Products, customers and consumers

Understanding our products

Our current scientific programmes are undertaken to improve our knowledge of tobacco and smoking, so that we can develop products that may meet the future demands and expectations of consumers and regulatory bodies.

We provide information on ingredients used in our tobacco products to the general public via our website and to Competent Authorities in annual declarations. We discuss this and other laboratory data with public health bodies, regulatory authorities and other scientists as appropriate. We also monitor and assess scientific developments and consider how to incorporate innovations into our products. Our views are based on the detailed work of scientific experts, generally academics of professorial status and practicing physicians.

New products or processes receive appropriate assessment, patenting, evaluation and testing prior to commercial application. Prior to sale, any new product introductions into existing or new markets are checked to ensure that the ingredients used meet our standards and comply with the regulations of the countries in which our products are destined for retail sales. We also apply our own standards of care everywhere in the world, whether local legislative provision is extensive or less so. We are engaged in significant programmes to investigate and understand the Altadis products to ensure they are of the same standards.

Product development

Imperial Tobacco believes that no cigarette is safe. We recognise that it is possible to reduce certain constituents in tobacco smoke. This may in turn reduce the exposure of smokers to these constituents. However, smokers should not assume that this results in any reduced risk.

No government authority has adopted regulatory standards by which one cigarette could be regarded as safer than any other. It is our view that the relevant government authorities should define the objective criteria and predictive tests by which products can be judged to have potentially reduced risk.

Imperial Tobacco has been an active participant in the development of potentially reduced exposure products (PREPs) for many years, starting with the development of New Smoking Material (NSM) in the 1970s. We intend to continue to develop products that might be regarded by government authorities as having potentially reduced risk. Consequently, we believe we would be an effective partner for government authorities that seek to make genuine progress.

We believe that without our knowledge and experience of tobacco products, a workable and effective regulatory framework cannot be developed. As a responsible manufacturer, we consider that we share an obligation with regulators to enter into dialogue in this regard.

Two independent USA scientific committees, the Institute of Medicine (IOM) and the Life Sciences Research Office (LSRO), have reviewed the science for the evaluation of potentially reduced exposure products (PREPs). The IOM stated that “for many diseases attributable to tobacco use, reducing risk of disease by reducing exposure to tobacco toxicants is feasible”, thus supporting, in principle, the development of PREPs. However, in 2001, the IOM acknowledged that while techniques existed to assess exposure reduction, the prediction of potential harm reduction was unknown. Six years on from the IOM report, the LSRO reported that “reliable testing and assessment methods for individual risk reduction are currently available for pre-market evaluation of potentially reduced risk tobacco products” and that “the data needed to evaluate risk reduction of PRRTP [potential reduced-risk tobacco products] use in individual smokers must be derived from comprehensive preclinical and clinical testing.”

Imperial Tobacco has long requested that the UK Government develop criteria by which tobacco products can be judged on the basis of their relative risks. This may allow adult consumers to choose recognisable tobacco products that may offer reduced risk. There has been little progress on this.

Our development work on PREPs is commercially confidential. We continue to share information with Competent Authorities on the PREPs that we are developing. During 2007-2008, we submitted further data to the UK Competent Authorities requesting further dialogue. We have repeated our request for the development of criteria by which PREPs may be judged on the basis of their relative risks. Our experience in this area has highlighted the need for engagement and establishment of common goals between tobacco manufacturers and Government Competent Authorities.

Regulatory compliance

We ensure that we conduct our business in a responsible manner by meeting the many regulatory requirements on tobacco products and by being proactive in voluntarily adopting high standards. We support sound, reasonable and practicable regulation of tobacco products. We believe that this, combined with well thought out local voluntary agreements, is the most effective way to regulate tobacco.

More information on the regulatory environment surrounding the tobacco industry can be found in our 2008 Annual Report and Accounts available on our website.

During the reporting period, we submitted 37 ingredients reports to Competent Authorities. Our intention is to use the common reporting templates in the EU, commencing in September 2008. Such format changes take time to introduce because of the complex alterations required to computer systems to allow accurate, efficient and auditable submissions to be made.

