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CONTACT: SINIKKA SARRO (212)880-3454 FAX No. (212) 907-5502 I I MONDAY, JUNE 20, 1994 TODAY'S TOPICS CORPORATE/FINANCIAL (Pgs. 2-18) • Management/Investing •International Markets TOBACCO (Pgs. 19-40) •B&W/Litigation/FDA/War on Tobacco • ETS/EPA/Smoking/Health/Taxes •Smoking Restrictions FOOD (Pgs. 41-43) •Marketing/Competitor News BEER (Pgs. 44-48) •InternationaUCompetitor News •Labeling I AT FRIDAY'S CLOSE I I Philip Morris 50 3/8 - 1/8 Anheuser-Busch 53 1/8 - 5/8 ConAgra 29 1/8 - 1/2 General Mills 55 1/2 +1/2 Kellogg 55 + 1/4 Procter & Gamble 55 5/8 + 1/4 RJR Nabisco 5 3/4 - 1/8 DJIA 3776.78 - 34.56 This publication is recyclable. Please remove mailing label prior to recycling.

-2- PHILIP MORRIS COMPANIES INC. uiness sDay hc Neltr pork eZimes MONDAY, JUNE 20, 1994 JUN 2 0 1994 Philip Morris Chairman Unexpectedly Resigns By DIANA B. HENRIQUES Michael A. Miles, the chairman and chief executive of the Philip Morris Companies, resigned unexpectedly over the weekend, the company an- nounced yesterday. Mr. Miles, in a statement released by the company, simply said that he felt it was time for the $50 billion consumer products giant to be led by a career Philip Morris executive with a background in tobacco. Mr. Miles was chairman and chief executive of Kraft General Foods, when Philip Morris acquired it in 1988. He was named chairman and chief executive of Philip Morris in August 1991, the first leader of the company from out- side the tobacco industry. The unexpected move comes less than a month after the Philip Morris board wrangled over and rejected a proposal to divide, the corporation into separate food and tobacco com- panies, as a way of enhancing its attractiveness to investors. Although he has not addressed the issue publicly, Mr. Miles was widely seen on Wall Street as an advocate of the plan, which called for separating the company's Kraft food brand and Miller Brewing business from its to- bacco company, built on such strong brands as Marlboro and Virginia Slims. His departure, therefore, is being interpreted by some analysts as a victory for the status quo - and a challenge to institutional investors frustrated by the company's failure to arrest a steep two-year decline in its stock price. "When a person takes that strong a stand in a highly visible arena and loses the battle and possibly the confi- dence of the board, a resignation often follows," Frederic Dickson, an analyst with D. A. Davidson & Com- pany in Great Falls, Mont., told Bloomberg Business News last night. It is possible the departure of Mr. Miles will increase the level of frus- tration and unrest among such large institutional investors - a develop- ment the Philip Morris board could not ignore, given the increasing will- ingness of such investors to flex their muscle on important issues of corpo- rate strategy. But it is less certain what impact the weekend's developments will have in the stock market, where Phil- ip Morris's stock has already sus- tained significant damage in the weeks since the two-company plan was rejected. S. Leigh Ferst, who monitors the company for Prudential Securities, said Philip Morris might benefit from having "a strong tobacco person to lead it through the maelstrom of pub- lic debate" that has been triggered by congressional hearings on the indus- try's handling of research into the health risks of smoking. "The break- Continued on Page D4

-3- Philip Morris _Chairrnan Unexpectedly Resigns Continued From First Business Page up is a sexy topic,'but a stronger tobacco-industry voice could be more important in the long run, because of the political context," she said. A Philip Morris spokesman, Nicho- las Rolli, said Mr. Miles, who is 54, had "decided to leave on his own, for his own personal reasons." He said the board first learned of Mr. Miles's plan to leave late Friday afternoon. Another spokesman, Barry Holt, said board members had convened by telephone on Saturday morning and voted to have John Reed, the chairman of the board's compensa- tion committee and the chairman of Citicorp, accept Mr. Miles's resigna- tion on behalf of the board. The resig- nation was effective immediately upon its acceptance by the board, Mr. Holt said. Two men who previously reported to Mr. Miles will now divide his du- ties, Mr. Holt said. During the confer- ence call on Saturday, the board vot- ed to appoint R. William Murray, who is 58, as its chairman, and named Geoffrey C. Bible, 56, as the president and chief executive. Both men had just been given new assignments at the rancorous meet- ing of the board of directors on May 25, when the restructuring plan for the company was debated. At that time, Mr. Murray was put in charge of the company's worldwide food op- eration, and Mr. Bible was named to run the tobacco business, with both men reporting to Mr. Miles. The corporation's six operating companies will now report to Mr. Bible, who reports to Mr. Murray, Mr. Holt said. The net effect of the weekend's developments is that all the operating companies now report to an executive who is seen as a veteran of Philip Morris's tobacco operations, al- though Mr. Holt noted that Mr. Bi- ble's tenure at Philip Morris does include "some food experience." Beginning in January 1990, Mr. Bi- ble served for about 16 months as president and chief administrative of- ficer of Kraft General Foods, and ' from April 1991 until 1993 he was vice president in charge of international operations for both the tobacco and food units, Mr. Holt said. In a statement released by the company, Mr. Reed of Citicorp said the chairman's decision to resign "was Mr. Miles's." Keith MeyersiThe New York Times Michael A. Miles 'Difficult Pricing Decisions' He praised the work Mr. Miles had done in building the company's food operations, and in seeing the compa- ny through "some difficult pricing decisions" - a reference, most likely, to the company's controversial move to cut the price of its Marlboro ciga- rettes in April 1993 in an effort to rebuild its market share. Slashing the price of one of the top brand names in cigarettes was wide- ly blamed for starting a price war that depleted earnings at Philip Mor- ris and throughout the tobacco indus- try. In a statement released by the company, Mr. Miles said he was leav- ing "in the full confidence that the difficult decisions made over the past two years will be proven right by our results in 1994 and beyond." Citing the "resurgence" of the company's domestic tobacco business and con- tinued growth in overseas tobacco sales, he continued, "it makes sense to again have a career Philip Morris executive in the top job." Philip Morris said Mr. Miles was not available for comment. Both Mr. Murray and Mr. Bible were careful to stress that they were JUN ? 3 1994 , committed to a strong oerformance by_ "all thre_e_ lines of busin_ess__''_ - foods, beer and tobacco. But w'all Street analysts who commented on the move last night said the markets would see Mr. Miles's departure as a victory for board-level supporters of the status quo, including Hamish Maxwell, the former chairman of Philip Morris, who retired in Septem- ber 1991 but still wields considerable influence among the company's 19 directors. Last month, when the board con- firmed that it had decided against splitting the company, several public pension fund managers - whose funds control substantial blocks of Philip Morris stock - stated that they were displeased that Mr. Max- well's influence was still strong enough to dictate company strategy. The company's shares. which closed at $50.75 on the eve of the May 25 board meeting, did not trade at all as that protracted six-hour meeting continued. The next morning, May 26, the shares opened at $50.25. The stock fell as low as $48.25 over the next few days, before recovering to close on Friday at $50.375. Significant Slump These recent stock price levels rep- resent a significant slump for a com- pany whose shares traded at more than $85 in the fall of 1992. Since then, the stock has been battered amid investor fears about increases in Government cigarette taxes, price wars and the threat of liabilities aris- ing from consumer health concerns. One analyst argued yesterday that those who favor a split of the compa- ny's tobacco and food businesses have already been disappotnted,and Mr. Miles did not have a strong per- sonal following among institutional investors. He predicted little addition- al damage to the shares, Ms. Ferst of Prudential said she would not be surprised if the stock gained in today's trading, if the mar- ket concludes that Philip Morris is stronger with its new leadership in the face of pubic debate over smok- ing. But other analysts said that since the departure of Mr. Miles eliminates any hopes that he might ultimately have prevailed with a divided-compa- ny strategy, the move might cause a further decline of at least several dollars a share. P

-4- What's News Business and Finance MICHAEL MILES quit as head of Philip Morris. The company tapped two veterans of its tobacco business to succeed him, naming R. William Murray chairman and Geof- frey Bible president and chief execu- tive. A split of Philip Morris's food and tobacco operations into two separate companies is considered less likely un- der the new management team. (Article on Page A3) Philip Morris CEO Resigns Under Pressure Board Names Two Veterans Of Tobacco Business As Successors to Miles By EBEN SHAPIRO Staff Rcporter of Tn[-: WAi.L STnrrr JuUR`A>. Michael A. Miles, the embattled chair- man and chief executive officer of Philip Morris Cos., resigned after months of mounting pressure. The Philip Morris board appointed R. William Murray, 58 years old, as chair- man, and Geoffrey C. Bible, 56, as presi- dent and chief executive, to succeed Mr. 'Miles. Both men had been vice chairmen. The change puts smokers back in charge of the nation's largest tobacco company. While the new leaders of Philip Morris are expected to be more open with Wall Street than Mr. Miles had been, the company's pressing problems remain. Large shareholders are frustrated that, under Mr. Miles, the company has lost more than S30 billion in stock-mar- ket value since 1992. And in Washington, the company faces the threat of higher tobacco taxes and Michael A. Miles I ~ ~- ~(- °fer regulation. A .,ew round of congressional hearings, :which have depressed tobacco stocks, is set °f^s this week. "The pressure isn't going away. We ai n't happy," said Richard Koppes, gen- eT Il counsel of the California Public Em- tiloyees' Retirement System, one of the large institutional shareholders pressing the company to split the company into separate food and tobacco business. Such an action, which Mr. Miles had advocated, is considered less likely under the new management team. Mr. Miles, 54, has come under increas- ing criticism from large shareholders, the Industry Whistleblower Merrell Williams Jr. is the tobacco indus- try's worst nightmare: an informed in- sider who has turned against the secre- tive industry. Article on page B1. board and employees in recent months. He was the first nonsmoker to run the company and never fully gained the confi- dence or loyalty of the company's tobacco executives, according to analysts and em- ployees. Questions about his leadership have haunted Mr. Miles since last year, when his abrupt decision to cut the price of Marlboro cigarettes rocked the industry. Never Quite Comfortable Mr. Miles joined Philip Morris in 1988 when it acquired Kraft Inc., and he never become completely comfortable with the swashbuckling culture of the tobacco busi- ness, some of the company's- tobacco executives say. At a six-and-a-half hour board meeting last month, the company's powerful for- mer chairman, Hamish Maxwell, resisted Mr. Miles's proposal to split the company into separate tobacco and food businesses. The board ultimately decided to take no action on the proposal, but named Mr. Murray and Mr. Bible vice chairmen. At that meeting, the board openly aired its doubts about Mr. Miles. People close to the company say the board discussed whether Mr. Miles was the right executive to be running the company. During that discussion, Mr. Miles and the other Philip Morris executives on the board were asked to leave the room. Philip Morris declined to comment, but John J. Tucker, a senior vice president at Philip Morris and perhaps Mr. Miles's closest associate at the company, said Mr. Miles retained the full confidence of the board. 'Nobody Ever Saw the Guy' But Mr. Miles's aloof style has been criticized by people inside and outside the company at a time when the industry is facing an unprecedented series of attacks. "He was invisible," says Gary Black, an analyst with Sanford C. Bernstein. "No- body ever saw the guy." Mr. Black said the changes were pQsi- tive for the company. "The board is realiz- JUN 2 0 1N4 ing this has always been a tobacco com- pany and that it makes sense to have tobacco guys in charge." Mr. Black added that it's likely that Mr. Bible, a hugely popular and well-respected tobacco execu- tive, will eventually run the entire com- pany. In a company statement, Mr. Miles said that, with the company's tobacco business gaining strength, "it makes sense to again have a career Philip Morris executive in the top job." He couldn't be reached for further comment. Philip Morris generates annual sales of 560 billion, selling such household brand names as Marlboro cigarettes, Velveeta cheese, Cheez Whiz and Miller beer. In 1993, 55% of its $9.2 billion in operating profit came from tobacco. Philip Morris had net income of S3 billion. The new team is expected to be far more open than Mr. Miles, who hasn'tbriefed Wall Street analysts or the media in more than ;i year. Messrs. Murray and Bible plan to meet with analysts and the media this week. Mr. Miles's problems escalated in re- cent months as he advocated splitting the company into separate food and tobacco businesses and old-line board members resisted. In recent months, Mr. Maxwell had been reinserting himself in company affairs and showing up at Philip Morris budget meetings. As chairman of the compensation com- mittee, CitiCorp chairman John Reed was the Philip Morris board member that han- dled Mr. Miles's resignation. Mr. Miles resigned Friday afternoon. A board meeting was conducted by telephone Saturday morning and the resignation was accepted with "regret," the company said in a statement. Mr. Reed said the decision to resign was Mr. Miles's. In announcing his resignation, the com- pany quoted Mr. Miles as defending his controversial decision to cut the price of premium cigarettes last year, a move that bolstered the company's volume but hurt its stock price and profits, "I leave with full confidence that the difficult decisions made over the past two years will be proven right by our results in 1994 and beyond," he said. Mr. Tucker, the friend of Mr. Miles, says that Mr. Miles plans to take the summer off and "play golf, go to [taly." While the tobacco business is faring better, the performance of the food busi- ness continues to be a frustration to ana- lysts. Cutbacks and perpetual restructur- ing at Kraft General Foods has resulted in a decline in service, says Ned Meara, a buyer for Grand Union Supermarkets in New Jersey, who says fewer Kraft General Foods salespeople now call on his store. The cost-cutting, he adds, became evident last year after Philip Morris's earnings plunged, following Mr. Miles's decision to cut cigarette prices. Says Mr. Meara, " 'Marlboro Friday' has had a tremendous residual effect throughout the whole company."

-5- jUN2o 1994 e By JONATHAN AUERBACH Philip Morris boss ',f ichael Miles resigned from the nation's largest to- bucco company yesterday following widespread criti- cism for lack of leadership. Big Mo said the 54-year old Miles decided to quit as chairman and chief execu- tivc officer and that' his rt•signation was "accepted w:th regret." Thr company split the t•,_ pvsts. namtng R. Wil- Itam Murrav chairman and Geoffrey Bible presi- drnt and chief executive otticer. Botti were named vice- cha:rmen in May when Pniiip 'vicrrts opted not to split its food and tobacco business. Murray, 58, was heading up the company's world- wide food operations, which include Miller Beer, Kraft and General Foods. Bible. 56. ran tobacco oper- ations. which include the Marlboro and Benson & Hedges brands w'all Street is expected to applaud Miles' departure th s morning, sending Philip Morris snares up. The consum er products gi- ar.t on Friday closed down •x at 50i~, - "I leave with the full confi- dence that the difficult deci- si,ns mace over the past two t•ears will be proverf right by our results in 1994 MICHAEL MILES Resigned, and beyond," Miles said in a statement, "Now, however, with the resurgence of the U.S.to- bacco business and the continued strong growth in international tobacco, it makes sense to again have a career Philip Morris ex- ecutive in the top job," he said. The resignation was ac- cepted by Citicorp Chair- man John Reed, who heads up Big Mo's compensation committee. Reed said: "We are fortu- nate to be able to turn to Bill Murray and Geoff Bible, who have long demon- strated their skills in guid- ing our food, tobacco and R. WILLIAM MURRAY Named chairman, brewing businesses around the world, "Between them, they have nearly 50 years of experi- ence with the company." Since taking the helm in 1991, Miles' inaccessibility to the investment commu- nity has irked analysts, while Bible has already garnered praise for his openness. Analysts were dismayed last year when he disap- peared after announcing what became known as Marlboro Friday. On April 2, 1993, the company stunned the financial com- munity by slashing ciga- rette prices by 40 cents a pack. GEOFFREY BIBLE President and CEO. Tobacco has been hit hard by price wars and growing government scrutiny of the industry. Last year, the cut-throat competition among cigarette makers re- sulted in a $2 billion drop in domestic tobacco profits. Since Marlboro Friday, Philip Morris stock has dropped more than 20 per- cent. Its share of the do- mestic tobacco -business hasinereasedto27percent from 22 percent before the pricecuts. In the first quarter of 1994, operating income in the company's domestic to- bacco business fell 25 per- cent to $769 million. Concern over Miles' lead- ershtp was also a key point at last month's marathon board meeting. At that meeting, Philip Morris decided not to break up its food and tobacco op. eration into separate busi. nesses. Some senior execu- tives of the company had lobbied for the split, saying the anti-tobacco sentiment was hurting its shares. They also pressed for the separation in order to pro- tect food operations from possible liability lawsuits, increased government reg- ulation and higher taxes facing the tobacco business. Miles' appointment three years ago was considered a surprise because he was viewed as an outsider com- ing from Kraft, with no to- bacco background. The fact that he had quit smoking also drew skepti- cism. The promotion was seen as an indication that Philip Morris was moving away from its tobacco roots. Food and beer now account for 56 percent of the company's $50.6 billion in sales, but to- bacco is still the profit cen- ter. Miles replaced Hamish Maxwell, who retired. Max- well recently has been spot- ted visiting the company's Park Avenue headquarters, a scene casting more doubt on Miles' leadership.

NEW YORK POST, MONDAY, JUNE 20, 1994 ~ / ~ ® e~ ~~~ e®ae charge of ® M ICHAEL Miles failed to show the leader- ship that would overcome the culture clash within Philip Morris between the tobacco and food opera- tions. He paid the price with his resignation yesterday. The stunningly efficient leadership coup, at Ameri- ca's seventh biggest compa- ny, came just weeks after Miles fought off an increas- ingly hostile board. The board knew Big Mo's stock price was languishing after last year's tobacco price war. It was also hurt by anti-tobacco sentiment across the country. The board also knew its tobacco people were confi- dent they would defeat the tobacco liability claims. Protits were bouncing back and its decision to slash cig- arette prices last year was vindicated. Marlboro, its top brand was regaining market power. What the board wanted was effective leadership to bring these positives to the attention of the shattered morale within the company and the doubters on Wall Street. Miles did neither. Instead the board decided to go with the so-called Kan- garoo mafia of fellow Austra- lians, Bill Murray and Geof- frey Bible. The two veterans - one from tobacco and the other from food side - would lead the fight. The appointment of these two seasoned insiders, with over 50 years combined ex- perience across the cultural divide at Big Mo, should serve as a rallying point within the company. The shake-up should be reflected in a higher stock price today, because both men are also better known among analysts than their publicity-shy predecessor. To help the cause, Big Mo is also expected shortly to announce an extended stock buyback program to return more value to stockholders. Big Mo is presently spend- ing the last of the $1 billion authorized for stock pur- chases earlier this year. Yesterday's action also represents a complete re- versal of the decision just three years ago that put Miles in charge. Miles came to Philip Mor- ris in 1988 when it pur- chased Kraft Inc. for $12.9 billion. Big Mo paid too much for Kraft. In a highly-competi- tive industry where all the participants are struggling, its performance has been just average. International tobacco sales will emerge as the profit leader in the company. Meanwhile, the domestic in- dustry is being hit with a wave of liability claims, which Philip Morris is confi- dent can be beaten. Big Mo's stock price is languishing. Friday it closed at 50%, off ','d. That is 28 percent below the 70-a- share level the stock traded at when Miles took over in September 1991. As reported last week, board-level concern over Miles' lack of leadership came to a peak at its June 25 board meeting. After seven hours it was decided to give Miles another chance. The market mistakenly thought the fight was over splitting up the company between food and tobacco. But this issue was settled before the June 25 meeting. It was decided the split was not legally possible. Murray Bring, the compa- ny's top lawyer advised a split could not safely pro- tect the food operations from tobacco liability claims without an outright sale of one of the divisions. It was Miles who first pro- posed the split some nine months ago, when the com- pany was fighting to re- store its tobacco profits in the wake of the Marlboro Friday price cuts. The move was rejected at the time as being a little premature. The board knew that the struggling food di- vision could only benefit from the steady cash flow from tobacco. With only begrudging board support Miles chose to stay on. But when word leaked out early last week about the real contents of last month's meeting he handed in his resignation. He rightly decided it was in the best interests of the company to leave quickly. This would avoid a poten- tially destabilizing public fight at a time when the company desperately needs unity. $£1T'flS.TL3 :t?4

MONDAY, JUNE 20, 1994 • USA TODAY Philip Morris CEO quits; stock likely to fall By Eric D. Randall USA TODAY Philip Morris Chairman and Chief Executive Michael Miles, 54, abruptly resigned over the weekend. And industry analysts predict more tough times for the firm in the stock market. "The decision was Mr. Miles'," John Reed, a Philip Morris board member and chairman of Citicorp, said in a news release. The board ac- cepted the resignation "with regret" Saturday. "For shareholders, this is not a good thing," says Tony Vento, stock analyst at Edward D. Jones. He expects the stock to drop today. The company is losing the leading advocate of splitting off its food unit, which produces half of Philip Morris' revenue. Some big shareholders support the idea. They fear anti-tobac- co lawsuits and legislation are hurting the company's stock. Philip Morris' board didn't act on the proposal after a 61/r hour meeting May 25. "That board meeting had to be a lot more bloody than anyone imag- ined," says Frederic Dickson, stock analyst at D.A. Davidson. Not so, says company spokesman Barry Holt. "There was a consensus among the board members, including Mr. Miles, (that) it was not appro- priate to take action at this time to split the company." Still, "you don't often find people walking away from mil- lion-dollar jobs; " Dickson says. In 1993, Miles was paid $1 mil- lion, a $345,000 bonus and stock options worth an estimated $1.2 million. Holt wouldn't comment on Miles' severance package. Miles, a non-smoker, be- came CEO in September 1991 after being CEO of Kraft Gen- eral Foods. (Philip Morris bought Kraft in 1988.) Since then, the company's stock has dropped 32% to close Friday at $50%, down ~/8. "He made the tough decisions," Dickson says, including cutting cigarette prices 40 cents a pack in April 1993. Now power Is shifting back to the tobacco side. Geoffrey Bible, formerly executive vice president of worldwide tobac- co, becomes president and CEO. William Murray, the for- mer president, becomes chair- man. Both were named vice chairmen last month. MILES: Background is in food business, not tobacco. 6€tri7,~ ~~~0Z

-8- J UN 2 0 1994 MONDAY, JUNE 20, 1994 THE W,asHINGTOw PosT P ' ' P Morris Chairman Announces Res' ation ~ 2 Longtime Executives to Fill Posts By Jay Mathews Was}ilngton Post Staff Writer NEW YORK, June 19-Philip Morris Cos., the world's premier tobacco producer, today an- nounced the resignation of its chairman and chief executive, Michael A. Miles. Like other cigarette compa- nies, Philip Morris has been be- sieged this year by threats of in- creased government taxes and lawsuits because of mounting ev- idence that tobacco is a health risk, but many financial analysts have praised the company's man- agement and said its food and in- ternational tobacco divisions showed potential for growth. John C. Maxwell Jr., a manag- ing director of Wheat First Securi- ties in Richmond, speculated that Miles may have quit after losing a fight to split the firm's troubled American tobacco operations away from its healthy food and in- ternational tobacco business. A Philip Morris spokesman, Barry Holt, denied the claim. "There was a consensus, includ- ing Mr. Miles, that such action was not appropriate at this time," Holt said. Miles, 54, a food industry ex- pert who has been with Philip Morris six years, said in a state- ment he thought it was time for a chairman with longer tenure at company, which had revenue last year of $50.6 billion. "With the resurgence of our U.S. tobacco business, and the continued strong growth in international to- bacco, it makes sense to again have a career Philip Morris exec- utive in the top job," he said. Miles joined Kraft General MICHAEL A. MILES ... with compuny for six years Foods Inc. in 1982 as president and chief operating officer and was chairman and chief executive of that company when it was ac- quired by Philip Morris in 1988. In 1991 he became chairman and CEO at Philip Morris. The Philip Morris board said it accepted Miles's resignation Sat- urday. The board elected R. Wil- liam Murray, 58, formerly corpo- rate vice chairman, as chairman. Geoffrey C. Bible, 56, was elect- ed president and chief executive. Murray joined the company in 1970 and Bible in 1968. John Reed, chairman of the board's compensation committee, said it was Miles's decision to re- sign. Reed, chairman of Citicorp, said Miles "helped build and inte- grate our global food business, and led us through some difficult pricing decisions," including a cig- arette price war last year that helped its Marl'noro brand keep its leading market share.

