACIT'IC (continued) Op~'atin$ Group Rerponsibili~ for Invesmwnt o~s on,up P.a~x~ili~ for O~ Otoup Solomon Islands BATCo BATCo BATCo South Korea B& W B&W B~W Tai~ BATCo BATCo BATCo ~d BATCo BATCo BATCo Tonga Islands BATCo BATCo BATCo Tuvuiu BATCo BATCo BATCo Vamuma BATCo BATCo BATCo ~v~uuun BATCo BATCo BATCo Wake IsJancls B&W B&W B&W Wadis & Fumna Isl. BATCo BATCo BATCo West Samoa (Brmsh) BATCo BATCo BATCo t,.rt u-t o~,
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OPERATING GROUP COUNTRY/MARK~_T RESPONSIIII.FFIES FOR DP A~) DF PRODUCT : FEBRUARY 1995 LATIN AMERICA/CARIBBEAN/NORTH AMERICA 01ATCo = K S l~nt) Opm'm~l Group l~u~y for ln~mmm opmu~ c~up Itmpom'oilip; for OpenuinS Group ~pon~ for Amisua BATCo BATCo Argentina BATCo BATCo Bahamas BATCo BATCo Barbados BATCo BATC~ Belize BATCo BATCo Be~nuda BATCo BATCo Bofiv~ BATCo BATCo Bnu~l Souza Cruz Sou~ Cruz Canada ITL ITL Cayman Islands BATCo BATCo Ch~e BATCo BATCo Colombia BATCo BATCo Costa Pica BATCo BATCo Cuba Sou,'- Cr, Lz So~m Cruz Dominica BATCo BATCo Dom/nican Kepublic BATCo BATCo Ecuador BATCo BATCo El Salvador BATCo BATCo Falkland Islands BATCo BATCo Grenada BATCo BATCo C.~uldeloupe BATCo BATCo Guatemala BATCo BATCo Cmyana BATCo BATCo I-lai~ BATCo BATCo Honduras BATCo BATCo Iam~ica BATCo BATCo Martinique BATCo BATCo Mexico B~kW B&W Montsermt BATCo BATCo Netherlands Antilles BATCo BATCo l~r.ara~a BATCo BATCo Panama BATCo BATCo Panama Canal Zone BATCo BATCo Pm~juay BATCo BATCo Peru BATCo BATCo Puerto Pico B&W B&:W St Kitts BATCo BATCo St Lucia BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo Souza Cmz/BATCo o) ITL O~W ~r B~W proau~) BATCo BATCo BATCo BATCo SouzaCruz BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo BATCo B&W BATCo BATCo BATCo BATCo BATCo BATCo BATCo B&W BATCo BATCo ,,.O
Page 201: 0500045928
LA'I'IN AIVIE]~LI(~AJCARTBBEAN/NORTIB AMERICA (continued) Operrins Group P.~sponsibmzy t'or Investment Openws Group R.a~'bgi~ for DZ.F, ZIZSaZ St V'u~'ent BATCo Suriname BATCo Torzola BATCo Trin/dad BATCo Turks & Caicos Ir~uzds BATCo Uruguay BATCo US B&W Group ~ror ]ZtzTum US v'zrZm I.dznds ~ZW Vemm~a BATCo V'u~in Island British BATCo BATCo BATCo BATCo BATCo BATCo BAI"Co BATCo BATCo BATCo BATCo BATCo BATCo l~kW ~w(rrL~ITL B&W B&W BATCo BATCo BATCo BATCo (I) Soua Cr~ Ls n~poible for szlm thxgellh Zhc ~zx ~e~ ouzla ~r ~ Ixlzd~ w/th ~o ~b~ ~ ~ ~ the'duty free ouz~. ~rl c jl ~O
Page 202: 0500045929
OPERATING (~ROUP COUNTRY/MARKET RESI~NSFSIT.rTTES FOR ~)p AND DF PRODUCT : FI~BRUARY l~)~ CALMESCO (BATCo - A C Joh~ton) Opm'min8 Croup Operm~nB Oroup Opm'mi~ Group P, mpoembility for ~ for ~ for Investment ~ BATCo BATCo BATCo Arm~ao~ BATCo BATCF B&TCF Aze~aij~u~) BATC0 BATCF BATCF B~ BATCo BATCo BATCo Bm~Shu~h BATCo BATCo BATCo Oeor$it(" BATCo BATCF BATCF Iran BATCo BATCF BATCF Iraq BATCo BATCo BATCo Israg B&W B&W B&W 3ordan BATCo BATCo BATCo Kazakhst~ BATCo BATCF BATCF KirBizstan (KJr!#izia)o) BATCo BATCF BATCF Kuwait BATCo BATCo BATCo Lebanon BATCo B&Wr~ B&W Maldive Islands BATCo BATCo BATCo MoldovaO~ BATCo BATCF BATCF Ormm BATCo BATCo BATCo PakS.g.an BATCo BATCo BATCo Qatar BATCo BATCo BATCo BATCoO) BATCF/BATCoO~ BATCF/BATCo~') Saudi Arabia BATCo BATCo BATCo Sri I.anka BATCo BATCo BATCo Syria BATCo B&W~-) B&W Tajildstan~I~ BATCo BATCF BATCF Turkey BATCo BATCo BATCo Turkrnenistan~, BATCo BATCF BATCF UAE BATCo BATCo BATCo Uzbekistan BATCo BATCo BATCo Yemen (Kepublic of) BATCo BATCo BATCo O)BATCF "~1 ~t ~ fro' marthiq fm mvamett ~t/ts, bm if m itt~mmm~t it ~ buth the m~ ~ ,..'tit ~ 111 t~mmtb~ty Qf BAT¢~ C'-qk1~ & Williamsom ,~I cma~m m ~ m 0w Levlmt umil s joim vmnul milj~ be pomMe. ~ ~ ~ ~ mvt~mttt ~t ~lmaS wiU witch to BATCo. ~ ~U i~ mqmmb~ f~ ~,tmmm raN/Ioc~ brudt ~F~ ~ a imm.wio~ brm~ BATCF m mspomib~ ~v~ a m~ Umif ~i ~TCo (Aim Pacific RB~T) m mmlmmmb~ O O O ~D ,,O
Page 203: 0500045930
Ead market responsibilities " An updated Est of end market responsibilities.'~'~.- incorporating the chanSes IFeed by the TSG to the oriliin~ list published m Iv~y t994,~I'~' was tFeed. As t result of the new import reiime in l~ssia from 1/i/95, BATCo and BATCF should tgree a proposal to repltce footnote (3). referring to P.ussiz. (.n C~ J~ t.n ,,O C~
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BRITISH-AMERICAN TOBACCO COMPANY LI~IITED i TO: P.N.ADAMS CC: FROM: P.C.O' KEEFFE DATE: 28 FebruaD" 1995 SUBJECT: EAST OF THE URALS Thank you for your comments on Neff • "-._ notes Can I clari~." that my understanding is tha: !n being given "East of the Urals"our first priority, was to dominate the local Russian Far East market with whatever portfolio of brands would best achieve that objective. The seconda~" objective was to seek incremental export routings for China. On the above basis therefore Hot[.vv.ood ".~ culde,.er--- ::~~ advama~es: a)lt is che~p.ye: one of'he group wc r:~wide :rademazks.and !s already going into Western R'.'ssia b)We could do a fz'.'our for Souza C=z.ge::i.ng Hoii'-~,'ood into "Asia".with commensur~-t~ Kudos f~r APRBU.This ,.