Tobacco Documents Online

o L !1. . .~ ~ C . -ef Pl_Af;l;?~;G ASSli;,F)IO;;S ,1"~i) Si FOR Tlii. i'ERIGJ 1D77-19E6+ rOR ft. J. REYNOLDS TO.it+CCO COMIPANY 1. THE GE;.'ERAL BUSINESS CLI1,'J{TE . . . . . . . . . . . . . . . II. THE TOBACCO IINi)'JSTRY ANI) R. J. REYNOLDS TOBACCO COi•1PANY 111. THE RESEARCH DEPhRT,"l`NT A. GtNERAL . . . . . . . . . . . . . . . . . . . . . . . B. • C. D. E. F. Sh;OKIWG AND NEALTN . . . . ... . . . . . . . . . . . . REGULATION, TAXATION, E•TC . . . . . . . . . . . . . . . RAW MAM~If1LS AND PROCESSES . . . . . . . . . . . . . PRODUCTS . . . . . . . . . . . . . . . . . . . . t4ISCELLANEOUS . . . . . . . . . . ... . . . . . . . . . Research Der.artment March 15 , 197u . 1 3 3 . 3 . J . 9 . 10 . 14 . 18

I. 71iC GLiiCRAL [-,US1i+ESS CLI,"V%Tt 1. No sudClen chanye will occur in the "s)'siU.ciTi" or business en\'irCn,-,a:nt ln willCh 14(; UiJe'rdZE', I.f'., iiiel'c 'a11 i be no cat3Sti"oN1lic NC:si ~,~r-ce, disease, world war, revolu':;:,n, li.ajor depression, natural dis:ster, or the l i{:e. Th-are is a pcss ; ~i l i ty of rene~•~ed warfare i n the ISid-Cast probably again ucc;;,-,;anied by a petroleum crisis. 2. As the present "under 35" age group becomes the dominant power group in our society, the new personal and political values of that group will exert a more predictable influence for change upon most aspects of 5overnm::nt, society, business, norality and foreign policy. The changes which occur are not expected to be favorable to business. ffoa;ever, th i s 1 arge consumer group wi i l have needs to be satisfied in te rn:s of tobacco products. This offers us a large market if we are sufficiently astute to identify those needs and design and sell products to meet them. 3. World leaders of morality, such as the Pope, will exert great influence to modify the personal mores, and consequently the civil and political values, of the present "under thirty" age group. There will be a strong swing to::ard wholesomeness, integrity and decency which will affect the consumer outlook and product expecta- tions of this group. Price, quality and durability will become more important than fad, fla-mboyant fashion or sex appeal. ----~' . 4. :'he "consumerixm" movenent will remain strong, and the ability of consumers to objectively judge the quality and utility of products alay increase. Product labeling will becoma more definitive in terms of coMposition, date, hazards, and the like. 5. Present socio-legal-gov.-rnmental trends will continue. Concern for "social justice", environment, energy, population control, and product safety will reimain high. Governmental regulation of almost all aspects of our society will increase. 6. The energy shortage and to a lesser extent other material shortages over the next decade will cause a change in world economy and politics, a change in national priorities and life style, and increased cost and difficulty in doing business. Concern for environment -iil remain high aiiong certain groups; and although energy needs will finally outweigh environment considerations, the environmental groups wrill continue to fight and delay. These influences will continue beyond the pro.iection period and will intensify as energy needs and environ- ment consideration exert a greater effect on the average person. 7. The U. S. standard of living will not increase at the rate of the last decade. The amount of discretionary income will decrease. The main squeeze will be on the imiddle economic class. ~ C ,