-9- CH{CAGO' xFN TiNE.g JUN 2 0 1S94 Chairman" Resigns At Philip Morris Inc. 8y Farrell Kramer .~ 7b As.00ww Prw N`_E.W"~ YORK-•Phili Morria m nies Inc. announcc un• ay the recianation of chairman and chief executive Michael A. Milea, who said It ML time t< "again have a care.r Philip Morris executive in the top job." Miles headed Kraft G.neral Foods, based in Glenview, when it was acquired by the Wbacco gi- ant in 1988. The world's largest tobac- co company taid iu board had named vice chairman R Wiiliam north suburban Murray aa Mkh" A' chairman and Muea vice chairman and board member Geoffrey C. Bible as president and chief executive, amid a Atreamlin- in6 of ita top management "The decision was Mr. Miles'," said Citicorp chairman John Reed, chairman of the Philip Morris boasd's compensation committee. "Mike has done much for Philip Morris since he joined the Philip Morrit family of companies in 1988." The New. York-baeed food and tobacco company said Miles' res- tanation was accepted Saturday by Reed. Barry I-io1t, a spokesman -for Philip Morris. said the reaiQnation waa not due to the company's performance under Milee, nor did it have anything to do with a rumor.d poesible split of the com• pany's food and tobacco businaaa- e., ''At a matter of fact, as we have prrviously announced, that is not ort the tabla anymore," Holt said. At a board meeting last month the company decided not to separate the busineasea, but there was a split reported between board members about that strategy. The tobacco.induitry has been under fire recently IYom Congresa and the publie over, the health haxards of cisarettes: and allega- tions that the industry concealed lnforiaation about potential daa- gen aa far back aa the 1960a. Tobacco companies have main-• tained they have done nothingg wrong. . A realienmeot of Philip Moriis' top management structure follows Miles' resignation, Holt said. There will no lon er be a chief operating officer. ~nsteed,, heads ot the cotnpeny's 6peritin¢ bus'i-• riesses will report directly'to Bi- bte, the new CEO. " ' Also, Holt'said, the two 'vice ` chairman positions will be •timi- nated. "I laaw with th. full cordidenc. t that the difficult declatons raade over • th. past two years will be proven right by our reauSta in 1984 and beyond," aeid Milea, 54. "Now, however, with the reaur- gena of our U.B. tobaoco buai• neaa, and the continued strong growth in iaternationai tobacco, it raakea senae to again have a career Philip Monia executive in the top job." :.:,:... Milu'waa elected chairman and JUN 2 0 1994 chief ezecutlve or Yrulip Morris tn August 1991, aftBr serving as dep- uty chairman. Befere that,, Miles was chairman and chief a=ecutive of Kraft General Foods Inc., which Philip Morris acquired in 1988., Heloltied 1{raft W4982 aa pte:• ic~en ~ qnti,~ chiir~ ~d~brtt~'r~g oft~ices; Of!'1Vfur`rdy, ; EB#'!'ht&•Mib1i'r 58; Reed; 3roted'1 tiiai~ togither ..t}saye have nearly ' 50, yearf ~xpvrt'enca with Philip Morris. Th.,, recent paat has . proven challenging for Philip Morria. In 1.993, Philip Morris surprised analysta with a draitic price cut on premium brand cigarettes. Hurt by the increasing populari- ty of cut-rate cigarettes. Philip Morris last May cut the price of Marlboro, • its beat-known brand, by 40 percant. The company later made similar cutc on other domea- tic branda. Also, Philip Morris announced a major reetructurina last fail that included the elimination of 14,000 jobs over three years. In the first quarter, Philip Mor. ris reported easnings improved 59 percent from a year earlier, when results were hurt by an accountin` 'chanQa:• The•i•company earned. ' t1; i7 . :billion, -or =1.34 ,a ahare, -eompared with $737 milliion;;or 84 •centa:a.sharR; a y.ar. earlier.:.. . , CHICAGO THIBUNE JUN201994 Philip Morris chairman resigns AssociATw PRLss 1 /3 NEW YORK-The chairman and chief ex- ecutive o>;_Philip Morris Cos.-the world's largest to 3cco comoanv- as resigned, saying it is time for a "career Philip Mor• ris executive in the top job." Michael A.,Miles resigned Sattiu'day after three years at the post, the company said in a statement Sunday. Philip Morris' board named two men with a. total of 50 years of experience at the company to take over Miles' job. Vice chairm.vi R. William Murray was named chairaian, und vice chairman and board memher GentTrey C. Bible was named pres• ident and chief executive. The New York-based fcxxf and tobacco company said the changes are effective im- niediately. Miles, a nonsmoker, was the company's first chairman from outside the tobaccn inrtustrv. 'The decision was Mr. Mi1es; " ,^.itico Chairman John Reed, chairman o t e PhSlip Morz-is board's compensatlon com- mittee, said in the statement "Mike haa done much for Philip Morris." Company spokesman Barry Holt said the resignation was not related to the com- pany's performance or to a rZtmored split of its food and tobacco businesses. "I leave with the full confidence that the difficult decisions made over the past two years will be proven right by our results in 1994 and beyond." Miles said in the atate- ment. "Now, however, with the resurgence of our U.S. tobacco business, and the contin- uerd atrong growth ir. interr.ational tobac.;o, it makes sense to again have a career Phil- ip Morris executive In tha top job," he said. Iiurt by the increasing pcpularity of cut• rate ~ci ga~rettes, Phiiip Mon•is in May 1K3 cut et?i price of Marlboro, it-s best-known brand, by 40 percent. The company Iater made similar cuts on other domestic branda.

.1 u t1 z .- 19,94 pALLp,S MORNING NEWS JUN 2 0 1994 Philip Mom*s Ctu resi~ls ~ Ana N7sts ~g =t to 5~a s~~~ t to spin off fcod. b~.~ilr1m hEEW ; GI2K - 7L.e surprtsir;g 7e~iguauoil of :4ic;.;a,-1 ?vitla5 us citu:~ :•,.:n nd „uief exec• utive of °hilip Morr-.s Cos, iol[oY,l a rift ae- twectt hirn and the ~u~ o er ti'~: company's dircrt:on, analysLtisafd. The board, IIItetis+g alt:ir ~`ty ill what a sx,kes ,tan descrilxW as an "emergency" ses- sion, eirctrd R. tbiititu.u Marray ts chairman a.nd Geoffrey C. Bible as rresident and LRO. Mr. ?~Lie:s, M:. Murray and Mir, Pible weren't avaiiable for con-ment Mr. Aike3, ,54, resigned f rn:a the New York- i?8,k.,Ci tobacco a.nd foo{j co?rakinY ~*'ild gPCfw• in5 g;:verntner,t scrutir.- of .ohxr::w c.o upa- nics, cont}K;'Ution from. des:ount cigarettes and press,ure from sh,areaoi4teEs to restruc- tur e. P~nt111I ~~CiaTl,$ ftf C.'S 1vr8, I i?o1 Cf C.Sgd- rettes, Kraft brand foods atld'd.iller beer. Soxurities ana'.ysts who track the company have been vocal in their bclief that a move to sptit ttre toi~c<o unft apart from 1116 food businc~ won;dmcre.ase the value of the food bus'ittc.~~' and raise Philip Morris' long•ailint; slock price. Mnny shareholders had urged such a breakup to shield the food operations from the possihility of liability lawsuits. Many analysts expected tUis decision to be made at 1'hilip Mon is' bc,ard meeting In May. Jt wusu'1 Mr. Miles "was invited to leave tlle board wceting and the insidets kept the meeting golnf; fo,• several hours after he left," said I•'rtderic I)icksorl, an analysi at D,A. Davidson iv Co. in Gi eat Falls, NUnt. ",t said to me that the battle had to bc vt,xy, very he:ted over tiic strategic direc tion of lhc com;,:ny," Tony Vento, of I:;d..,ttrd S). Jones & Co. in St. I~ouis, said many ruiaiysts believed that "Mr. M.i1eS had wanted to sTlit up the food and tobacco busiccssLs He v.•,ss wicltr a iut of pruz-~ure to bchzs; the va] ue of the stock" "if h:r, !iiles thoubiit spiitting the co;n- pany was the best way to enhance shar4 holder vaiue," he would have felt suNs!entiat Ple~ see P1ff LLiP tit0;21~ iS on Page 4D. "frtuttraluon" vAt.h the board for its txk of support, said Jeffrey Omohundro uf '*NI.E. Hilltard & Ca, in A~Iysts aa.id Suno'ay they expect Pwlip morr`is' new Ieadersb.ip will soon e.nnounce that the company wiil begin buying back its saares as a gesture of support designed to bc,V~,t the price of tise stock Mza.na; ile, Pla.ilip Morris tried to d.i~spai the nction thA: a rift between ~L". Wes and tue buar~ compelled ldm to l:.ave the k,b he had held. since _Septembt.~r 1991. He JoiIIed P'ai.lip jc4oi-iis in 1988, svhen t~':e cum- Wy acqt:i.red :nraft General Foods Inc. tusisting that Mr. Miles was not ptl4hed out by the 1v-;te25oTi Doard, P?icholas M. Ro'Li, a;?hiL'p Morris spakesman, said: "He decided to leave on hfs own, for his own per- Sonal rea3ons." in any event, the moves occurred swiftly. Mr. Rolli said the matter of Mr, Miles' seuignation was first dis- cussed by the directors by telephone tate Priday sfternoon. "The formal resignation was ac- cepted on Saturday morn.ing at an emergency meeting," Mr. Rolli said. "We were quite d.isappointed after the last board meeting." said analyst Marvi;t Roffcna.n of Roffman-Mi11er A9sociates in Philadeiphia. "We were looking for a break-up or a share- holder repurchase. A significant amount of value is locked up in the fond business. If you break the com• pany up, you can release that value." To the analysts, the timing of the announcement indicated that Mr. Mites had become too frustrated to continue in his posts. "It's interesting the announce- ment came out on a Sunday," said Mr. Dickson of DA Davfdson. "My initfal sense when I first beard it was basi• cally the board meeting of a couple of weeks ago was still being played out behind the saenes, nnd off-stage Behind the scenes, it was clear you had a cha.irman that was looking at options, trying to best protect the company from the possibility of fairly severe legal fallout t'egarding domestic tobacco liability." (OtFler caverage ava(iabfe upon uques't.)

LOS ANGELES TIMES JUN 2 0 1994 Philip. MorrisCEO Quits; 2 O~~rs to S~~~~ ~~ Duti~ 0y STt1.'.RT S!i tfg%sTEts a T!1.er.a 3TAiF VQiTr.t The i•tead o= r'hiifR '~nrr±z_ t^.r~3. YtL'ri+t7t3y, ^quit Uve: 'tPC sH~L't{Fis~ 2!! @ 11iur,nir tr angkt -s:;i at ti1C na:ion'ft biggrat wbxc conr.crn. ; h~lrrn:n and i.hief ExCCuttvc idichxci n. ;ri,lu8, o vaterarl of ti:r, comfsony'~ food '7~iraah who haa been criucfrxti by tob"Icco r.rti- sarie far b•:;)ib :,nrFsfa;o-frive ` IIti3ck: on tiiR clg-'.~L' ir~ifl:atry, in bcing rt•piaccd hy two eacc;ii;vea with lond expcsricncL :;n tiie totzc• co side oFtad btblr:c.'m The Changryt at the hclrn ct: °itr'V York•basi2Ci Nhili;o Morris come scs the entire C:,S. tobacco indtig7try is recling from aeuults by -4tit>-c!anf and an!!•crt:okin4 acuvista. .4bac• co camr,any prc:fita aat; nave suf- IcrC(i u'1",til I'C.c.^.rttly irJi21 apTlce war fucled by Phi;ip b.iorri: t year wher, lt siaai,ed the prSce of i" Mari boTo cl;garttt€3. "v'n W, thC ehake-'tif, a: P;'ltitp Morriic !avora thi tGhaoct! :.Cie of t.he coYnFa,ny over its vat&> .cw-Y? and b e.- operations, which M nc uuc and Miller Brewing Cao, . ilcs, b-i, w t~o 4y• atepping down after ncarly thre8 yr,ars 8: t;o head of Philip Misrris, was the first noru;noker to run the company and was Kraft'e chief cxccutive when the food proce¢r!- inA giant was acquired by the tobacco concern in 1H$8. By contrast, Miles' replacc- mcrns-R. William Murray, 59, and Geoffrey C. t31b1e, 5F-arc both IongUmc tobacco cxecutivea, with a combined 50 years of experience at Philip Morris, Murray, Philip Mnrris' presidenl and chief operat- ing officrr until he was named vice chairmars for food 1ut month, now becomrs chairman of the entire i'te,>,te set SHAKE-UP, Af5 cnnti)atty. zlit:it•, wha huti If;K.)1 vive ch,tir m:u1 nf Wilharm. wru" etcvulocl tu Irrrvicit:nt ;lnd c:hlcf oxt,rutivn nf tiw cnti!r r.cu)tltalt,v, Aitttt,urh t}e tiiic c,f (:I,:f) wnulcl gt,};g"l that J31lric ts now thr /cn4,st frc,w(•rfitl ('XCYtlltivc` ;it 1'lrilii) R4nrrut, I t'Ur,r- ;,atty rt~crkcunm.;n ,u!ci t1vIt zr will !•rtx3rt tJ aftfrrty, ir) a kcit(:r of rctiit:uuti<rii tc;i,lnii tf`ti IZit` Pt'iti;ly s)ilt r:nt tii. t.;4ec':1 hy i=h niii) >>ifil`2' )k`2')k U1)t:! 1tiut;tuly, 1i1lCa r~lici hc,. ia ic:,ying witds "iuti ctlnfi. tit,,c" thai I.he cist"l4iiYiQ tn;tclc dt)ring r,~x t:^n,irr. "wi11 tyc; ,,rnven #Ight by ci:.~ iesLit,3 iri iWj and, btyond," "rti,'c3w, ho4veyer, ivitl't the reas:u- ao..us of our U.& tU~ux,c :iu.:,inou 'a.:, : t`,e c.ontir,:tcd ytrong ,growtl: In i,rtcrrintionai tobacao, tt mitices serwe to agaut have a caN;er Philip 'aorrLq z*xacutiYe in tiic to~ ynh," he ad:±f3ti. N cii,hcr [S;,~a nor htr £uccc-.,ac~rb could be rczchcd fnr ,-ortt- '7nc:nt. 53;oka3tr.en for Oic torr.;iar,y xaid idacai was not ;;ro"t:red to '4rrlve. but ht< ts wi:j:ay Lialieved t:.i ~h8ve rtin into stTor-4 op" ition f-om othcr t"ircctor, and r;lnicir -fnvetstnrs. l.ia , tmfn nemczie ;r.ay ;,avc : ecn Pntli* 'rl'corris' forr.,er c:hairtnnn, fii9fi M8..''w~el'., who is mit1 to hAvc pluiSg.H back Iniu the comnn- dy's u,-x.~r.ttlurs rec.et.tiy. t7Jhen a propo-sal bcticvcd to have bccn puuched by Mi/ea to Rpl,t i'niiip Marris' tod,aer; and food operstiotts Waa conxidert*d by the board last 'tsionth, pdaxwell is believed to have Payed a itrong rolc irt shooting it down. Splitting the company had fans on Wail Street, whcrr e inveatrr.ent community hoped ch a movo would both yield resitQr v>alue for sharcholdcrs and taulutc a• tzcparate food busincsa m tobacco tiability. Philip Morris stock is One of merica's mnst widoly held und i.. cluded In many pension funds. he company'r aharca climbed m about $80 wher. Miles ct~nk ver ln September, 19$1. to a high f;`LiBt over $86 a ; ear later, but they h:vc ylttngntf aittcu-thoy cinar.ri nt VrT.37i, on I"I'idtty--cost• ii1f; itivc-sUs,-r= uu!!Y> thatl t.'30 I,illic,t! ainc.P iS!+}2. Inrltlatrywide tt)rmnti y,t,>_s lllt:ca: cif tnc bltit))c, huwever. 'I'ilc clvrri!I" v;;llic c;i thc cnlnlur- uy u:f W;,ll tiirtc•t Nii by t,cul'ly $13 itiliiua onc diiy liist ycar, aftcr invr.Xtnm. were caught off guurd hy ac!1 ullnuuncesncnt thut the curnluw !ly WaK AiaKhirtg prtmium r.iqarvttc trrtc:cR tn R!avr c,ft ct,mpr.t?tlnn frr,!n Ct~CiitJC~c 'tU.~/~t28. Altiruu; h Miiv.r' drpl;trturc dc.;csi ncst try,,x•yr in 1w% clirr-ctly rclatnl to ril'iitil, ;,rut< rax F.!v at!N-!trnUkini: activiata, he is belicvcd to have 'rttKiruirci thcaQa clr,cr to thr cclln l);aty with hiu ty;lrely vitt'st,lv prufilc In ihr, r»rrnnt nntit,nr.l ck,h;tte. hlilccu rarely (;ivt;x itttct'vicwti trs titt' new.x nzc,flsl or iircnkrs trc^fr,rv Wnll StrcvI ai!ulyxt.r w1!u follow thc• Cutrtls~tny'c fitock. 1lut John C. MaxwcU .1r., a+r atiatl}'st with WhCtlt il'irfit tit:vurr• ticrt in lticlimnl'Id, Va., M,id hr 'vt'l:uvVt: thW t:ct)ltl,aily ifi pcnitiunccf t(i t)n wrli itn t•rrrninK yn;1rH-•unlesxv i;ic(>.atctlti;ti )rcw ta!a-x or othcr ~ 4trntti, rcgutc)tttry rcrntrc!!K /trr jll'ui.t i i,il lU[43Ct:U tialt.'Y.

-12- _.~ ADVERTlSING AGE, JUNE 20, 1994 What MOrray brings to Kraft Industry speculates his role is as caretaker pending PM breakup By Patricia Gallagher Philip Morris Cos.' decision to bring in a tobacco man to run Kraft General Foods has investors and Kraft followers wondering what's in store for the mammoth food company. With his new job_.of vice chair- man for worldwide food, R. Wil- liam Murray gives up half his re- sponsibilities and takes more direct control of KGF at a time when Philip Morris is poised to separate its food and tobacco businesses. "I think they are positioning it for a cleaving," said J. Bruce Har- reld, Boston Chicken president and former KGF executive, echo- ing a theory of dozens of investors and observers. Mr. Murray, 58, spent 21 of his 24 years at Philip Morris selling cigarettes-and three oversee- ing both food and tobacco-as president and chief operating officer. He also moves into the KGF position at a time when growth of food earnings has fallen from the mid-20% range in the late 1980s to about 7% last year. So who is the man who could end up in charge of a free standing, $30.3 billion food giant that would rank No. 13 on the Fortune 500? Industry sources, including some former KGF executives, characterize Mr. Murray as a strong administrative and op- erational executive with close ties to former Philip Morris Chairman Hamish Maxwell. He also provides a liaison to top Philip Morris management, the board and Wall Street. But Mr. Murray is viewed by some as a caretaker at KGF, having virtually no direct expsri- ence manaaing food businesses. He's "solid and trustworthy," said one source, but "really doesn't add much," said another. What Mr. Murray does bring is impressive international business experience. The Australian native joined Philip Morris in 1970 as a finance manager in Switzerland, later holding jobs as president of the Benson & Hedges brand in Can- ada, president of the company's Europe/Middle East/Africa divi- sion and president-CEO of Philip Morris International. He brings that cosmopolitan background to Kraft General Foods at a time when the company's phenomenal growth overseas has slowed. Just four years ago, KGF's in- ternational sales were growing 66% annually and operating in- come was surging nearly 80%. By last year, the pace had slowed dramatically, with revenue up 8% and operating income up 3%. Mr. Murray's new focus also co- incides with increased invest- ments overseas. Last year, KGF bought Freia Marabou, a Scandi- navian candy company, for $1.3 billion, and Terry's Group, a U.K. candy concern, for $295 million. The company also expanded its coffee business in the Czech Re- public and China, its cheese busi- ness in Poland and other food cat- egories in Australia, Turkey, Ar- gentina and Brazil. As Europe's fourth-largest food company and the Asia/Pacific's leading U.S. food marketer, Kraft General Foods International gen- erated $1.11 billion in earnings on $9.43 billion in sales last year-12% and 15%, respectively, of Philip Morris' totals. International expertise aside, some observers say Mr. Murray's lack of food industry depth is a detriment. But his impact will be significantly buffered by a thick J UN ? 0 1994 laver of seasoned KGF executi•es, experts sav. ` As long as he and [Mike; Miles work together, I think they 'll be a good team." said Bruce Gregory. R. William Murray, Kraft General Foods' new boss, brings loads of inter- national business experience but no direct experience in the food category. portfolio manager for Progressive Partners, a New York money man- agement company pushing for a breakup. Mr. Murray continues reporting to Philip Morris Chairman-CEO Michael A. Miles, as he did as president. Under a breakup, though, KGF might lose Mr. Miles, its former president, as a safety net. Only he-and presum- ably, his board-knov,• whether a split will occur. The investment community is pushing that scenario. After a board meeting late last month, Philip Morris said it would take no action on plans to consider separating its businesses. A day later, the company said it didn't anticipate the board would take up the issue again "in the foreseeable future." But Philip Morris hasn't com- pletely closed the door on tearing apart the tobacco and food busi- nesses, and management re- mained flexible on the subject in a meeting with six large institu- tional investors. "They have indicated a willing- ness to meet," said Anne Hansen, deputy director of the Council of Institutional Investors. =' Ms. Gallagher is a reporter for Crain's Chicago Business.

-13- RTf 06/17 1606 Philip Morris <MO.N>, others cut by Salomon NEW YORK, June 17 (RZ~uter) - Salomon Brothers analyst Diana Temple downgraded tobacco stocks Philip Morris Cos Inc, RJR Nabisco Holdings Corp <RN.N> and BAT. Industries Pic <BATS.L> to hold from buy, citing extensive news coverage of the industry. The analyst left a buy rating on American Brands Inc <AMB,N>, saying she believes B.A,T. Industries will close its deal to buy the U,S, tobacco unit and will indemnify the U.S. company against the litigation risk. "We believe the tobacco industry is being tried by the press and mass media which.will make it difficult for the tobacco industry to get a fair hearing in court," Temple said. REUTER Lhcrtcw~ork~iins~s SATURDAY JUNE 18, 1994 Date: Goodbye Cyclicals,' ` Hello GrOivth Stocks I Or So the Analysts SayrapY any time sooR . . By SUSAN SCHERREIK Quite a few mone mana ers are gushing about~te prospec for large-company growth stocks, a group that has languished for two and a half years. The cyclical stocks, in the -auto, steel, rail and other economically sensitive industries, have had a heady surge but are running out of steam, the argument goes. The Fed- eral Reserve, in its zeal to keep infla- tion in check, will ultimately slow economic growth. When it does, the cyclicals will be replaced by big growth companies, which record con- sistent earnings gains even in a slug- gish economy. ."The next major move in the eco- nomic cycle is going to favor growth stocks; ' said John D. Gillespie, man- ageF of the $2 billion T. Rowe Price Growth Stock Fund. t ou it is hard to pinpoint economic transi- tions, the growth-stock followers ex- pect a shift over the next six months. Naysayers, of course, point out that just last week, a blue-chip growth stock --P~e ps~ico - headed south on a report at the company's second- quarter earnings would be flat. Other food and beverage stocks fell as well. The decline raised concerns about whether growth stocks could stage a growth stocfts will come arourxi, the investment advisers in- sist But something else is afoot as wq~p - a drastic change in the catego- . "The 1990's will largely redefine growth stocks," predicted Shelby Da- vis, rtfolio mana er of Selected Amencan ha s, a mutua un vested primarily in large companies. Some old die-hards are giving way to new favorites. Quality growth companies, which have hefty market shares and strong bajance sheets, typically post 10 to 20 percent increases in earnings year after year. Because they plow most of their earnings into operations for fu- ture growth, they pay skimpy divi- dends, if any at all. Like Energizer btmnies, they keep going even when the economy languishes because they sell goods and services that people buy no matter what. Consumer products companies % ~ u N 4.'. u Iyy't dominated the growth category in the late 1980's. Their brand-name prod- ucts, whether small-ticket items like soft drinks, cigarettes and cereals, or essentials, like drugs, found a ready market. But in the early 1990's, con- sumers turned frugal, and price com- petition squeezed profit margins for food, tobacco and dru,g companies. inc u tng e a~z ila . orns and Merck. Pepsi cited similar competi- on and price pressures in its latest earnings forecast. "The traditional growth stocks are showing signs of age - their profit= ability is stowing," said Ron Ognar, who runs the ~trong Growth Fund, which invests in growth compantes of all sizes. "Newer, fresher companies will have an easier time." Although it is premature to con- clude that Pepsico will be displaced as a blue-chip growth stock, many companies no longer fit the mold, said David Shulman, chief equity strat- egist at Salomon Brothers. What managers inter- viewed in recent weeks pointed to companies that help consumers and businesses cut costs and save money. Financial services companies, like Charles Schwab and tvSerriil Lvnch are ezpect"~to flouns a"-~s bab boomers focus on saving for retire- ment. Companies that help business- es raise producuvity - by using tech- nology or by taking over routine tasks - should also deliver double-digit earnings growth. Among the manag- ers' favorites: Automatic Data Pro- cessing, which processes company payrolls, and Motorola, a leader in wireless communicauons products. Many of the new growth companies will add to earnings by muscling into foreign markets. Mr. Davis dubs the American International Group "the Coca-Cola of insurance" because of ffs o a straTcgy. 1 ,Y~er,trd}

GROWTH COMiNG l«~;ACK? Total annual returns for Stocks and stocks. The New Yor1e 71arcs And not all the old-line growth stocks will fade. Gillette and Procter d~ Gamble, for example, are expectea to thrive in large part because of their international positions. Investors who coliect these stocks will be rewarded over the next three to four years, said Mr. Ognar of the Strong fund. For support, the fund managers, point out that the party is ending fortcyclical stocks. The cyclicals have, been the market leaders for 22' months, while their typical spurt is just 18 months, said Michael A. Ham-: ilt.on, a financial analyst with the Leuthold G roup, an equity research! group in Minneapolis. What's more, investors can find exceptionally good deals in the growth sector. Growth stocks usually sell for a premium, reflected in high . price-to-earnings ratios. But the P/E ratios of many issues are near theiri lowest levels in several years. , One way to spot issues ihat are welf ~ priced is to compare a stock's P/E, with the annual earnings gains fore•1cast for the next five years. If the P/E; ratio (the price of a share divided by~ its per-share earnings for the next 12~ months) is equai to or less than the' annual growth rate, then the stock represents good value. Mr. Gillespie of T. Rowe Price fa- vors the Federal Home Loan Mort- g~2e Mort gage Coroora tion. Its stoc has a P/E of 10 based on 1995 earn- ings projections, and its annual earn- ings growth is expected to be 15 per- cent. At the end of March, the mort- gage company was the largest hold- ing in Mr. Gillespie's growth fund - a stark change from five years ago. At the end of 1988, the fund's biggest holding was j,B.M., no longer a growth stock by any definition. -14- JtlN-2 0 1994 OR State Investments-Tobacco, 5~t,s7^ OreQo1"i Public T: =5tmen~ Mcnac~ers '_---c.,. A;^_.,.... "Obd~~O StoCKs PORTLAND, Ore. (AP) The prospect of anti-smokina lecislation has state retirement fund mar.aaers reconsiderina more t.an a half billion dollars invested in tobacco companies. The Business JOurnal, a Portland week'_y, said the si.^.g1e largest state investment in tobacco is 1',45-j million worth of stock in RJR Nabisco Holdings Corp., the makers of Winston, Salem and ocher cig_arette brands. ''The thing that's really overhang'ng the _ndustry •~s what's aoina on in Washinaton, 'said John Maxwell Jr., an analyst with Wheat First Butcher & Sinaer 'i_n Chicaco. MaxweLl noted that David Kessler, commissicner ~_ the U.S. Food and Drug Administration; Surgeon General JGycelyr. E_^ers and U.S. Rep. Henry Wdxman, D-Calif., are leading a f1Q 3•Tai^:St STiGCing. Waxman, who heads the health and environment subcommittee, hauled seven tobacco industry chief executives before the panel in March as part of his effort to ban public smoking. Kessler said this spring he's willing to Consider classifying nicotine as a drug to put tobacco under FDA authority. As a result, OregOn Treasury Oii_C_a1S regueSted _n writing this spring that four of its mone_v managers justify their investments in tobacco stocks as a part of the state's $18 billion investment portfolio. Jay Fewel.Jr., the state Treasury's equities investment officer, said the state bought RJR stock at $5.50 a share five years ago but it has gone nowhere, trading about the same level this week. But the state could not dump its RJR holdings even if it wanted to sell because Kohlberg Kravis Roberts & Co. is the managing partner of the state's portfolio and the Treasury is a limited partner without any legal right to interfere. Past KKR investments have been hugely profitable lor the state, includin_a returns in excess of 20 percent for the buyout of the Portland-based Fred Meyer Inc. retail chain. The state could dump the rest of its tobacco industry holding, estimated to be worth nearly $75 million in Philip Morris, American Brands and US Tobacco. But none of the state's four money managers indicate they are selling tobacco stocks despite the state's inauiry. •'I'm not speaking for them, 'Fewel said, " but based on their actions, they must feel that there's greater upside potential than downside risk. " Copyright (c) 1994 The Associated Press Received by NewsEDGE/LA.'V: 6/17/94 4:06 AM

