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DR. H.. WAKEHAM R&D PRESENTATION TO THE BOARD OF DIRECTORS (November 26, 1969) Gentlemen of the Board and Guests: ' Once again it is my pleasure to appear before you and to make this traditional annual presentation of Philip Morris Research Center activities. Before talking about that particular aspect of the program that I have selected for this year's presentation, let me make a few remarks aboutthe Research " Center in general. We have now been in the present Research Center facility ten years. We have greatly increased the depth of our scientific knowledge.tn the cigaret product so that we are able to cope with the demands for new and improved products and the needs to defend ourselves from attacks in the areas of smoking and health. We have extended our skills into areas pertinent to our extended product lines. We have greatly improved our communication with and services. to other operating groups and have overcome many of the problems encountered in the early days of the Research Department. We are highly and effectively instrumented ~vith the most modern research tools, and the quali~ty of our Staff is second to none in the business ..... - You have on the table before you copies of a new brochure on Research at .... Philip Mortis. In it are details about our people and the facthty, but here are some figures I think you will find of interest. Our present staff numbers about 330 persons. We occupy 125,000 feet of floor space. Our operating budget for this year was $6 million, of which about 25 percent goes into " research, 50 percent into product development, and 25 percent into technical services to other departments. - " ~:. -.-.~ . ;::'@:: . So that you will be reminded that we are still very active tn developing new . ::,.~ cigarets, I will now show you one product prototype which is perfe.ctly practical in terms of present technology but still fairly far out in terms of the present

• .; " ?'.~:':..... ' , . . . . . . .... ' '.:-:, "."::.!~,':'i) different elements function in different manners. The front plug [sa' ,.-,,::.: ' treated papers c[fic for phenol and hydrogen cyanide removal The soace ;.. "~ :;:],'~" contains three solids identified by color. ~e black one is a general . .:;,~.-~- actwated charcoal fo~ gas phase removal; the blue one m specffm for hydrogen " .... : ~/'~:;cyanide; and the white one for certain watersoluble gases. " ' ~ ~ .... " .. ":"~-~;~:'~ -. . . • " ' • . -,~ C::'.i~'~.'* . .~ ~:.,,': : .... . - .. . . .... :,:,.,...:,,-,,,~..These. solids can be mixed, inserted into a plug-space-plug filter system, and itS specific function tngas phase com. ponent absorpnon. " ; ' -~:,,~;-~,~,mde~ndent of the others. A year ago this kind of a product was only a gleam''~ - ~. (% in the chemist s eye. Today it is a laboratory reality. We have several other :' ~~cigaret protot~es in the works and are now scheduled to present the Iate"st ~~:~:'. . ..:. :~:ones for 1970 consideration to our Marketing Department on January 15. .- : .:,."~:~/.. .. , -_ . ':';~: ~is year I have chosen to talk to you about some of our work tn smoker " .,..-psychology. This work only represents about three percent of our total effort ~.but it is an important program, so I bring tt to your attentio~ t~ay. , " Ever s~nce research began at Philip Morris, our emphasis has been on the ~.etgaret--its chemistry, physics, biological effects, engineering, raw material • %i-requirements and production problems. We have been largely concerned wit~ -::'~-the technology of the cigaret and cigaret making. In all this we have until : . . ..,' ~,..~,..recently. almost totally ignored the smoker and the why of smoking. " : ' " :":,~Why do 70 million Americans and countless millions outside of the United States ~moke despite parental admonition, doctors' warnings, governmental t~es, .--.- and health agency propaganda? -,~:::, ....~ ~ : ~ ' • ", k ." ~ '" ..'~ What benefits do smokers wittingly or unwittingly find in smoking that outweig~ the real or imaginary risks that the same smokers feel? W, hy do some: people not smoke, others smoke relatively few cigarets, ~till others many, some merely puff superficially, while others inhale: dee,ply7

