Thursday 2 November 2017

OMG! BAT's plans for Next Generation Products

Last week British American Tobacco held an "investors day"  in London, U.K, and invited investors and analysts to learn more about its "next generation products". The 10 presentations made are now available on the BAT web-site and they are worth a very close look.*

There is much to ponder in these pages, as the company sketches out its interpretation the drivers of nicotine use, its plans to keep people using nicotine in cigarette or other forms, and the ways it intends to do.

BAT's operating framework for "Next Generation Products" like tobacco-heating and vaping products challenges the mindset of groups like our own which have for decades focused on reducing cigarette use. It goes beyond the 'harm reduction' proposals made by those within the health community who see these new technologies as an new tool to reduce the harms from nicotine addiction.

BAT's approach is the one we should expect from the manufacturers of 'fast moving consumer goods'. But it is one that was not anticipated when the Tobacco Act (or even S-5, the proposed amendments to that Act) was drafted. Indeed, their plans seem to transcend the protective measures which we have promoted and achieved through the federal Tobacco Act or the Framework Convention on Tobacco Control.

It's hard to know where to start:

What is the product?

Public health authorities continue to rely on clear distinctions between (bad) tobacco and (medicinal) nicotine. Our recent struggles on how to regulate e-cigarettes in this binary model have exposed the vulnerabilities of this approach.

BAT's risk continuum model exploits those vulnerabilities: its move towards product fragmentation works to further erase the line between the nicotine products we are prepared to accept and the tobacco products we are not.

BAT 2017 Investor day

Conversion instead of quitting
We already have a pretty good idea that the the difference between a former smoker and a relapsed smoker is often a question of months or weeks, and that successful quitting eludes too many smokers.

Rather than find a way to help people quit, BAT wants to block this process. Its goal is to "convert" dissonant smokers to other forms of nicotine use. It illustrates this in the slide below - conceptualizing that on the road to conversion the company must gain trust, and move people from thinking "Should I give up or cut back?" to "It's part of my life."


A new approach to marketing 
In its quest to "convert" would-be quitters, to establish "new behaviours" and to "acquire.. new consumers" BAT has designed a marketing approach that goes beyond the 4Ps (product, place, promotion, price) that served the industry well in recruiting 1 billion or so smokers world wide.

Now it says there is "a very different marketing 'job to be done''. It presents a series of "consumer engagements" that develop from "acquisition" (experimentation) to "conversion" and "loyalty" (addiction?).

Countries which have aligned their promotional restrictions with the FCTC article 13 guidelines on tobacco promotion will find themselves with little regulatory protection against the "social selling",  "automated hypercare" tactics that are foreshadowed here.

A cynical view of unfilled needs.
I will leave to the philosophers and economists to describe how BAT is approaching the utility or considerations that might influence a consumer to use the various products that the company has on offer. "Performance" seems to be their code-word for addiction, but the other factors it names -  affordability, social consideration, potential for reduced risk, exploration, self balance and connectedness speak to a much more granular view of attraction of smoking/using nicotine than is often presented.

This is not the first time that this industry has identified the human desire for autonomy, experience and social acceptance as needs to be filled with an addictive product. It's not often it is laid out quite so unabashedly!



There is much more insight into the plans of this company and the possible road ahead that can be mined from these presentations. What is not so clear is how -- and when -- those of us who are concerned with public health and have a responsibility to protect it will respond.


* You have to affirm before accessing them that you are an institutional investor or shareholder. With our forced investments in the company through the Canada Pension Plan Investment Board, Canadians workers certainly qualify.