~ :=!d not exclu/e doing Viceroy as well for objective two. Therefore we would have good news for EATC~.Browr. & Wil!iamson and Souza ~.,k'l.. ,.-" "3'., Cruz, so anv small difficulties with BATCF ".voul~ 5e ~..~e.- to overcome. Perhaps I am being too "Group Conscious' '~ " L-# ~-~" ~. ~C~- L"~--a- t,~,, ~,~--''~- ,.~.~.h;' "~,~y eLu :' ¢" C~ Y . e~-~J~'r" : • ~ ~1,~-" I'~'" - t ~ .~" ~,/~'~ ' I _ ,. ¢L,,~,, "" c" " • / . ~ v ,,~i~,.~.~,v ~, " ~v~'l ''b " h~.~ ~" . ~-~" . t ~1~'c - ~.~. r,":'~ ~,. ~ ' ~ _:,,1 ~ ~."~ .. '" x .¢tu-'~ .~t mL~ANK'--'r~'" K.','~WI.E c;Rr r.~t STAIN ~'$ ~X "TW'IS"~ ' L. t,~-~/" , -.: tl~,..,<d ~ ~.X,.~ ~ , - .-, ,--- ' ~-/.i~ "'~ L" • , ,[ ~- ~'=,_ ".. ,.;.., t ~z,.S...) 3 ;'I~..~-~t ~ L ~'~ ' '~.," .~._,'~" .-'" 0 CD C~ ',D
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Notes on Visit to Far East Russia- Khabarovsk, Vladivostok. 21st. 27th February 1995 11 Visit Objectives: p.N.A.7,,,,?- ;/~ FEB 199~ i) To assess, firs: .",and, potential for BATCo brands in this regionand the mechanics for exploiting those opportunities, particularly ~.iesed initially towards trade m=#keting andS[so assessing brand marketing opportunities. [/ I . ~.". i To verify the work being undertaken by ADD in this region• t~ 2) Market Environment ~ t,,~d'- ~ ¢~, ~a.u~,, k,~ i) General ~) e~.-v- ~ Themzdertaken,fOllowingbyS."~mary,~DD. will be ezpanded in some detail with the separate macro study currendy being ~, . Population of V'..'i'~os:ok app::*- 700,000• K~abercvsk 600,000. Vladivostok is considered :o be the .e...¢- ~.~'~.- most dove ape.~ :!ty anywhere a.~st of the Urals, although severe infra.structural shortcomings e~t. ~,~ ,---.~ ~-- A similar equiva;ant in China mi;nt currently ~.e Shenyang, but V1adivostok's development in the next V"~ . 2/3 years will fail ~ehind that cf Shenyang. . Vladivostok ais: ".=.oresents in.-" fity with tna highest disposable income East of the Urals, with Khabarovsk ne,:. (~ ~: ~,1 ~'tl" l/ . Activities in Vl.'-di'~.-s1.~k will .-.=.ed to be conducted ~th caution, given unsavoury elements, which have grown ra:.:l~' s,nce the ¢;:nball'mg and consecuent unemployment of large numbers of :he ~ C/vv'''"" previous Soviet 'i:-v'v. Tne test-: 'or caoitaiism has engendered widespread crime. • Current wee:;.'.-" :.~nditions iim~t market activity. Weamer variation is wide. Currently •25C. in summer up :c -7.CC. Heatin9 -:no cooling ..aoabilizies are limited given the regions severely limited access ~o f,.,=t. ~,,n:cn must ~,e s:urced from further west. - Bureaucracy ,s :!f-= and o~en :; widespread ao~e, with laws changing almost weekly, an: widespread in t~.':_ re,.afion. • Capital utiiisa:::n is incredib:v '.ow, with so much high vague machinery decaying. .Tim, nl=~-ti~ ai'zit-~ermmdacwm i= I~ with excellent ~tribLrdon, merchanoising operations in piac=.. With an absence of any other concerted local effort by any international fmcg company, inck::;i:.; toV.acco, _till. Opl~ql exists foe maldl~j an ingect. To that end, given Mars undoubted st:'ngeh, iddilo~.~~p~hmml~tlffezpio~through ia~ net~works. More study neaps to take place into their operation, whirr has included a variety of numerous ezpats from Australia and US, as they currently define the benchmark ideal. 9 ii) Tobacco- G~..-.erai This summary, precedes the v,~cer in-depth analysis being conducted by ADO. -~'ulually all stoci~ cuntndy origfltams ex w~ mostly ex Moscow, via trucks, operated by Azerbaijanis, A.=enian Jews etc. 6~ma=toc~ not,zi~y Hi-Lira, amd ~K breeds had been brought in via Nakhodldta, bu~ relatively small q=a,ides. • im~orts in the 2 cites represent appmx 50~k of al~ whito cigaxitt~r sdd. This reduc~ considerably in rural areas. Although diffic:it to diermina in a brief visit, it is e=rtimated that t~impert market could be worth up to 120 millions par month in Prime~skyfK]'mberovsk Krais (Provinc=~. • The current duty system enoourages stock ex west. Duty in Moscow, Yeketerinburg, and St Petersbur9 [where the tikes of church funds can obtain some ~pen=afion) mostly attract a lower duty, based on 188?. excise regulations. Duty in FE Russia is applied on higher 1994 rates. The duty differential mc:e t~an offse!s transport cos~s. A meeting on 13 Feb should c]arify these issues. i L,n Lrl I%) ~,,, -Z=.. ='z,.~ ,~.,.~,,,.~,,t-,? f