USA TODAY • MONDAY, JUNE 20, 1994 Follow-the-leader can be dangerous for investors Even pros stumble: Soros makes $10 million gaffe NEW YORK - Even smart guys who think they have the ' inside track do dumb things. 'Igke globe-trotting George Soros, 63, skipper or $10 billiori Soros Fund Management Financial World magazine- . reports the Investment whiz per9onally made more than $L billion last year. . - Whether that's so Is anybody's _ guess. But his brm ` - In its stock ac- tivities - is said to have pulled a blunder on the short side (a bet on falling stock prices) on Qswi- tec~,l , a biotech leader. Given the size of Soros' fund, the loss is no big deal - about $10 mil- lion, I'm told. But there's a les- son tor investors: It's dumb to get involved in a stock just be• cause Soros is a rumored play- er in it. And many investors have been doing just that. . Biggest stock holdings About half of Soros' assets are in stocks. At top of list: Company Friday ciose Holding value (millions) Shares owned March 31 Newmont Mining $41 $471 8,461,000 Deere & Co. $743/e $135 1,569,000 Perkin-Elmer $31 % $68 2,036,000 Tektronix $281/4 $57 1,869,000 Phili M $50% $41 808,000 Lege~~n $281/4 $34 1,321,000 LIN Broadcasting $119t/2 $33 304,000 Anadarko Petroleum $531/e $32 700,000 Host Marriott $11 $31 3,054,000 General Motors $537s $30 562,900 Source: Federal Filings How George Soros is playing the U.S. stock market A rundown of Soros Fund Management's top first-quarter stock purchases and sales, ranked by dollar value. BIGGEST PURCHASES ... ... AND BIGGEST SALES Friday Shares Bought in Held Friday Company close 1 st Gl '94 March 31 Company close Georgia Gulf $34 800,000 800,000 Home Depot $433i6 Southern Pacific Rail $201/4 950,000 950,000 Kemper $585/e LIN Broadcasting $1191/'2 185,000 304,000 Motorola $471/6 Phili Morris 3/e 371 000 808 000 Sears Roebuck $483/4 Western t as $47 , 402,000 , 402,000 , Newbridge Networks $34% UAL $1233/e 125,000 125,000 DSC Communications $201/z Stone Container $15% 1,118,000 1,118,000 Burlington Resources $441i'2 Valassis Communications $141/2 800,000 800,000 American International Group $951/4 FlightSafety International $38% 345,000 355,000 General Re $1163'a McCaw Cellular Communications $521Y6 224,000 224,000 Goodyear Tire & Rubber $391/4 Source: Federal Filings Shares Bouslht in Held 1st Q'94 March 31 1,665,000 0 950,000 194,000 498,000 9,000 762,000 0 659,000 361,000 537,000 114,000 592,000 0 272,000 25,000 205,000 0 507,000 8,000 9'i+tVQTQ%0z

-16- ADVERTISING AGE, JUNE 20, 1994 JUM 2 0 1994 Actor Tsutomu Yamazaki helps introduce Merit's lower tar content in a spot featu`ring a traffic jam caused by turtles. PM is pinning high hopes on low-tar cigs in Japan By Jack Russell TOKYO-With a two-prong strat- egy to turn around its ailing ultra low-tar brands, Philip Morris Inter- national isn't just blowing smoke. The marketer lowered Merit's tar content by 33% to 4 milligrams and began a new campaign, helping slow sales declines by volume to 14% last year from 20% in 1992. The brand's market share hovers around 1 % by volume. And Philip Morris also expects a new campaign for Next to pay off big with a threefold sales increase to $175 million this year. Unlike many global markets where cigarette consumption is down, the Japanese market has risen four years running. The To- bacco Institute of Japan reported sales climbed L.6`o to $36 billion for the fiscal year ended March 31. Ultra low-tar brands, classified as those with 6 milligrams or less, are showing exceptional growth in this massive market. James A. Scully Jr., Philip Morris director of marketing, said ultra low-tar cigarettes now hold 2t3?6 of the overall cigarette category by volumc and will likelv roach a 35"0 share by 1995. Merit sales in 1993 wero ~*Sa2 mil- iio~n and ;lre projec: oci tu cieciine about 3.3°,o in '94. Philip Mnrrts' to- tal ~r31es last Vrar VcerO 51 4 htllinn Merit virtually created the ultra low-tar segment in 1987 with a'I'V. print and transit ad campaign from Leo Burnett-Kyodo, using the slo- gan "Thirty-three percent less tar than Japan's leading lights and it tastes better." "We woke up Japan Tobacco," Mr. Scully said. In fact, Philip Morris caught Ja- pan Tobacco by surprise, forcing it to reduce the tar content of its lead- ing smoke, Mild Seven Light, by 33% to 6 milligrams. Mild Seven Light and its higher-tar sis- ter brand Mild Seven domi- nate the indus- try, with vol- ume shares of 15.6% and 10.9%, respec- tively. But by 1992, about a dozen brands had crowded into the field. The pro- fusion sent Merit's sales falling, and for '92, volume sales were down 20%, Mr. Scully said. Merit suffered a disadvantage because it was priced at $2.38 a pack, 14% more than the $2.09 charged for Mild Seven and most othe'r rival brands. Instead of lowering the price, however, Merit created a new point of difference by dropping tar con- tent to 4 milligrams. The change was her,3lde<I in a TV, ne~vspaper, transit and magazine campaign that began earlv this year. starring actur Tsutom u Yamazaki. In one 30-second mini 1r.3ma. o conservative father of the bride re- fuses to pose in the wedding pic- ture. Mr. Yamazaki comes on the scene and says, "For the time being, I wish you happiness," and offers him a~dlerit. The father joins the photo session, the bridegroom's toupee falls off and the bride faints. In another spot, the actor smoothes the ruffled feathers of motorists in a fender-bender by of- fering them a Merit. While Merit has been battling back from sales declines, Philip Morris' 1-milligram Next has per- formed more evenly. Japan Tobacco opened this even lower-tar niche in the early 1990s with 1-milligram Frontier Light, leaving Philip Morris to challenge the brand last September wtth Next. Within one year, the 1-milligram tar niche quickly racked up 3% of the total market, including 1% for Frontier Light and 1•o for Next. Lightness is the overriding theme in Burnett's Next campai);n, begun last fall. The spots, a:30 split into two :15s, use animated fingers. The finger with a male voice asks, "The No. 1 lightest, please'" Another fin- ger with a female vntce, represent- ing the retailer, says 'Tho lightest with the great taste The male voice then savs. "Next' "1'h,,t',;E;re_at Next with 1 milligrams picase.'In the second h.3if u( ihe sl~r,t, Ihc male finger im<is the 'iightest, ' which is Next at avon<3ing ma- chine i]

-17- UtxNEAPUn srAR MC 7Ri&M JUN 18 04 Btowing . smoke 250 miUion strong; China's market for cigarettes has, its share of quirks, High prices and low output keep brands like Blue Panda out of the average smoket's reach. jtastw `10 a i b ~ dties, where eona;ricw Ia ~a' oue consumoon has becoau a liib- etyie far a few and a hotly yarcuod drnat for the rest, there us foma thia=s that the local cumenc,~y s>ii1 cannot buy. "Puld1 bruid? The one that (Datl. mount leader Aenjj Xitoping tnsalros? You ean't buy them any- wfi?"o one te1L thtm," a 20-ytar. old who peddle: cigarettes in one of Beijin:'t darh alleyi whiipered oon- tp"torialty, looivnS around to mab ture nd one wu watchia= or lIttezr ins, Deag is officially reported to hava siven uP 4w_kL~Lx faw yrui w. The Poddler lata coatided thRt ba could secure a"Blue Paadti" P.ckei of 20 at the bladc•raarhat rate of 529, more thast 10 timtt the cost of Chi- na's. otbar przai3ar brznda euch aa Chunjhaa, produced by the aame ~ PartQry in 92inthsi. ~The Hlue Panda brand is supplied only to Bei1to the ceatu au- . thontiea and the uate council, and only by requett for top offlcial etsta functions," a tPotieitnaA at the Chiu Tobaroo Shan4hu Corp. told Reatm in a telephone mterv". Prcasod for detu'lt abo= ..hsrm the tobacoo that :oes into the Paada is Srewa, tus com tian iad mamtha ~' ~ ~t.« uatrY seo'et. He aLn declined to disdaa t2se prioe. "It is prialas; we produce only a very,. vtry small quantlty t;rCry YeAr: "It rrou3,i deflnitely be flla if you f3.nd it in theopen maricet, or fn the black riarlctt. You cannot buy it." One•fburth of Qini's 1.1 biZlioa people are amoYrn, m countr., tha worid's bignt trillion msrket. 1t produced 1.7- retset :att year. Forty biltion wera export+'d to Ruula, Soutberst Aa~ and ott:a' rtsions. Thert ara is0C~r et:e factorlet in Chias Ectept in the far wpt, at leaat one $:tory an be found in avery provin'x The hupe market is sean u fl<rtiL ~nd for US. b'aco ` ad soa~ Pacin4ircrrssitu~~' a ttrlcticni at homa, U.S. nanu$cittt- ers an lookiat; at A" the Indian subcontinrat and yarts of Europe aa stew m u4cett. o divi:icn o abit id arom itt Nort#s na uarten that It har op. erttior.t in China on a ver~+ unaIl scale. It c~pened a plant theto m I933 in a jcint venture with the Chines. sovernment. Each year it producra 3 billion a&cs of Ca.nui. Wuuton und a local brand called,Mden Hridje in a 1.7 trillion• itick rnarket, accordin~ to Brenda Pollmi r, director of publfs ztlation: for R: Tobacco Iaternatiosal. She said tt,e cmrap'aay~would like to•1qc.d patid 9ut the Chinese jIIvQlbnlent has no: atlowed it M' 11s its Marlboro c- Ehill rettea o spCCial ImIZZ Wt ments of foreign currency stores. But ipo{cesw»man Elizabetls Chu said "We atver discuas the luture." Mover.tent: againtt smoldnj urn few and ffr between in these overseu rasrfcc,x, espcciillY where smoklar is } een as a iign of affJuevce arxi, espe- ciilly f'or women, aocial }iberasion. "Althcugh China's pvernmeat it ditcovcy~n$ its people from amoh. in=, and mnsu on .raralng labels on c*retx bozet, the production of dr. arettd tsss bean rtabte ~in the Lst &* ears s:nd ti not likely to hil shtrp` ti ~aaal ~ axo Corp. in &ulj* told Reuters. J UN 2 0 1994 "Poople 1uu do nat trajce ttp ia the m0miDS and decida not to s ... ~ ~~~t?a~em," >s. asid ~~ , ~~w~ Value C'Epr" oo:ninued normally oott between 60 cents and $3 for a nach of 20 - h,u =ona back to the etae eaffe:Y In taxq, Total s2 pertent~las: uct tax - rtood at m~ae isrhio~wrbtesimMof i~u p~ ulaoe are cDtilv !br lbreip braadi such as SSS and Marlboro, which is birt~'~txand in tL~s Unitod stata. But beau~e of tts exclutfveneaa Chi. na'6 top Panda brand it, notsu~ F intdy. ttill iturouaded~y a raytbicay aura for the ordinary Chine.e. "It (the Pa.Xda tobax. some hflthlaad wh t5e tU ] ie jrotvn~ ere cool and pnrs. No pollutantu from the envfrottment They also don't al- low aay paiiddp and }bn=idba, ADd only a very amall qtuIItity ia produced, maybe for 100 People in a11 vf Ch1na. Even minittert may not aet to smoke them," nid a 33-yatr, tobiC4o-Connoiiseur, a senior oil ex- ecutivo ia 9etni. While the Blue Panda's qrioe puu it almost entirely out of rcach of Chi• na'a 250 million smokers, the coun. try't tobacco author3tied havt not been ahy to riah in on its Tnytterioui lustrs on spedai occaiiona. Yellow Ptnda, a cousin of the Blue Panda, was specially created for Dub- lio iale during the 1990 Aaian Games in Csina, a spoicesmaa at Cniina ?da- tional Tobacoo said. "It was then sold to the public at 700 ~~ j a~~ n," pr;8 for a China's th?A,rae moinpo pular br =ds - Chunjhwa, Yun Yan and Hon~ Ta Shan - now retail for S10 to $ZS per carton.

-18- JUN201994 0 ADVERTISING AGE JUNE 20, 1994_ Investment, not ads, soaring in Vietnam By Laurie Freeman and David Butler Investment spending in Vietnam is going through the roof, but ad spending hasn't kept pace. U.S. companies including Visa International, American Express Co., Coca-Cola Co., Pepsi-Cola Co., Mobil Corp. and Gillette Co. almost quadrupled their invest- ment spending in the span of a month-to $78 million in May from $20 million in April, accord- ing to Vietnam's State Committee for Cooperatioh & Investment. . The rise comes after February's lifting of the U.S. trade embargo, with the U.S. now ranking as the country's 18th-largest investor. No. 1 Taiwan was far ahead with $1.5 billion and Hong Kong with $1.4 billion. But the big bucks foreign com- panies are investing don't extend to advertising, estimated at less than $5 million total this year by local agency executives. "You go in and expect to see big billboards all over the place, but there aren't that many" in Viet- nam, said an agency executive based in Thailand. "The truth is there is not that much to buy. [An advertiser] can get good national coverage for $50,000 a month." The exceptions are the cola gi- ants. Both Coca-Cola and Pepsi are using splashy, big budget ad campaigns including TV, radio, print and point of purchase. AmEx is limiting advertising, to outdoor boards, one in Ho Chi Minh City and another in Hanoi, handled by Ogilvy & Mather Thai- land, Bangkok. The boards have "a world cur- rency theme,'' said Elisabeth Coleman, VP at AmEx's Travel Related Services Co., New York. "Our thrust right now is to build an infrastruc- ture so we can provide high quality services to our corporate card and business travel custom- ers." AmEx accounts for 7 5 % of Viet- nam charge card purchases, she said. The card is accepted by 40% of the restaurants, hotels, car rental services and retail stores in the nation. Visa is using outdoor ads themed "Welcome to the world of Visa," said a spokesman in San Mateo, Calif. It's just a matter of time before other marketers follow suit. San Diego-based Vietnam Investment Information & Consulting held an April trade show in Hanoi, at- tracting 50 major U.S. marketers. Pepsi, Gillette, General Electric Co., Kraft General Foods, Carrier Corp" an tis evator Co. were among the exhibitors. More than 100,000 people at- tended the four-day show, said Richard Pirozzolo, whose Piroz- zolo Co., Wellesley, Mass., han- dled communications. The success spurred plans for a Ho Chi Minh City show. A Coca-Cola spokesman in Sin- gapore said the company is im- porting U.S. creative and has some ads created by McCann- Erickson Thailand, Bangkok. Outdoor boards are done locally through Vinexad, Ho Chi Minh City, Vietnam's state advertising enterprise. The campaign's theme is "It's great to be back." "This is a grass roots promotion that has gone on from" the day the embargo was lifted, the spokesman said. "We started in the centers of Hanoi and Ho Chi Minh City, and spread out to the suburbs. Now we're moving into the other cities and towns." Coca-Cola and Vietnam National Foodstuff Import-Export Co. are partners in a $20.4 million bottling plant being built south of Hanoi. Pepsi is also running a heavy schedule, with $1 million being spent on ads and promotion. Dur- ing a major sampling drive in February and March, 1 million samples were given away in Ho Chi Minh City and Hanoi. [I f

-19- TOBACCO PHILIP MORRIS COMPAIr'IES INC. THE IVALL STREET JOURNAL MONDAY, JUNE 20, 1994 Ji1N 2 0 1994 The Insider Who CopiedTo'.bacco Firm's Secrets By EBEN SHAPIRO Staff Reporter of THE WALL STREET JOURNAL Merrell Williams Jr. is the tobacco industry's worst nightmare: an informed insider who has turned against the secre- tive industry. Mr. Williams, 53 years old, the sus- pected source of a trove of internal files that have been leaked to the media and Congress, may be the most damaging whistleblower in the annals of the tobacco industry. An attorney for Mr. Williams says he doesn't know if Mr. Williams leaked the documents. As a paralegal for Wyatt, Tarrant & Combs, the Louisville, Ky., law firm for the nation's third-largest cigarette company, Mr. Williams cataloged industry secrets. Beginning in 1988, when he joined the firm, and for nearly four years, he reviewed legal papers detailing Brown & Williamson Tobacco Co. executives openly acknowl- edging the addictive properties, of ciga- rettes and the health risks of smoking. Mr. Williams, who is being sued by Wyatt Tarrant in Jefferson County sta`-. court, is bound by a court order not to discuss the papers. He couldn't be located and his attorney, J. Fox DeMoisey, wouldn't make him available for this arti- cle. Mr. DeMoisey says Mr. Williams's reasons for laying low go beyond a court order. "He really has a fear that some Bubba that has been raising tobacco all his life is going to pull up next to him in a pickup truck and blow him away," he says. Nonetheless, in absentia, Mr. Williams has become a central figure in a period of unprecedented pressure on the tobacco industry. Mr. Williams's supporters say he copied confidential tobacco-industry docu- ments as a cleansing act of conscience. But Mr. Williams's case seems more complex. Court records and interviews with people in Kentucky who know NIr. Williams paint WHO'S NEWS a portrait of a bright but stymied man, a downwardly mobile holder of a Ph.D. in theater who increasingly was bent on using the courts when he felt he was wronged. The confidential papers "horrified" Mr. Williams, prompting him to quit smok- ing, according to his lawyer and court records. His lawyer says Mr. Williams "was shocked at the fraud and hoax being perpetrated upon the government and the American people" and began copying ~: ~- uments. In 1992, Mr. Williams was laid off, and the following year, he underwent major heart surgery. In court papers, Mr. Wil- liams blamed his heart ailment on the stress of "having critical information that should be make public and that would save countless•lives and stop children and young adults from smoking." He also said a lifetime of smoking Brown & Williamson, cigarettes contributed to his health prob- lems. In the summer of 1993, he retained Mr. DeMoisey, who returned a box of documents to the law firm with a letter demanding "recovery" for Mr. Williams's injuries. The law firm refused and filed a civil suit accusing Mr. Williams of theft. Brown & Williamson, which has joined the suit, has called Mr. Williams's actions an extor- tion attempt. Mr. Williams countersued, denying the allegations and seeking dam- ages for health problems he claims were caused by smoking and the stress of keep- ing the company's secrets. No criminal charges have been filed to support the allegations of theft and extor- tion, but the judge in the case has issued a broad order forbidding Mr. Williams from discussing the documents or conferring with his attorneys about his case. His attorneys have filed a motion to amend the order. The contents of the papers, which have been leaked to various news organizations, were first disclosed in an article last month in the New York Times. Officials of Brown & Williamson, a unit of B.A.T Industries PLC, are expected to appear before a congressional subcommittee this week to answer questions about the documents. Peggy Williams, Mr. Williams's mother, says, "He's done something for other people that not many people would do. He has suffered for years from knowing what he has known." Mrs. Williams says her son has always had a strong sense of justice and proudly recalls that he was once voted "citizen of the year" as a schoolboy in West Texas. Friends, former coworkers and his ex- wife describe Mr. Williams as a bright but frustrated man. He is widely described as articulate, intelligent and charming. A man who took great pride in his Ph.D. and once taught college, Mr. Williams held a series of jobs including car salesman and waiter. His ex-wife, Mollie Nickels, says Mr. Williams held more than 20 jobs in the dozen years they were together. Mr. Williams earned a Ph.D. at the University of Denver in 1971. In an ex- change during a deposition last year, Mr. Williams insisted that opposing attorneys note his educational accomplishments. When asked to identify himself, Mr. Wil- liams gave his name and added, "And that's doctor. I have a Ph.D. I'd like that on the record." After graduate school, his ex-wife says, Mr. Williams held several teaching jobs, but his teaching career ended in the early 1980s, when he was dismissed from a position in favor of a youn;,-er teacher. What Mr. Williams found particularly grating, Mrs. Nickels recalls, is that his replacement had inferior academic cre- dentials. V"

Mrs. Nickels says he spent a great deal of time investigating his legal remedies ` and complained to government agencies. "The Equal Opportunity people told him they could not base a complaint on his having a superior education," she says. That experience, she says, led to Mr. Williams's growing interest in the law. "He once read an article about someone who had gotten a large judgment out of a lawsuit," she says, "and made the com- ment that he thought it was a good way to make money." Pursuing a career as a paralegal, he attended Sullivan Junior College of Busi- ness in Louisville. In 1986, he sued the school for fraudulently misrepresenting its placement rate for its paralegal program. The college countersued, seeking unpaid tuition, and the case was eventually dis- missed. Several key points in Mr. Williams's lawsuit against the firm and Brown & Williamson are disputed. Greg Land, who worked with Mr. Williams at Wyatt Tar- rant and left to take another job in April, says Mr. Williams copied the documents only after he was dismissed. Mr. Land, who says he is friendly with Mr. Williams, says Mr. Williams went to work on the Sunday after he was laid off and spent 14 hours copying documents. Mr. DeMoi- sey, Mr. Williams's attorney, says the copying occurred during Mr. Williams's tenure at the firm. Mr. Land also says that, in the three years he knew Mr. Williams, he never saw him smoke a cigarette. His ex-wife, Mrs. Nickels, says Mr. Williams smoked only occasionally in their 12-year relationship. The news that Mr. Williams had copied documents significantly altered the atmos- phere at the office where the document analysts worked, coding documents and rating them for their "litigation signifi- cance." The firm tightened its security measures, abruptly halting the practice of allowing document analysts to work late into the evenings and on weekends. In addition, a guard was recently posted to watch the analysts at work. "It got real spooky," says Mr. Land. When Mr. Land repeated a longstanding office joke, about going to work for the "other side" -the people suing the tobacco company - he was met with stern admon- ishments from his boss. "He got real tense. I was told, 'We don't talk like that any- more.' " When Mr. Land announced that he was leaving to take a long-sought job as a technical writer, he expected to work -20- STATION PROGRAM ALL THINGS CONSIDERED CITY DATE 06/16/94 6:08 PM AUDIENCE SUBJECT WNYC-FM NEW YORK J~N 2 0 1994 BROWN & WILLIAMSON DOCUMENTS/INDUSTRY-FUNDED RESEARCH BROADCAST EXCERPT NOAH ADAMS (ANCHOR) : This week, we're presenting a series of reports on Brown & Williamson Tobacco Company internal documents. Yesterday, we reported on the company's failed search for a safe cigarette, a search conducted while downplaying tobacco's health hazards. Today in our final report, NPR's Richard Harris reports on how the tobacco industry spent millions of iiollars to fund academic research, much of it designed to defend companies against lawsuits and to create doubt about the risk of cigarette smoking. RICHARD HARRIS (REPORTER): The tobacco industry has made no secret of its extensive effort to fund academic research. The industry has always maintained publicly that it's being a good corporate citizen by studying the health questions raised about tobacco. But Kenneth Warner from the University of Michigan says the real reason the industry has supported research at outside laboratories is not simply good citizenship. KENNETH WARNER (UNIV OF MI) : They were using research funding as just one more mechanism in effect, and a direct one, to promote cigarettes. HARRIS: The primary way the industry has supported research has been through a supposedly independent organization called the Council for Tobacco Research, which was established in 1954. Warner estimates the Council has spent more than 200 million dollars over the years, and he says the industry has bought two things with that money. First, company officials point to the research when they argue that the link between smoking and disease hasn't been proven and needs more study. And second, the research provides tobacco companies with a critical shield in lawsuits. Documents obtained by National Public Radio support this view. The Brown & Williamson Tobacco Company helps fund the Council. In one company memo written in 1978, Brown & Williamson Vice President Ernest Pepples writes thaL the Council for Tobacco Research was, quote, "organized as a public relations ef[ort," close quote. And in a second memo later that year, Pepples goes on to write that the Council, which he calls CTR, had grown to be much more. UNIDENTIFIED MAN (READING MEMO) : CTR is our window on the world of smoking and health research. This avoids the research dilemma presented to a responsible manufacturer of cigarettes, which on the one hand needs to know the state of the art and on the other hand cannot afford the risk of having in-house work turn sour. HARRIS: Other documents spell out that risk. Brown & Williamson didn't want lawyers to be able to subpoena company research that could then be used against it in court. In the memo, Pepples also noted that the Council for Tobacco Research had been quite successful over the years in grooming scientists to help the industry to counter medical research funding by the government and philanthropists, such as Mary Lasker. UNIDENTIFIED MAN (READING MEMO) : This history of staying power and steadiness encourages good scientists to respond favorably to the industry when we ask them to frackle long-term tough assignments. A corollary to that is without CTR, the government and the American Cancer Society would be the only game in town. In that situation, the strong-minded scientists willing to deviate from the party line of the Mary Laskers of this world would have no place to go. As long as there is a CTR, they can and do have someplace to bring their applications. (COrfC41}

