The US tobacco company, Liggett’s announcement that they had joined
the rest of the world in accepting that smoking is addictive and can
cause cancer threw the industry into turmoil. BAT Industries was
obviously in a quandary. It has no tobacco interests in the UK,
preferring to focus on subsidiaries with more cuddly products such as
financial services through Allied Dunbar.
Yet BAT chief executive, Martin Broughton felt duty-bound to respond,
attacking Liggett’s move as a ’desperate ploy’ to sell its ’failing
A BAT spokesman was quoted as adding the tobacco industry line that
cigarettes are not addictive and that links with cancer have not been
conclusively proved. Tobacco companies are to medicine what
flat-earthers are to geography.
You can understand Broughton’s dilemma. BAT makes about dollars 1
billion in profits from its US tobacco subsidiary yet, because of
impending litigation, the US stock exchange is in effect valuing those
profits at zero. Even if tobacco companies win their US court cases this
year, the US Administration, elements of Congress and a considerable
number of states have declared war on tobacco companies. If litigation
doesn’t work under current law, they’ll change the law.
It can only get worse. President Clinton broke the taboo of presidential
candidates throughout the 20th century that you can’t take on the
tobacco lobby because you’ll lose the south.
Whether or not tobacco is a victim of virulent American political
correctness, what happens today in the US will be here tomorrow. Labour
has already pledged to ban tobacco advertising. A Private Members’ Bill
to impose further restrictions is also likely to be passed by a new
So what future for BAT’s tobacco interests? Liggett’s decision to seek
compromise with the federal authorities in settling tobacco claims may
force the rest of the industry to follow suit. In the medium term,
giving away a substantial proportion of tobacco products in return for
an end to litigation may well be the best deal the besieged industry can
It is difficult to foresee any good news for the industry in the US and
Europe in the immediate future. The outlook is more legislation, ever
higher duties and taxes and even greater restrictions on the ability of
smokers to smoke. And, interestingly, an increasing number of companies
are making it contractually clear that they do not want to share client
lists with tobacco companies. BAT is hinting at demerger of its tobacco
interests. That would be good for PR.