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- On 1 March 1995, a now sytem of banderoles for all imports is due to be applied and the tax/duty structure is likety to equaiise then throughout the country. This shouid make import into FE Russia equally attractive. • Ueclt- TV tobacco advartfln'ng ovaibtda via 2 local stations. • No duty free shops in anmidence - op~rt~ity. iii) Tobacco. Comoethion • There is no obvious AlL or outdoor support acdvity for any brand in the market. The major brands are in bold print. • R JR is the leader, with Camel (80% {5sm), Winston, (805 zism) Manna (70% cFism}and to a lesser degree Salem, (50% ¢ist]z) with More, Monte Coda also available (ea~ 155 (istzl). • PM! lead brand is Bond 5'tstat, the highest vo(ume import in the region, priced at Roub~ t500 with 805 ~tn'budon. Mzrffzoro Rod KS box with apprex 35% ¢rzstribudon in Vta£irmstok, idthough better in ~abarevsk [60%). Marlboro lights XS is in yen/narrow ~t~'b~on (appmx 55). SporadTc distriburion of Congress and L~,M in Vladiyostok. • JT] brands lead with Hi-L|ta (asp. VlaCivustok) as their main entry, but with significant offtake. JT1 were believed to be stationing a man in Vladivostok, and it was reported that Cabin was a possible entry. Wave was aisn avai]ab!e • Xothmans entries at law ~tn~nudon induded are RK$, Dunhili [nt, Dunhiil Menthol lnt. Rothmans Int. Dallas. Saint Durnont. Psi[ Mall (Rothmans), Royals 120's. Other imports with low distribution. State l Joe, Pierre Card]n. Wave, Gold Dollar• Golden American 25's, Blue Ribbon, Wines, Montana. • Other cheap impels included Rodolpi (aJmusz 1G~% ~stfiburionl, Tu134, Stewardess all ,=x 5ulgaria• • Very few regionat ~rands, iDeal production, could ~:e identified. All iccel brands appeared to be from Waszem regions. • Capstan and Classic were in evidence as was a ~ow ieve] o~ s;ic~,ar:.ng suoport (What is ITC's role in FE Russia?} iv) Tobacco- Own Erands a) SE55S SEFK was in apprex 15% ~tribudon at retail in Vladivostok and t0% in Khaberevsk. Pricing was aimust always alongside Marlboro KS box ai~ somsldmes at a premium. SEFK codes were SCMO, SCET (May '94). SE 1at was in 85 ~tzToul~on inthe oudets visited in Vladivostok, with offtake reported higher than SEFK. Recall of the brand was encouraging, generated from advertising ax Moscow. ]~) Xent Boz KS had approz 15% levet of ret~ ~tribution, but in very low stock quantities. Pricing was 5- 10% below Marlboro KS box. ConsLrner/trade interest was apathetic. c ) Luci¢y Strike - the best distributed BAT brand at approx 4Q% with reran prices often at parity with MarLboro, but more general]y 10% below. Posidve interest in the brand and good recall. Codes were G3,1.3,H3. d) JP$ Both KS and International avaliable at 25% ~stributJon. Positive offtake with retail prices atparwith Lucky Strike. Codes seen were all FSAP. [Russia?} e) Pail Mall In ['=ited e~dence indexing at approx 70% on Marlboro. f) Viceroy O J~ ',,0 r~
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KS Boz liras::: :.s'ributi;n :ode V3H, Y3H. source? f} Hend Win:~,~-.-.s Cafs Creme SpeciaLs in one outlet. 3) AO0 Paris ,~ ;!osoow. Sasha Dusk: :~::elled his agreed visit, leaving Martin Oanie[s and NAL to start irom scratch from making conta::s .n the re~ien. The ]evel of support that Oaniets has received appears to be minimal, eepecia]]y in :.'.-- -'tea of duty interpretation. Dorskrs contacts from his previous visit were not passed on. NAL has s:.-.:.~ written to ADD outlining his concerns, and a hold put on AOD's second consdtancy instalment pa;.-..=nt. Denials is ais: !:':strated by AOO's support. He will now concentrate on completing the macro stu:'y being unde~aL-'~, and setting up for Project Tundra, in the target cities. A dear indi:'::" from AOO on their future role will be needed before commitments are made. Neve~hei~ss =,'-~Jn Dan;ass was pro.active in progressing opportunities- Denials nay have a sn:". term cons:f:.=-:, .ore ,=, =,,T outside of ADD, to complement our expat presence in the early sta.:as. 4) BAT Reor~','.:ation in FE Russia - Vlaoivostok -.'.'. :.'.'Jd be t,'~e BAT base. • Communicz::-s. althouC.h often indeterminate, are better in V]arfivostok than elsewhere. - Provioing _-.= .=.-':at exer~..ses responsibility, he should not be in danger. Incumbent must exarc[s-: grea~ ;are ~:: ".=z:onsi~i :v and move cioze socially amongst the small group of e~atria.'.es the.: z:~ there. He .'.e-'_ :~ ": re ,rnai= :3w key at all times. • Har=nio :=.-..:; .s higher ~nan Moscow by approx 30% as a guide, so ] was told. - Incumban: ,~:.:': ooera~=. on visi~ ~f, sas, in the short :e~, as done by other Int c,~mpanies. - The eve~:':_= "::ruben: .-no,..,ld: • :..~~.~orzed ~y a Russian interpreter cure driver. • H'~ c~icle sho,3d be 4WD, probably Toyota Landc~ser. Habitat housepacL can be imc:.-:ed ,,~.,--- .~lr if nec=...~.sarT. • L'.= ~:.,-n, is a tnp out to HK,'Seod every 4-6 weeks, if nothing eLse but ~o renew visas. • ~..z :~=-d within ='-he Viad Motor Inn I Captain Cook compJes. • 0,'.:~ :he incumbent is in situ, e visit from group security is recommended. - It is sucg-~:z: :nat 2 ccntract merchancEsers be recited. Careful screening witl be necessary. - There is :.: -;-:: to se.: '-'0 any legat entity here in the short term. Any employees would bp contrac:ed -" ~: ;vorsz :aid on a cash basis. There is no point establishing any legal entity as cle=.: rules and re.'.:~::ons do not r~ally ezJst. • All operant..: :.~sh will need to be carefully deposited in a safe. 5} Conci~s!:'~: • Vladivos;;f. ~-:uld be -:he strategic focus of any initial BAT entry. It shoutd be the base from whi:h BAT opera~:=.s should be managed through a representative office. - Project T~:':'~ will roll out from Vlao%ostok in mid/late April followed by ~abarovsk, Ornsk, Tomsk, Novcs-~i:sk. These dries will be the major initial focus. • We shou]~ '::::s on SEE-=5 (FTK & int) and a low price brand, either Hollywood, or Viceroy. How.=ver, pricing woE: "eed to be at parity with those into Moscow on a CIF Vladivoztekl No~odkhal Vostochny ~:-s-s. A USIg, possibly Lucky Strike, world be added in phase 2. - To sut;p~ :':i=.ct Tun'.'ra, Outdoor signage will be aggressively explored through BATES. 0 0 L~q