-. " " - " ." .. } ( Why do some people start very young, while others wait until middle life ~ . ~ begin smoking? " In answer to-these and similar questions you will find many opinions, -:: ):::~:7h~otheses, and very few facts. Some will throw Up their hands and say ....... :~.i%.:~-:...: ~e problem ts hopelessly complex. We do not delude ourselves into thtnki .< : we are dealing here with a simple question searching for a simple a~wer. -,:. ::.~;~ S~e other hand we do believe that the subject ts tm~rtant to our business • . ~ .~ y...~.J.ef~C.~' . ..... : . , . ,. ::. ~.~;:-}~:{~2.:;~.. that it is amenable to systematic investigation and research which will lead '-*' ,<' e.: '~:~~:-;'~ .... ," • ~ ...... . . " r "~ " '. -~ " . ..... ..,'- -: :" "~: ~~:~:::'~ some useful ~enerahzattons.-.- - " " • ... • :.~ " ;~;..:~::.-:.~:~.;..R is for this reason tha~ I have chosen this year to talk abou~ the ps:ychology • ~, "":: "v.;:';~ • " - ' • , ~J:i,~:.,:i:..~ of.smoking and the part which psychologists play in our research and developmen ' '::i--;:program. " . . . "..::::': : .~,.i~.. -- ..... . .~ . - " ':~.::': :: • - ~ " 4,:: :', "-..;. • • . . - . . Our alms in this direction are twofold: ~"- .".:.-. - Slide 2 .... I. To determine early in research and development the consumer acceptability of a product idea before we expend hundreds of thousands of dollars developinl " ~-.i.. 2. To learn more about the psychology of smoking, hopefully to discover ways " °:::"~-to exploit the benefits of smoking to the advantage and profitability of our .- - major company business. " Focus of our first aim is the work of a consumer research facility having the ."front" name of Product Opinion Laboratory. This organization consists of about fourteen people who have as their chief task the Collecting of opinions and judgements about our developing products. The judgements are made by differer types of people, depending on the stage of product development and the degree of • expertise required. Thus, preliminary taste and flavor profiles are supplied our chemists and development engineers by three small descriptive panels of highly trained experts. Products slightly further along the development trail are evaluated by larger groups of less expert Research Center employees, supplemented by a group of about eighty Richmond housewives who smoke

. ~ '. ""; "i ..., :...' ":~:- i " . - " " '~ " - :"cigarets tn the Product Opinion Laboratory office near a shopping center. " ::::!'c.:-- " - " - '2- -'.~'. ~ " ....Further screening is available from about 1500 members of civic clubs and " community organizations who are called on when we want a quick test from a more representative group of non-experts. And finally, products approaching ' : ':~".-::"i-.~the test marketstage of development are evaluated by a national Cross-section • -~5.:.::~;.-.: =(.:i!" of American consumers, chosen from some 35,000 people who represent '" "::~;'~ . :.. ..... -~.. ~. ~- 15,000 families. ... .. ~ ""_:. • • - ~. : " .: .4~:,:'~4,~~ ~.:::.~?:.~., So, funneled throuo_ our group of POL peoe,e, there ts a connnuous flow of L,;,Z:~~: ~Z~'-i;':.~'~':.-" :,. ."~... ;, ~-" ~ .~ - • ........ ~.-,.,.'~," -. ~::.:.-.:.,.:,~.:...cons~er responses to grade the Research Center and Markenn~ ~oDle m :)g2'; :: ~.._~; ?.:~.:.One observation from this product testing work has been co~[rmed to us over . . . ~ .;. ~nd over again, and that is that the expert smoker panelist is much more acute ..... ~_~ :,:.. ..in detecting differences in cigaret smoke taste than ~he consuming public. " For example, in studies aimed at determining the desirable amount of menthol in a cigaret tt was established tha~ over half the menthol smokers cannot dtstingui cigarets with 5~ more or 5~ less menthol thanthat tn Marlboro menthol. ~e presence or absence of menthol can be detected at very low levels, lower than But differences tn levels at higher amount . ... :one-tenth that in most menthol brands. - are very hard to distinguish. - ,?~'.':.;:::::.~ "_.;'.'.! ::-... . " ~.:.i,::.~ . .....Incidentally, another study on this subject demonstrated rather dramatically Slide 3 that the menthol coolness ascribable to our competitor's Kool cigaret is attributable to its name and brand image rather than to the taste of the smoke, per se. When the Kool cigaret was compared to our Marlboro Menthol with Slide 4 the brand identity concealed, could not tell the difference:. When these same smokers smoked ~hese same cigarets in their regular packages, most of the menthol smokers chose the Kool cigaret to be the "cooler" smoking and the Marlboro to be less menthol tasting and more tobacco tasting. menthol smokers, including regul,ar Kool smokers,

' ", In another example, it is well known to the experts that smoke from a regular :- .... " ;leaf blend tastes different from the smoke of a 100or/o, reconstituted tobacco . ~... - product (BL) containing a large percentage of stem material. The expert taste -" " :.: panelist can .also detect small changes of the order of 5~ tn BL coment of the " ...... -~-,,.~....: blend. This t~ste accu[ty ts not present tn the consuming public .~%;;:~; ~: :"" ~no~her one of our s~ud~es. In ~his ~est we used the vending machine procedurg, • ' ~~'-.?. in which the panelists use issued slugs to "buy" one of several test c~garets.. • ~ ':;:,?:~2~..from a modified vending machine placed in a factory or office lunch room. -:.y~?:?,.;~.--;:;!~;,~-.The test ctgarets are all tn plain white packages identified by a simple geometrt~ :~:.:.~,~~.~.:~:~. and then repeat purchases of the one they prefer. By following the sales '" ...... ~..,:_~:~...: .:::~;.frequencies we d~sco~er ~he consumer accep~abtlities of the tes~ products. ..~ " ~-:.,' " In this study we started the panel on two identical standard cigarets, and then .Slide gradually changed one stepw~se ~o a high (75) level of BL. The results indicate. 5 - that we could put ~nto the blend well over g~ of BL without s~gn~ficantly altering the taste and subjective properties of the smoke. These findings have tmpltcatto in cigaret blends that can be ~ranslated [mo cos~ considerations. Slide 6 .. In a third study, a thousand smokers were asked to compare cigarets made of ,.. " aged tobacco with cigarets made of unaged tobaccos. They had no preference, suggesting that the aging process does not significantly alter the taste of the cigaret from the consumer's point of view. Thins observation means we may have more latitude in maintaining a tobacco inventory than was heretofore appreciated. These examples illustrate how by studying consumer responses we can arrive at valuable information about our products and our business. But we have only scratched the surface. I now want to indicate how much more informat~ion we have about the smoker by looking at some information about the smoking population. ' ..

