Products

A key priority has been integrating the Imperial Tobacco and Altadis science and stewardship activities and extending standard systems and processes throughout our 56 factories.

Our product portfolio spans all tobacco product categories. We leverage our portfolio to build sales and continually review our brands and products to ensure they are aligned with local consumer preferences.

We ensure raw materials and products are fit for their intended purpose, meet relevant specifications and comply with legislation, regulation and voluntary agreements. We are also committed to continually improving our quality management processes and performance, and extending best practice across our manufacturing footprint.

Integration Update

The scientific and research capabilities of Imperial Tobacco and Altadis were complementary and we have made good progress with the integration of our facilities.

Product research and innovation has been consolidated into our facilities in Hamburg, close to our central manufacturing departments. Strategic studies on tobacco leaf, smoke and bio-monitoring, and studies for regulatory submissions are now based in Les Aubrais, France.

In Bristol, we have enlarged our team of toxicologists to meet the increased demand for ingredients safety assessments and submissions to regulatory agencies as a result of our extended product portfolio.

Research into the quality and characteristics of raw tobacco, from seed production through post-harvest treatment to the final product, is undertaken in Bergerac, France.

We have an ongoing programme of training workshops to enable management teams across the business to recognise and understand our responsibilities as a manufacturer of tobacco products.

The workshops, which have been in operation since October 2006, explain our responsibilities and the complexities and historical development of our corporate positioning on aspects such as supply and distribution, smoking and health, regulatory and legal issues.

During the course of the year, we held regional workshops in the USA, France, the Netherlands and the UK to further aid the integration of the Imperial Tobacco and Altadis management teams.

Understanding our Products

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

We 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 practising physicians.

During the year, we undertook a major review of scientific requirements in light of future regulatory developments. This involved a review of research to date including smoking behaviour, biomarkers of exposure, tobacco plant research, ingredients, plant protection products and requirements for developing regulation. As a result, we are undertaking various projects and programmes.

We also continued to monitor peer-reviewed scientific research on diseases associated with tobacco products, in addition to the latest research reported at international conferences. We received reviews from external experts on the latest developments in the mechanisms of certain chronic diseases and have continued to fund external research into disease mechanisms. These developments have been reported to senior management.

Product Development and Innovation

We recognise the importance of investing in research and development, which brings innovative improvements to the Group and its customers, both in the products that are supplied to consumers and in production and marketing techniques.

New products and brands are developed for specific markets to meet consumer preferences.

Product introduction processes are in place to ensure potential new products comply with local regulations and meet the standards set by our Assessment, Guidance and Permission (AGP) Panel. These processes cover major new product developments, innovations relating to existing products or simply changes in artwork or brand promotions.

We believe that no cigarette is safe, and operate our business on the basis that smoking may cause human disease. We recognise that it is possible to reduce certain constituents in tobacco smoke, which is a complex mixture of particles and gases. However, smokers should not assume that reduced exposure to any of the constituents found in tobacco smoke will result in any reduced risk.

For more than 30 years we have been active participants in the development of potentially reduced exposure products (PREPs). We continue to explore ways to reduce specific smoke constituents, while monitoring regulatory and scientific thinking and seeking to engage constructively to encourage and establish new measurement standards.

We have encouraging results that indicate we can produce reduced exposure and potentially reduced risk products but we require direction from Competent Authorities on how best to proceed. We believe it will be difficult to successfully introduce such products on to the market without endorsement from any government or its authorities and without the ability to communicate any potential consumer benefits.

Our experience illustrates that PREPs are best developed in collaboration with government Competent Authorities, recognising that potentially reduced exposure to certain smoke constituents does not necessarily mean that the risks associated with smoking will be reduced for all smokers.

The potential benefits of reducing certain constituents of smoke need further understanding. This requires the involvement of governments’ scientific advisers. Testing methods are still evolving and we seek engagement with external scientists and public health authorities to discuss them with a view to establishing their potential.

To date, no government authority has adopted regulatory standards by which one cigarette could be regarded as having less risk than any other.

It is our view that the relevant government authorities should define the objective criteria and predictive tests by which tobacco products can be judged to have potentially reduced risk.

We believe the techniques and technologies required to develop potentially reduced exposure products will be required for regulatory compliance in the future and we are currently developing such systems.