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5) NAL Acdon Points • writs to ADO of disappoinm'~nt at level of commitment - arrange induction visit to She,yang for Martin Denials • arrange return visit in eady March • contact Chris Jacques, BATES to further initial discussions on exploring opport~ties in the region, asp given there likely involvement with Goodman Fields Foods, Australia. Currendy BATES media buys are directed through Zenith for the whole of Russia, which would include Mars products. . revisit applicable pricing for SE555 and tow price brand, probably Hollywood. Propose price structures, and get Staines to confirm to interested parties. • Project Tundra. Confirm storage venue f quantities l items for merchandising materials (SE555 post Regal). • Further check FESCO as ships store customer, as possibJe importer to Vladivostok. • Arrange for post Regal SEFg {customer coded), SE International and A N O~er brand to be positioned in Pusan to quickly respond to import opportJnities. • Clarify duty regime in West vs East- current and post March 1995. • Confirm ETA of expat incumbent and arrange induction programme. • Arrange meeting Mars amangement during next visiL • Contact Algy Thomas to arrange visit. • NAL to contact IJDG on business arangements in tJ',e region • Next visit planned 18-19 March. (.n ¢D C) J~ (.jr'l
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Appendix: Contact Ust Main contacts made for follow-uo: • Dan South, ~ranch Manager. Russian Far East. SEA.LAND Service Int'l, Vostocnny Port, Wrangel.1, Nakhodkha, Russia 692900. Int'l tel/fax: [7-504)9152210, Local tel/fax: [7-42366) 45.670, P~tt tel: (7-42366)52-437. Shipping service, useful for use of Trans.Siberian railway, current tobacco activity, and oeneraJly how imports are working. • Yud Shinkovsky, Director, Truezask Pry. Ltd/ Eden Captain Cook, Near ~ad Motor Inn, Vladivostok, tel: 61.2-3875107 fax: 61.2 36.,,6112 Possible distributor } importer, currenUy exclusive distributor for Russia FE for Casdernaine XXXX (1994 volume 68 x 2Oft containers), also wines, $chweppes products (as AustraJia). Main shar~elder is Australian company, Truetask P'I'Y, New South Wales, through Bob .qteinburg.Will be fo]lowing up import data of cigarettes through Russia FE. Seemingly good connections with es:ablished, ai:.':ough currently immature, oistribution : merchandising network. - Levon A Akopyan, President, L.=von & Co, Vladivostok, 6g0041, 43, 9altiyska'.ca St, or Raiiv.-~y St, Chayka, Pacific OceanoloaicaJ Institute. Tel: (4232) 31-35-33/31-39-89, telffax::4232) 3 t-23-.:2. Main ~s[ributor lout of 4) for Mars products in Primorye region. Excellent ne¢wcrk and ~y ,~,: :~.a most prominendv ~!s'ributed and .~erchandised brands in the region. Possible ~'!~ with Project Tundra. '~ p .*'-l,'- £) Andrey Shuiga, Director, MVI _,.=.~ns.s In., 25, Pervomaiskaya, Khaoarovsx. ~.~0021, R.ss!a Tel: 7(4212] 344.-3~I; 3~6-121 ' 3-'F,-78,~ Faz: 7(~0901)600-091, 7(4212) 346.~'r;. Distributor for ~,Zers ,~roducts in K.',etJarovsk. again, most prominient brand. - Irina Iou, Daewoo Corporation "3 DzerzJnins~y St, Room 710, ~abarovsk. Talc 388855, 3Eicn9, Fax: 331229. Currently impon!ng and distribut~,,:,g Korean fmcg it=.ms and some second raze ;i:~or labels. • John Wood, Genera/Manager, Courtaulds Fesco Lid, 7a Morozova .S~reet, V]a:i,;nstok 69C.'~.=, R=sia. TeE~fax Tel/fax : (04232} 219-465. NZ'r who reports into Coutaul~ HongEang. Useful with con[acts leg Fesco) an'~ condiLions ,~:r =xpats. Contacts to HK ~ased FESCO worthy of follow.up. Currently buying liquor and :obacco as a s:~,ips store customer, and 8&HSF ~code FFMO 6cB7) was available in FESCO's hotel :he Yersail;as, in Vladivostok. • Abraham Gin, kmerican 81obus Corp, Cbayka. Involved in a variety of projects from importing and distribution, cash and carry wholesaling,:: turnkey projects. Not pro.oared to deal with tobacco products. (../'1 ¢J'l
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BRITISH-AMERICAN TOBACCO COMPANY LIMITED I TO: P.N. Adams FROM: P.C. O'Xeeffe DATE: 13 January 1995 SUBJECT: East of the Urals I|ll P.N.A. lS JAN 1995 I attach the ~_mutes of the last "East ofthe Urals" meeting, and the first market repor~ from Omsk. MILLBANK KNOWI, E GREEN $TAINES MIDDLESEX TWI$ IDY .1~ ,,.0 -,,,4.