~y~i~[ V t ~/~~ HARRIS: Alvin Feinstein, a top epidemiologist at Yale University, is one example. He's known in his field as a major intellect and a bit of a gadfly. A survey of his published studies shows a handful that suggest tobacco's role in lung cancer has been somewhat exaggerated. Documents show that Feinstein received hundreds of thousands of dollars of tobacco money to support his research. DR. ALVIN FEINSTEIN (EPIDEMIOLOGIST/YALE UNIV) : One reason that I have been willing to accept support from them is that some of my free-thinking thoughts have at times led to the disapproval of grant requests that I sent to the NIH. So if I want to carry out work that does not always agree with the pervasive establishment viewpoint, when the establishment reviews requests for funding, they may turn them down. In that case, I'm perfedtly happy to look elsewhere. HARRIS: But the documents obtained by National Public Radio show that Brown & Williamson was not simply interested in supporting dissident voices to keep an ember of doubt glowing in the public debate. The company was also concerned about defending it>;cll tn kawsuits. So Brown & Willtamson, alouq_ with the othet majoi tobacco companies, ran a seciet fund at the Council for Tobacco Research called Special Projects. Th i s fund was administc~red behind t.he scenes by Iawyers. One I.requent recipient of these funds was Dr. Theodore Sterling at_ Simon Fraser University in British Columbia. Sterling had done much work of interest to the industry. His studies suggested that chemicals in the workplace were actually responsible for many cancers attributed to smoking and he has questioned the importance of tobacco smoke in office buildings and the link between chewing tobacco and oral cancer. Sterling is not shy to admit that some of his research was funded by the Council for Tobacco Research. DR. THEODORE STERLING (SIMON FRASER UNIV): I have received a great deal of funds from various sources and the procedure to obtain monies for tobacco research was no different. HARRIS: But the documents show his proposals were not simply left to the officials and science advisors of the Council to approve or disapprove as they saw fit. They were handled by a big Kansas City law firm called Schuch Hardy & Bacon. For example, a 1982 letter from that law firm to Ernest Pep}~lles at Brown & Williamson and top lawyers at the other major tobacco companies recommends giving Sterling another $800,000 in the form of a CTR Special Projects grant to continue hi,s research and relationship with the industry. Here's an excerpt. UNIDENTIFIED MAN (READING LETTER): We continue to consult with Dr. Sterling about new directions for scientific research, developments in the smoking and health controversy, and the identification of investigators and research institutions of possible interest to the industry. Our contacts with Dr. Sterling continue to be helpful and most valuable, especially in view of his expertise in the area of the health effects of occupational exposures. HARRIS: The Council for Tobacco Research's 1993 annual report naming all past and present grant recipients doesn't mention Sterling once. But a partial listing of CTR Special Projects grants obtained by NPR shows that Sterling and his associates received more than 3.7 million dollars between 1973 and 1988 from the Special Projects fund. CTR officials didn't answer NPR's questions about the fund. Neither did the lawyer who wrote the letter from Schuch Hardy & Bacon. Nor did Brown & Williams_ But one cigarette company, R.J. Reynolds, provided court papers that acknowledged that the Special Projects fund exists primarily to generate research that tobacco companies can then use to defend themselves in court. Sterling says lie had no ~ Idea that his research was being suppoit-ed ftom a fund th,it was run by lawyers instead of scientists. DR. STERLING: I know of no dark conspiracy that went on behind my back. For all I know, there may have been. HARRIS: Sterling says if the tobacco industry wants to use his results,.he sees no problem with that. They've been reviewed by other scientists before being published, so they conform to the standards of science. DR.` STERLING: It's just absolutely complete horse manure to say that the support by any funding agencies will buy you a particular piece of belief from the public. HARRIS: But tobacco companies don't always have to convince the public. Just a few jurors. And Sterling acknowledges that he has prepared written testimony in a lawsuit on behalf of a tobacco company. The company won. The success of the tobacco industry's legal strategy is renown. To date, tobacco companies haven't paid a penny to a smoker who died of cancer or heart disease. Kenneth Warner at the University of Michigan says the public relations/success of this research has been much more subtle. WARNER: The typical response to these kinds of concerns is that everybody knows that smoking is bad for you. So the subterfuge does nothing for the industry. The fact is that virtually all Americans recognize that smoking is hazardous to health, but they grossly underestimate its health implications, and in particular, smokers underestimate the implications to them personally. HARRIS: For example, Warner cites a 19B6 survey. Medical experts ranked smoking far and away the worst thing for health while 1000 average citizens ranked it tenth on_a list of 24 factors. WARNER: So the public has a very distorted view of the relative importance of cigarettes. They see cigarettes as simply one more toxin in an environmental stew of chemicals that we're all exposed to in the environment when, in fact, it is a unique toxin. It is the cause of more death than all other products combined. HARRIS: Warner says the-industry-funded research isn't the only reason people have that misconception, but it does help explain why 50 million Americans continue to smoke today. This is Richard Harris in Washington. ZQi1''$)'~S`.T00=0Z

WASFilNGTON TIMES JUN In states, tbb~cco firms may have met their match By Torty Munme »,a Mwsrwo•ror4 n"s I The embattled tobacco tndustry faces a potential legAl nig tm.are as states begzn auinQ to recoup bil- lions of dollars paid to care for vic- tims of sm rela~ted illne Miry7 coeme tFie aatt state to mount a legal ctial- lenge against the tobacco istdustry4 jouung Mississippi and F1orida. West Virginia recently anaounced plans to take on the mbaeco indura- try in court, while numerous otfser, states are said to be considering their own lawsuits. "'Phis could be a tremendous suit if we're able to prove our posi- tion," Maryland Attnrxuy General J. Joaeph Curran said in an inter- view with The Washington Tiaus, . He hopr.a to prove that cigarette tnakrrs are responsible for repay- ing the sute for Its costs in treat- utg sick smokers. Mr. Curran said he plins to use aa eiasting NW- land law the allows the state to, recover Medicaid expelieea from third parties - such as cigarette maanufacturert. "We're seriously inveat•ig•atinr; the issue to see if that theory hoLis up," Mr. Gtitran said, adding that the state will decide whrx#ter to sue by the end of the summer.•• 'Ibbacca companies argue that stites will have the same burdea- of proof as individuals who've sued the Industry for liability and lost. "It gets down to individual caaes," said Victar Han, a spokes-• man fo Pfi ili e ol the natina tggest cigarette man- utacturers. "Proof has to be person by per- son," which u extremely difficult to establish, agreed Victor Schwastz, a lawyer vrbo specials izes in litigation strategies uith the D.C. law firm Crowell & Moring. While the tobacco industry has never paid a cent in a court judQ- ment or settlement, the pending state lawsuits could succeed whem individuals and groups hive failed, sotne observers aay. The legal strategies on the state level are patterned on a key prem- ise: the states, not u~viduals, are the plaintiPfs. In past tobacco liability law- suits, the industry auccessfully defeated individual pldintiffs' ar- Quments that smoldng duectly caused their health problems. But the new cases, which rely on sta- tistical evidence to prove that smoking has cost taxpayers bil- tians of dollars, could pose a sharper challenge. "The critical questioa is Qoing to be, are these individual defenses going to be available (to the to- barra industry}?" said Richard A. Daynud, a law professor and chairman of the'Ibbacco Products Liability Project at Northeastern University in Boston. "I don't think it ma]w any eense to saq, `Why did Jones smotr?' " Mr. Daynard favors holding to- bacco companies liable far amok- ing-relatnd illnesus. States also can capitalize on surgina anti-tobacco public seati- menr. The tobncco industry has taken a pummeling in recent months at the hands of activists, the Clinton administration and members of Congress. "There has been a total sea change in the way people perceive cigarettes, just in the last six months," said John R Banzhaf III, a law professor at George Wash- ington University and executive director of Action on Smoking and Health, which supports lawsuits against the tobacco tndustry.' "You hava everybody from the presideat of the. Unitod States to 'Doonesbury' calling them liars; he said. Tbbacco companies have tradi-• dona.lly argued that smoking is a matter of choice. But some scaenti- fic studies show smoking is addic•_ tive, and F'hilip Morris was re- mtly accused by Ad.ministration Commissioner er of suppressing its own studies showing nicotine to be addictive. Philip Morris denied the accusatjon. The tobacco industry, which de- clines to discuss individual 1labil- ity cases, must aIso grapple with widely publicized media stories citing Industry research suggest- ing that cia rette com rties l;*+.ew decades ago that smoking is harm- ful but did not make the informa- tion public. Tbbacca- companies maintain there is no proof that smoking is bad for people and will likely press these arguments when the state cases go to trial. ' "Assumption of risk - or free- "#• 1 0 18'y+t dom of choice;" aaid Mc Han of Philip Morris, will be a major ele- ment of the industry's defense. But some observers think that the industry will have a much harder time defending itself with state attorneys geaeral suing on bq_-l.al.f ef ta:4.-ay^ers - buoy.eu by gOtCntllil:y lucrativc pfiyouts• ib'_%acco t1!at1Z3:'.'il?'el's''flre g;r ing to 00 °'acing %!Lc figta; for the ft.t'st Lir71e 41 tTalSt:r~G~'S Mr. ia~yilar;.~ ~~'i~:. t~ l:?~'l1 ! t.(i: n .i{ ai,t l: C i 3 t cl t. Gf esL' ~"~e ststc :egai f ri cnalleng:a, a 1'lortG.a :3w Pas's~4 Last ;r.onu-1 pr~es thc -nost senoue ti•,rest ro the tobacL~e industZ-y, legal expe•:-ts ~: i:P iav±' 3;io'~Y3.:(;e aiaCeTo arguthaC it t5 ti:.. Cu'1oi.elit FiCt.~iCn of the Lll-heA;t.h rfl'ectx of smoking. re- r^nov^"~g akr; defense of the ao• vqE:co i^c :srr~ tlat smoi<.us know t :c :^sks when t.l:ey cLoflse to smof:F• tInd~•r t_he i2w, Florida can relyy on statisticai ez-idcncct, shawing thxc xMo`s•ing caLLS~ed r-eCple to gct s-ir.k and cost the sfatr 5 1.2 bitlion in ~~edicead payments over the pcst fi-m ;ecrs. 'lb calculate its C;a;io Flo :c?- simply adds up the number of Eiadicaid patients for iilnesses generally as- soc:ated with smolcint;, and sues tobacco wmpaniss for the aiesiical bdls based on their market share uitY n the state, Florida business leaders o~- posed tne law for fear t^.at it could be broadly applied to other prod- 4l.ts, such as iiquor a.nd h&ndgl_ns. But Florida Gov. LLawton Cb:.te_- in- sats the 1•aw is tnrgetxd only at cigarette m2nufacturera. The tnu3cco industry has vawei to ctLi.lenge the l:tor<d.a law. tf:e uisust;*y ccu2d Senofit fr om a backlash against anti- smokirsg forces ri tvbBCCo-de- pendent states: Ia reta;~ation against the Florida I, w, aNorth L„ar•oii:a legislator recently pro- posed a 4-cent excise tax on citrus fr ait. -" c bacco States are just about f~_-d up Mth all the harassm2at they are get-Ling," said Walker Merm2:an, a vice president with the 'ibbacco Irnsntute, the indus- try's Washingtor.-based lobby group. "Mississippi gmws a lot of C-atiish"

-23- ` ST. PETERSBURG TIMfES JUN-3 tim--- J uR c : 1~J4 ~ all ldnds of iIlnesses and',to early death, that, it adds Ch ~ 1 es s~a 1 ks :. tre~dou~y to health care ~t~: Tfty also would be wil~g to support higher ~~ ~ya 1nd other ~' "' tobacco products, an end to to subsidies and protection of noa-emokers and cl~dren from second-hand tob~cco w~~tE~ C • . • srnoke: u ai r t~ ct i cs ~:Tbutire 'is little'to debate oa thoae issuea. But the Waiorry..of :nti.,smokiag forces has.gme beyond such stions qu It i# now: aimed 'at 'ostratirin and i i hi , e g .pi n s t~ ' 'nioker:, giving thrm less sympathy than the sralots are  PhiliR': GeileY ; ` " D :''willing* to, extend to ;hardcore drug addicts.. Our governor, rt tum9 out;;is'passioa.-.: A's::Xesv .York :Titnes columniat': Russell Baker and ate zbout. somethmg . :other. ahan •. tcr"rkey~~', ottiers )zavaargued.~xntly, the 'anti-smoking ausade - it ; hunting. He's also gunfiing for...the, tobaeco, ,,is'a: crusade; m4e no mistake -= is entering a dangerous industry,• which has, replaced the`Lo.om=7 phase .afiere sQme people, are prepared to sacrifice civil nists, the Mafia and the South AmeAc,an.' liberties.to snuff out the last cigarette. drug ca.rtels:. as'': Amhiica's'..No. .~~, publi,~, '' Thousands,of eQmpanies, refuse to hire. smokers and ri e o pl ye s who smoke away from their workplace. My enemy. •' : fiie er Lawton Chiles' pursuit of wild turkey led him to try an {avozite znti-saw3arig zealot is T~edbaur r, whose business assault weapon of a type since baaned by federaYlaw. ~9hy, . empire ii~cludes the Atlanta Braves seball team and Cable he even stumbled into a beited field recently; He realised it News Network.• At CW'smokers need not apply. There is zero tolerance for. smokere,.. even if they light up in the in the nick of tisne, just before a game warden,cariie'tlong, Charges were f~ed against Chi.tes' 1~untinQ',partne,r but not privacy,of their'homes: But TurAer has an amazin capacity the governoi.' for forgivin'g Braves- players'wlio test positive ~or illegal The governor says he would nevet take advantage:of a drug use:.Turaer's fa+ta*+c+sR+ on &zIioltiDg Wis formed long turkey in a baited field. I believe hirn. Chiles is a sportsman, . before he ma=ried Jane Fonda, the video fitness queen. and there is nothing sporting about blowing awayi'gobbler The outgoing president..of the American Medical that walks into a trap: The goveraor, believes'in a fair fight, -Association,,raade an astonishing statement the other day: at least in his pursuit of quail.and wild turkey;. '.' He claimed that cigarettes were Just as addictive as heroin. But' when. it comes to the tobacco' industry, 4orget This is the kidd of talk that infuriates me. These gourdheads fairness. It's the political equivalenf.of the baited field -- a who suggest that cigarette smoldng is comparable to using setup. As far as the governor is conceraed, anXthing goes: hard drugs ought to be flogged: ; That explains how Chiles was able 'to sneak a tobacco .. Is this the message we want to;send to our thi7drebl I liability bill through the Legislature without debate;without wM do eve;ydiiog I can, to discaurage my son from smoking, most lawmakers even, knowng 'what theyy were •voting on. but I had rather see him puffing on a Camel than to find out The bill, which Chiles signed uico law, would not°only hold' that'he,is smolang crack or sniffing eocaiaa It's not even a the tobacco industry liable for the Me~ii ajLcosts '(be close call. But I know people who, if they had their way, figures about $ 1.3-billion) of treating the.ilfnesses of sm'ok- would legalize heroin and criminalize cigarettes. ers, It would chaage .the rules of evidence, to •kave . the , The Florida Legislature ' last . year passed a bill to fobacco companies defease.less. A turkey ui a baited field protect smokers from employment discriaunation; but Gov. would have better•odds. ; '.Chiles vetoed it, saying 'such a law was not needed. Chiles is extremety proud -of his tobacco liability.law. Obviously, tlx governor has been spending too much time He holds on to it the way a dog'grips a:bone in •its mouth, in thewoods, tip-toeing around'baited fields. If•he doesn't growling at,anyone who'who comes near.,It is about the last think it's happening in Florida,'be should ask. the Americann bargaining chip Chiles wznts.to put on the- table with•state, , Civil Lbeities Uaion. ' legislators in his fight' for bealth ca're: In fact; •during the.•, Speaking of the gove:rnor,: he owns.a.half interest in.a' recent special session of the LegisJattire called to •coiisider ..number.of Florida seafood restaarants where the specialty Chiles' health care plan, the gove,rnor, was willing to' cut. is lobstes:' And ; everyone Iaiows; that lobster is always deals on nearly everyttung but his tobacco liability 1aw., To. s.erYed with ~elted butfez: We also 1o;ow that too much win the vote of a Cuban=Americazi lawmaker, Chilea was ' butter, melted 'or otheryise;' clogs•arteriea, requiring ex- prepared to clear the wa3~ for 'some. 200 Nicaraguan ;and. pensive heart bypass surgery for those lucky enough not to Cuban doctors. to piactice in Florida; even' though, these :. '.drop dead of a heart attack. Maybe the Legislature should doctors have not been able to pass' the standard pxamira= : t'onstder passing a Melted Bptter Liability Act to allow the tions required in the,United States. Some coiitn'bution that state to recover the bealth' dolIars that are spent on wquld have been to health care in FJorida. uncloggi.np the arteries of people who soak their lobster in When I see people like our governor letting their tubs of inelted butter, zealotry; override their sense, of fairnesa, I recall'Justice.• . As far as I'm concerned the tobacco industry 'is fair Louis Brandeis''warning: "The greatest dat~gers to li.berty game for Chiles. But, J: don't like sneaky, underhanded lurk in insidious encroachment by men of zeal - well, mean- tactics, whether in sta,Iking turkeys .or cigarette cornpanies, ing but without understanding." that cheapen a'good cause and..,offend our democrasie, Wost rational people are willing'to stipulate,,that values. srrioking'is dangerous'to.one's health;• that it contributes to ' Phu1p Gaiby ts odttar ot edltoiials'ot ttrv rimes, 

-24- ST. PETERSBURG TIMES J iNIL19H Tobacc~,Ts ,, A Ntartin 'Dyckman „ JUN 2 0 1994 , 8S ItS C10Ut 3, KinQ James .I deteeted bb3c:co " ' •with: an eloquence Morthy of bia & bT--- Smokiag, taid 7amea, ia'~t custnm laathiorae tA the eye, bateful to the nose~ har~ful to the brain; daiigerous tq.the lungs, add ia.the black,,atinldng lumathereo.f; nearest reiembnng tne nomnte _,%tygian-, tragedy, of inunerise. diroerisions that, people with smoke of the pit 'tbaat'is b'oitomless," . '' ; hearts and consciences cannot ignore. It ie• by far the leaves were both cash •crop and curreacy for a •Virginia settlement named in his honor. Tobacco has been getting the bettet • of 'govp*T+ment regulators ever since. ; Curreatly; even President Clinton's puny Z5-cent- a-pa.ck increase is proving too big for Congress. Will Congress agree to regulating tobacco as a drug, as Food and Drug Commissioner 'David. Kqsales has suggestedl Not a chance. Lci.California, Philip Morris addiction and to diacauage children from taking up has been snookering v.oters iato signing up for a ballot the • habit. The lives to be aaved are those of our initiative that appears to,crack dorvn on amoking in 'spouses, parents, friends and childmn.. We should also public. In fact, it' tvould piohibit • 3oca1 governments begin to think about using tobacto t,ax revenuea to,buy from enforring blanket baris like Los• Angeks'..nevr up growers' acreage' illotments. Among those who ordinance agauist saioking in restaurants and other. . make thei.r• living' froam tobacxo, the farmera born to public places. hi Florida, tobacco lobbyists have such that }aad are:tbe*only ooes with a.valid c}aim to public clout that when.the Legislature finally wa, ;embar- ';s9mPathy. Tbere`are plenty af.other productc, on the rassed into raising the.atate's 24-cent tax four qeara ; other hand, that RTR Nabisco and PhIU]D Mpjp _p could ago, the increase waa held to 9.9 cents a pack rather ` make. •: than 10 so that the•lobbyists cbuld claim a symbolic `L~ ' Whatever the rate'of.tax, it stands to reason that victory. ' Nothing gets by • them.. except: by stLealtht '. no one should ~be ezempt: History knows no greater, which is the method Gov. Lawton Chiles used to pass .:irooy.than tbe Yairket share .ome Indian tribea have , a bill setting up a. =1-bi1[ion 'clasa -action la*suit `.to , `obtained• through .tbe tgz-free loopboie: Granted, the recover~expease. The courts, whose eyes natioa has a debt to pay, but surely there must be a: will be open• when tiety consider that law, aill more less harmful mediura of exchan.ge, : than likely overturn it. Last'week's.U.S. Supreme Court ruling endorsing Meanwhile', tobacco has been waging an aggres= New York's method for collecting tax on Indian.sa]es . sive advertising and public; •relations .campaign; to., .fOn.o,n-Indiaiis told Florida: nothing it' didn't' already dispange the Environmental Protection A,gency'.q; ~w: , TFie' Semincks were threatened with loss of 'data on second-hand smoke,'to block Keaaler'a regu]a-• t~ ezempt3on •aorne years ago, after they began to tory gambit and to defeat any signifcant'tax.iaczease; . muacle in on bingo; but aothing ever came of it. They : Sympathetic voices in the, media have begun to ecbo.: .. know how."to }obby,•too.' ' .. . ; the refrain: Since• everyone' knows the risks: by now, :, The Seminole smoke shops are 'no differeat, of whose business is it to meddle? ''. course, than the military PXs and commissaries in The apolopsts have . one .compclling point: Given Fbrida that ; sell • some 43-miIlion tax-free packs a the historier of Prohibition '(which, by'the way, rua „'~Y~~ Tax bieaks for~mditarq smokerc aie an anarhro- ceeded splendidly: in reducing alcohol-related disease) Nsm • dating tq,World War II, wben. soldiers were and. of the unending, tragically costtq, war on psycho=' p8°r1Y paid :land ' the health hazards of tobacco re- tiopic druQs', stricter regulation would 'be 'a fiiale. •:mamed to be proved. Norv, witb tazes higher, You caa. remedy for anything. to which 4b-mi}lion Americaas bet': }ot of those padcs are .being bootlegged for' s:' ' happen to be addicted. Too atiany nonviolent offenders '•non~ ~~ ~g,>~s: ' are in prison as it.ia.'Besides,~tazatioa and educatia~ . .. ,¢top Wben piga.fly.' (assuming enough of both) have proved . effective at ,:~i.rnii oydcm~an tr ssoda~..d,tai A ;1ot of good that did. Within a decade, tobacxc Iiigest: preventable ,cause of '• al}nesa and death. If ' gcttit~' adulta to'. quit 'amo]dng and in be}ping to persuade chjj,dren not to atart." : : :`As far'th~'five-and-l,et-die arguaient; it begs two •. fiindamental. questioas.' Tobacco smoke •is offensive ~ as' well as ' poisoaoua..-- `.to. Aon-smoictrs who ~ sbould~'thave: t6. bfeathe itr And the fact.-- yes, fact - thaf tobacco oritzibutes to the ~premature deatha :of ' azore • than 400,000' Anxsuans each year is a tobacco exe.cutives Were capabk of aharne,'even they ..would-blush at their. attempts to make comparisons with butter; beef and couch .potatoes, Tobacco is the only legal produdt• :vith -absolutely no :redeeming qualities. The beat case' for' tas=ing the taz is not to make money, for the governitnent but to• help amolcera .overcome wbat for many is.a devastatingly powerful ,