Projects are ongoing to enable our compliance with the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) regulation, the implementation for which is phased according to the amounts of ingredients used. REACH aims to improve the protection of human health and the environment from risks that can be posed by chemicals. Registration of chemicals, supported by a standard set of data, is the responsibility of manufacturers and suppliers of the substance. All chemicals manufactured or imported in the European Union in quantities of one tonne or more must be pre-registered by the end of November 2008. Discussions have taken place with our suppliers to ensure that the ingredients we use in the manufacture of our products are pre-registered. During pre-registration and prior to commencing the integration of Altadis, two separate teams have worked and liaised to ensure the REACH requirements are met throughout the enlarged Group.

Product portfolio balance

We operate a balanced product portfolio which supports our strategy in being both competitive and profitable. Our competitiveness enables us to offer a range of products, maintain strategic market presence and develop innovative products that meet the needs of our customers and consumers. Our profitability enables us to achieve a sustainable business, to deliver significant returns to our shareholders and to support job security for our employees.

We take a responsible approach to maintaining our product portfolio through meeting our responsibilities as a manufacturer, complying with regulatory demand and maintaining stewardship capability, notably in toxicology. This ensures we create and discharge appropriate standards of care and meet regulatory demand.

The regulatory burden has been escalating with increasing numbers of ingredients submissions, the implementation of REACH, and potentially increasing toxicological testing. Global convergence of regulation is also being driven by bodies such as the World Health Organization via its Framework Convention on Tobacco Control (FCTC). The acquisition of Altadis has both increased the size and diversity of our portfolio and increased the technical resource available to us to steward that portfolio. The reorganisation proposals for our Science and Stewardship department in the UK, France, Germany and Spain will aim to ensure we have the appropriate resource to service the testing requirements of the enlarged portfolio. A second approach is to improve cross-functional decision-making on the portfolio via our Five-for-Five programme.

Responsible marketing

Imperial Tobacco seeks to advertise its products responsibly in order to maintain brand loyalty, encourage adult consumers to switch to our brands and to try to make users of tobacco products aware of any new products that the Group makes available.

On a strictly commercial basis, we enter and seek to increase our market share in countries where we have identified an existing demand for our products from adult consumers, and where it is legitimate for us to do so.

We are committed to promoting and selling our tobacco, paper and tube products responsibly, within the laws and voluntary agreements of the countries in which we operate. We apply our own International Marketing Standards (IMS) as the minimum, setting out clear rules and principles to ensure that our advertising and promotional activities are directed only to adult consumers. The IMS are available on our website.

Our employees worldwide must observe and enforce the IMS. The standards also apply to all advertising, promotion and research agencies employed directly by Imperial Tobacco.

The IMS for tobacco products has undergone extensive review during 2008 to ensure that it is fit for purpose for the enlarged Group. As our business grows we inevitably encounter many new challenges, particularly relating to language, translation and interpretation of our standards. Where possible we have incorporated geographical and cultural nuances into the updated standards, taking care not to dilute their aim and effectiveness.

Adult choice and youth smoking

Imperial Tobacco believes that the decision to use tobacco products is a choice for adults. We believe that smoking can be characterised as addictive as the term is commonly used today. Some people may find it difficult to stop smoking, but we believe it is important for them to understand that they are able to stop if they choose to do so. Millions of people have stopped smoking, the majority without assistance.

We do not want children to smoke or to use other tobacco products and we support the enforcement of legal minimum age restrictions by the appropriate authorities for the purchase of tobacco products.

Youth smoking prevention is an issue for society as a whole to work together to resolve. We play our part by not directing the marketing of our products to anyone under the age of 18 or older where a higher minimum age is specified by local law or voluntary agreement. Our IMS includes the restrictions that we place on brand advertising, product placement, promotional events and activities.

We also support governments and the retail trade with a range of programmes designed to stop the sale of tobacco products to children. Initiatives are ongoing in a number of countries including Hong Kong, Singapore, the UK, Taiwan and the USA. These include a range of programmes and campaigns such as raising awareness of minimum age laws and proof-of-age schemes.

During the 2008 financial year, we participated in a new initiative in Slovenia. The age limit for buying tobacco products in Slovenia was increased from 15 to 18 years. Tobacco companies, including Imperial Tobacco Ljubljana, supported a government initiative to help inform shop assistants and consumers of the new law, by distributing stickers to help raise awareness of the age restriction.