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.~.-_ ~0 i:~tc B.A.T (U.K. and Export) Limited - tata-P, cm¢ ~otm ~ItmlL~CA'I'R'I OIPNflb F.&CSLMILE TRANSMISSION Nura,~ $¢d~ Do:aid - ADD P~i8 I.'rom Martin D~i©ls ADD do 44. 8| 466 5067 Palrick fYKeeffe - BATCo Staiaes Tv,,, WulE~¢~ do BATCo $~ 9 Samutry 1995 i I No. of P~ce Nell Loveu [8 Musap: I eat Jose ¢Qpiee of notes relad.u8 to ot¢ met'tin8 o~ 2 t December 1994. I~yo~ l-~ve any querica~ FlCU¢ rcvcr¢ u ~oo u po~le. ] ~ouk t'orv, ud ~o ~ece~.-i~ demib concemlnS viu.~ for Ivan an¢~ myself to be collected in London. 0 0 0 ~0 ~o
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Meefins whh ADD ~P~r~s - R~.IT~nT, ,~ion ~oln~ BATCo Nel Loveu; lw~'t Wulffaen ADD Ksen/a Norall Sasht Man~Dmdels I) The ~je~ve ofthil i~dviw, named ~ Tundra, wu o~: To 8tia ~t|~ ~po= ~bE~,7 md di.~bufio- cl~ for cl~umed llroup ~ATCo Inad.s h the domesd~ ma:km i~ the area Eut ~fthe Urda Frier to a=y comFetittve a,suult BAT bc~.v¢ tlm ~ m be an area of high potential and thcrc~r¢ the projcct is af~rdM & ~ d~ ofpdc~dcy by I/~ BATCo boerd. BATCo' s ~en¢ to this initia~'e was o.di~d ,-d edu~ in in plan to b~ cx~,sm~e@) ~ th~ ~, h:v~t ~n c~mnmu~adc~ and ,r~'oil~/Fopium~ md th~ ~.no~a( ~o~ of U~ Hu~, d~e BAT ludus~-~ ~oup tob~¢~:o chignon to this project ~ pba was ¢o pdoddse SFJ55 ~ in ~ hi#z ~ sqimem (25oo Roubles). pos~y X~,. ii~toa htSe mid Fr~e ~ ( ] soo ltaebtm), ~ Vt~eroy or PallM~ ;" ~ hw~d ]:dee ;~pe~t sesmeat (1000 P, aubtes). NAL poi~ted out tha~ sevenl avc~cs ~or explotfiu~ tl~ tr~ were bei~ exFLored apart from the approach to ADD #rod bued on petgomumce a~st qu~[e ob~ect~, dlstn'budon arrar.~ "7,'o~d be awl~ded. Z) ADD wou~d provide s r/nop~ of the pzmenmion on Siberia / Omsk from Mar~ Dan~cls by mid lan~arT~ th~ shoed edso [r, ekuie some bew.ksround on ADD's c~n~s for ~AL to i~0duce ADD to scdor menasemcnt ~n HQ. It wss noted that SES~;5 ~ has ~, erco, ns~j levd of recall in Omsk, ma~ 2) Thc inhbJ me~~8 activity is ~;@ Frioriry. Wcathcc coadidoas prechule azxy effe~., impternea~tia~ 1~ before April. ht.~ 199S v~ now beexrme the ~zSet d=e for this z~v'ky to ¢,om~u=u;c. Sv~ action plans ts £'oltows: - ?~DD to F~. vide q~ote.ti~ for the provision of 4 mer~ teams o£5/6 p¢o~lc to cover the fi~liowinS c/c~cs coacarre~y:. Oa~k, Novo~:~sk, Vladivostok, Khabarovsk. A tarot of 1200 outlets per c~y wu agreed to gaia brand domhutncc U1 O J~ U'i
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over a Fctiod o~1 month. Such quot.',tions will Led to incbJde all eleumum ofche o[:~'rafica inciudlns Ct'uisp~'c ofpccpIa and mata~ k)d3,in~ si~ storaKc of' mammals..~ay eSrccd ~'~vi~T ~ bo ~¢d by 4 BAT drive team [e.adc~ ~o bc appoizned. -NAL will source $cmeric mm~ ~rom BAT Chiuu rot SE555 and porously Kcu~. ADD ~ill need to ~ovidc dctaH: ofwh~re such~ ~ be ¢oa.~Sl~ed to stood Such mater.s should be ~ni pccmaacnt at best and ~o¢ hi~ value due ¢o pi~er~ abuse ¢~ - ADD ssreed ~a umur~ ~ all ckivc ccams had supp~ ot'$E55SPTK ~ la~ for Nll- ia to each oudct covered (~,;- pu~d=.w lx200) sad conm~ucd to tnmsporc t3~is st~,k over from ~w ~it were ne~m~u'y. ~) NAL will restaze applir..abl¢ CIF Vl~livostok / ~ Coast pr~a8 :o ADD for BAT brands. 4) Iflnt'raries a]zw~, p~-u~cd ~o ADD I ~ Dnniels for N,~,I.. and Ivan ~i~ ~o VI~Uv~oic, Khabaw,,~ ¢ommen¢~ 21~t Jan. ADD bav¢ ~p'ccd ~o obt~n vires ¢hnmsh london embauy. Lat¢~ news u~en~y ~'q~ed ~om ,~D. ~,Lmin Dirties h~ a~cd ~o am~o accommod~io~ Mes~ Dsa~ I Smha Do~ki ~1 accompuny Nt~IW d'~ ",'bit. ~) Martin Daz~ls w~II co~nu~ the macro sca'v~ for other d®fn~l key ~¢ics and w~'ll providc fcrwacd dz~s for ~rcse~a~on. Where poss'bl¢ pbc~os i ci~re~.e ~alal~s shou/d be used ~b~raz~ ~) N~L wilt ~e ¢~' 0,,,,,~ ~ ~ fi',:iSEt me:, ~ rl= Trans.- ~'b~ia~ railway =c.Nokhodld'm ~ ~llvostok. ~cs/nnd op¢~¢ inch a sm'vice. 7) Top liae iaductioa Fro~unm~ for Martin Dv.ui~ bcln~ arrayed. Commenced wi~ • ~t to S~u~mpton ~'cory 6/I/95. NAL 711~9~ I~$tn'bu¢ion: K.senia Norall & $ash~ Donkl, AT~O P~.~ ,~n Oaniels, ADD c/o PaUick O~ Iva,o. W,.dffaerc Ln C~ C~ 0 Ln C)