In 2009, we continued to share and discuss our research results with regulatory authorities and within the scientific community. It is our view that a workable and effective regulatory framework cannot be developed without our knowledge and experience of tobacco products. As a responsible tobacco manufacturer, we consider that we share an obligation with regulators to continue this dialogue.

Ingredients Assessment

Ingredients, for example flavourings typically used in food, may be added to tobacco products during manufacture. We use ingredients in some of our brands to enhance their overall flavour characteristics and aroma, to give each brand its own distinctive style in line with consumer preferences.

The term ‘ingredient’ also applies to substances in the non-tobacco materials that are used to make our products. These materials include the cigarette paper, the filter, the adhesive that seals the paper and the ink that colours the tipping. Information on the ingredients used in a number of our cigarette brands is available on our corporate website.

Our panel of toxicologists assess the appropriateness and acceptability of the ingredients we use.

We do not add anything to our products to make it more difficult for smokers to stop smoking, to make our products attractive to children or to increase the level or change the chemical form of nicotine in tobacco smoke.

We do not seek to use genetically modified (GM) tobacco, as we do not believe that our consumers wish to purchase products that may contain GM materials.

We take steps to ensure we do not purchase or use GM tobacco. These steps include regular testing.

During 2009, we reviewed existing processes for the detection of GM tobacco and are developing multiple detection techniques with the aim of identifying new types of GM tobacco which are not recognised by current analyses.

We also examined the ingredients risk assessment processes in both Imperial Tobacco and Altadis and developed a single system for use throughout the Group on all products.

The communication and roll-out of our product-related policies, standards and processes is almost complete. We have completed an initial assessment of our enlarged cigarette and fine cut tobacco product portfolio, and begun the further assessment of the Altadis products against our standards.

Ingredients Regulations

Many governments regulate the ingredients which may be added to tobacco products and we comply fully with these regulations. Even in countries where no regulations exist, we make sure that we conform to similar standards. We are preparing for the increase in product testing that we anticipate as a result of greater regulation.

Regular submissions are made to governments’ Competent Authorities on the ingredients used in our tobacco products which are sold in their jurisdictions. This includes the toxicological information which we have available on those ingredients.

During the 2009 financial year, we made 47 such submissions. We seek to maintain the confidentiality of our own trade secrets and those of our suppliers during all submissions.

Ingredients which are used in quantities of one tonne or more in the EU are subject to the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) regulations. REACH aims to improve the protection of human health and the environment from risks that can be posed by chemicals. We have pre-registered all items relevant to our product portfolios.

Product Portfolio Balance

We continually review our product portfolio for unnecessary complexity to achieve an appropriate balance between product stewardship, regulatory demand and the needs and preferences of our consumers.

Reducing the complexity of our portfolio by rationalising or re-specifying brand variants and improving systems and processes is being managed by a newly established cross-functional team.

A new approach to complexity evaluation and reduction will be rolled out in 2010.

Quality Systems and Processes

Our quality management systems address continual improvement and consumer focus. Central manufacturing’s ISO 9001 management system provides our manufacturing sites with a framework for delivering Group business objectives, improved performance, compliance and sustainability in a constantly changing operating environment.

We drive improvements using a product quality rating system (PQRS), standardised test equipment and methodology, benchmarking of final products and quality improvement plans. Benchmarking through market surveys enables us to compare the quality of our products with those of our main competitors, and to initiate product and process improvements where required.

We have procedures at operational level to support contamination prevention and define the actions that must be taken should contamination be found. If contamination is not contained, we have crisis management and product recall procedures that could be followed as appropriate.

At the end of the 2009 financial year, 30 of our 56 factories were ISO 9001 certified, with projects underway to implement the standard in eight other sites by the end of 2011. Our Supply Chain function is also ISO 9001 certified. Four factories have successfully integrated their management systems for quality (ISO 9001), environment (ISO 14001), and health and safety (OHSAS 18001). Other factories are working towards this goal.

PQRS has been installed in the Altadis cigarette operations and the factories have made significant progress in achieving and maintaining our highest Q1 quality standard. We aim to include our tobacco processing sites in the PQRS system in 2010.

Customer and consumer complaint procedures are in place in the factories. We are aligning the Altadis product non-conformity and product recall procedure to our existing process. The Altadis brands are also being brought into our product benchmarking and market survey process.

During the year, we reviewed and implemented changes to our product storage and shelf-life procedures across the business to further improve the delivery of fresh product in top-quality condition regardless of the point of sale.