1. What role do harm reduction products play in tobacco industry strategy? Geoff Ferris Wayne Harvard School of Public Health Center for Tobacco Regulation U Maryland School of Law April 20, 2007 April 20, 2007

2. Context–the current market Long term declines in US but continued growth internationallyLong term declines in US but continued growth internationally Market consolidationMarket consolidation Strategic acquisitions targeting new populations and marketsStrategic acquisitions targeting new populations and markets –Altria Sampoerna (2 nd largest producer of cigarettes in Indonesia, primarily kreteks) –RAI Conwood (2 nd largest smokeless manufacturer in US, other cigarette companies following suit)

3. Context–the current market Accelerating movement toward regulatory oversight, as well as greater coordination of strategies and approaches (e.g. via FCTC/ WHO)Accelerating movement toward regulatory oversight, as well as greater coordination of strategies and approaches (e.g. via FCTC/ WHO) Heightened public awareness of health burden of tobaccoHeightened public awareness of health burden of tobacco Heightened public mistrust of industryHeightened public mistrust of industry Greater vulnerability in litigationGreater vulnerability in litigation Response by manufacturers: emphasis on perceived corporate social responsibility and public image, dialogue and cooperation Response by manufacturers: emphasis on perceived corporate social responsibility and public image, dialogue and cooperation

4. Context–brand development Brand proliferation, particularly by expansion of popular brands (Marlboro, Camel) into new line extensionsBrand proliferation, particularly by expansion of popular brands (Marlboro, Camel) into new line extensions Flavored productsFlavored products –KOOL Smooth Fusions Midnight Berry, Caribbean Chill, Midnight Berry, Caribbean Chill, Mocha Taboo, Mintrigue Mocha Taboo, Mintrigue –Exotic Camel Mandarin Mint, Twist, Izmir Stinger, Crema, Dark Mint –Also: cigars, bidis, smokeless, waterpipes, rolling paper

5. Context–brand development New conventionalNew conventional delivery technologies –Filter pellet Introduction of newIntroduction of new smokeless products smokeless products –RAI Camel Snus –Altria Taboka –Smokeless line extensions of BAT cigarette brands (e.g. Lucky Strike) Reduced harm products/ PREPsReduced harm products/ PREPs

6. Some open questions What market considerations provide the primary motivation behind development of PREPs?What market considerations provide the primary motivation behind development of PREPs? –Threat of litigation or anticipated regulation –Need to expand or develop new markets –Competition among manufacturers Are PREPs different from other industry product innovations?Are PREPs different from other industry product innovations? Are PREPs developed in response to the same or different market considerations from other product innovations?Are PREPs developed in response to the same or different market considerations from other product innovations?

7. One approach to answering these questions is to study the industry: Market/ analyst reportsMarket/ analyst reports Public statementsPublic statements Internal documentsInternal documents Trial testimonyTrial testimony

8. Analysis of industry trial testimony How PREPs are described or presented in comparison to conventional cigarettesHow PREPs are described or presented in comparison to conventional cigarettes How market success or failure of PREPs is definedHow market success or failure of PREPs is defined How PREPs are described with respect to their potential safety or potential for harm reductionHow PREPs are described with respect to their potential safety or potential for harm reduction Do these change over time? (1996-2003) Do these change over time? (1996-2003)

9. Comparison to conventional cigarettes Language used to describe PREPs is more excited/ radical in earlier testimony than in later testimonyLanguage used to describe PREPs is more excited/ radical in earlier testimony than in later testimony Earlier testimony contrasts conventional products with PREPs; later testimony tends to promote similarities (continuum)Earlier testimony contrasts conventional products with PREPs; later testimony tends to promote similarities (continuum) In later testimony, difference is not a positive attribute (i.e. next generation) but a negative (i.e. challenge to be overcome)In later testimony, difference is not a positive attribute (i.e. next generation) but a negative (i.e. challenge to be overcome)

10. Market success and failure Earlier testimony evaluates PREPs based on their market performance; later testimony avoids evaluations of market failureEarlier testimony evaluates PREPs based on their market performance; later testimony avoids evaluations of market failure Later testimony focuses on test markets as a vehicle for gathering information rather than as a means of demonstrating market acceptanceLater testimony focuses on test markets as a vehicle for gathering information rather than as a means of demonstrating market acceptance In later testimony, positive expectations are relied on to provide a sense of progress despite the ongoing reality of continued market failureIn later testimony, positive expectations are relied on to provide a sense of progress despite the ongoing reality of continued market failure

11. Conclusions based on testimony At least some within the industry appear to have been convinced early on that they were on the verge of the next big thingAt least some within the industry appear to have been convinced early on that they were on the verge of the next big thing Failures in market have curbed this enthusiasmFailures in market have curbed this enthusiasm The new reality means protection of the conventional market is the primary concernThe new reality means protection of the conventional market is the primary concern Introduction of PREPs is problematic because it begs the question:Introduction of PREPs is problematic because it begs the question: If there is a radically different, safer alternative to cigarettes, then why are cigarettes still around? If there is a radically different, safer alternative to cigarettes, then why are cigarettes still around?