-25- Vuatimg Tobacc"'o Get Stnokers to' 'ck thle Habit? 2 Heaitb: FDA o:i;c;P.3s Ixt:eve $radua1;y lowerinis yl '~.` bL i`i':C+Sivn~ ir tacJ.7 7tF<ty .lc,aJ;is~'iE.9 t-rn d q6t(J1(.'a1on. 13, MAit" `.d:.NECiWOt'':'3 +-.L•4i Y;uu s1Ats Vatrro a so. !~ttj' i.`1 which "r':"'-A !SS 6()' tyatc:zza a.^.d snap;•ealin5 that 31L•oitsr't can waiiy ctuit on.d tetr:• iy;era t39y t.'y t)sQm but wiil r,tver a t t 700 k M~. L'nreauctk? ~1;rha;s. Ncvc-theieta, ret}cti i icer.arlo- or a veral3n of it-is iobrt:ing in the isztion's not. too'dljtant fut;:re. In riDec-ent tawths, Ant!-Erriokirg forces in the federai ,r6ovarnjnent- pa: ttcu:arLv the irood an+5 Drug A¢miniAtrotjon, key nembers of Congrr~s ar,c3 tbt Whac Iiou*e- qt!ietly have been buitdit;g a casa 3'ar txla n`gutaticm of ci.Qtrcttcs. i DA _;fici:lF Deiicve ihey um:,d,y havs tht authsrity und-6r t7ta &gcn- cy'a drug st-a.tutta to regulate ciga- rcttel at druga-or more precisely, 21 dru,g delivery iyatem.a-bcczu.~ al the zddictlvc nature of nicotlno. Ciltitnatqly, the oal would bu to help ih® r~er~,*ly f~mt{iioct Arr.ari- ,a already addicted to tigarett.^a kick their habit and to kecp young peopic who "rtment with to- tzc,tto, from getting permanently S•saoked. • ";'i^.e f{rst premiee would have to 1~e to try to not make things too to4i'i on amokss," said Dr. Neal r`3enowit.e, t profcs+wr of inedlcine at UC San P'ranclaco who hat SWdied th• eftects of nicotine on hurnans. ";l rhotildtl't a punitive poilcy birt one simed at protecting rnisia*s. Thrre Is going to be some di*=tisA fcr trnoSccre, but it'a erop°t.r9 :t if it pretecta the next jerieratSan from getting addlcted.« T.r. be g", =yertt 1111itt t}Sat any war aga.iatk tobacco m+ut bo A znuit!•prongcd approach-includ• ing t,hc atrict entorc•ement of exiat- ttsg laws agalnst salcs to mlAora ard restsictiorv agai118t tmokiag In public placei. in addition to chang- Ing labeling and cutbin8,advertis- irtg practkes, particularly thae aimed at the nitson't youth, But the most drzmatic-•nnd in- trigutng-propoaal so far is thc idea of a iorced ch.ango in tho producl itsclf, a c;nrafully tlrned lowering- over the course of a decade or so-oI thc allowable levels of nico- tlne in clgarettes to enable smokera to wean themselves Rreduslly from tj`ietr addictlon. h,9 concr]t raises aau5,c tix3rr;y qt:•s•a.bnsu VJiil ;:rnoaccr* cansumo morr c~g2rcttes W coivpcns,ata fot the dc^:^ca-~ in nic•otir,e? Lii!$ aio c'.ga:e.ie irtdustry firxi eorne ~Ahc,p by ;,dd;ng :omc new aul>.erarlw to CiF rettcs-•t4 main- toin thc dernGntl? Wi;I the rhangea turn iaw•~:hidi;;g Amer:cana into tobttcco booticggera, ~ii;L^G iuli• atrcnF,t,'ti ctgsrottcs alrr.cA-t certasn- ty will Rt{11 bt avallYblf ntiieiuc tl`iS s:o;lntry? ( r will therC cc,mc a tin:e wh~;~ Arncricana will iuot hackk with IrxrcduiIty on a 2vth•Ccntwy ao. ciety in wh;c,h clgnrettca were frf+!iy availahlc arA =)a'.<eri by millions' "You never know for surt, ae. c.ause ;t'a never been done beforr," Benowits CUid."'But I :relieve it ca^, be succes,slui, i# it's re4il alow." The FDA is in a"fact-fsnding mod,e,'• said Camraisaione;' David A. 3Ceister, w?zo ;.8 xcbeC;;Ird to give conKrtaaional testl1nsur.y on lhr. sua CCL t uj r~G''sy. "i l;e 35 nc:y iii i;tveittiy,ating both "thc phyhirlc;Y-il eaI aq,-c',S of n:co;:ne a~n-d t:;a extent to which manuia,:turar a contml or monipulatc Ll-,e nicntine Wtrnt in cigarettea;" he said. Industry officials repeatedly have dentcd that they de;ibcratciy incrcase nicotine teveis 'rn thcir prpducta, I Jowevet, they have ;+c- knowic,dRed th-1t niWtlne cone:en- tnrliune ran W adju5tecl thrnugh blcnrlinp, di(fcrent tobaccos, and that thcir Cornpanlcs engAgo in this I~t~n~kottnc is addictivc, as a I arowing body of ccicntific evidcncc Indicates, then it could be ciamritlcd am a drug under }''1?A etatutes -, which definc a dtvg as "an article, exccpt Sor food, intendcd to affect the dtructure and functlon of the tody"-and it would be Pub~rct to agency rrgulatkm The a.geticy n1- rcady reguJatcs nlcoiine in aIl nic- o4Jne.cantaining prodsaets tsupt cigarct.tm. Kes$ier reftmd to dia- cwss the FDA's regulatory options it th!, ttmc but aaid a rcaiL+tic apisronch rnust "invnlYa rcYiucing tlrm:utcY' for cigarettzs. An ali-out ban would n,~Yer work, he c..un• tciids, txc,~ttsr "pr;;hibltiun wotizcD ottty "Ltft in a black msrkct." J U N 20 1994 , ek frsrincr FDA r.ffk-inl involved in the Wrticst tiieCU1RarQ of c;gao rt ttc rcgt:lat.1,:,7) thcr't prs.`s;.icts tltrit sx:c a two tihiflgs wi31 octuz. ' i hc iar-m-tte comWiM w{!l try LO cut a sicat in i.hey iotirr thc ;: nicoilc?c tonicnt and oF^_n L.;a L'",ir plar,tl: and "+e ariil scc rnnssive iottrctcturi.^.g of how : g~~t+ex ar:r? ~d irc ihia eo~trr;' hc s3y.+_ "Qr the cigarct:•a comPa- mtx ivifl h.;vC n 31oCic cf inwycrx tw w tu : lbck th, F 1)A at rvcry turn, i:nd it Wiii g<) af1 t!7t-' w;.3r up to the ~t~ cmc C'4urt to ri.ecsdc wY;cther F DA has jt~riad:ctiod over ;.c,izac- ca." lie adds, "The a;o;cy ia Com- rnitt,~d to this c; urse notv, whkh It h~.m ncvrr been cosn~;lttcd to be- fors. 'The compa.-i:ea f^wc ve.st3y under:atimated which hao been a bi~ mi4takc on tbcir patt.,' The h'uAA l5aa b~n au,^.ported in iu efforts by i+-reaidcnt Ciir.wn and key nmema^m oP Cvngr~gs who rcbarti thcmae3)vm, et ft*t of toi.`aC- to• •Enciudin& Rep. Nen!~ h• Wax- i^'.xa'n (i}'iw:$ ryTi6C1:3 j, C dirll'.l~~ Of ~ the I•iouae b:ncrgy and Cc,mmerrc aubcommlttcc on haatth, who is 9ixo pushing for legislative rCstric- tiona against srnoLii+g :- publiE p?a cea. It is his comrn#itec t.hxt will hear Kesalcr's teatimony on Tues- dxli'hc agency also has thc support of Rcps. Hichtu'd J. Durbin Mike Synar (D-Okla,) and Ron Wyden (D•Che.), a11 of whom are seckinR rne.asures to strcngthcn the h'DA's aut}tority to reEulate tobflcco. w glkeT Mcrryman, vice preii. dcnt of the pro-tndustry To- bacco Institute, calle litigitioti to block the FDA "a vcry gtrong possbiiity" and sa}7he antkipatas a iong battle. • "1f tho FDA wants to pus}t it, we're not goirg to give in," he saya, addtrLgl "You cai't bavF a fed+'rai agency.detlgninR a cigarette, rhat it a concept that boggles the m:r,d." Iic and other industry officiate m:dntain that clgarettcn arc not addicttvt, and that "r.%<ut of tho k id* who cxperimcnt with cigurcttcs don't end up b+tin.g rrnotcr.re." POMM

Nr,vcrLhClr+u+, Dr. 3ack Hcn- ningflcid, c!,Jef o{ the ciinir.al ph.ar- maculogy rcaearch bnu~ of {hc Naticrnai Inatilutu on 1}ruR Abuxr, ptrinta out that rnarit adult .mokcrs beqr~n Asnoktng afi teeff-.tgrM Itc aiasa isotcx that hpprokttr;atcly us~c- thfrd or morc uf amokvra try to quit evcry ;ear and "only ut,out ?% makC it." Mo;Cpvm', hr. ~~~idcrl, the 40 Mit- liort Rmrriarss who have AuCCCSR- fully atc+ppr.d smoking rcprcscnt "oniy <..',% p(,r yCar s1nCc` AM4, which 'is rnally a luu+iy rat` of "ntancoua ;-e-covery." Addiction e)V.rts say the only logicai atratcgy that woutd help Eurrrnt smakera quit a,,d protect futute isrnokcrs irom addJcUon ls to reduce the depcndonce on nlcotint by leRScning or eliminaUn$ it in elgarettCE. Gtigarcttcz now on the market have fivc tu six timcs the nlcotine lcvcix rn.cc1cr.ary to crcatr anA auRtain an addictinn, expr.rta say. T hc umount of nfcutinc In cigu- rCttcA i,aa rcma(nod vfrtu:dly the samc for more than .i0 yeirs, acasrding to licnn3ngfieid. In 1952, t,he pcrcentage of nicotinc in ciga- rettea was abaut 1.5% to 1.R96. Currently, the range is 1.546 to 2.5°6, he sayt. }!ach cigarette, re- garcSicr,Q of whcthcr it ir Y"light" or rcguLu' vcrsiun, cs7ntain,s from 7 tn 9 rnilligrama of ni<:otinc, he saya. The averap,e smnkcr Lnkca in a milligram nr more of nicaotinc lxr cig-aretto, fnr a toW of npproxi- mately 26 m{liigramq a day, ac• cordinpj to llenningtield. A smokCr begifu to tu{fcr with- dravtzl wifen the accwtomcd lcvel of nicotinc dtopt betow hz.lf, he says. For essmPle, tf a><rookcr is' tussd to getting 40 mitligram: of Ncotine a day, he or she will begin to cx}xricnm withdrawal when the lcvel rcaches 20,ulll4'rirn:e oc Iea% he says. Cutting nicotine levels by a small pcrcentage over a long peri- od ot time "wili give tmokcrs the oppc,rtunfly tn icArn to rncxlify thcir tu ste und luarn tu cmoke cft,*amttra with lees nlco0n(,," Itc- nuwlts mya. "!'cclitc mxy find c.i.Eat'ottca rnot &utisfying anymorr, Irl-d vrfll tuKt ttop „ -26- I3ut some critiey of t.hiA iouroach ar" tJut ernoketa will only Wm- pen_eatc by imoking morc ci$u- . ~ ty.'hen Qvg mYdc:i6ht cigsrettx.a. f tn0icera jual arnoked rrtorc of t&m," +ta,,ys i)r. a'tctert Dupont, t.'e €'u^et directtsr 41 the Nrtionai I r ir.as& 3s!'f9AACO{3, AY3 ~ tauio~1 ~8tauio Oin L'3rugAu_:.-_: Wio noii qa ~8 , fit4d5 t274° 1:runitut9 far *Ci;i.vi,,X &c 1-io--iLh. a nrn-iprCfit row~L`$ organimik: z. ' ,,ritose:a WIu ama>~t ' erlsatcver It tak4~1 to get to urs h'.~ 'nicodne levcis they sc=e,& s~'irt3 People ',V?~o tCtl Y6Y+3 twtt ys?'. C$n raor:'t Any i,,-k.;lir~:tl: f by st'to;D2,d W eompens.ete for =ower 7:cotir:e tcv- elSc by afiuaiP4 i72i»`t3 c)g3r^ite8 ct,~uld fndccd phov_ i.z'+xtbicsainc. 3uthciugi! the aCl~+..acti.?n to cl.ga• i'C:.tSz EtCma FTO,'it T11totf7M, tilo he,lth dan.gei's come tio:ri iRhiling the s=nokc prcxfucrd by bur'ilng tLe tobzcm "'f'1e t~ ac~ ieat ~fs eYL-s~ ciy taoc when bu.-nW• iienningi`ield sayr. "You uan clean stp the natu;al praSuct a ht~o bit, but you st;a h.ave a bighly toxic Y:-oduet. .t's li3ce the diff=_re~ste boctwce; faiZing Gut of s IG-ttory burildirg i,^•3t:~"d of r5 t2-et.ory buildLng. '-ne anly xa,y y" get a rugs gain, It you na&d to keep sc;rne people on nicot9ne, La by taking awa,y the tnbacco," bC adda. "Uping nicotine in a oofl•tobacco prac2uct i, tntiniteiy safer tsan smoking a cigarette. Also, smoking brtnga out the 9vorst in nicotine by giving you high, spiking dosea that go direelly td the loft side of the hcart, into the tsratn, ond, if you're pregnant, to the fetul." E xperu acknowledge that there could bc a short-term compen- satory incrcase In smoking, or that . anokers cnuld puff their cigarcttca more tntcnslveiy. :'But whether It wi!U perslst in ibe long trrm ia mclear," 8cnowits taye. '°I'here lA socn.e evidecsec that people will be ®r,oking tise rarne number of ciga. t'Ottts "L they smoked before, or ai]1 *c~1uai :o the Lower lcyels of : uiF.ottne. That's why gradt:al ~resnir~ }a impetative." "T`~, e FDA ta rtudying ib4 iim+ts J Ui 2 0 1994 to whk.h tt can reduca scedi .vt'.tyout etimutatlnx a biirk tnar- lcet. Ctin-rently, these lt4 TesLrk- t3ona on nurnerous aubtante,t-al- cohd and prescriptlon dru^ for e;eanipie--whkh have not roeti:ltcd in , ihe davelvpl-cnt c€ a black mitrko- 4etxy crt*sci.tL4 tlrudy Elava reyecteci the idea of ;i bart for tW r--1wr_ 4_P yva rLt „de.r iy Csrt = i wds, ~~ ~k thc:°, 'tiht G~:?+2ck Z~tGtrk~et,,, ~L~`ttajl- 4iiJL~4l w{','.~:y Lq: .~q~ ~R:1,'aJRiLz "pn. "&4 if tt'$ pretzy e.torv--a decade w~d g*,alf--and it you go down by x0% a y'eaf, thAt gfve:s people vmc..And they would never rrotic,e' it r-:x:h. A'ra, a bGerk mgr- kct wouid nc; 1.% netestLry fvt 1:.ld.a btcaus•t ~,'~cy ar-e not smo3Cing lu u~e b'egir.ni" fo•r ak4tine, tx,r3 Mora 11.00 reX-1ai saa@aas- [Itiowj Lhey learn to anao~o f;~r iliCatSne ove3 tf rce." Thu:, a gradu+l tapertng over years wo-U?d give e4r.fag mfokers enoLgn dme to s*ust, and nlcou„e in cigarettes eventually would rcach a level where It would be difisctilt to iniLate addictio-n, par- ticularly ar~g f'u-at-ttme amok- ere, cx~e~°ts~ 7xlieve, "a~, ?ot of 'sadg exper(rnent with elg&rettcS, btrt t7se dlfferCtStc 'with a Iow or ruo niLOtin* cigarrttc) wotud bt that four or fflva yeul down the mad, if they decided nat to be a renegode, they aouid rtop," uM±ninQficld $ayL "'I'hey would be able to do It." Keseler, the father of two yotmg children, calls this oM of hia aut}or motivations-to keep today's youngsters from beoomtng tomar- row't eYnokdM "If we can pnverit t14o vnat mu*r.lty of teen•aaexs who smoke a few ctgarcttes from becoraing addicted for lifc, then it will be an enoraioUs pubtk hea.Ith achicve- mcnt," he says. .

-27- J U N 2 0 1994 THE NEW YORK TIMES, MONDAY, JUNE 20, 1994 Grim Findings on Tobacco And a Decade of Frustration ifron By PHILI J. HILTS Embattled Tobacco Special to The New York Times WASHINGTON, June 17 - By the end of the 1970's, after the Brown & Williamson Tobacco Corporation had gone through a decade of negative research results and inconclusive at- tempts to develop a safer cigarette, a senior lawyer for the company rec- ommended that much of its medical research be declared "deadwoud" and shipped to its affiliate in England. "No notes, memos or lists" of the material should be made, the lawyer wrote. Among the documents to be re- moved were the results of Project Janus, a series of more than 40 sepa- rate experiments on the biological effects of cigarette smoke, which had succeeded in isolating some of the hazardous components of smoke. Thus ended a decade of frustration for the company, marked by increas- ingly negative health news from its own research laboratories, aban- doned attempts to develop a safe cig- arette and a growing number of law- suits against the company. In repeated calls this week, the company was asked to comment on the information in this series of arti- cles, which are based on more than 4,000 pages of documents from the company's archives. The company responded today. Tom Fitzgerald, the company's spokesman in Louisville, Ky., said: "The Times's stories verify to us that there is nothing new in the debate that The Times is writing about. "There was a worldwide debate going on 30 years ago about smoking, just as there is a debate going on today. The Times's stories emphasize theree was also an internal debate on research on smoking and health with- in the company. "Why should that surprise anyone? It's important to note that this was a debate, and points of view were ex- pressed; no consensus was reached nor conclusion drawn that translate into policy or practice. "We feel that The Times's stories undermine our critics' position that the industry has not been focused on research. The tobacco industry was and is just as interested in research on smoking and health as those out- side the industry, Our position contin- One Maker's Struggle Last of three articles. ues to be that there are health risks statisti- cally associated with smoking, but that there is no conclusive evidence of a causal link between tobacco use and disease. When these issues are played out in the courts before juries, where our rights have been protected and respected, when we have been given a fair hearing, common sense has prevailed." - The decade of the 1970's saw increasing public anger at the tobacco companies, which was expressing itself in the passage of new restrictive laws. Beginning in 1970, cigarette packages were required to carry the label, "Warning: The Surgeon General has deter- mined that cigarette smoking is dangerous to your health." Smoking advertisements on television and radio were banned by 1971. The same year, the Surgeon General proposed a ban on smoking in all public buildings. And the Fed- eral Communications Commission declared an official end to the "debate" about the ill effects of smoking, saying that the fairness doctrine would no longer apply to tobacco, and that the companies could not ask for equal time to counter negative comments on television about smoking. Cigarette smoke's potential hazards, which in the early years the tobacco compa- ny scientists had hoped would be few and easily filtered out, continued to multiply. Reports in the company's internal chronol- ogy of research referred not only to the chemicals they had long known were in to- bacco but also to pesticides and other chemi- cals used to treat tobacco plants. And where once researchers thought they could isolate and eliminate the cancer-caus- ing substances in tobacco smoke, they were now beginning to realize that an entire shelf of carcinogenic chemicals could be found there. Today it is known that there are at least 43 different substances in cigarette smoke that can cause cancer. Product Redesign Becomes the Answer Tests started by the company in the 1960's began to produce a record of consistent re- sults in the 1970's. They showed that ciga- re;te smoke could not only produce tumors on animal skin but cause other serious health problems as well. One report cited "a grow- ing interest in the area of non-cancer dis- eases, e.g. emphysema, bronchitis and the cardiovascular diseases." "Attention should be directed to carbon monoxide," it said. ,At a research conference in 1972, docu- ments ments snow, neaiu, cuucerns seemea to nave been replaced by product concerns, Rather thAn seeking to eliminate the hazards of smoking, the goal now was more modest. "Our aim should be to provide smoking pleasure accompanied by a risk no greater than that with comparable habits," like alco- hot, the company's summary of the meeting said. "It is felt that the main objective of the research department should be 'to design cigarettes preferred by smokers.' " In 1974, H. L. Brooks, advertising manager for Brown & Williamson, suggested to the ~ c•bmpany's research director that "defensive 'research" be set up to combat scientific .reports that linked smoking to ill health. About the same time, Brown & William- son's British affiliate, the British-American Lrobacco Company (Batco), test-marketed a cigarette, Planet, that was made with a to- bacco substitute. It was called "Courtauld's Smoking Material" and had about half the tar of a regular cigarette but about 60 per- cent more carbon monoxide. The British Department of Health and So- cial Services "condemned" the new cigarette because the company had given the govern- ment no information about it or its contents. - The research news continued to be bad for the tobacco industry. A Batco review of the scientific literature on the effects of smoke on cells in tissue cultures found "permanent, non-reversible and hereditary changes in morphology and cell functions which may be invoked by cigarette smoke and its carcino- genic components." Studies of the effect of changing the ratio between total particles, mostly tar, in smoke and nicotine in smoke showed that "de- creases of 30 percent nicotine produce only a small compensation in smoking," which smokers make up for "in the form of longer puff retention times," the Batco review said. In a study of low-tar brands, researchers found that a smoker "adjusts his smoking habits when smoking cigarettes with low nicotine and TPM to duplicate his normal cigarette nicotine intake." Looking for Safety, Finding Danger At a research conference in Florida in 1974, researchers reviewed four materials that were leading candidates for safer tobac- co. The company also investigated a pro- cessed tobacco product called Batflake, which showed promise in reducing the ef- fects shown by ordinary inhaled smoke. It is not clear from the documents what happened to the four possible safer materials or to Batflake. But a company report on Batflake dis- closed some of the harmful effects of smoke. Among them were changes that might pre- cede the appearance of cancer, including, "squamous metaplasia in the larynx, hyper- plasia and keratinisation in the larynx, goblet cell hyperplasia irr the bronchii, goblet cell 110"

Top executives of American tobacco companies were sworn in before testifying in April before the House Subcommittee on Health and the Environment They are, from left, Donald S. Johnston of American Tobacco, Thomas Sandefur Jr. of Brown & hyperplasia in the nasal cavity, and in- creased macrophage activity in the lung." Dr. John Laszlo, the vice president of re- search for the American Cancer Society, said today that hyperplasia is often a precuser of cancer and is a "common signal that cells are being massively injured in animal tests." Among the papers are lists of company research projects, with brief legal com- ments: 9Project RD1091-R: The legal department commented: "Qualitative effect of cell trans- formation by cigarette smoke condensate is established. Contains concession and confir- mation of causation." 9Project FE-40, 1967: "Reviews the biolog- ical activity of smoke condensate from St. Pauli cig, Document contains confirmation of causation." 9Project T, December 1969: "This deals with interviews with female starters con- cerning their attitudes, behavior, feelings, and views on smoking." 9Project RPT-146, March 1975: Using a smoking machine "to investigate changes in smoking behavior." The report added, "This discusses compensation to maintain desired nicotine levels." 9Marketing studies, May 1975: "Ted Bates doc. - highly sensitive re mentality of smok- ers: introducing starters thru 'illicit pleas- ure' theme." ' The next document in the series noted, "Controversial Ted Bates advertising target- ing young smokers, never used, but still dangerous." Sowing Doubts About the Facts Among the documents are minutes of a meeting held just before tobacco advertising, was banned from radio and television in 1971. The company had designed a response to its antismoking opponents, code-named Project -28- J UN 2 0 1994 Williamson, Edward A. F{ornKan of I,iggett, Andrew H. Tisch of L,onllard. Joseph Taddeo of United States Tobacco. James W. Johnston of R. J. keynolds and William J. Campbell of Phillip Morris. Truth. John V. Blalock, director of public relations, and C. S. Muije, director of market- ing research, gave the presentation. The text of the presentation included these state- ments : "Doubt is our product, since it is the best means of competing jith the 'body of fact' that exists in the mind of the general public. With the general public, the consensus is that cigarettes are in some way harmful to the health. "If we are successful in establishing a controversy at the public level, then there is an opportunity to put across the real facts about smoking and health. Doubt is also the limit of our 'product.' Unfortunately, we can- not take a position directly opposing the anti- cigarette forces and say that cigarettes are a contributor to good health. No information that we have supports such a claim," The project listed objectives, among them: "Objective No. 1: To set aside in the minds of millions the false conviction that cigarette smoking causes lung cancer and other dis- eases; a conviction based on fanatical as- sumptions, fallacious rumors, unsupported claims and the unscientific statements and conjectures of publicity-seeking opportun- ists. "Objective No. 2: To lift the cigarette from the cancer identification as quickly as possi- ble and restore it to its proper place of dignity and acceptance in the minds of men and women in the marketplace of American free enterprise. "Objective No. 3: To expose the incredible, unprecedented and nefarious attack against the cigarette, constituting the greatest libel and slander ever perpetrated against any product in the history of free enterprise; a criminal libel of such major proportions and implications that one wonders how such a crusade of calumny can be reconciled under the Constitution can be so flouted and violat- ed, "Objective No. 6: To establish - once and for all - that no scientific evidence has ever been produced, presented or submitted to prove conclusively that cigarette smoking causes cancer." No scientific evidence would be coming from the company, at least. The British to- bacco industry's laboratory at Harrogate, England, which produced many of the re- ports confirming the hazards of cigarettes, was closed in 1974. Scientists Give Way To Lawyers By the mid-1980's, the documents show, the emphasis appeared to have shifted from bio- logical testing and research to a legal depart- ment concern about what would happen if the years of studies on biological hazards of cigarettes were to become available to plain- tiffs in court cases. By 1985 the lawsuits were piling up fast, and the lawyers had become discouraged about keeping sensitive documents secret. On Jan. 17, 1985, a senior lawyer for Brown & Williamson, J. Kendrick Wells, wrote a note about how to deal with the sensitive biological documents: "I have marked with an X documents which I suggested were deadwood in the behavioral and biological studies area. I said that the B series are Janus series studies and should also be con- sidered deadwood." He suggested that the research, develop- ment and engineering department "should undertake to remove the deadwood from its files." "I said the articles I had suggested were a first pass at removing the deadwood and that R.D. and E. should do additional work to identify and remove deadwood on other sub- jects," the note said. The deadwood was to be put in boxes and sent to England. The note said, "I suggested that Earl tell his people that this was part of an effort to remove deadwood from the files and that neither he nor anyone else in the department should make any notes, memos or lists." Asked today if that material had in fact been sent to England, Mr. Fitzgerald, the Brown & Williamson spokesman, declined to comment. ~

, -- .r , .~'Top Scientists ~ For Companies a Saw the Perils . : The two chiefs of research in the British ~ and American companies, Dr. Robert B. -Griffith of Brown and Williamson and Dr. S. J. Green of British-American Tobacco, or Batco, who appear frequently in the --documents, have been the subject of news ~ reports because, contrary to company pol- a icy, both said after retirement that they ~ had no doubt that cigarettes caused can- cer cer and other diseases. a An article in The Louisville Courier ". Journal on June 1, 1994, noted that Dr. ~ Griffith left Brown & Williamson in 1969 -- "because he wanted to focus on research and move forward with his ideas for de- veloping a safe cigarette." - The article said, "Even before he be- came a key researcher at Brown & Wil- liamson Tobacco Corporation, Robert B. 'Griffith believed nearly 40 years ago that smoking cigarettes could cause lung can- cer and heart disease." The research papers, beginning in 1955 before he was hired by Brown & William- son, until 1969, have never been published. Dr. Griffith died of colon cancer at the age 72 in 1991. Dr. Griffith was a smoker who tried but was unable to quit the habit, "Those who knew him say Griffith never gave up his goal of making a safe cigarette and con- tinued his research in that area until he retired" from the University of Kentucky staff in 1988. The BBC program Panorama inter- viewed the widow of Dr. Green last year, and reported that Dr. Green "became increasingly disillusioned as he fought to publicize many of their findings." The program reported on a memoran- -29- JUN 2 0 1994 The Louisville Couricr Journal Dr. Robert B. Griffith, who was a researcher for Brown &`Williamson, in 1960. dum Dr. Green had written to himself, saying, "The position of the tobacco com- panies is dominated by legal considera- tions. It has retreated behind impossible, perhaps ridiculous, demands for what in P,R. terms is called scientific proof - usually the first reaction of the guilty," Dr. Green resigned in 1980 and went public with his concerns about smoking and health, the BBC program said, and quoted his widow, Olwyn Green, as saying that the fights between her husband and the Batco board became increasingly bit- ter.