2 TNE: GE:IiCRAL E:USI'.;SS CLItlATE: (cont'd) II. The health consciousness and technical understanding of the population, as applied to products, will increase. , ^rI 9. E'rice-;iage-profit controls will remain a possibility for at least several more years. 10. Coping with the business cycle will remain difficult. The profit squeeze will rei,iain a major problem unless periodic "pzss-through" price increases are competitively feasible and allowable. 11. Due in large part to political tampering with an economy already under real stress, it was long thought that the economy would cycie between high unemployment and high inflation at about 2 to 3-year intervals. No;~Lver, it is apparent from recent experience that this idea should be abandoned. For several years unemployment and inflation have been cycling together. As a 10-year average, inflation will probably run at about 8% and unemploymant at about 8%; i.e., politicians will continue, in election years, to place more emphasis upon full employment than upon price stability. Also, for complex reasons, the government is committed to a continued policy of inflation. 12. A key factor in the control of the economy's vigor is the decreasing birth rate. Even at current levels, every facet of the juvenile market may expect to be depressed. And only a few years beyond the projection period looms a markedly reduced generation of young adults who will need consumer goods. Tnis may provide a built-in cooling of the economy, leading toward less inflation and specialized areas of unemployment. 13. More and more evidence of financial mishandling by cities, states and national c;overnvients will leak through to the public in the immediate future. The roat causes, such as overextending in ;aelfGrn programs, abuse of expenditures in such programs, corruption, waste, unwise and ex;e.nsive experimentation with ec::cational programs, and unnecessary services will become more evident to the public and will elicit strong response and possibly backlash. Considerable instabilit, in municipal, state and federal spending policies and programs will result, with attendant uncertainties in taxation outlook.

3 . THE TOi>'1.CCO I(J~)USTf:Y AI1i) R. J. III. THE FrSEARCtt DEPART:SC(dT REl'N0! DS TOE,',i,CO CU'IN :(IY The format for the discussi:,n of the tti:o sections (a) The Tobacco Industry and R. J, ynolds Tobacco Company and (b) The Research Department has been presented as two separate cticns in past issues of Planning Assumptions and Forecasts. This format has been changed .r the present memorandum. The planning assur,iptions and forecast for The Tobacco Industry - RJR for 1977-1986+ are :ralleled, where applicable, on the san:e page with connents on the possible response of the •search Departr:ert to the assumptions affecting the Industry and RJR. While this parallel : r.rat l: 4us ,.o some rereti ti on i n the text, hope f ul l~v i t wi l l provi de a better understandi ng _rLicularly t:, perscn,>>1 in other depart;.ents of the Researcn Department's involvement in .e situations forecast for tiie 1977-193;i+ period. A. General The profit squeeze, the incr_asing cost 1. As the technical ccmplexity of the of domestic and Oriental leaf tobacco, tobacco uusiness and the sophisticatior.` increased t:.-..xation, 4nd the smoking its products increase, there will be health controversy will rei.iain the increased needs and opportunities for major problems of the Ir,dustry. research, particularly in the area of `basic research. Results and procedur_s,; developed in basic research from past years v;ill be utilized at an increasea ~ level. Projects aimed at effecting operating pconomics will continue to receive major short- and long-ter+n emphasis. The need for research services, e.g., new analytical methods development, analyses, literature, ecology, sr:okinc-. health related, and the like, will in- crease as the size, product lines, an::; scientific complexity of the tobacco business increase. ' i i Closer working relationships wi th hianufacturing,,hiarketing, Tobacco Development, Lega7, and other Coripanv I Departments w-111 provi de i: :. ro ved i r,; ertinent to research pro rams p g . & . ~ ;

A THE TOf ACCO INDUSTRY Ai;p R. J. RCYt:JLGS TOBACCO C0'•~PP%NY I I I. T HE R:. SEr;-"C,i C"':,;: T.",:.U A. General RJR-T has a great opportunity to capitalize on the growing foreign market, particularly the riarket in "emerging nations". In- creasing trade barriers and international monetary difficulties, increased regula- tion and taxation of tobacco products in foreign countries, and increased require- :-aents that much of the tobacco used be "home grown" will add to the difficulty in penetrating these markets. Over the long run the influence and politi- cal power of the Industry rri l 1 decrease. Total cigarette consumption in the U.S.A. as well as per capita cigarette consumotion will be affected principally by the following demand factors (listed n order of estimated decreasing importance): a. b, C, d. e, Total U. S. population 118 and over) Age distribution within this population Taxation and other cigarette price factors The impact of the health controversy The per capita disposable inco-me For the projection period, per capita consumption will stay level, at best, and may tend to decrease as the percentage of new smokers decreases. Tt can be assum?d that the other factors will have their "logical" impacts., Thus, the long-range uni t sal es rri l 1 i ncrcase no more than 1 to 2% per year.` For RJR-T, the unit sales increase will exceed that of the Industry at least in the first few years of the projection peri3d. The public concern over energy, inflation, political integrity, unemployroent, etc. will create a period of national psychological stress, during rlhich;smoking-health concerns ' may be overshadowed. The declining birtlirate, if continued, indi-s cates decreased, ci6arette;;sales in 15 to 20 ` years, due to tne,reduced consumption by the then larrle over,-50,-age grnup. 2. Research Derartnent will be involved -,.;i RJR-I on request (probably through TFl);. r'r~•.~9 ~iJ~s~Xli~lvti ~. XJ 7-4 ,