Our support for youth access prevention has continued in the UK for many years through our membership of the Tobacco Manufacturers’ Association (TMA) and proof-of-age schemes such as CitizenCard and the ‘No ID No Sale’ campaign. The schemes are about raising awareness of the minimum legal age for buying age-restricted products such as lottery tickets, tobacco, alcohol, solvents and fireworks. They are also about helping retailers refuse underage sales by showing them how to assess someone’s age, spotting fake ID and helping them to record attempted purchases. Over 1.8 million CitizenCards have been issued to date in over 55,000 retail outlets. More information can be found at www.citizencard.com

The ‘No ID No Sale’ campaign has involved more than 100,000 UK retailers. During 2007, campaign organisers held fringe events at the three main party political conferences. More than 40 Members of Parliament held photo-shoots in their constituencies and agreed to distribute CitizenCard application forms to 18 and 19 year olds as they become eligible for the electoral roll. Fringe debates are planned for the party political conferences in September and October 2008. More information is available at www.noidnosale.com

On 1 October 2007, the UK Government raised the minimum legal age to purchase tobacco from 16 to 18 years. The TMA supported the tobacco trade by reprinting the ‘No ID No Sale’ campaign materials to reflect the age change. Materials include signs, vinyl stickers, the statutory notice and a refusal register to record attempted purchases by underage consumers.

Our UK sales force continues to play an important role, delivering campaign materials by hand to shops across the UK. We also distributed similar support material to trade customers in Northern Ireland, in preparation for the increase in minimum legal age planned for 1 September 2008. In addition to the distribution of campaign material, we communicated the changes in law through our UK trade bulletins - The Source and E-Source. We also produced and distributed an information sheet with a staff training record on the reverse, to help retailers to understand and meet their legal responsibilities.

The renewed activity of CitizenCard and ‘No ID No Sale’ campaign coincided with the release of figures by the National Health Service Information Centre Survey, which show that six per cent of school pupils aged 11 to 15 smoke regularly, compared to ten per cent in 2001.This represents the lowest level of smoking among school children for 25 years. The full report is available on the NHS Information Centre website www.ic.nhs.uk

Engagement

In the context of increasing regulation and a challenging global environment, we continue to contribute to consultations with governments and regulatory bodies worldwide. Our objective remains to ensure that the regulation of tobacco products is sound, reasonable and practicable. We are not willing to accept without challenge regulation that is flawed, unreasonable or disproportionate, or not based on such legal foundations.

We recognise that it is the role of governments to provide the general public with clear and consistent messages about the health risks to smokers that are associated with their smoking. We do not challenge those messages.

Owing to the breadth, depth and complexity of the scientific research into tobacco and health, there are limited occasions when we believe it is right for us to provide detailed explanation and analysis of our views. These occasions include meetings with governments and government-appointed agencies or their scientific and medical representatives, together with court proceedings, tribunals and inquiries. There, we would explore and discuss the science surrounding tobacco and health and considerations for the future.

In a comprehensive submission to the UK Department of Health’s ‘Consultation on the future of tobacco control’, we have outlined our position on product display and packaging and included our views on PREPs, environmental tobacco smoke and addiction. We believe that legislation must meet the principles of good regulation by being proportionate, supported by compelling evidence and fit for purpose. In our view, measures outlined in the UK Department of Health’s consultation document do not meet these criteria. This is particularly true of the proposal to prohibit the display of tobacco products and the suggestion that tobacco products should only be available in plain packaging as a means of reducing youth consumption. There is no credible evidence that young people start smoking or that smokers continue to smoke as a result of the display of tobacco products or tobacco packaging. Banning the display of tobacco products and introducing plain packs would be anti-competitive and would further facilitate the illicit trade in tobacco. We will continue to support practical measures to reduce youth smoking but remain opposed to disproportionate regulation that erodes adult freedom of choice and the right of retailers to display and sell a legal product. Our full submission is available on our website.

A review was initiated by the European Union Directorate General for Health and Consumer Affairs (DG SANCO) of the Scientific Committees on Consumer Products (SCCP), Health and Environmental Risks (SCHER) and Emerging and Newly Identified Health Risks (SCENIHR). This review considered the mandates and fields of competency for all three committees, improvements to their structure and composition and improvements to their function including coordination and transparency.

Imperial Tobacco participated in the consultation process for the review of the EU Scientific Committees. We highlighted the issue that consultation is currently inadequate since not all relevant stakeholders are asked to provide information during the early stages of the risk assessment process. It was encouraging to see that some of our suggestions were included in the summary produced by the Health and Consumer Protection Directorate-General. These included increased stakeholder dialogue; a balance of committee members in terms of affiliation and field of expertise; and the following of specific risk assessment guidelines.