Trust Us We're The Tobacco Industry - Tobacco Control Supersite

should pursue a DP price increase.
PMI wanted linkage between the
DNP increase. This was not supported
by us.” 192
(BAT, 1992)
Smuggling is also a way to
maintain market share, as this document
from Imperial Tobacco Limited*
(ITL—a BAT subsidiary, not related to
Imperial Tobacco in the UK) in Canada
illustrates:
“In share terms, ITL finished
1993 back where it left off in 1991.
Following a loss of share in 1992, ITL
rebounded by making its major trademarks
available in smuggled channels
in the second half of 1993.” 193
(Imperial Tobacco, 1994)
Another ITL document to BAT
further explains the situation:
“As you are aware, smuggled cigarettes
(due to exorbitant tax levels)
represent nearly 30% of total sales in
Canada, and the level is growing.
Although we agreed to support the
Federal government’s effort to reduce
smuggling by limiting our exports to
the U.S.A., our competitors did not.
Subsequently, we have decided to
remove the limits on exports to regain
our share of Canadian smokers. To do
otherwise would place the long-term
welfare of our trademarks in the home
market at great risk. Until the smuggling
issue is resolved, an increasing
volume of our domestic sales in Canada
will be exported, then smuggled
back for sale here.” 194
(BAT, 1993)
The company was confident it
could accurately evaluate what
portion of its exports to the United
States were being smuggled back into
Canada. Indeed, it appears the company
could supply a breakdown of its
exports into legal and illegal sales
on a monthly basis:
“Many Thanks for your Hand
Written Spreadsheets….I am also look-
ing for your Duty Free sales. Legitimate
DF to be reported as Duty Free and any
Transit DF to be reported as Duty Free
Unspecified.” 195
35
(BAT, 1993)
At the height of the problem,
Bill Neville, a lobbyist for the Canadian
Tobacco Manufacturers’ Council,
remarked that:
“If there’s smuggling, we’re
unapologetic that it should be
Canadian cigarettes.” 196
In the United Kingdom, Imperial
Tobacco made a very similar admission
in 2001 when asked about smuggling:
“We do not want only foreign
brands to be imported to the UK. It’s
important that whatever is going on,
our brands are not excluded from it.” 197
The UK companies Imperial
Tobacco and Gallaher are currently
exporting billions of cigarettes manufactured
in the UK to countries where
there is little or no market for them,
just as occurred in Canada. It has been
estimated that more than half of the
cigarettes currently being exported by
Imperial are being smuggled back into
the UK. 198 There is also evidence that
the tobacco companies have targeted
the “bootlegging” market, which is
exploiting the difference in tax levels
between the UK and continental
Europe:
“Bootleggers (who account for
over 70% of the market in most areas)
only bother with big brands—Old
Holborn and Golden Virginia. We need
to create a demand for Amber Leaf
among the newer, younger consumers
to encourage both shop purchase and
a willingness among bootleggers to
sell Amber Leaf.” 199
(Gallaher, 1997)
Smuggling is also used to build
market share in different countries.
One document implicates senior BAT
executives in the development of a
marketing strategy based on smuggled
cigarettes:
“Subject: DNP Brazil—Argentina
I am advised by Souza Cruz that
the BAT Industries Chairman has
endorsed the approach that the Brazilian
Operating Group increase its share
of the Argentinean market via DNP.” 200
(BAT, 1993)
Another shows the high degree
of control over the smuggled
market so that BAT’s marketing planners
treat it as just another channel:
“Kent Super Lights…DNP product
should be launched two weeks after
the DP product has been launched….
Lucky Strike…[should] withdraw from
the DNP market the 20’s and 10’s
versions. 201
(BAT, 1994)
However, it is impossible to rely
just on smuggling:
“1. Domestic
a) Nigeria
Obviously it is practically impossible
to develop a pure GT [General
Trade, a euphemism for smuggling]
brand, thus a home base is necessary.
It would therefore seem logical to
import legally some quantity, allowing
also for an advertising campaign to
take place.” 202
(BAT, 1990)
Yet GT trade or “smuggling” will
remain a priority:
“Fixed Assumptions:
1. The political situation in
the Cameroons will remain
unstable throughout 1992
and then settle down:
2. The economy will show
no improvement over the
next 5 years.
3. GT movements to this end
market will remain a priority
throughout the period.” 203
(BAT, 1991)