? I!c TO!I';,CCO A,';J R. J. ;;E -:)S 1-GC',CCO C0: ;7'tIl;Y Q. Smokinq and Health The scientific controversy over the alleged effects of sr,oE:inS en tiie neal th of the srloker ti•,i l 1 stabi l i ze or abate, provi ded Industry, Government and other 5roups begin to reach a truly constructive, collaborate consensus and 'Joint effort; othenrise it may intensify. A hard-core anti-tobacco group will alw~ys remain and will be joinea by ariti-ui; business groups in attacks on the tobacco industry. The negative effect of the smoking-health controversy on ccnsumer behavior is approaching a raxiviu-n; i.e., no ne_w_ adverse data r•!ould be exnected to r.iat.eriallv cha r~ce the a~titnde of the - --,-- - ------- ~lic Lo:lard^smorino and n;.~a ltn. The anti-tobacco lobby, :n addition to harping on the alleged association of ci garette smoke wi th cancer and other diseases, will aim a najor long-range thrust at smoking in an attempt to stigmatize it as a socially objectionable and lo~•!er class nabit. One of the major tools in this endeavor will be the cam- paign against the effects of environmental smoke which is labeled "passive smoi:ing". "Passive smokinp" is defined as the ex- posure to tobacco sr^oke by nonsmokers. Three related but distinct areas need be considered: a. Legislative activities of anti-tobacco forces aimed at prohibiting or restrict- ing smoking in public places such as rest- aurants, semi-public places such as the working place in general, including offices, factories, etc. A concerted effort to ccunteract these activities is being made by the Tobaccu Institute; no RJR initiative is needed. .. b. The longrange, more important, second area is the unequivocal- declaration to smoking ar, objectionable habit. Very li-._1e is being done to contest this industry-wide, and an•RJR-led effort could be highly .important. l. Smoking-health research done on a collab;rative b?sis by Coi11paIIV, industr and private or academic grouPs V:-ill require the Research Jepartr!ent to provide inpats such as consultation, analyses, and possibly various detailec'. laboratory studies. Research related to the sn,oking-health Controversy will continue to receive major short- and long-term emphasis. 2. Awareness will be maintained by Researc'-. Department. 3. Techniques to determine composition and quality of sidestream smoke to which t'-~ nonsmoker is exposed will be developed. / X- y . ~~ s.......-~C..I ~ ~ ^~ ~ ~ e ~

(. TH~~ iUc CCU RY R. J. KL1'i,Oi-US B. S,'f~0lq i Iir; ;af"id ({i:d l tn c. The third effort of the anti-tobzcco lobby could he labeled indirect prehit:ition. This refers to the effort of the anti- tobacco lobby to enforce over a period of time a steady lowering of tar and nicotine levels i•rith the purpose t;lat loti,%arina tar and nicotine, especially the latter, %•rill eventually lead current scao'r.ers to stop _altogether and the "new snoker"•not to start. Very little is ~eing done on an Ir.dus;,ry-ti-ride ..asis to counteract tj",is, and a RJ R initiative seems %•:arranted. it is imFo:•t:nlt, that' efforts on this point be m.ide, not only within the United States, but also overseas. New data favorable to smoking, if generally 4. Awareness will be maintained by Researc. accepted by the public, could significantly Department. improve the position of the Industry. If RJR-T were to become the Industry spokes- man in matters related to sc;oking and health and take the offensive in present- ing information favorable to the Inciustry (and RJR-T), the impact of the oft- repeated arew:ents of the anti-tobar-o forces arillyoe offset. Nicotine, ultimately, may return to its 5. Awareness will be maintained by Researc, position in the 1964 Surgeon General's Department. report; i.e., not good for a few persons with specific healtn problems, but in general not a significant health hazard. Currently cigarettes having no r;ore than 6. 12 mg of "tat•" and about 0.8 mu of nicotine, with acccrar•anying reduction in carbon monoxide, etc., 1•:ould appear to lf-E con- sidered acceptably "safe" tu the r.,ore moderate anti-tobacco yroup. ldith tir^e, these nraxiti:u;rr acceptable values would be expected to drop to loti:er levels; e.g., 5 mg of "tar", 0.5 mg of nicotine. Current simplistic emphasis on direct 7. reduction of smoke "tar" and nicotine will remain high but may be replaced gradually by emphasis en selective reduction of specific smoke components alleged to be harmful, with shift from "prohibition- total cessation" to development of an allcgedly "safer" -igarette. This is based on the grot:ir:g ackno;iledc,rnent by anti-tou-_cc~j ;rou~s that large numbers The Research Department wi l l be preparec to assess the corr.nosition of the smoke from such cigarettes in terms of flavorant delivery, physiological impac_ and satisfaction, and the like. Much ' effort wi l l be di rected toward the l c:- ~ "tar" concept. Anticipation of the nature of-the specific selective smoke co,r:p onents alleged to be harmful will Fermit development of appropriate analytical procedures, methods to contro: lev,;ls, objective assessment of allercd harmr"ul effects, etc. .~