-30- A Chronology ~`~'at cigarettes are more hazaraous tnan previously suspected, and estimates that cigarettes would kill 346,000 people Of Concern in the United States in 1979. 1980The National Cancer Institute an- nounces that it will no longer help the ~,m`-~~lobacco industry to make a safer ciga- 1952Work by Dr. Richard Dol.l`firids~ rette, but will instead concentrate on the i n that lung cancer is far more common those who smoke than in those who do not, and that the risk of getting lung cancer is directly proportional to the number of cigarettes smoked. prevention of smoking. The General Ac- counting Office of Congress calls smok- ing a major source of indoor air pollu- tion and a potential cause of lung cancer. J U N ?`1 1994 1988The Surgeon General issues a re- port declaring that cigarette smoking is addictive by the same scientific stand- ards that apply to illicit drugs. 19941n February, the Comm ssioner of the Food and Drug Admintstration. Da- vid Kessler, declares that the agency is willing for the first time to regulate cigarettes as drugs. In April, Represent- ative Henry A. Waxman, Democrat of California, chairman of a House Sub- committee on Health and the Environ- ment, questions the top executives of the seven major American tobacco compa- nies, and each states that nicotine is not addictive and that cigarettes may not cause cancer. ~Flk 1981The Reagan Administration moves 1953Dr. Ernst Wynder of''Mein&riaY.r 4t^. fb'cut the budget of the Health and Sloan-Kettering Cancer Center publish- Human Services anti-smoking pro- es an article showing that condensate,, grams; it also plans to block further made from cigarette smoke, paint.ed:~~~ r- £igarette taxes. onto the backs of mice, causes malig- nant tumors. The presidents of the top six tobacco companies meet at the Plaza Hotel in New York to determine what to do about the new reports on smoking hazards. They decide to begin a public relations campaign to cast doubt on the scientific findings while doing their own research to gauge the risks and how to combat them.. 19571n July, the United States Surgeon General's first official warning says that statistics indicate excessive cigarette smoking may cause lung cancer. 1964Surgeon General Luther Terry's Advisory Committee on Smoking and Health says smoking does cause lung cancer, is an important cause of chronic bronchitis, may contribute to other dis- eases and is "a health hazard of suffi- cient importance in the U.S. to warrant appropriate remedial action." 1966Cigarette packages and advertis- ing are required to carry the message, "Caution: Cigarette smoking may be hazardous to your health." i97oMore strongly worded label for cigarette package goes into effect: "Warning: The Surgeon General has determined that cigarette smoking is dangerous to your health." 3971Cigarette advertising is banned from radio and television. The Federal Communications Commission states that the fairness doctrine will no longer apply to tobacco after the ban, so that tobacco companies may not seek equal broadcast time if cigarettes are criti- cized on health grounds, because there is no longer a controversy over the issue of smoking and health. 1972The Supreme Court upholds the ban on tobacco advertising on radio and television. 1973The Civil Aeronautics Board or- ders the separation of smokers and non- smokers in airplane cabins. An advertis- ing ban on little cigars goes into effect. 1979The Surgeon General releases an= other smoking report, this one saying , cHICAGQ TftIBi1NF JUN 2 0 1994 ~obacco I is T $f.. !r i.1 a L ~ ILC1 a, 9%J .~g ~ ~ ~ : , c ibl~.~is ~~'~' L1t`c~,I'tS ii~~'tL oi~~J~vse{t reJnuaic[iVi s il 't ( ~ By fsn~ +~iitt?^.:~s ' SPEC'W, it7 7HE TttiaL'NE R,i, Ret•rtolds Tobacco Co, naYy rowly won its sk>1°'m:sh wit,, the Federal 'i'rarie Corun±ission over its co::troversial ".hse r4j'1Yl„ adver ttsing character, but the r;Ka!-ctt'? illarketer knows it iu2s much tougher battles aiaead. For a rnonth now, i'ZJR, t..r1e country's second-big!gest sailer of c3,gssvttes, has bt*,n rtLnmng fl.ts-page, issue-oriented acL- in ;tatio::ally distrtbuled re vs• paper5 in an attei2lUt to c;otii,ter the• tidal wave of negailYe nleii;= coverage e sundating Y'~? Ln~t~sf7^y `,yar tl~ : -ie ~ -ie newspaper camp4.- wili be supplemented with a~- city tou]' by RJR oMciai~ who want to nteet with editorial boards, science writers and business reporters to teli their side of thesnoking story, said a spokeswoman for the Winston- Salem, N.C.-based company. Since 1971, when tobacco ad• vertising was banned from tele- - vision and radio, th . tobac rn industry has fought of attempts to regulate its products and the way they are advertised and promoted. But more recent- ly anti-tobacco forces hxve been steadily gaining sophistication g i~i d_power._And mainstream A.rerica is backLr,;, e_tzc;tai rep. reseatattves who ccme out against tobacco. Even ,restau.rents ;tave de- cl.ar si cigarettes o~'-limit,c Sirrce ~.arcn, wben r ^~~ , ~,. ;,, a d-t,ni <•r3ticr. c.'htef David A Kessie; tra ;&o ore a congressio,^,a; s1h-cor-nutittee about the tobacco cQmpantes' abaity to manipulate nicotine levels In cigarettes. the battle i i.^-.,C inteP.:{11Ied. In Aprii the tobacco compa• nies released the Ic;:g-secret list of ingredients, inclading chenii- :.ss, that are added to cig-arc•ttes, a.:d the industry's top zxecu- ttves testified befoi`e C+aigz-ess, answering questions abnut their pruducLS and busvless prat:t;ces. '; The clunate in regard to to- bacc« has L•.ecorne a lot ntor e hot," said Daniel laYfe, execuiive vice president at the Association of National Advertisers in 'Nashiitbton, an ad mdwztl--y lob- bytng group. "There a-tr un ut- c:•zdible number of proposals :ating the tobacco industry. rve:,r week there is a cunten' tioas fight, and advcrtt,tng tsst,es are a paR of trat f;~ht." Now t~oattng in the House and Senate are tegislattve prnposa ls t? :!,T C'_?i ~P Alln !??at1ng 11p to °c,U percent of the tax deducttbtlity tGi' 'sJboC!'^ adverti5in'~„ :Lr~oi.ller that would rest_*sct the cuntent of all CtQnrette ads and ban promotions and sports sponsor- ship5; and a bil'i co sponsored by Reps, Richard ,1. Durbtn (D•ILL) and Mike Synar (D-Ukja.i that seeks to put tobacco under the regulatnry power of the Food and Drug Administration. "All this is going on at once on top of proposed excise ta-tie5 SEE TOBACCO, P.1CE 4 'Oort`d)

and kgislation about where you can smoke," JatYr said. CigarPtte adyeriising spending has declined drMncally the last several years, even without regu- lation. In 198g the industry spent $656.8 million on cigarette ads, compared with $329 million last year, according to Competitive Media Reporting. a New York :'L m that measures ad 'speziding. i:huc,`t of the decline last year rme as a result of price cuts in. r,tituted by Philip Morris and mtched by the competition as the ir,dustr y struggled to muintairi saies in a shrinking mari;et But all is not dark for the tobac- co industry on the reguiatory front. RJR won a victory this month when the Federal Trade Gorimission, by a vote of 3=2, de- c:ded not to taKe =uon against its cartoon character Joe Camel, Wh irh has appeared in U.S. adver- tising for the Camel brand since 3 ~V'7. A petition fi:ed against th.e Joe Camel camf,aign by the "ition on Srnokir.g or Health had asked the FTC to prosecute the cam- paign as an unfair advertisint; practice because the anti-smoking group contended the character was desigrted to appeal to children and attract them as smokers. The F'Tt: statement said that "al- though it may seem intuitive to some that the Joe Camel advertis- lnb campaign would lead more children to smoke, or lead chil- dren to smoke more, the evidenae to support that intuition is not there." ;;,espite the r,xll~~lg, the ad indus- rry publication Advertising Age, in an editorial last week, urged RJR to drop the ad campaign be- cause It has been used as "a club" in the hands of opponents of to. bact* advertising "to bang away at public tolerance ... with charges that Joe is designed to at- tract the attention of young kids." RJR used Joe Camel to create an up-to-date image for an aging brand. In the same way, the com- Dany is using its issue-oriented advertising to create an image of accessibility and-the new indus- • try buzzword-"accotnmodation" among the public, "We're hoping to use the ads as a catalyst to open the debate on a bunch of issues concerning ciga- rette smoking," said company i:znune Crxto Dy 8,~ hogar Tobacco companies have iaunched counterattacks ;n newspaper ara magazine ads agatnst charges of nicotine•spiked cigarettes. spokeswoman hlaura Ellis. The issues include secondhand smoke (where the tobacco company finds ault wii.t; :nvironmentai Prot.ec• tion Agency statistics);,nii^.(;tine (company Chairman James W. Johnston proclatms in the headline that RJR does not "spike" cigarettes with nicotit,e); and smokers' rig.iltS, Consumers can call a toli•t:ree nur,aL*r for more information on the RJR point of view on these issues. Philip Morris Inc., the leading tobacco marl~eter, also tried the informational ad approach this year, presenting its side of the cig- arette-ingredients issue and of- fering copies of the congressional testimony of its tobacco division president, William Campbell, to interested consumers. But Philip Morris also is han- dling the smokers' rights question in an unusual way-in magazine ads for its Benson & Hedges brand. The company version of this strategy is that it's the '90s twist on the old Benson & Hedges tongue-in-cheek ads that portray the funny situations befalling smokers of the 100 nuti-long ciga rette. "In the '90s, we're talking about the disadvantages of eii,)cv• ing a ciZ~irette today .. the incon- veniences that smokers face," maid a company spokeswora.an "We're not using brand adverti.s ing to talk about the issue, we're using that issue to advertise our brand to smokers," she said. 'it is not expected that any of the proposed regulations against to- bacco in general or cigarette ad- vertising in particular will be. cotnE' law this year. Nevertheless, the cigarette companies clearly are using big chunks of their ad- vertising budgets today to try to get smokers and non-smokers on their side for the day when et:e people they send to Washington will be voting on these issues. But reversing the tide could be next to impossible. "They're fighting a losing battle," said Barbara Molotsky. president of Bozell Pubtic Rela- tions in Chicago. "I'm sure they think they've got to do somet.hing and they think that this is the right way. They are, at least, ad• dressing the fact that there is a lot of controversy. But it seems to me that nothing can work for them. They're never going to vcin "

June 16, 1994 9:00-10:00 AM (CT) KTRH-AM Radio Houston Fiouston Hotline J.P. Pritchard, co-host: Good morning, and welcome to 740 KTRH Houston Hotline. Public intolerance of second hand smoke and allegations that cigarette makers concealed evidence about addiction are spurring unprecedented litigation againat the once-invincible tobacco industry. In fact, that alleged industry evidence along with continued research may land the tobacco industry under *he thumb of the Food and Drug Administration. Some members of Congress are opening a new front on the war on smoking. CBS news correspondent Rob Armstrong has more. Rob Armstrong reporting: Several Democrats are trying an end run around the tobacco lobby and will propose an amendment to the rule governing the Agriculture Appropriations bill that will require the FDA to regulate tobacco without banning i't outright. The architect of the measure ia Oklahoma's Mike Synar. Mike Synar (Congressman, Oklahoma): This amendment to the appropriations bill will for the first time permit Congress a floor vote to direct the Food and Drug Administration to put a halt to the tobacco company's unabashed targeting of children and their unchecked assault on the health of the American people. Armatrong: FDA Commissioner David Kessler has resisted calla for a ban on cigarettes or to make them preacription drugs. Synar says this amendment would meet thooe concerns but would allow the FDA to regulate cigarette advertising, manufacture, sale, labeling, and the content of tobacco products. The tobacco industry and tobacco state representatives oppose any FDA regulation of tobacco. Rob Armstrong, CBS News, Capitol Hill. - Lana Hughes, co-host: We'll he talking about regulating the tobacco industry, tobacco advertising, the addictive nature of nicotine, alleged nicotine spiking, and the ever-controversial second hand smoke. Does it cause cancer? Now for the first portion of the show, we are joined by Dr. Alan Blum with the anti-smoking group Doctors Ought To Care, or DOC, and Dr. Don Debethesi, director of RJ Reynolds' product development. We'll be focusing on second hand smoke this half hour and its impact on you and our society. Pritchard: Your direct hotline to our guests is 526-4740. For mobil and long distance callers: 630-5740. And for GTE Mobilnet callers, a free call. The number is star-4740. And we'll be taking your calls and questions for our guests momentarily. I guess it was the EPA study that was re"ased a few years ago that really got this second hand smoke issue going. Does the tobacco industry accept the findings of that study, Dr. Debethesi? Debethesi: We do not accept those findings and have questioned them. But not only us, but a number of other people have too. In fact, just recently on National Public Radio Dr. Alvin Feinstein, a prominent epidemiologist from Yale University, indicated that with the small level of risk that's been reported between aecond hand smoke and lung cancer, it's so amall that standard scientific techniques would not be able to detect that. And he went on to aay that, in fact, many respectable epidemiologists have said that this level of rink in so small you just can't pay very much attention to it. And what we're trying to do is draw attention to the fact that there in still a scientific debate going on, and we have publiohed a numb©r of studies in this area. We've published the only complete animal study in the arna. And tho data are just not there to support a link between lung cancer and second hand } (ENTIRE 17-PAGE TRANSCRIPT AVAILABLE UPON REQUEST) c9$t,'~ rogt}z

-33- li PDATE ..... New studies of women & children confirm the risks of exposure to secondhand cigaret smoke By COLETTE BOUCHEZ `'`%._ f you7e a«oman whose spouse lung surgeon at smokes cigareu, you could die of Memorial Sloan-Ret- lung cancer. even tf you yourself' tering Medical Cen- necer take so much as a puff. If ter, these observa- your co-workers smoke as well, uons coincide with and,or you spend lots of ttme so- other findings indi- .ializrng in smoke-tilled environments, cating that second- >nur chanc •< uf dying are even greater, hand smoke tncreas- That , the messa¢e the Antertcan es a child's risk f'or a \letirral Assuctatuou tA1L-\i presented to ~'artety of respiratory comen nationwide earlier this month, ailrnents, including uhen it published a study chronicling. asthma, pneumonia, the dangers of secondhand smoke. bronchitis and other tt %eas not the first study of its kind, Ituig disurders. but it certainly was the largest and. "Study afler study clinically speaking, the most accurate has shown that chil- and well-planned study ever attempted dren of parents who on this subject," reports Larry Garfin- smoke have weaker respiratory systems kle, an epidemiologist with the Ameri- and are more prone to illnesses of all can Cancer Society kinds- Now we know they may also The multi-year study conducted in grow up with a significantly increased ntres around the country examined da- risk of cancer," says Cahann ta Irom 653 li•male lung cancer patients . "If you are a parent who smokes in who had ne er smoked and compared yrour home," he asserts, "you are com- it u ith that from a control group of mitting one of the worst forms of child 1 253 women aged 65 and older. Re- abuse known to mankind " ;varchers found that women exposed to If you find these words a bit strong. sec•ondhand smoke at home increased you should know that lung cancer is their ruk ol' lung cancer by as much as not the only lethal health risk linked to 30' , Those also exposed to secondhand secondhand smoke, for both children smoke on the job suffered an increase and adults For years, the American of 391, end those exposed in social sit- Heart Association (AELA.) has warned of uation, had up to a 5t.y, increase. the damage caused to the cardiovascu- ln additwn. the study recealed that a lar system by inhaling someone else's ~~uman , risk at home increases in di- cigaret smoke. In 1992, the AHA re- rect proportion to how many packs per leased a paper detailing more than day her spouse smokes Especially dis- 4.000 chemicals and 40 known carcino- ;urbrn_ wa, the finding that those gens contained in secondhand smoke ~comen scho had also been exposed to Each year, the AHA estimates, some •rcondhand smoke as children were 40,000 deaths from heart and blood ves- ucrce as likely to develop lung cancer sel diseases occur as the result of sec- s: the %eomen exposed only as adults ondhand smoke. \ccordine_ to Dr William Cahan a Adding more fuel to the fire is a new study from New York University Med- • ical Center suggesting that secondhand `If vou are a parent a~ho smokes at home, you are committing child abuse.' smoke may be particularly damaging to the cardiovascular systems of young children. Researchers found that baby chicks exposed to secondhand smoke for just 16 weeks had significantly larg- er deposits of fat, cholesterol and other artery-clogging substances in the aorta than those who inhaled only clean air Scientists claim their findings, re- cently published in the .-\HA journal Circulatton, are a strong indication that childreu exposed to secondhand smoke at a very young age may be at in- creased risk for heart disease starting • as early as infancy "Couple this with the smoke expo- sure children can experience in social settings and you really have a f'orm of abuse that we, as a society, can no longer ignore," says Cahan Similar sentiments are being ex- pressed on a public level. Recently. City Council metnbers heard testimony from scientists regarding the need to protect all nonsmokers, especrally chtl- dren, by further• banning cigaret smok- ing in public places, most notably restaurants And in Washington, med- ical professionals urged Congress to re- classify cigaret smoking from the status of habit to that of physical addiction - a move that, if passed, could cause cig- arets to be classified as drugs, Ways to reduce the risk But while the debate continues, the risks remain. If you are a woman who lives with a smoker or if you are a par- ent in a household in which an adult family member smokes, here are some suggestions front our experts:  Get adequate ventilation mto any room in which sorneone is sntoking.  Urge smokers to confine their pufling to one room or, preferably. to smoke outside, perhaps on a tetaace or patio  Invest in an air cleaner systcm. un exhaust fan or an ionizer These help move the air around and draw smoke out.  Try to reduce your exposure outside the home This mcludes seeking out so- cial activities where smoking is not per- mitted or is confined to a separate area tBouclae_ regutar(y reports ori heulth forTlk' Nett'S.l %JunzU IW4

-34- CHICAGO T'R18,UNE JUN 19 1994 Pressblew away secondhand smoke truths The results of the secondhand smoke study_ are much less compelling than s. By Jon Van /1 gested June 7 at an American Medica2 As• he lat.pst scare over secondhand sociaaon news conference in Washington. smoke may be a classic case in The JAMA study, conducted by Dr. Eliz- w ic smoko and mirrors over• abeth T.K Fontham of Louisiana State shadow scientific substance. University and colleagues, appears to have Recently, newspapers and TV been done weli and with great attention to anchors made much of a study reported tn deta'L the,Tonrnal of the American Medical As- For example, researchers required par• sociation (JAMA) that found non-smoking ticipants to provide urine samples when wives of smokers had a 30 percent greater possible to assure that women who chance of contracting lung cancer than claimed to be non-smokers weren't did wives of non-smokers. meaking ct ttes The finding may have caused many But it is mi portant to remember that women to fear needlessly for their health. lung cancer seldom is seen in non•smok- There is no doubt tha~t smokin causes ers, and the contributing factors may be cancer and other serio ~h -roble many, subtle and varied, making them and that secondhand smo e is a smell very difficult to isolate. nuisance and perhaps a health hazardy ~~e JAMA report, researchers inter- But the case for environmental smoke as viewed nearly 17,500 women with lung a cancer threat is weak. cancer to fInd some 65Q who had And the case illustrates how a statisti- the disease but weren't smokertm cally unsophisticated media can provide The scientists theh selected the public with sweeping conclusions• about 1,?SO women at random based upon scientific results that can't who didn't have lung cancer and support themL tI'ied to match them with the Anytime the phenomenon under study lung cancer patients according to Is rare, as is lung cancer in non-smokers, race, family income and educa- small changes can produce large percent- tion. age swines, said Temple University Both the lung cancer patients mathematician John Allen Pauios, author and their "controls," as the ran- of the best-sPll lng book "Innurneracy," domly selected women are called, "If you look at the new cases of death were asked about exposure to flrom AIDS, the fastest Qrowing category smoke as a child, as an adult and could be ladies over the age of 70," Paulos other topics such as diet. In some said. "If last year one woman over 70 died cases, relatives were Interviewed tYom AIDS and this year two do, you get a because cancer patients had died 100 percent increase in AIDS deaths for or were too ill to talk. that categot-y," • The raw study findings aren't Knowledgeable scientists reading re- difncult to understand. ports in journals can tell at a giance Among 651 non-smoking lung which studies are important and which cahcer patients, researchers are margi.nai, but to many reporters, one found that 433 had been exposed study looks like any other. Too often, sto. to smoke from their husbands' ries emphasize a study's conclusion with- tobacco use, about 66 percentt out mentioning the limitations that pro- Among 1,253 non-smoking vide necessary context, women who didn't have lung cancer, 766 had been exposed to Jon Van cflc+ers technotoqy and science smoke by their husbands, or fbr the 77•ibunem about 61 percent. " Most people might conclude that the difference between 66 percent and 61 percent isn't much, and they'd be right. To make the difference be tween 66 percent arid 61 percent 'meaningtlil, researchers calcu- jated a risk number--called an 'odds ratio-of 1.29. An odds ratio of 1.00 indicates there is no added risk; an odds ratio of 1.29 works out to a 29 J tf N 2 0 1994 Fpercent added risk, which was rounded to 30. ; This figurE suggests a pre- cision the study doesn't have. .: Random chance could move the gtudy's odds ratio anywhere from 1.04 to 1.60. That is, any fig- ure in that range is consistent YOVith the study's result, meaning that the risk percentage could have'been as low as 4, which sug- gests no added risk, or as high as ~That uncertainty range, which f1 part of any stgtistical report, 'Was clearly stated In the study, but it wasn't mentioned in the A;merican Medical- Association tZews release about the finding, por was it stressed at the news conference. "Even though statistically so- phisticated people would find the Journal of the American Medical Association conclusion weak. an AMA spokesman stressed the 30 percent risk ngure and called for stricter government regulation of tobacco, giving the impression that this study was clear-cut. Scientific iindings are seldom clear-cut, but that may not deter advocates from making them seem so, and reporters some- times abandon their innate skep- tici8m when confronted with charts teeming with statistics. "It's very hard for the public ot even the legal system that de- mands yes-no answers to view these things the same way as we do In science." said Dr. Peter Gann of Northwestern Universi-s tys department of preventive medicine. "An odds ratio Is an estimater of relative risk, the incidence of something happening to one 'People fn public health always hammer away that you have to consider actual risk versus relative risk.' Dr. Peter Gann

-35- group versus another. It doesn't take into account the actual risk. "I might find that wearing red clothing doubles your chance of being struck by Ughtning, except your chance of being struck by lightnina is extremely small in the first place, and the finding itself might be due to random error. "Peopie in pubiic health always hammer away that you have to consider actual risk versus rela- tive risk." Stories that try to boil down scientific studies to one or two numbers may appear simple and straightforward, but they may mislead. The secondhand smoke study's weak conclusion is evident when the error range is given, and error ranges should be provided In most stories that list risk per- CH1CAG0 SUN-TIMES .i tJ M 2 0 1994 centages, s31d Shelny iiaberQtan, a Northwestern statistics profes- sor. "It may be a Little tricky to ex- plain the meaning of the range of uncertainty, but it's a good idea to use it in news stories," Haber- man said. 'For one thing, It helps the reader to understand that there is uncertainty involved here, that these flndinQs aren't all that pre- cise." JU1`I 19 1994 Study Links, Moms' Smoking, SI By Ketta Harby 1<. ~... typically strikea babies while they Such repeated airway obstrua M,d"Ydp„mµ,e,a Sw,,ios are : ileeping. ;But scientisb have tions have been observed in 401 ~been puzxled by SIDS because the peronnt to 60, pernent of babies Women ivho enioke during preg -' babies aho' die of it appear com- who later die of SIDS, said Dr. ' nancy increasetFieTikelihood that pletely healthy. Andre Kahn, the ttudys author. their infanta will have the kind of breAthin` problems often ob- served in babies who Later die of 'Sudden Infant Death Syndrome, according to Belgian reseuchers. If the prospective father also smokes during the woman's preg- nancy, tbe risk of their baby hav- ing breathin; problems is even higher, the researchers found. Smoking by pregnant women- as well as anmokin= around young children-has long been known to be one of several risk factors for SIDS, a. mysterious . death that The new study, published in tbe. "Tbe mi ssu'~g link betrr..o aotae ~ current isaue of the journal Pedi- casea of SIDB arid tb.. data oa atrics, found that a~~ particular smoking could be airway ob~struc- breat.hIng problem calied obstruc- tion," Kahn said. "f have, we tive aleep apnea-in whicb the think, a missing l,ink:" baby stops breathin; for at least Most acientists believe that three seconds because of blockage SiDB probably is cnrwd'by many of the upp.r airway-is tnore than' diKetmt thinia, eapee;a]ly since two-and-a-half times more com- babies of nonsmokers also hav, mon in babies of smoking mothers died of $IDS. But this new find- than in the babies of nonsmokers. ing adda yet another reason for The episode of apnea also is expectant motbars to lead a longer for babies whose mothen smoke-free life, -said I?e. Alfred smoked while prrgnant, compared Muassr, preaideat of 'tlie. -Amari= .vith nonamoking motbenm can Lung Aa.ociation. ADVERTISING AGE, JUNE 20, 1994 Joe Camel only one target Your editorial calling for R.J. Reynolds Tobacco Co. to give up Joe Camel (AA, June 13) baffles me. Understand that the antismok- ing industry will be satisfied with nothing short of a total ban on cigarette advertising. Our drop- ping the Joe Camel advertising campaign will not appease these groups. Instead of continuous headlines about Joe, you'd be writing about the assault on our competitors' advertising. If you have any doubts about that, refer- ence The New York Times' story of June 3, "Joe Camel may have won the battle, but the war against cigarette advertising con- tinues." In that piece, Stuart El- liott quotes Dr. Alan Blum, founder and chairman of Doctors Ought to Care: "Obsessive cries on our side that 'Joe Camel must go"' have meant "we forgot the Marl- boro man. .." Dropping Joe Camel will not "take a weapon away from (militant tobacco foes)," as you suggest; it will sim- ply shift the focus to other brands. Clearly the Federal Trade Com- mission spent enormous effort taking an exhaustive look at the Camel campaign. Had the Journal of the American Medical Associa- tion articles of December 1991- the very basis on which Ad Age originally based its position on Camel-had even a shred of valid- ity, you can bet we would be fac- ing a protracted legal process rather than the exoneration given Joe Camel last week. The truth is we don't want kids to smoke and we actively sponsor programs to enforce age restric- tions. The FTC, after careful inves- tigation, found no evidence to sup- port allegations to the contrary. However, essentially what Ad Age has said to the advertising world is that it's not enough to be right; that the politically expedient route is more important than sound busi- ness decisions based on market- place performance and consumer demands. We are not, as you ac- cuse us, simply ensuring sales and profits for Camel today. We are working for the shareholders of RJR Nabisco, responsibly produc- ing a campaign to ensure a long- term repositioning of what was a flagging brand, thereby enhancing the value of their holdings. What has happened over the past three years with Camel and the tobacco industry can happen to any manufacturer of any prod- uct in America. Collectively, in- dustry has to take a stand and send a message to political advo- cacy groups that they should not and will not make the choices for the American people. James W. Johnston Chairman-CEO R.J. Reynolds Tobacco Co. Winston-Salem, N.C.

