Judge and Jury: Smoke got in BAT’s eyes when it came to tobacco truths - BAT Industries should give up trying to follow the old tobacco industry line, says Michael Craven, managing director of Market Access

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.

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

company’.



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

parliament.



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

strike.



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.



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