New Tobacco Markets Progress Report - July 1992 (Secret)

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This article is part of the Tobacco portal on Sourcewatch funded from 2006 - 2009 by the American Legacy Foundation.

In this 1992 British American Tobacco (BAT) document from the Health Canada collection, BAT talks about the development of new cigarette markets. It shows how BAT takes advantage of cigarette smuggling to benefit the company and to help establish new brands in a country.

The term "DNP" stands for "Duty Not Paid," and refers to smuggled cigarettes.

An excerpt from Page 37 shows BAT feels entitled to a "rightful percentage" of DNP trade, saying the company cannot prevent smuggling and so the "requirement is to MANAGE DNP to the overall benefit of the BAT Industries Group..."

The report also shows how BAT uses smuggling to undercut other cigarette companies. In the following excerpt, N-P refers to Nobleza-Piccardo, the tobacco company of Argentina and a member of the BAT group. (Souza Cruz is Brazil's largest tobacco company):

[From Page 38]:

"As discussed with you in late June, N-P [Nobleza Picardo, tobacco company of Argentina] under my direction will now enter the DNP market albeit with reluctance AND based on the repeated rejection of our proposal by Souza Cruz. N-P cannot accept continued erosion of its [share of market] without some response. This strategy is not without political risk..."

The following quote shows how BAT introduces a new brand into a country through the black market first, to establish a market, then brings the brand in through legitimate channels in order to advertise it:

"A small volume of Duty Paid exports would permit advertising and merchandising support in order to establish the brands for the medium/long term, with the market being supplied initially primarily through the DNP channel."

Page 26 contains a discussion about the potential of certain brands in Brazil, and indicates that BAT targets the "very young" and "lower classes" to try to compete with Marlboro:

"Hollywood could be positioned as a Marlboro for the very young, lower classes, as the brand and its communication have much in common with Marlboro..."

Title: Document 50257744 (Central Europe Briefing Document)
Company: British American Tobacco
Date: August 26, 1992
Length: 59 pages
Bates No. 502577449/7507