-36- DENUER POST JUN 19 1994 JUN201994 Let's keep. theanti-s..moking -- argumentsionest, iiI~~i ase By Donald Homa ap.csai to Th. D.r,aK Poct ih T be pretident's claim that his uni- ver~al health-care plan won't tax the average American means little to the 26 percent who rn oeA married couple - hard-worki ~~g,'Taw- abiding and useful contributors to society, bnt addicted to arettc~ can expect to pay an additiona year if they are i7eavy smokers (two packs a day). Since 39 percent of Americans near or below poverty sznoiCe, according to the National Cancer In- stitute's own brochures, this tax is especial- ly egregiotu, hitting those wRcan least af- ford to pay. For the long-term smoker, this ts a forced tax, since tbe addiction is diffl- tult to break. The justifiratJon is that smokers wreak a subrtantial hardship on the health-care sys- tem, and that their smoke is a carcinogenic danger to noresrnokers. Both claims are du- bious. Research findings, summarized be- low, contradict much of the nonserae and bysteria of passive smoking. In a society ig- norant of facts and a willing participant to let someone else cary the burden of health csre, and a government far too eager to Lin- ger a politically powerless scapegoat, im- plementation of the suggested taxes is ooth- ing short of tyranny by the majority. If nons7rwkers wish to claim the moral high gr'ound, then they should be prepared to ex- plain the following inconsistenciea 1. TLe Smoke Inhaled by Nonsmokers. Researchers (New Euland Journal of Med- icine, 1984) have measured the amount of amoke inhaled by nonsmokers by analyzing the level of cotinine (a ruajor biological by- product of nicotine in the blood and urine) in nonsnokers exposed to smoke at work and .bome. They found no statistically significant lacrease in cotinine level for noasrnokers in even the most extreme conditions: norLmok- ers wbo worked with six or more smokers per ivom. In fact ". .. the cotinine level as- saciated with smoking one or two cigarettes a-day occurred only among one group of noaeZnokeFs - thoee who worked with more than six smokers per room and who also lived in homes where reore than a pack a day was consumed." 2. Physics of Smoking. The nonsmoker cannot physically inhale more than a frno- tion of one agarette. Assume that lung ca- pacity is about 1 cubic foot. Smoke exhaled into a'amall room, say 10 x 12 x a feet, is roughly diluted by a factor of 1,000, the vol- ume of the room. This value is reduced fur- tber, since much of the smoke remains i,n- Qide the smoker rather than being dispersed Into the surrounding, room. Smoke exhaieti in open-a rez arenas, such as stadiums, has a concentration near sero, since the volume is essen ti a ll y inf'i ni te. The conclusion that passive smoking Is probably harmless to healthy individuals was made by experts on smoking and health at the International Conference in Vieana (1985): 'Tbere is a high probability that car- diovascular damage due to passive smoking can be ruled out in healthy people." The Di- vision of Lung Diseases of the National Heart, Lung. and Blood Institute (1983) re- ported: "The effect of passive smoking varies from negligible to quite saiall." 3. Pregnancy, Smoking, and Passive Smok.:ag. The fetus ahould be especially vul- nerabie to toxins. Doct.ors studied 4-year-old chiMren (Developmental Psycbolo®, 1990) who had been prenatally exposed to alcohol. caffeine, tobacco or aspirin. Although not reported, it is a good bet that most of the children of smoking mothers were subse- quently exposed to secondhand smoke as well. Analysis of 14 motor tasks and IQ re- vealed that alcohol was a negative influence for 7 t:.sks, aspirin for 5 tasks, caffeine for s tasks and tobacco for 0 taaks. Nine of their tasks were corrrlated with IQ. Tbe authors concluded that this ". .. study replicates previotss evaluatlons .., in which we were unable to detect neurobehavioral conse• quences of prenatal cigarette ezposure." Dr. Lefkowitz (Child Development, 1981) inves#igated the physical, intellectual, alfee- tive, and personal and social functioning of offspring of mothers who did or did not smoke during pregnancy. Analysis of results revealed that the chlldren of smoking moth- ers did not differ from the children of non- smoking mothere on any of the 16 measure,. Tbe IQ of children from :moking mothers was a nonsignificant s points higher than the children from naaaawldng mothers. .4. Passive Smoking and the EPA. The major discrepaacy has been the pronounce ment by the Environmental Protection Agency that envirvnmental tobacco smoke is a Class A carcinogen and responsible for 3,000 Lung cancer deaths a year. This con- elusion Ls false, an example of shameless science, based not on new data but by vio- lating standard rules of statistical testing In a meta analysis of previous studies, most of which failed to find any relationship be- tween passive smoking and health risk. One prominent scientist, Alvan Feinstein of Yale medical sebool, atatod in the jaurnal Toxico- logic Pathology that the EPA study ". .. 10")

"r~ -37- JUN 2 0 1994 . simply ign~ored the incaawenieoi :+esn}ts and emphasiaed tb4ee that are belpfuL" In a meti analysis, a avmber of sbodies ar. combined Into a slagk at~lysts. In fact; the EPA found no gtatistlcal significance between passive 3 molCing and ilinaet to nonstnoicerz What was done, bowever, was 'to eo;pund what to stadsda h termed the "dgnitlcance kvel" to reJect the nnll hy- pothesis - in Lyman terrns, the level ne,.eded to conclude that a relatioesbip es- lsta. To bettes understand thia, I pulled a researrb journal off my abelf aad coanted the number of statistical tests and the level of significance ased, to report findings. Acroes the 8 atudlea, a total of 67 statistical reaults are ~: not one o~ r~ te ailopted ed EPA. ~~ ~ . ~ 5. Comparative Rfays oi Other Habits. Di- abetee Care (1991) reported a etndy linEng miik eoa:umption and ineidence of juvenile diabetes, a disease affecting 1 millioa American children, Researchers found a near,thirtytold increase in incideoo•e of dia- botes due to milk cansumptioo (the ratea for Japan and Finland). So strildng was the re- latiornhip that Scientific American (1992) began lts intro with these words "Tbe Na- tiocal Dairy Board's slogan, "Milk, it does a body good,' totmd: a ltttle bollow these days." If you believe In atn taxes, why not tax milk? The relationship between cancer death rates and fat intake was reported in Cancer Research (1975), According to this :tudy, there is a near twenty-fivefold i=vase in cancer deaths based on fat consumption (compare Denmark with Thaflafld~ If yva believe in sin tues, wby,mt tu fat~ 'Ibe New Pmolsnd Jovrnal cf Medic~ (19a6), followed amokeri and• nooa~e~ oves 12 year: and fatmd tba( iadde~ce ~` sttoice waa 4.9d perccit for tbe KD0ketsanZ' 2.64 pescent for the nooamokets. This t*o-' oooano~;. fold lacreasle in drota, relattve to era, ir paltrY, compared to the tweaty-Hv~; fold alld thirtyfold lncreaaes in caaeel diabetes asaociated with fat cotnumpoloa and lnili<: 6. Death, Diaease a.nd Smoidng. C. Eft-fi% ette Koop, the previous aurgeon ;eflerit~ c3a.tmed that smok.ing was the aingle, most- prevrntable canee of ¢eath. The statemeat`, is abeurd. If everyone quit amo" totia, b~e virtually unchanged. The reaioa for Ehia it that amoking may reduce the age. M' which you die but not prevent death. #s~ (we all die). A suitable analogy is this~~ aider two cylinders, eacb fed water frorn tbz bottom, aoe 70 ivc,.~bea high and anntbet' ; TViac3ses high (rouay the age e=pectaadet bf mnokerc and nonamotera). •Tbe ratk,&E, which water flow: over the top of each cpd-, inder (number who die) is tiot affected by the bei~t of the cy.linder btd , by_the rate at which water is fed into the cylinder. The rate at which water is fed into each cylinder is aaalogoua to the birthratt Birt2rate, not our habits, determines the rate at whicbi people will die. Sioce smokera, even by the worst :cenario, die weli after tbeir child- bearing years, their habit cannot influence ttu rate of death. N at Artzom aoft Ltvwsory aorria l+om, b. Prahrbor or Exp.Am,rtfa! P.v7qIupV BUSINESS WEEK/JUNE 27. 1994 L•11t• ill[!9 1t=11[S ~-~ .rrq BY GENE KORETZ U. S. DEATH RATES: ANOTHER SOCIAL GAP IS WIDENING.. . ' n the 1980s, social observers lamented the growing income inequality in the U. S. Now, attention is being drawn to a parallel trend: a widening gap in mor- tality rates between the middle class and the poor. ~ i ... AND TOBACCO IS ONE OF THE BIG CULPRITS A mong the many factors contributing to the indifferent health of low-in- come Americans, notes economist Jef- frey E. Harris of Massachusetts Institute of Technology, is the prevalence of smok- ing. "Cigarette smoking is now respon- sible for a fifth of all deaths in the U. S. annually, and the poor are the heaviest smokers," he says. Some 35% of American adults below the poverty line are regular smokers, compared with just 20% of those from households with incomes above $50,000. Harris, who is a physician as well as an economist, estimates that lifelong smok- ers live seven years less on average than nonsmokers. In addition, secondary smoke harms children and other non- smokers in a household. Similarly, smoking is more prevalent among blacks than among whites-and blacks have higher death rates from smoking-related diseases. For example, 86% of deaths from lung cancer are at- tributed to smoking, and blacks' death rates for this ailment are more than twice those of whites. Such stark statistics are one reason many health groups are calling for a 82 increase in the federal cigarette tax. To be sure, such a hike would hurt poor people who continue to smoke more than it would hi2~her-inc'ome smokers. On av- erage, a household with two adults each smoking a pack and a half a day now shells out nearly 52,100 a year for cigar- ettes, and a S'2 tax hike would raise it to 54,200. But economists argue that the regressiveness of the tax would enhance its effectiveness in curbing smoking. "Health information sways the more affluent and educated," says Harris, "while the poor are more concerned about costs." And although the proposed hike would be re2ressive, the benefits of quitting are progressive: ln other worcis, the poor, who suffer the most from to- bacco use, are the most likely to im- prove their health by kicking the habit.

-38- r Xi _Af4Ta CONS i TUTIGN I Movie heroes still smoking ons creen, h though audience less likely to light up ,SS=A,tD "Mc ~- WasMnVon s SM_OUU in the movies may not be as glam- orous as Bogie and B;acail once .made It,• b'ut a neyV study aays' there'a still more righting up on ' the 'siivar screen than in the . real world. Smoking has dramatically •declined since the 19609, but University of California re- searchers who reviewed 30', years of films say Hollywood , didn't catch on. : Not only are cigarettes atill prevalent, movie 'heroes are three times more likely to ' smoke than the real-life -roie models of Arnericsn society, the study concluded.. This has re- s searchers wor;led about an un-- du¢ smoking influence on ! young moviegoers. .Why should people care if • . 'fantarry Eig{ires smoke? : "'I'he Impression kida get lrorn watching thesa Movies is ;th1t most people smoke and' smoking is something done by •.desirable flgures," snid UC re- ,seaarcher Stan Glantz. "It'a not fthe bad guys who are smoking, •it'a the good guys." ` • Anti-smoker: ' have •long. jc.omplained that cigarette mak- M manipulate movies. In one hly publicized Incident, phLUp Morris paid 5350,000 to get,its~ttea in the James' Pond movie "Liceace to Kill." The industry stopped these "paid product placements" in 1990 even though they didn't in- fluence moviegoers, insisted Tobacco Institute spokesman :Thomas IAuria. "rhe ai.ght of a smoker does 'not another smoker make," he. -aaid. Movies shouldn't be puri- tanical, coaceded Glantz. Many characters need to smoke to be oetlevable, as soldiers did in' "The Longest Day," the 19631 .epic about D-Day. And, sure,: gangsters smoked in "The God- father." , But what about "E.T.," the ,cuddly extraterrestrial of 198S whose adopted mom smoked? Or"Ghostbusters," the 1984 hitcomedy about dehaunting New York City? "Srrioking had nothing to do •with'Ghostbusters.' But all of a sudden• they all break out ciga-. rettes - it was almost a disjoint ,in the plot," Glantz said. The study, published in Monday's American Journal of Public Health, looked at two -randomIy picked movies from- the Top 10 films of each year from 1960 through 1990. Researchers spotted tobac- co or a tobacco references 785 'times in the 62 filma, 78 percent' 'of which was on-camera tobac- co use. This use did not decline over time even though the num-r ber of Americans who smoke dwindled from 42.4 percent in 1964 to 25.5 percent In 1990. JU N -2 0 1994 JUN t o 1984 "That'i counter to what sur- veys show moat people think and to what we expected to flnd," Glantz said. Who smoked did change. In the 1960s, 38 percent of movie smokers were major charsc- tera, compared with 26 percent ta the '80.. • But the number. of young adults .mo]dn.Q on camera more than doubled from 21 percent In the 19601 to 45 percent in the 1980s - compared to 26 per- cent of their rzal-life counter- partb. And although only 19 percent of Americans of high socioeconomic status smoke - the real-life role models, ac- cording cording to researchers - S7 percent of their movie counter- parts do, the study said.. That statistic is the one that bothers Glants. Smoking is por-' trayed as normal "by peopla who, if you were a teenager~1 fyou'd like to be like," he said. (Other coverage ava~liz;~?-Jl£ upon requea't.)

-39- BOSTON GLOBE JUN 2 0 19% , Th,ere's been a~ rnvolution c>',rrn.ind me nt20nCL7fZO'12g ~~cials;'. : pubtic o : , but th,e r~ev~olutzarti. - has not caught on in MaLSSachusetta.' " RICHARD DAYNARD NorfArarura Lowsa+taot Smoking* foes cite inaction by Weld / By F4 anlc PhiIltpe . oc.oas arArr Opponents, of ~afnokin ~say Gov. Weld's reluctance t~ •tarnia-h his U'b- ert4riaa irnage has puahed Msas- scbusetts to the backwaters of the tobacco control movement. '`~ such states as Florida and Missisaippi have taken bold leads on the issue, aiaoldng foea point to initiatfves by state govern- menta or other public authorittes to sue tobacco companies to recover Medicaid ca" divest public funds of tobaxo' company atocka and de- clare public buildinie smoke-free areaa. "There's been a revolution around the natian Among public nis- cials and the public eqeciation to- .ward the tobacco industry, but ths revolution has not caught on in Msssachuse"" said Ric3,ard Dsy- nard, a Northeastern Law School professor and president of th. coi- lege's Tobacco Control Keaource Center. In recent- wee3cs, Weld, a non- s'moker whose extensive stock port- folio includes holdings in the_el rette manufacturer Phili MorrTs C_,o has reportedl,y re ed pu health advisers who hoped he would unilatarully luut smokicg in state agenciea. He has also opposed di- veatment bf his Philip Man•it stock. Sources said Weld's political aides persuaded the governor to s1- law the initiative to oame, inatesd fr= the Legfelature., Those sdvisers believe Weld's well-cratted image as a libertarian would be jeopardized by unilateral executive action on the isaue, the sources aaid. It was that iame advice that persuaded Weld to veto the atate's inandatoiy seat belt bi'll, which was overridden Iater: Sourcee also said there ia an in- ternal strvggle In the adrniniatration over the smoking iasuQ. • Weld's libertarian philosophy, which is behind his support for gay rights and abortion rights, has won him strong bardCing from some libet- al;. And those liberals have had, an impact In changing some of his views. Once allied with the gun lobby that opposed the. aaaault weapons ban. Weld flopped on the isaue last fall. And he folded In the face of strong arguments on the issue of re- quiring children to wear bicycle hel- mets, a measure he initiall,y opposed. At a recent luncheon with Globe editors and reporters, Weld ac- knowlodged he is torn between his concern for public health and his ad- herence to libertarian ide9ls. For- example, the governor said he is unsure what he would do if the Legiatature passed a pending bill to ban smoking i.n Massachusetts res- . taurantt. As for other initiatives on smoking, Weld made it clear he would watch what the Legislature does. \ . "I'd•rather *aft." Weld said when asked why he had not used his ax- ecutive authority to ban smoking at all state agencies. "I'm not at all sure I'd want to tell the Legislature where they can smoke or not." Weld'a reluctance to take a lead- ership role in the amoking debate also surfYCed in 1fl92, when he pub- licly opposed and voted against the Question 1 ballot initiative to raise the cigarette tax by 25 cents per pack'to fund antismoking initiatives, saying he did not think tax policy should be used to shape social be- havior. Dayua.rd said that, while Weld ahrinka from taking any lesd, Mass- achusetts has become the most "backwYrd" of the. New England states on smoking control Issues. An exception, he said, came about when voters chose to raise cigarette taxes and create the etzte'a huge emoking control program. `I'd rather wajt rm not at aIl sure rd want to tell the Legislature where 'they ean, snmok,a or D.4~;.: :; CO.Y_' WELLt~ t : ; . aakxi a6out. p~e re~uladion to cura r„iaxh„g . "It's really peculiar," Daynard, said, referring to Weld's stance.. "He's a iibe.rtarisui, but that argu-: ment doesn't work anymore."' Smoke, he said, "geta all over the: place and it gets into the lungs ot nonamokan." Weld's libertarian philosophy also places him in oppoaition to ef forts to divest the atate't pension funds of tobacco stocks. His fellow. Republican, State 'Ireasurer Joseph: •Malone, agrees. The two pension funds currently hold $95.8 million worth of tobarco company stocks and bonds. Former Gov. Michael Ihtkakie had moved in his last term to divest the stock, but was blocked by then-Treasurer Rob- ert Q. Crane. ; Malone said he feels that tinker-' fng with pension funds to try to' change people's personal habits,; however worthy the efiort, Is not.re-; sponsible management of the money.. "We should be careful about slid- ing down a slippery alopE where one social issue s.fter another is ad• dressed by divestment," Malone said. "Aa the fiduciary of the fund, L have a resporLsibillty for ma:xdmfzing the returns." ; Malone said other measures; such as advertiainQ and halting subr sidies to tobacco growers, are the, best way to curb cigarette smoking.,

-40- =~~= ORAMGE CUUNTY REGISTER JUN 1?. i~ Santa Ana's newban, on smoki.ng takes 'effect C1T1E5: The law pro- hibits lighting up In public buildings and workplaces. M Wo By DEBORAH BELGt1M t, 4~ ^ The Orange County Register SANTA AXA - The Marlboro man better keep out of Santa Ana. The city's new no-amoking ordinance went into effect Thurs- day, and it bans smoking in pub- lic buildings, pubIic-meeting rooms; places of employment, museums, libraries, retail stores and restrooms that are open to the public. Restaurants that serve more than 50 people have to reserve 75 percent of theindining rooms for nonsmokers. Cigarette vending machines are illegal in public places. Bars are exempt. The ordinance was passed unanimously by the City Council on May 16 after Councilwoman Lisa Mill's suggested it was time to 1JmIt smoking in the city. Residents had called her ask- ing that the city impose a smok- ing ban, especially in work- places, she said. "A number of people were' afraid to approach their boss or employer" about a ban, Milla said. "Especially if that boss smoked." The fine is $100 for breaking the law, but the city isn't sending out troops of cigarette police to make sure everyone is comply- ing. .0 v iN :, J Idts,4 "The ordinance is self-enforc- ing," said Jill Arthur, senior management assistant in the city manager's office. "Compliance comes through peer pressure and other mechanisms that don't involve the government." Smokers didn't appear bath- ered by the new law. "If the ... ban is in a confined, area, that's fine," said Holly Ze- bari, smoking with friends at a table on the Topaz'Cafe patio. "1 think it's great," said Shir- ley MacDonald, a nonsmoker sit- ting at a nearby table. "I have secondhand smoke damage or asthma from having lived with a father who smoked three packs a day." NEWARK STAR LEDGER SUNDAY JUNE 19, 1994 Morris jail enforces ban on cigarette smoking By BRIAN T. IdUIiRAY P 1J~' New Jersey to adhere to the national senttment If you're locked up In Morris County, you can't ~ ~ iM that amookinghwtl~l be bafu d light up• thrvagbout its justice complez, including the jail, by A ban on.clgret r.mn nv in the county Jail Is Juiy 1, and state prisons have a policy permitting In effect, and authorities are allowing no eucepttons, pufting only in cell.s. even for corrections otncers. The policy had been tm- Morris County's program grew from objections plemented gradually over eight months, with in- by some corrections officers about the smolry condi- mates being permitted fewer and fewer smohes. , tions In the old, cramped and unventilated facility, As of June 6, no one has even been allowed to and Sheriff Edward Rochford allowed the union and strike a match, and new inmates have been forced to , Jail administrators to come up with a plan. It in- quit cluded developing some counseling prograuu for ."It'a cold turtty," said John Klnnecotn, acting, ;. amokers, although they had to want to quit the habit • administzator. to get involved. No mental breakdowns tiaree beea repotte, ' As for employees, many continue to puff away, t even amoag heavy smokers. But the behavior oG :_ But because of regulations against doing it in or even some inmates is growing strange. One desperate in tront of the Jail, they have been reduced to acting smoker was caught rolling tea leaves in toilet paper kke schoolchildren by snealdng a smoke in lavataries ln a bome-made effort to bypass the near regulatkns: or 1n hallways during breaks. Some doorweys around '"ihat Was pretty hard-core: I can't Imagine the county courthouse complex have, turned into eebat that would have tasted like," said Capt. Yack moking enclaves DeLaney, a fonmer smoker who d T~ ~~~ however, do not have such outkta. e~~ ~~' ' "we`ve been giving them access to food to make nfzed the policy. 'up for it. They can buy up to $45 worth of candy and "I'm glad not all of them are out working in ': ' things through the commissary," said Kinnecom. flelds every, day, or some of them would probablybe -We were going to take out the microwaves trying dandelions. It's tough, I know. But;for the (orens) we have in some of the cellblocks because most part, we haven't had any problems." , some inmates have been using them improperiy. „. The Morris County lockup is one of the IIrst in But rve're not going to do that Just yet, because we7e letting them have the extra food until they get used to this," he added. Medical services personnel wtll be checking on heavy smokers who are suddenl7 forced to quit and assisting lnmates who have dit4culty adjusting, said DeLaney. "I'hey will not be )etting them use the patch or anything like that to quit smoking because the in- mates just aren't here long enough for those kinds of programs. But we will watch the inmates and give them a lot of extra fluids, which is what the doctor' recommends for quitting," he added. When the policy began in November, iiunates ; were told what was to come and were informed ! about programs that would be offered on giving up j the habit. At Qrst, an inmate's access to cigarettes ; was limited to two cartons a month, then graduatly'' cut back until only two packs would be Lssued• Na cigarettes were permitted by May, but the policy was- . not strictly enforced until now, °Most of them (the inmates) laid rigbt dorrrr - (cooperated), although they didn't like it. The ofII- cen are another st,ory, Some staff don't like it, and tf they can, they,dip out on break to have a smoke,'~: DeLaney said. "But the whole place smells better now because of it (the policy), and now we have the Inmates scrubbing down the walls. They're getting the nic-. otine off that has built up. When they're done with that, they'U be pzinting," he added.