7 1IT 1(;::;,CC(! ,.';i)1 L. J. I I] TIiC Ni i'.~O}.:)j i OIaACCO B. Sh)oh:iliq ifnd }ievlth of peop1 ewi l l cont i nue to sr•.oi;e and that the realistic c;oal should be to minimize alth haz~.;•ds claimed to be the Ulle;ed he associ ated r+i th smoki ng. Increased researc;) effort under the 8. National Cancer plan %•rili not fur,tish substantial amounts of ir::r~ediately useful new information L•caring on the smoking- health controvers%-, but, by the end of the decade, governrient research may point to moves which it feels the Industry can make toward allenedly "safer" cigarettes, with at least indirect government endorsement. Suhstantial procress will result to1•rard what is al leqed to be a"sa.i Lr" cinar°ttG _f Yo:TI `' use of a coriUi i~a ~ i cr o~_r~;anv t~chnf ~u~ s, e.g., use of fioi„ogeiiiied tobacco,};orous paper, improved air dilution and filtration, alteration of the burning process, pre- treGtment of tobacco, additives, alteration of tobacco varieties, use of synthetic or extended tobacco, and the like, rather_ than from a sin le effr~ct. -- -------- --g-~---- -- Some presently-used flavorants, 4dditives, and colc:runts may ccsr4 under attack because they may be claimed to at~d to the alleged health hazards of smoking. De- tailed information on the properties of flavorants and additives with long his- torical use may be rec,uired by Federal agencies. Despite improver,:ent in methods for predic- tioh of susceptibility to, detection, r.re- vention, treatment or cure of some of the diseases alleged to be associated with tobacco usage, and im;,rove.-rent in the a',leged safety cf tobacco products, the allegations regarding the "risk" of smoki ng wi 11 not be. substanti al.ly al tered . in the next fiv., years. 'r+ouse skin painting will remain the standard but iwperfcct test procedure for alleged carcino5enicity of smoke for most of the decade, but pro,ress ti•ri 11 be rlade toward develo~.:,!ent of new more rapid and meaningfull, and less expensive test procedures. Iniial ation testing ti•ri 11 become increasingly il,portant as the method is improved and becomes more widely accepted. + Consultation of Research personnel t•,it~•. National Cancer Institute personnel be directed toti-:ard ensuring that government personnel recognize and acknowledne the Cc:rpany's (and Industr contribut or,s to the studies in progra:: or planned. 9. Studies on the effect of various combir: tions of these techniques on s!,oke quality and properties will be contii,L.: or implemented to ensure that progress indeed in the directien of an allen,edl- "safer" cigarette. 10. In anticipation of such attacks, the Research Uepartment ti•ri i 1, as time and personnel availability permit, catalcc the nature and cne:aical' and physical properties of the raJor and minor components of all fla vorants and additives. 11. Because both the "tar" yield and the concentrations of alleccedly harmiful components i n the "tar" t•ri l 1 proba bly continue to decrease uuring the pr oe;.-- tion period, the "risk" firo:n sr:rokinc should be reassessed in terms of dUse response. 12. Awareness of alternate short-term, les: expensive test procedures fcr alleoed carcinogenicity of smoke will be maintained.