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• ::l; "-.-. determined by the number ~f cigarets"people say they smoke is a very unreiia " .,....~. :/. : ~is great variability among smokers results trom the fact ~ha~ a smoker : :~:~.~::: : ..?/:.:~ tends to seek his own level of intake. Even while smoking a single Slide . he adjusts the vol~e of his p~f as he goes down the rod,com~nsa~tng" for 10 ....: ...... "~': ~ ", , the change in the density of the available smoke. • , : "-: ..... : ~.: :~F~,"~.;L:. :-,:,:~¢~This adjus~ent [s also observable as the available TPM of the total cigaret ::~.:~:~:~)..~:.~'~))~:~.<~::(2:.~:weeks the cigaret delivered 20 mg of TPM. The next three weeks the c~gare~. ...~. :... .c dehvered 25 m o£ TPM. The changeover was unannounced. Immediately : :.~:,.. .. .... . ::.:.~:-..(~ter ~he changeover, a number of participants complained that the ctgarets .-,.-: ~., ~ were too strong and defected foregoing the $~0 gift certificate promtsed [o -:'. '- ~ose who completed ~he study. We found that adaptation occurred the ftrst _ ~ day and remained stable for the remaining three weeks. Those who were changed ~o stronger ctgarets smoked less of each one and those who were : ".:.J~hanged to weaker cigarets smoked more of each one and/or more c[garets. ~e smoker's determination of his own intake level ts also seen in some SHde . ' figures provided by our associate, Dr. M~ Hause~ann, of FTR. His data 12 • ~: :. ":strongly suggest that brand choice is a functton of desired intake level. ., The above examples illustrate the kind of work we do ~n studying the smoker's -taste preferences a~d his smoking behavior. The examples were selected to emphasize three important conc lus ions: I. Smokers are remarkably [nsensiti.ve to the taste nuances in smoke. 2. Differences in smoke intake among smokers are much gi-eater than is suggested by tar numbers and estimates of how many cigarets are smoked each day, and 3. A smoker's intake level is determined by the smoker hims41f, not by the manufacturer of the cigarets.

: _. ~.~,...~.-: ~ Recently our psychology program has added a new emphasis. We are now - ~: :-.~;~ " beginning to concentrate on the motivation of the smoker. We are asking th~~-~:~ ~ ":'?~~;:~:~:".:"~ I m~t admit ~o some embarrassment when I say [ don'~ know the answer to ~". :"~?:~~.~'~."~)~ ~" this question It is even more embarrassing to the psychologists on my " .':~)~":,)~.."~ " But I can tell you this -- despite the voluminous research and pseudo-sophi~tLcat~ " ~'~.'~.).~,:.~: theories, no one seems to be able to give an explanation backed up by substantia~ " 13 ;:~~: FLrs~, we have to break ~he question into [ts ~wo par~s: 1) Why does one begin . ~... There ~s ~eneral a~ree~ent on the answer ~o the fLrs~ part. ~e 16 ~o 20-year ........:old begins smokLn~ for psychosoc[al reasons. The act of smokLn~ [s s~bol[c; ..- it sign[fies adul~ho~, he smokes ~o enhance h[s image [n ~he eyes of his peers. .... But the psychosocia] motive is no~ enough to expla[n con~Lnued smoking. Some other mo~[ve force takes over ~o make smok[ng rewarding Ln its own Long ~ter adolescen~ preoccupation w[th sel~-[mage has subs[ded, .the cigare~ W[II even preemp~ food [n ~[mes of scarcity on the smoker's pr[ority list. -Witness the experiences many people had at end of World War II when one could buy wine, women, and song with a cigaret. The question is "Why?" One of the obvious ways to approach the problem is to ask the smoker himself why he smokes? When you do this (and Leo Burnett did this about ten years ago for P.M. ) the smoker will either parrot an advertising slogan or give you one of these responses: 1. it relaxes me. 2. it stimulates me. One way to interpret this is to conclude that different people are affected in different ways by the: inhalation of smoke. We are inclined, however, to ascribe this apparent duality of effect to an inability on the part of the smoker to describe smoke-produced sensations.

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