-41- 9 PHILIP MORRIS COMPANIES IIVC. Cereal's big guns Corporate shares measured in pound volume. Note: All others includes private•label products. 'Nabisco brands were purchased by General Foods in 1992, and sales were added into General Foods'totalfor1993. Source: John C. Maxwell Jr. FOODJ Kellogg Co. General Mills Ralston Purina Co. 1984 J ~114 ~ ~ 1994 General Foods USA Quaker Oats Co. ~ Nabisco Foods* All others 39.0% 12.2°'° 36.0°.o i 223.7% `~ 810, 24.5°/0 1989 1993 New items boost cereals Coupons also belp 5% volume gain; Kellogg's lead slips By John C. Maxwell Jr. Volume in the cold cereal indus- try rose an estimated 5% to 2.96 billion pounds last year as a result of new-product introductions, line extensions and continued heavy couponing. Sales increased around 7.3% to $8.9 billion. Market leader Kellogg Co. lost share in total pound volume, fall- ing to 34.9% from 36.6%. It ap- pears market share gains went pre- dominantly to General Mills and Quaker Oats Co., though Kraft General Foods' Post division gaine-'~Fe strength of acquiring. Nabisco Foods Group's cereals. Cereal prices, led by Kellogg, climbed about 3% last year. But in a sharp break from pricing trends in the industry, General Mills in April announced it would reduce prices on its largest cereal brands by an average of 11%, or about $110 million, which translated into about 30¢ to 55¢ a box at retail. In 1993, Kellogg initiated three price increases, two not followed by the industry as a whole. Kellogg raised prices 6% to 7% Top 10 ready-to-eat cereals Share of pound volume Brand (marketer) 1985 1987 1989 1991 1993 Corn Flakes (Kellogg) 6.7% 6.3% 5.4 0 5.4% 5.1 °lo Frosted Flakes (Kellogg) 6.0% 5.9% 5.1 5.0% 4.9°% Cheerios (General Mills) 5.0% 4.6% 4.7°'° 4.5°,a 3.9°I0 Ralsin Bran (Kellogg) 4.I°lo 4.3% 3.7% 3.7% 3.3°b Frosted Mini-Wheats (Kellogg) 2.0% 2.2% 2.1% 2.5% 3.3°'° Cap'n Crunch (Quaker) 2.6% 2.9% 2.9% 3.0% 2.9°fo Rice Krispies (Kellogg) 3.8% 3.6% 3.1% 3.2°b 2.8°'0 Honey Nut,Cheerios (General Mills) 2.8% 2.9% 3.1 % 3.0?'0 2.7°'° Chex (Ralston) 3.6% 3.6% 2.9% 3.2°.0 2.5°b Shredded Wheat (General Foods) 4.0% 3.9% 2.8% 2.3% 2.3°'° h) O TOTAL 41.2% 40.2% 35.8% 0 35.8% 33.7°/0 CA Source: John C. Maxwell Jr. r+ (31 4:b .t~ ~ verall, about double the average mo re con sumer s have turned to rs0 o industry increase. Private label and price brands will pose a more concrete threat than in prior years. More and store brands, once reputed to be less than desirable but =;-pro- viding a palatable taste and a more reasonable price. Ralston 15.1°./0

Purina Co. has an estimated 70% , of the U.S. private-label business, with others including Malt-O- Mea1 in Minneapolis holding the remaining 30%. Ad expenditures, monitored by Competitive Media Reporting, fell 1.5% to $810 million. Post was the only company to boost spending in the year, increasing measured- media dollars by 16.9% to $166 million. 7 Mr. Maxwell is managing direc- tor at Wheat, First Securities, Richmond, Va. THE WALL STREET JOURNAL MONDAY, JUNE 20, 1994 Quaker Oats Shares Soar On Takeover Speculation By a WALL STRF.CCT J(IL'R0.AL Staff Reporter CHICAGO - Shares of Quaker Oats Co. reached a six-year high as rumors that the diversified food company might be a takeover target swept Wall Street. Quaker stock rose $7.375, or more than 10111, to $78.50 in New York Stock Exchange composite trading Friday on speculation that Swiss concern Nestle SA or another foreign company might seek Quaker. A spokesman for Chicago-based Quaker wouldn't comment, citing normal corporate policy. Officials of Nestle couldn't be reached. A maker of Gatorade sports drink, hot and cold cereals, pet foods and snacks, Quaker has long been on food-in- dustry analysts' lists of likely takeover candidates, partly because of its leading brands and recent efforts to pare costs. Takeover rumors gained fuel follow- ing the recent bid for Gerber Products Co. by Sandoz Ltd. "After Gerber people want to believe," said Prudential Securi- ties analyst John McMillin of Friday's sudden stock rise. Michael J. Mauboussin, analyst at CS First Boston, noting that Nestle and Quaker are in several similar businesses world-wide, called such a combination "particularly attractive." He recently put Quaker's private market asset value at about S104 a share. -42- J U N 2 0 1994 THE WALL STREET JOURNAL MONDAY, JUNE 20, 1994 MARKETING Chinese cereal (left) copies Kellogg's packaging, and Chinese facial tissues use well-known American name. Chinese Flagrantly Copy Trademarks of Foreigners By MAeCUs W. BxAUCHLI Staff Reporter of THE WALL STREET JOURNAL Visit a Chinese store these days and you'll catch glimpses of America: the bright red of a Colgate toothpaste box, canned foods in Del Monte green, the Kellogg's Corn Flakes rooster. But the toothpaste is Cologate. The cans of "Cream Style Corn" are made by a company called Jia Long. And the rooster adorns a box of Kongalu Corn Strips. "Kongalu," says the box, is "the trust- worthy sign of quality which is famous around the world." Kongalu is indeed well-known in Battle Creek, Mich., Kellogg Co.'s headquarters, where company lawyers are considering their options. "We will take whatever action is available to us under Chinese law" to stop what Kellogg considers a flagrant violation of its well-known trade- mark, vows a spokesman. Audacious copying of foreign trade- marks, copyrights and patents is rampant in China, the world's fastest growing and potentially biggest consumer market. Brands are ripped off: Bausch & Lomb's Ray Ban sunglasses become Ran Bans. Products are copied: Virtually any Ma- donna album is available for Si or less. And well-known names are exploited in strange new ways: One company markets Rambo facial tissues, in pink and blue. The problem is so serious that the Clinton administration is weighing a spe- cial investigation under Section 301 of the U.S. Trade Act. Washington must decide by June 30 whether to proceed. If the U.S. Trade Representative determines that U.S. companies have been hurt, such an investigation could ultimately lead to sanc- tions. Already, U.S. officials put the an- nual damage at S800 million. At issue is China's actual protection of so-called intellectual-property rights. Al- though Beijing has promised to stop in- fringements, a senior U.S. trade official says that China hasn't done nearly enough to head off a special 301 investigation. "I have real confidence if the political will is there, it will be carried out," says the official. "What's lacking right now is political will." Violations of intellectual-property _ rights afflict most industries and busi- Please Turn to Page B2, Column 6 '~"

tO"R10 Chinese Often Copy Trademarks, Patents Owned by Foreigners Continued From Page BI nesses doing business in China. Microsoft Corp. says Chinese software pirates cost it S30 million a year, and the amount is growing. The Motion Picture Association says virtually all the $45 million or so in videotape and laser-disk sales in China last year were fakes. Beijing Jeep Corp., a Chrysler Corp. joint venture, found more than 2,000 four-wheel-drive vehicles de- signed to look nearly identical to its popu- lar Cherokee model. Even the powerful suffer: Within weeks after the daughter of China's patriarch, Deng Xiaoping, published a biography called "My Father, Deng Xiaoping," thou- sands of illegal copies were flooding book- stores in major cities. This month, Deng Rong won a legal case against one pub- lisher among the many who produced tens of thousands of illicit copies of her book. Spurred by such embarrassments and eager to avoid a trade tussle with the U.S., Beijing has passed tough laws for dealing with counterfeiters and last year set up special intellectual-property rights tribu- nals. "It's quite clear that in terms of a comprehensive legal framework, China has done an excellent job," says David Buxbaum, a leading China lawyer who is pursuing 12 intellectual-property rights cases through the new courts. But he worries that some of the judges assigned to the new courts may be unfamiliar with the concept of intellectual property. "It's only beginning to dawn on people that copy- rights and trademarks are property," Mr. Buxbaum says. While the legal concepts may be new, China is staging a huge propaganda cam- paign to show that it is trying to grasp them. The government says it handles more than 13,000 trademark-infringement and counterfeiting cases each year, of which about 500 involve foreign compa- nies. The U.S. has the largest number of the 59,466 foreign trademarks registered in China. For the most part, Chinese enforcement so far has meant police raids on street markets or stores that sell counterfeit software, compact disks or laser disks. Few factories have been shut down, to the dismay of U.S. trade officials. It's not that the factories are secret. Indeed, U.S. trade officials recently visited the biggest of China's 26 known CD factories, Shen Fei Laser Optical Systems Co., in Shenzhen, just across the border from Hong Kong. The U.S. says it has given the names, addresses and telephone numbers of major counterfeit CD manu- facturers to Chinese authorities. "We've in a joking manner offered to -43- provide them with satellite photography if that would be helpful," the senior U.S. official says. CDs, laser disks and software have attracted the heaviest publicity, in part because losses have been big and those relatively glitzy industries have aggres- sive lobbies in Washington. Pirated music accounts for half of China's nearly $700 million a year in recording sales. And the software industry estimates that 94% of the software sold in China is fake, a loss industry puts at $595 million. Yet consumer-products companies are being hit just as hard. Shampoos, soaps, toys, clothing and shoes ace all being copied. Particularly vulnerable are those BUSINESS WEEK/JUNE 27, 1994 eaders ReDort HEINZ SETS THE RECORD STRAIGHT W e are disturbed by the number of basic errors in your article "The new life of O'Reilly" (People, June 13). The following are some examples:  Your report that William R. Johnson is "still not on the board" of directors de- spite the fact that he and William C. Springer were nominated in last year's proxy and elected at last September's annual meeting.  U. S. consumers have "turned away from the company's premium price brands." The market shares of our big brands in Ore-Ida, StarKist, 9-Lives, and Heinz ketchup have increased. Overseas, Plasmon and Heinz baby food in the U. K., Canada, Australia, and New Zea- land have also grown. Heinz has 18 pow- er brands around the world, each with over $100 million in sales. O'Reilly clear- ly did not "concede" that our brand- oriented strategy isn't working when it clearly is.  In his interview, O'Reilly twice con- firmed that he had been rocked by an earthquake in Bombay, but you reported him in Calcutta, 1,000 miles away.  You describe food service as "deadly dull." What is "deadly dull" about 5% growth per year and, when on any given day, half the adult population is dining on food-service products.  Regarding baby food, you omit point- ing out that Sandoz' acquisition of Ger- ber for 30 times earnings actually vali- dates our previously announced baby food growth strategy. You write, "Heinz will likely feel the heat first in Sandoz' ~ JUA- Z v Id,~It made in China: Exact copies of products made by Procter & Gamble Inc., Colgate- Palmolive Corp., Reebok and Nike are common throughout southern China. "They'll actually hire workers away from the real factories," says an executive. Most companies in China like to keep low profiles in trade disputes, so few will comment publicly about their troubles. But as with most issues in China, the companies say privately that the intellec- tual property-rights infringements are compounded by China's size. Even if they succeed in wiping out a counterfeiter in one city, fakes can pop up somewhere else overnight. home territory-countries such as Swit- zerland and France." Suffice to say, Heinz does not compete in these two countries.  You report that the Kathleen Sulli- van winter Tv ad campaign "bombed." Lower Weight Watchers attendance last winter was due primarily to the worst winter in years and the California earth- quake. Attendance has, in fact, shown a positive response to the Kathleen Sulli- van campaign post-Easter.  Fourteen Research Corp. is not one of our "largest institutional shareholders." Although we would welcome it as a shareholder, current listings of our insti- tutional shareholders don't include it. Ted Smyth Vice-President, Corporate Affairs H. J. Heinz Co. Pittsburgh Editor's note: The Heinz story contained a number of errors. The story was wrong regarding Johnson's board service, the site of the earthquake, and Heinz's pres- ence in Switzerland and France. Other errors were an assertion that the invest- ment by 0'Reilly's Fitzwilton PLC in l1,`a- terford Wedgwood is its largest (It is No. 2/ and the statement that O'Reilly is a director of General Electric Co. lHe is a director of an unrelated U- K. company~ General Electric Co. Pz,cl. The mention of Fourteen Research Corp., which fol- tou•ed a sentence quoting an unidenti- fied institutional investor, wasn't intend- ed to assert that Fourteen Research is an investor.

) PHILIP MORRIS CONIPAh'IES INC. -44- SEER RTf 06/17 1309 Femsa <FEM,MX>says close to beer alliance--analyst NEW YORK, June 17 (Reuter) - Fomento Economico Mexicano SA de CV (Femsa) told a Bear Stearns Mexico conference it was "very close" to reaching a strategic alliance with a major beer company, said Bear Stearns analyst Carlos Laboy, Femsa chief financial officer Alfredo Livas Cantu did not say who it was in talks with and did not give any more details about the structure of a possible alliance, Laboy said, However Laboy said he believes Femsa may form an alliance with Philip Morris Cos Inc's <MO.N> Miller Brewina unit. Philip Morris has an ei~ht percent stake in Femsa, Philip Morris was not immediately available for comment. An alliance also might involve Guinness Plc <GUIN.L>, which distributes Femsa's beer in the United States and Europe, he said, Laboy said he believes an alliance is likely to be announced by the end of the summer. He said Femsa may be interested tapping Miller's expertise in market segmentation, a strategy that Femsa is pursuing in its Mexican business. "Femsa defined a very clear strategy of creating this higher differentiation and segmentation and Miller is very, very good at executing that strategy in the United States," Laboy said. Laboy said such a strategic alliance would unleash shareholder value by isolating a more specific value for the company's beer operations. "Such an announcement would likely be a strong price trigger for the stock," Laboy said. Femsa trades in Mexico and has American Depositary Receipts that are available only to qualified institutional buyers, --Patricia Vowinkel 212-912-7181 REUTER RTf 06/20 0650 Guinness<GUIN.L>declines comment on Femsa "rumour" LONDON, June 20 (Reuter) - U.K.-based international drinks giant Guinness Plc declined to comment on talk from the U.S that the company might form an alliance with Fomento Economico Mexicano SA de CV (Femsa). "Guinness never comments on rumours," a Guinness spokesman said. Femsa has confirmed in Mexico City that it is close to forming a strategic alliance with a major beer company without disclosing any names. A U.S. analyst said on Friday after a New York Bear Stearns Mexico conference that an alliance might involve Guinness, which already distributes Femsa's beer in the U.S, and Europe. He also said Femsa may form an alliance with Philip Morris Cos Inc's <MO N> Miller Brewing unit Philip Morris has an eight percent stake in Femsa, Kirstin Ridley, London newsroom +44 71 324 7987 REUTER JLfA z u iililr

-45- ADVERTISING AGE, JUNE 20, 1994 If UPf 06/19 0559 China's beer market next growth area BEIJING, June 19 (UPI) -- As China's wealthy turn to imported alcohol, foreign breweries are scrambling for a share of China's beer market and predict it will be the world's largest within a few years, the official media said Sunday. "Brands like Beck's, Carlsberg, Pabst Blue Ribbon and Fosters now fill grocery shelves and restaurant counters," the Business Weekly said. China's 860 breweries produce an annual 12 million tons of beer, second only to the United States, but consumption per capita is only 12 bottles a year, compared with 168 in the U.S. "We believe China will become the world's largest market in the next few years," a spokesman for Australia-based Fosters told the newspaper, Fosters has already invested $900 million in two Chinese joint ventures, and will start a third brewery in Beijing this year. Beer consumption has risen at 20 percent a year for a decade as China's economic boom creates wealthier urban citizens with greater spending power. U.S-based Anheuser-Busch, the world's biggest brewer, bought a 5 percent stake in Tsingdao -- China's largest beer producer -- in 1993. "We expect to strengthen our presence in China," A-B's Vice President John Koykka said. In 1984, annual beer consumption was less than one bottle per head. But now, even in the poorer countryside, where farmers traditionally drank only at festivals, bottled beer, at 0,9 yuan (d0.1) a time, is for sale in practically every village shop. THE WALL STREET JOURNAL MONDAY, JUNE 20, 1994 Anheuser•Busch Cos. Brewer Seeks Large Stake In Zhongde Brewery in China Anheuser-Busch Cos. said ii signed a letter of intent to enter into a joint venture in which it will hold an 800,Ir stake in the Zhongde Brewery, a Chinese-German joint venture in China. Terms weren't disclosed and the St. Louis-based brewer said final details of the transaction are still being negotiated. But the company said it expects to either buy an 80-c interest in the existing joint ven- ture company or establish a new joint venture to acquire the Zhondge Brewery's assets. The purchase would give Anheuser its second stake in the fast-growing Chinese beer market and would be its first majority stake in an offshore brewery. Last year, Anheuser purchased a 517c stake in Tsing- tao Brewery Co. in China. The transaction is expected to be com- pleted during the fourth quarter. (Other coverage available upon raquest.) J U 4 201994 A-B rejiggers after Sharbaugh exit ST. LOUIS-Anheuser-Busch set in motion a series of promo- tions and title changes that fol- lowed the departure of Tom Sharbaugh as VP-brand man- agement and his replacement by August Busch IV (AA, Feb. 14). Bob Lachky, 40, succeeds Mr. Busch with the title of group VP-Budweiser brands. Mr. Lachky, a former DDB Needham Worldwide executive, expands he duties to the entire Budweiser line. He previously was director of Budweiser brand marketing since leaving the Bud Light brand in Janu- ary. Succeeding Mr. Lachky is Michael J. Brooks, 35, from group director-sports market- ing. Robin Braig, 37, succeeds Mr. Brooks, from group manag- er-motorsports marketing. Moving into new posts are William E. Braun, 38, to group VP-Busch brands from director of Busch marketing, and Wil- liam McNulty, 39, to VP-Miche- lob brands from group director of the Michelob family. 7

USA TODAY • MONDAY, JUNE 20, 1994 Zippy Zima zooms Zima - a clear malt beverage - is poised to overtake Bartles & Jaymes and Seagram's wine coolers, the lead- ers among low-alcohol drinks. More clear malts are on the way, such as Stroh's Clash and E&J Gallo Winery's Kypler's. Catching up ww""W"am - Bartles & Seagram's Jaymes Wine Coolers Source: Impact COVER STORY sodwamomms Zima By Marty Baumann, USA TGC 4A Y Clear malts chase beers, ,wine co&%*,;,.1err.T,-J, Zima aims for USA TODAY Neuborne young adults, Taste testers have de- h its th e s ot scribed it as everything from p a sparkling vermouth to a with mystery beer with four melted ice cubes. Trendy housewares retail- er Crate & Barrel u~,=. ' rn summer barware displays. Its ad campaign, marked by a comedian who sprinkles his pitch With too many Z's, has generated curiosity and annoyance. At comedy clubs, it has supplanted Barney the dinosaur as a top joke target. It's Zima, the hot-selling beverage of the summer, and possibly the great clear hope of a struggling beer industry. Zima is a clear malt beverage, and most tasters put it some- where between a beer and what's known as a wine cooler. If you're still confused, that's fine. In fact, that's great. Zima's creator, Coors Brewing, actually wants you to be as L.LVtist{3~4z

Ox" confused as possibie, hoping you'll order Zima just out of frustration or curiosity to know what the heck it Ls. "We wanted there to be an air of mystery. Curiosity goes a long way;" says Julie Demiow, brand manager • for Zima. Brandweek magazine calls Zima part of the "weird beer-like bever- age" trend. Zima and a crowd of up- and-coming competitors from beer and wine companies are making a hard pitch for young adults - a group In its 'prime beer-drinking years that still hasn't latched onto a brand. Targeting men and women ages 21 to 34, Zima et al. are trying to spark the flat beer and wine cooler market.' Curiosity drove Tom Murphy of Monroe, La., to try Zima - even be- fore he knew it was an alcoholic bev . erage.'"The ads looked pretty hip. I `noticed they never used the word 'beer' In the ads, so I was curious„ • What was it? What did it taste like?" he says. Now it's his regular drink, displacing Bud Dry. Zima, which graduated from test markets to national distribution this spring, is off to a fast start Last year in just 30% of the country, Zima sold 4 million cases. This year, Zima is ex- pected to sell more than 13 million cases. That would put it on par with Seagram's Wine Cooler, the second best-selling low-alcohol drink: Zima has an alcohol content of 3.7% - about the same as a light beer. Many regular beers reach 5%. Production of the entire low-alcohol drink category rose 8% last year, to 42 million cases, but it's expected to leap to double digits this year. "This is a product that has taken off like gangbusters," industry ana- lyst Robert S. Weinberg says, "Beer hasn't given the consumer anything new and exciting in a long time.... This is a timely new product." And a host of competitors want to capitalize, too. Coming as early as this summer to the nation's coolers: > Clash, a clear malt beverage from Stroh's, entering test markets In Colorado, New Mexico and Arizona this summer; Stroh's of!lcials will test three ad slogans: "Skirmish against the fray," "In transparency lies simplicity" and "Resist the usu- al." If young adults rush to buy large quantities of Clash, watch for the -47- dUM 2 0 1994 THE Z-MAN: His redurKiant pitch inspired curiosity and lifted Zma quiddy. But he was 'starting to get zily' and new ads are on the air, company says., drink to be sold nationwide In 1995. other to gain market share," Wein- "Consumers have been telling us the _ berg says. "You had to do that tn' an mainstream regular brands just industry that's been moving sideways. aren't cutting it," says Victor If this new product stays hot, it could Daenowagis, new products director.' . be an answer to a lot of, problems,' ' it Kypler's, from E&J Gallo Win- bringing new customers instead of ery. From the company that brought stealing each other's old ones." consumers Bartles & Jaymes wine ' To the casual trend watcher, ZI- coolers and the memorable "Thank '~ ma's clear look appears way behind you for your support" ad campaign, the curve. Miller Clear died. Crystal comes a challenge to beermakerS. : Pepsi daled. Saturday Night Lfve. Kypler's is being tested In New York, : parodied the whole clear idea with Michigan. Arkansas and Arizona. Ad its faux ad_ for Crystal, Gravy -.`T industry gos~ip says a campaign with don't see any lumps! -', the slogan "Think you've seen every-, ~ The key, say Zima farL s, is that thei: thing?"., is In the works. Industry drink doesn't strike them as a gim- watchers' say. Gallo has to, move.' mick. "It's a new product that's actu- quickly to protect, its leadership in : ally new. It's not just a twist on some- the., low-alcohol refresher market. thing," Murphy says. ' . Bartles & Jaymes is still No. 1. It sold. It took three years of research to. 15 million cases last year. " come up with something totally new, 0- Miller, despite its disastrous ex- says Demlow of Coors. Armed witlt perience with Miller Clear beer, con- 1991 consumer research indicating flrms it has a clear malt beverage in drinkers wanted an alternative to development. Miller introduced beer and wine coolers, a 20-member Miller Clear In early 1993 and spent team in Golden, Colo., went to work. ;12 million promoting and testing the The result a clear, ma]t-based, ' brand. It was a flop within months, lightly carbonated and brewed drink. Mlller, is waiting to see just how Coors has trademarked as Clear- much staying power Zima has. ' Malt. It doesn't smell like beer, foam Beer makers are excited about like beer or look like beer. clear malt. Brew production was flat ~ Zima's ribbed bottle was born last year, after failing 2.5% to 188 when one team member went to Eu-' million barrels, or $49 billion, in. rope on vacation. He spied a ribbed •1992: Experiments such as dry beer glass In a cafe, swiped it and hustled and flavored beers have had limited It back to the lab. A professional success. Wine cooler popularity has naming t3rm In California came up been sliding since 1990. , I with "Zima" (from a Russian word "Historlcally, brewers have pros- for winter). And Foote, Cone & Beld- pered by kicking the hell out of each ing last year created a marketing K*rti)

-48- biitz of TV, radio and print ads in that memorable-if-annoying Z-language: "What iz it7 It's zophisticated ... not so zweet; and it's clear so you can zee through it and check out what's going on in the rast of the room even while,you're drinking it." '' Zima is backed by an estimated $50 million ad campaign - as much as Coors spent on its lead brand Coors L1ght last year. Beverage analyst Tom Pirko, of Bevmark, says that marketing moa- ey is making Zima a hit. Once every- one who is curious has tried it a few times, he says, the weird beerlike beverage category will go the way of the wine coolern a hot but brief fad drink du jour. "What I see now is still the curiosity phase." Coors itself is not overly confldenL The company already is tinkering. Officials are considering a price cut - a six-pack costs $5 to $8 - to keep the interest of value-conscious con- sumers They're also planning 12~. packs and 22-ounce bottles In the hope of attracting more men. Cur- rentiy, 55% of Zima Is drunk by women. And new ads are on the way - low on the Z-language. Watch for new "lifestyle" ads showing young. hip rooftop barbecuers enjoying Zima. "The Z-spokesperson was great to start out with. He really cut through the clutter," Demlow says. "But he was starting t.o get rllly." , DENVER-ROCKY MOUNTAIN NEWS JUN 18 1994 Nanny time agam In oda kga2 news, the Supreme Court also agreed this .reek to decide whether the go.ernmmt has the right to prev Lnt from mnc.~h alcohol ~t~y cautaia. Z~e right ansrver: It ah Thu noasmae took bold back in 1935, brewers fram wagia~ '~ to ~~s.,t Coloradsa~:boutid be pk~~_ ~ the many Co., Wlichhas even the Selwer wholesome brews, along Bullet girl. While the ]ustice Depart- nseat,vbkk iastaffedbyavrsyttiff crew, rvaats the hw upbeki, a federal appcay co<ut has already foimd it to be Aocaa%Ung to a.vire stary, the "court aafd the gove:nubeat ogered `mera sgec- ulatian and caajedare' to support fts arg=eat that hrepess might st*rt nir ing. the alaohoI cootent af their beer if p~ le could compare it with other b~~~~ads." The larger qv~, of «n~rae, is: What if they did? What basiaeaa is that of The a government's? he that question is mWlied by goveramect lawyers, who are quoted as sayinY the sup af such infor- mation reflects Cm~ fears over "a patticular type of beer' drfaker people who, in the ab.mae of a proh>tioQ on the diactosure of alcohol corrteat, would choose a beer based on its alcohol strength.an'That an' work both.vays, of coau-ee: A growing ntuabex of driaYera prefer las alcohol. Let's hope the court rules cor- rectly, and let'a not forget that Congress oantaias a higher proportion of rummies than Blachbeard'a crew. Dave Shfflett AaWstant editoral page editor J UN 2 0 1994