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FAX To: I~lr. ~ I.ovett ~1o: S5 ;[973690 From: Martin Omdeis ,Mo: 081 ,I.OZ 0454 ~ar mdi, i'~eme ~ u uyn~i~n of m~ IXam'mmon in ~ mlhe f~low~g fn. ~st r~md~, Iq~in Oznt4(s (.71 C~
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INITIAL REPORT - OMSK The following Findtc~s represent those dmived from my firfc 3 week per~ci in Or~k in Oer, ember 1994. The structure of the ixesenta~on is designed to brutally reflect the br/cf ~s OUtlined bY Mr. Andrew O'Regan In Ns fax of 12th August 1994. 1. Oemographics: Perhaps T~e first pertinent qum~tion to ~t~ fl~ ~llh~e & wt~t ~.~ ,e4beris ? Silaeria is r~ an admtnlstra'dve r~jian and therefore tends to be elefin~l by somewhat mote loo-~ely drawn geographic bounc~ries. Fr~iu~.~ howe~are it is ¢onve~i/mt '~a su~ Sib4.'~ int:o :3 d~cmt.e afe~, being: Western Sibyls: U~l~b - Y~lr~i river (l~rasnoy~) Eastern Siberia: Yesenet river- c;oas~l fo~¢hilfx Far East: ~Madtimo Torrkor~es) g~nchat~ Khabarov~, Pdrnorye, Sakhalin & It~uriie islands The mm of 5ibe~, as defin~ ~=ove, i= q~xo~ 1Z,5 rain square lans. To put thiS into ~ perspective, this is s grNter area than Nerth/vneri~ and W. Europe cem~ned. .e~nca ~l=~ia iS not an admi~strative entity, it is ~fqtcu~ to give ; dePmlttve pet~a~en ~iure, I~c it is approx. 40 miflir~r~ In very i~c~l terms, therefore, the population Sl~ of Europun Rus~ vs Sit~l~ ~s 2:~. (with Vnc ~at pop~tapx~ of ltussla being 148 nun.on). 0 0 0 m
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Nthough ch~e are over 1 O0 diluent indigenous & n~- ind~gemous groups in .~=~r~, their sc~uml numbers ar~ smatl and Rm c~rn~ SS% Qf the pop~tX~. ~uent~, nttion~tsm is not an ~ in SiliCa. Given such a mla~Jy =mall population =l:~ad over such a large =~, ~ ~ ~ then posed ~ to where -,~ ~u~ tct=ily locatect, In gener=l, r.he main ¢oncentr;;;lons of poputati= lie =tong the corridor of t:he Tran:r-Sil~=n rolhqT, wilt, after the LVats, braces = pmh ~lv~ Ek=t~-rlnburS, Om=~ Novo~birsk~ Krasna~k, frku~, U~an Llck=p Ch~, Khab=r~k Nakhcxlka. Omsk & Omsk Obl~st (Region): The population Of Omsk ~ is 1.35 m{n. The ~ of Omsk O~=s~ is approx. ?..$ m~ Although t~ resident- pop,~i=. Of Omsk Oblast ~s =~en =s I~inG rdath~.~ stable, the population of me =tee is ~g as = r~mt~ of e~chnic ~ mo,/ml) in from the ~ Cen~ A=i=n Rel~blics (Kaz=khst~, I~bekistan, Taj~k~um & ,~yrSyz=ten). ,era ed'mic Rmm~ar~ I:~.:~me ;ncnm~ir~ ~enh~:h~ ~i~aily & ~~a~ in 'cho C¢~rr=t Asian Rep~llcs, this ~rend is likely to ¢~,n',,fque f~ the forseeabl¢ future. "The ]~xx-cMr wiL"h ~st'MI. i|, for ~t~nce, le~ ~bln ', O0 r~,.,s from Omsk. There is ~d=o an = minor influx of people Into Omsk town from =fie Nor~hen Siber~ oil & ~ fieldS, ~s a res=t¢ of ~e general freein~ up of l~e l=bour marker. U1 C~ J~ U1 ,,0 IB
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Geography: Omsk Ot~st tins an w~ of ! .4 rain ~pmre kms (sknilar to France ~nd large~ th~ kus~r~). Fhe q~x~. North - Seu~h clst~nce is 600 kms. The approx. East - West distance is 300 kn~. Climate: O~cially described as continemal, with winter ~emper~ur~ falUng to. 35C & summ~ temperatures rising ~o + 3SC Communication: The main East - West corn~ artery is ~ T~ms - Stbert~ ralw~y ~jo.me7 tlme ~o Mescow being ~l~r0¢ 42 I~um). The main North - South communicatk~ art¢rj, is the #rctsh fiver, whk;h flow~ for 8 mcm¢l~ Of ~e year. Omsk is also a common transit point for Aeroflot flight~ from Europ~n Rtm~ to Sibede & the Far Eemt. Industry: Omsk is ~1~ 4th Imrgmit industrial city in Russia (folkmk~ Moscow, St. Petersburg & ~k~terteburg). Omsk Oblast does not have oil or ~as fields (m~st o~ which are kx~ted in the Mi~g Tyu~en & Tomuk regions), tx¢ nc-~ucheless is ~ msjor reflmng ~ petro-ch~mical cen~,e, tt is also I hub for the aarospace ;ind ~ic indu~les Omsk is a slgniPcanc scuden¢ cemtre in Siberia, having over 85,000 stu~en~ ~ higher ~l.ca~anal & voc~ien~l institutes. c~ 0 o u~ ~0 I
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Brief History: 1899: ~g4s-: 1991: Omsk fortress l~itt Om~ I~mw s Siberim crade ~mre aada~ I~,c, ,~ ex~, Trarm-Siberian ndiway buHq; through Orr~ ecur~ dme~l~en; ~f Omsk Omsk wh~e capita~ of Russia Adlllkml Kol~1.1k Omzk ~ created Rdgc~l~tan of ~ ~am Eump~n ~o Omsk Oe~Ip~enz of T~,~tng, pc~.m- ~trn~l & defem:a ~'kJs. Om~ a ~r~l r.~ Omsk t~,~ zn open (:~y U'l C~ C) (.J'l