12. Conclusions based on testimony So, the industry needs to position PREPs alongside and not separately from conventional productsSo, the industry needs to position PREPs alongside and not separately from conventional products –Legitimizes the sale of conventional products –Legitimizes (by association) conventional harm reduction efforts (including low tar) –Shifts responsibility for harm reduction from company to consumer, as an issue of market acceptance PREPs remain in indefinite test market in order to support the illusion of choicePREPs remain in indefinite test market in order to support the illusion of choice

13. Another approach to answering questions about PREPs is to study the products: Market approachMarket approach AdvertisingAdvertising Physical and chemical analysisPhysical and chemical analysis Consumer responseConsumer response Market impactMarket impact

14. Marlboro UltraSmooth (MUS) Test marketed in the US, specifically: – Salt Lake City, UT (Apr 2005) – Tampa, FL (Apr 2005) – Atlanta, GA (Apr 2005) – As Marlboro Ultra Lights in North Dakota (June 2005) Uses a modified charcoal filter Various configurations

15. SEM carbon slides MUS Carbon Bead and interior structure Standard Charcoal Granule and interior structure

16. Machine smoke constituent yields (intense) Percent Yield of Conventional

17. http://tobaccodocuments.org/product_design/508026176-6283.html

18. Consumer sensory assessment DrawEffort Mouth Full Impact/ Kick* Taste Amount* TasteQuality* Aftertaste Amount Aftertaste Quality* MouthDrying Acceptability* Irritation * p<0.015

19. Perceptions of product messaging N = 147

20. Summary of findings for MUS Unique technology, but questionable value for harm reduction in comparison to conventional cigarettesUnique technology, but questionable value for harm reduction in comparison to conventional cigarettes Consumer response to MUS is not positive, low levels of satisfaction and acceptabilityConsumer response to MUS is not positive, low levels of satisfaction and acceptability MUS was not perceived as a safer product or as a quitting alternativeMUS was not perceived as a safer product or as a quitting alternative

21. What was the objective for MUS? Why introduce a product that is clearly not ready for consumer acceptance?Why introduce a product that is clearly not ready for consumer acceptance? Why attach the Marlboro name to it?Why attach the Marlboro name to it? Is this:Is this: –Information gathering? –Stepping stone to a new product technology? –Protection from litigation? –Positioning for potential regulation? –Serious attempt at a competitive product introduction?

22. Putting it all together Given what we learned from testimony, MUS and products like it may simply be intended to blur the line between conventional and reduced harmGiven what we learned from testimony, MUS and products like it may simply be intended to blur the line between conventional and reduced harm Proliferation of new products supports the industry presumption that consumers are responsible for choosing harm reductionProliferation of new products supports the industry presumption that consumers are responsible for choosing harm reduction This also defines the regulatory framework, in which safer products are placed on the market within the context of a full spectrum of conventional productsThis also defines the regulatory framework, in which safer products are placed on the market within the context of a full spectrum of conventional products

23. Putting it all together Recent market acquisitions and product innovations suggest continued expansion into alternative tobacco products and technologiesRecent market acquisitions and product innovations suggest continued expansion into alternative tobacco products and technologies The objective of these product innovations is to support and expand the current marketThe objective of these product innovations is to support and expand the current market –Smokeless products negate impact of indoor air laws –Flavors/ kreteks develop alternative starter products At least from the industrys perspective, there is no magic harm reduction bullet on the horizonAt least from the industrys perspective, there is no magic harm reduction bullet on the horizon

24. Conclusions What lessons can we take from this?What lessons can we take from this? –Eliminate the false continuum of less safe to safer products –Place the burden of harm reduction on manufacturer, not consumer choice –Limit expansion of products in market and development and use of new technologies Harm reduction products must be evaluated on the basis of their viability as a serious alternative/ replacement to conventional products Harm reduction products must be evaluated on the basis of their viability as a serious alternative/ replacement to conventional products