8 111. T}{F f;: S:',~;Cli i)G i;~ ;~T B. ar,d !'_,alth 3. The co,~.~onent or components of tot)acco smoke ucer;ed responsi ble for al l:.•~ed healtii ha:ards associated ;,ith s;wJr:ing will be wDre closely defined duriny the decade. Appropriate biological test procedures for these components will be developed 4. Carbon monoxide will receive increasingly more attention as a maj^r alieged smo}:e- heal th 6pzard, particularly t.,hen FTC begins to publish carbon monoxide values for brands in about two years. Before the end of the projection period, nitric oxide will also receive increased attention. 5. Studies may identify certain types of individuals hignly susceptible to diseases allegedly associated with swiol:ina. This may allow others to smoke with less health anxiety. 6. Diseases or disabiliti4s not presently alleged to be associated with smoking will, in the projection period, be alleged to be so associated. 7. Progress will be made.in developing techniques to make cessation of smoking easier. 8. Anti-tobacco programs aimed at the public, ld d l l l particu y at cni rer:, w il an ar continue, and with experience and tie:e may become more effective. 9. Industry-sponsored research related to smoking and health is likely to be ex- panded, at least for the next several years., '0. The search for a quality cicarette free of alleged health hazards will continue, but it is unlikely that smoking critics will be totally satisfied with any pro- duct produced. Such a product woutd, of course, be a boon to the lndustr~y. 13. The l;esearch 0eczlrt,rent r•: i l 1 attc; ;pt 11 anticipate the nature of the compon;:r;;, or cor'ponents. i?; propriate ana i;rses -, these comp onents r:i l l be devel oped , a:-. methods to reduce the levels of such components wi l 1 be i nvesti gated . The claims that such components are respc!. ble for health hazards will be scrutinized as to their validity. 14. Continued emphasis on carbon monoxide by anti-tobacco forces will require continued research on method5 for controlling levels of carbon monoxide in smoke. 16,• The validity of such allegations will : objecti%-ely scrutinized and counter- arguments, if available, will be prepared. 17.'• Awareness will be maintained. 18. Awareness will be maintained. 19. Research services in the form of analytical methods, consultation, sar•-' preparation, and the 1 i i:e t•ri i i he pr;,- d vided as requested. , 20. All necessary rese-:-rch services will L. supplied to Tobacco Development, . f•ianufacturing, etc. in support of this search.

9 I 1. TkiE TMI\CCO i ,NuUSTi;1' R. J. Rt'i;+(11 US TB;tiCCU Ci: *1i';;"' Y 111. TI~E C. Reoulation, Ta>:ation, Etc. 1. Co.nposition, manu''acture, advertising, sales 4nd use of tobacco come under i ncrers i ng goverr,ri~:ntal regulation. 2. The Federal govermmient may set maximum permissible levels for "tar", nicotine, carbon morroxide, and other coraponents, probably via a "voluntary" ag,-eement with the Industry. Failure to comply may result in increased taxation or the necessi ty to irrr.riediately reauce "tar" levels of major brands while maintaining quality. The probability and the date of such goverrn,;ent action may be advanced by the introduction of low "tar" products such as the Carlton and the 1;0t-J which der•ionstrate the feasibility of low "tar" cigarettes. 3. Taxation of tobacco products will increase, beco„iing more punitive and ultimately more specifically related to the alleged health hazard of each product. 4. Additives or adulterants and colorants of tobacco products may be regulated. 5. The FTC rnay extend i ts snooke analyses to include components in additi'cn to "tar" and nicotine. Carbon rr,onoxide and other gas-phase components are the next likely group. Anal~s~es for these ot'~er com- ponents r~a:,- _ultf.~iatelv be r~cuircd`9r~ adv2rtisiiig. This extension of analyses ': inay require simultaneous determinations of various entities; e.g., "tar", nico- tine, carbon monoxide, and nitric oxide on the same sample. 1. f;esearch ser•vices to provide i nforlJd ti'. to combat suci, re;ulation wil vided on request. ? L•e pro- 2. Research will provide technology to enable such reductions to be acco,nplis;. 3, Awareness will be maintained. 4: Awareness will be maintained. 5. Anticipation of analyses required by t!. FTC will be a continuous Research Department function.