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Market sLze~ .".: OCfi~ figures exist indir~lin~ the number of smokm's in Omsk Ob~m =r $iber~, sO it I~ orgy ~ =o exr~-~po~ate fr~, the ~m,-..~lll popula~ figures, Pmonat e.xp~lonce w,~uld point market s~e in S;~erta could be put in the ~.gion of 1 ~ * 20 ..-~, but this ca~ o~y I~ a guesstimate. A very Important f~-tor is that there ~ no social movemerrl: ~amst smokin9 ~n Rum~ indeed peqon~ and ~ecdotal evince tends t~ ~k:ata ~ t:h~e ~s a ~'ov~ in srr~n9 l~'acui~, m~ong~ ~n~er ~Oe groups ~nd ~ (b¢~ ii~ 1. International Brands: Mulb~'o W~t~n Camel are th= dom~,anz brand~ in *.he Omsk markst. "These three bamds :re ~~ retailed toge~d'~ ~t it '~ merefore ~o s~y wt~n~,~ ~ ~ne hss a retar~ly larG~ market shar~ The t,~cat De,-jnd~ 1994 re~ai prk~ for these brands is Rbs 2500 (alth~4;h th4 retsV ~.e S~'~K~ iS between ~ ;[300 ~d Rbs 3O(O). 2. Me~ Pz"~ed B~m~s, eG: 8ond Sueet L&M .%:~e Carlo Sts~e Line Ho~ywood This sector ;s c~ar~ctertsed by a profu~on of bmnm (man)" more than liszed -bo~). u~ 0 o c~ ~n ~o Ox i
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3. Bu~jlria. Brands & Cheap Imi~r~s: Bulgarian Opal Rodo~ TU Import, CIl~tan (India) (.Certain), llu~r~n cigar~es ha¢l a sultana| -.,ham of Re~il l:Hricas am In the Rbs 500 ~,, ~ a00 range- 4, L~l, Non-filter ~1 Pip~o.~r. Prima Astra Seb~.r C~a| Super (t~ar ~j~a~) am m~nuf~-~e~ ~ly ~ "the om~ tobacco f~-'ZC~'y. TI~ factory his three hundred pltJ~ md produced 3500 ~ cigaretl.m in I$92. hra, Prima and Astra am all r~n-fl~er o~glrette~. Setcrnor Canal are P~smn..st-~e ~e~'tes or pap,~'osy ~bl~'i~ly i hollow ct~lretm wt~:h I sm~ll amount of tali~-~ • the end). These c~3arecte~ retail in ~na ~ 300 to Rbs 500 range, U~ 0 0 C~ ~D -..j ""l
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Segmentation: CQ~sumer ~eference in the age range SO ~ to be Wx t~e d~e8~ ~,~ and I~,,! ~u,t~t~ this age ~a~mt has ~m ~ tQ me~e brande I.~ is rete~J~, ur~e~, co ray inmrnati~ brm~ which are newer to the msrk~ ogm.=t~= ~rmn~n ~ ~ a key isaue toe grm.Jp, ~ In~eerltianml brmnds s~y pcwm~ the required t~ smm~ This age ~ fi'~pm~ h~ re~a~ively ~ purchasing For people under ~h¢. age o¢ 50, Intemat6~ medium ixiced brands predor~rram. 2. Income Inl:emation~ brands (e~ Ig~ 2S00) c=n be ,, .n e~ p, xctuse ~r pe~ o. 300,000. 3. Asplra:lon;i People with higher ~ inr..orr,~ and younger e~ woke ~emetJonaJ ~. There m tHgh perceived ~es~i~ factor r~lat.~d' Co storming u~umgy ~ to trade up to int~ 4. Sex ~rn~ ~rn~en hmv~ a slight bu~ id~Ufi~ble WoW=r~=m f~ ~ ,rod ment~ brands (eg, M~Ib~o ~ ~). " For Intern~met brand smokers there is a great fear (sometim. armost irrational) of fake and counterfeit [:~ducts. El U'I 0 0 ~.~
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Dlszrlbution: it is po~blw ~o ch~erlse four m~n categorl~ of traded c~f~urn~r gc~x~ In Ru~la: 1. Clgerett~s 2. Spirits and ~qu~ 3, C:~m~ate and conf~-tionary 4. Chew~ gum ~cler~ c~am~zes, ~re are no o~c~ brge ~c~ d~to~ opeem~ in On~ (apart ~rarn tim Omsk tobac:o hle~her Phillip Morris or R. J. Reync~ls has an ~ffi,.~'~ distribul:m' in Ornsk. TyF~alI7~ jrmwnatiorm brands reach the Omzk mz~kez via whoi~em in la~scow ~ St li~z~9. ~ ~ ~c~ wholesale opmltion Ulen occ*.urs in Oen~k, u~ulally ~1 m rua~nher of recogni~d markm.s o~, ]H:eragy, off the ba~ of lorries. A~ far mrs I can z~c~rmln, there arc n~ domlmmz wholes~de dis~buto~ in ~dm~ Om~ic ~" Of~k ~ with thw rmu4klK being n~nn~nted l~zwmmn m ~ number c,' rebztvefy smmll sc~/e pizj~,s. 8£¢0 (zh. ~n with whom ! am co~~j ~, Om~) ~ on m four tier w~ok~l~ system for consumer I:toducts, •9, coffee: ~. ~ sc~e wt~les~ (> 0.5 c~ntz~,~er) Z. Small state whole.~ (1000 ~ns) 3. K~sk ~des (1 O0 ~) B~CO I~s 168 whole~l~ customers in Omsk town, m J~ ~O ~O
