Anne Landman's Collection
New Tobacco Markets Progress Report - July 1992 (Secret)
Abstract
In this 1992 British American Tobacco (BAT ) document from the Health Canada collection, BAT talks about the development of new cigarette markets. It shows how BAT takes advantage of cigarette smuggling to benefit the company and to help establish new brands in a country. The term "DNP" stands for "Duty Not Paid," and refers to smuggled cigarettes.
An excerpt from Page 37 shows how BAT feels entitled to a "rightful percentage" of DNP trade, saying the company cannot prevent smuggling and so the "requirement is to MANAGE DNP to the overall benefit of the BAT Industries Group..."
The report also shows how BAT uses smuggling to undercut other cigarette companies. (In the following excerpt, N-P refers to Nobleza Picardo, the tobacco company of Argentina and a member of the BAT group. Souza Cruz is Brazil's largest tobacco company):
[From Page 38]:
"As discussed with you in late June, N-P [Nobleza Picardo, tobacco company of Argentina] under my direction will now enter the DNP market albeit with reluctance AND based on the repeated rejection of our proposal by Souza Cruz. N-P cannot accept continued erosion of its [share of market] without some response. This strategy is not without political risk..."
The following quote shows how BAT introduces a new brand into a country through the black market first, to establish a market, then brings the brand in through legitimate channels in order to advertise it:
"A small volume of Duty Paid exports would permit advertising and merchandising support in order to establish the brands for the medium/long term, with the market being supplied initially primarily through the DNP channel."
Page 26 contains a discussion about the potential of certain brands in Brazil, and indicates that BAT targets the "very young" and "lower classes" to try to compete with Marlboro:
"Hollywood could be positioned as a Marlboro for the very young, lower classes, as the brand and its communication have much in common with Marlboro..."
Fields
- Notes
Selected on visit 3 (May-Jun 2000)
Special Report Major Tobacco Multinational Implicated In Cigarette Smuggling, Tax Evasion, Documents Show
By Maud S. Beelman, Duncan Campbell, Maria Teresa Ronderos, and Erik J. Schelzig.
(Web posted Jan 31, 2000) -- British American Tobacco, the world’s second-largest multinational tobacco company, for decades secretly encouraged tax evasion and cigarette smuggling in a global effort to secure market share and lure generations of new smokers, internal corporate documents reveal. Center for Public Integrity http://www.publicintegrity.org/dtaweb/report.asp?ReportID=80&L1=10&L2=10&L3=0&L4=0&L5=0
- Quotes
[From Page 26]: SOUZA CRUZ BRANDS POTENTIAL IN ARGENTINA Brazilian cigarettes in general were badly evaluated in the research - being thought to be very strong...The two brands (of the six tested) which showed positive interest were Hollywood and Free...Hollywood could be positioned as a Marlboro for the very young, lower classes, as the brand and its communication have much in common with Marlboro...
[From Page 37]:
The suggestion is not that attempts are made to eliminate DNP, for this is simply unrealistic, and will deny BAT their rightful percentage of that trade. However the requirement is to DNP to the overall benefit of the BAT Industries Group, rather than for the direct benefit of one Operating Group's results at greater expense to another Operating Group...
[From Page 38]:
As discussed with you in late June, N-P [Nobleza Picardo, tobacco company of Argentina] under my direction will now enter the DNP market albeit with reluctance AND based on the repeated rejection of our proposal by Souza Cruz. N-P cannot accept continued erosion of its [share of market] without some response. This strategy is not without political risk...
5. Conclusion
This note is to advise you ahead of the TSG meeting of 3rd September as to how we plan to move forward. Whilst my preference is to obtain Souza Cruz's commitment to halve their RITZ volumes into the N.E. Province for a period of up to three months to assess the effect on Group results, in the absence of such agreement, we will launch DERBY and JOCKEY CLUB into the DNP segment by the end of September 1992.
K.S Dunt 1st September 1992
[From Page 46]:
5.2.3. Ecuador - Small but growing market...high levels of excise and tariffs, dominance of MARLBORO/LARK and international brands...BAT has a 1% market share, mainly of B&W products coming from Panama (DNP).
[From Page 47]:
6.1.3
It is recommended that BAT operate under "Umbrella" operations. A small volume of Duty Paid exports would permit advertising and merchandising support in order to establish the brands for the medium/long term, with the market being supplied initially primarily through the DNP channel.
- Company
- British American Tobacco
- Author
- Presumed corporate author, British American Tobacco
- Recipient
- Presumed corporate recipient, British American Tobacco
- Copied to:
- Sheehy, Patrick (BATCO Director, U.S., Canada & Australia.)P. Sheehy was a BATCO Director for the U.S., Canada and Australia. He was also the Board Chairman, Public Relations & Planning, Tobacco Executive and Chairman. Also served as chair of ICOSI, the International Committee on Smoking Issues, which convened to fight governments on regulations due to health concerns.(Source: NM Tobacco Companies Personnel List); Sheehy was the first non-chairman of BAT Industries to be put in charge of B&W as Territorial Director in 1973. He thus became responsible to the Board of London for the performance of this biggest, 100% owned subsidiary. When Sheehy wrote to B&W, the words were chosen to avoid any connotation of telling B&W what to do. Sheehy took all the significant strategic decisions ofr B&W for 20 years until 1993 (with just a year or two when he relinquished being Territoral Director) but only very, very senior BATmen were allowed by Sheehy to know anything at all about the US market. His knowledge of BAT's most important market clinched his getting the BAT Chairmanship in 1982. He holidayed with his family oftern in August in the 1980s in the US and B&W moved the Sheehys around like Royality. (Source: NM facsimile dated 4/3/97 to Michael Moore entitled "Brown & Williamson Tobacco Corporation")
- Herter, Ulrich Georg Volker (BAT Tobacco Managing Director & Board of Directors Member)New Business Development
- Bramley, Barry D. (BAT Chairman & CEO (1990))
- Mr H. Tomat
- Miss H. Barton
- Mr K. Ethcrington
- Ettedgui, Edouard (Group Finance Controller Tobacco BAT)
- Mr M.C.T. Prideaux
- Mr G. Burgess
- NBD Team
- Region
- Bulgaria
- Poland
- Romania
- Baltic Republic
- Czechoslovakia
- Yugoslavia
- Hungary
- Albania
- Russia
- Tajikistan
- Kirgistan
- Uzbekistan
- Myanmar
- Cambodia
- Vietnam
- Brazil
- Argentina
- Ecuador
- Philippines
- Type
- Report, Marketing report
- Named Organization
- Nobleza Picardo (Tobacco Group of Argentina, now a member of BAT Group)
- Souza Cruz
- Subject
- Smuggling
- international trade
Document Images