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Retail Trgde: In ~bam ar~T dgarott~ are Illmit~l ~ exclusively r, hrough ~, There are apl:m~m~~ 24.000 regilr.ered ldos~ in restaurants, tmteb, er~ t~ ~ Is wdkdy ~ these would Kkxsk:; .to the kc.y c~ian ~ far cigarette, ~ tJ~ other m,'ee r,w~ c~egor~ of ~ rncled ~mer goods. Transportation: b • r~L~b~ rxof~ition to ImFo~ ,J-~ett~ to Orfl~ tflmugh th~ nunilm Fair ~ kl, ~ ~ ~nkn~lll from N~hodl~ to Omsk on the T~ ~ vary ~:cordJnO tO me amoun~ or U-afWc on the ~ Ix~ in noamd The current cost of ~mrm~xt/ng • ZO foot ~'ri~r frem to On~ is Rbs 4.9 milrmn (S1500). AS a ~ the c0~: of transporting a container from ~ or St i'et~r~l~rg xo i~ tl:qxQxM,~ltety Rbs 3.5 million ($1050). BECO's pref~mn~ is to receJve 40 foot a ~ that ~ on U~ Tm'mbertan Rallwey |s n~ usuxlly a protein, since w~r~d ~rds usudy ~ on the trains noway. In any ~,,em, 9o0m" ~ m the Tr~nslberi~ sh(mkl be fully Insured. ! ~ vi~it~l 6~CO's warehouse in Omsk and personaiy r, omider s~:~y ~ be good (tt~ waNe~ou~ complex ~tf is locked in a secure ~ea}. t,n 0 o 0 t.n t.n 0
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6~ ~97~9~ Competit;Qr Anely:i:: previously indicated, whilst Madb¢~, V{mston and Can.d Ire stl res¢lily av~at~e in the Omsk mint, all the pcoduc~ seems to be sot~ad from tJ~ Moscow or $~ Petersburg whole.Jme ,wke~. There ate no ~ k)c,d d~,~tb~.a~. I saw little or nathlNg to tn~, any ~'~ ~ ~ Foe or rnerchsn~s~ ac-,M~, Legal and ReguJal;ory'. Ci~es beLng so~! in the Rmst~ merket arc oP/~ct~ly ,able to three dtfferee: forms ot tjxatiom 1. Ex¢~Ir~ tax: S ECUs i~r ~hmmmO I~oc~ 2, fmpo~: duty 30% Of QP yalue VAT 239k on the above Typi~ily, this tax s'a-ucr~re would equate to 105% taxation on a packet wRh a OP cost of SO.~5. NO: From 1:t Jormury 1995 ~ will also be a rsqulmmen¢ for Facks to carry an ofr~ia~ ~x~ ~tk~k~, d:.odr~ d~e produ<: a lewdly/reported item. T~ manuf=lcttu'~ will ~ tO pre- pu,.¢l.~ ~;h,~ ~m and ~ffix them to the picks during ~he ma~ufsct,,.,~g process. Enfarcement & A|ternative¢ Since the major Internaticmal brands re~l st $0.75 - $0.80, it is ~t~uIly not viat~e ¢0 I~y ta~tl0~ at around IOIPAt. C~nse<FJenrJ~, other arrangements need ¢o be reICh¢~ In order I;o ~-o,,mv~n~ ~ ~t of tt~ level of e~dse & taxation. ~'~ the product thrqh am o~janili~ ~ his official charity or ~I wel~,~ body statu~ (J"l 0 0 J::,,, (J'l (J1 I
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kd,~r~i~ing & PramaUon: Omsk r,~'~ $1V cMnn41s - 3 natioeaf d~amds (Ostanldno, AIJ-Rus~ 8 St. Petersburg) and Z local cham~. All channels acc~c adve~g. Ocn~ h~ 4 m~in rm~o ,~n~: Evmj:~ Pt~; Al~ernxtiv Avtorsld Omsk Ra<So Lnca( Fairs ~c:~:le: On~ Prr~le Novoye Obozre. Vechend Omsk A pmstt~e ~ ~ s4so exts~ ~ ~ ~m~ o~ the Gmsk V.~ h~key t~, ~v~t Garde. V,e ~ i~ mcu'emeJy polx~ in emnm generally and the Omsk team ldays h~ r.he Nst~omd L~Je which receives extensive TV coverage (ma.k)r G~o~e & Coca-C01a). U'I 0 U'I U'l r,o lib
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P. ~:~ Observstions: U'I C~ C~ C~ .b ~O U~ U< BE
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I F.17 Wholesale Price Points 1. International Brands: l~hlllboro winston Came* Lucky Strike Rbs 1900 - ~.100 1750 - 1900 ! 730 - 1850 1650., 1800 2. Medium Price grands: MOnte Carlo Band Serem: Ho.ywo 8~0 - 900 750 1100 90O 1o0o S. Sulgarian eh-ands: Rodopl 6OO 600 4. Local & l~m-fker B~n~:. Super Ira Prima Polet 200 - 3O0 ZOO- 300 20O - 300 200 - 300 L.~ 0 (:3 C~ 4~ U's ,,D U't am
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=. 16 Typical Margin Structure From CIP (o,~ Omsk) Importer/Distributor H#rgin ~i~Q~lqi~ale Mwgin IP.a~0il Margin 20 - Z5% 20- 30% SO- 0 0 0 (j1 m
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a BRITISH-AMERICAN TOBACCO COMPANY LIMITED P.N.A. To: Company: Fax No: Date: FACSIMILE HANS TOMAT BAT Hamburg 010 49404151 3231 27/02/95 From: Phone Number:. 2 7 FI~ 1.q9~ PATRICK O'KEEFFE Fax No: 0784 448652 Pages To Follow: Comments: I confirm our telephone conversadon with Mrs Muller oftoday 27/2/95, that Paul Adams and myself will arrive in Hamburg evening of 7th March (Mrs Muller has made reservations in the [mer-ContinentaD. We will meet in the morning of 8th March, I will send you a draIi proposed Agenda later this week. Paul and rnyselfwill depart after lunch on the 8th March.
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