bat sustainability report 2007 - Marketing practices
We aim to increase our market share, and the value of our share, amongst the one billion or more adults who are tobacco consumers and to deliver value to our shareholders.
In this, we are pursuing strategies appropriate to a Fast Moving Consumer Goods (FMCG) business in a mature market. However, the nature of our products means that they should be subject to appropriate marketing controls. This is why, in 2001, we collaborated with other international tobacco companies to establish the International Tobacco Product Marketing Standards (IMS) building on our previous Advertising Principles.
In 2007, in response to stakeholder feedback, we decided to update these Standards to strengthen them and to ensure they remain relevant to today’s marketing environment. The changes we have made cover, for example, further procedures for adult verification and the responsible use of new media such as the internet and other electronic messaging. Our adoption of the updated IMS has meant acting without the collaboration of the industry.
All our companies are expected to adhere to these Standards. In some countries, our updated IMS can be stricter than the local laws and where this is the case, we encourage regulators to strengthen their legislation to create a level competitive playing field and to raise industry standards more widely. While we recognise that the law is more stringent in many countries, our companies in 57 countries reported that in 2007, our updated IMS exceeded or were generally aligned with the provisions of local laws.
"IMS states it is also about principles and spirit. It is interesting to see how you’re trying to do it. Spirit is critical."
Socially Responsible Investment analyst in dialogue
We understand that for some, our updated IMS do not go far enough. One of our key challenges is meeting stakeholders’ expectations of our marketing activity while also remaining competitive.
This was a key topic of discussion in dialogue, although a solution was not identified. We will continue to adhere to our updated IMS (or local law, if more restrictive) and hope that they will ‘raise the bar’ within the industry by establishing a global benchmark for voluntary marketing standards.
The Board expects all our businesses to be able to confirm their adherence to the updated IMS by 30 June 2008 at the latest.
Are we meeting our Standards?
Examples of how our updated IMS address tobacco product brand communications include:
- Not to be aimed at, or particularly appeal to, youth;
- Not to feature a celebrity nor link tobacco with sporting, professional, social or sexual success;
- Not to appear in printed publications unless measures are taken to confirm that at least 75 per cent of readers are adults;
- To carry a health warning in addition to the health warnings on product packs;
- No use of billboard advertising larger than 35m2 and no placement within 100 metres of a school;
- No use of web, television, cinema or radio advertising unless the audience is restricted to adults;
- No direct or indirect product placement;
- No involvement in event sponsorship unless it is reasonable to believe that the participants and audience will be adult;
- No direct consumer contact except with verified adult consumers;
- No unsolicited free samples.
During 2007, no material breaches of the updated IMS were found and brought to the attention of the Audit Committee. Some minor instances were identified and dealt with at a local level. During 2007, the anti-smoking campaign group Action on Smoking and Health (ASH) published a document alleging that there had been significant breaches to our Standards at various times.
We immediately held an internal audit investigation. We found that many of the allegations were either factually incorrect or that the activities mentioned were in fact compliant with the law and in adherence with our updated IMS. However, in two instances, we found that breaches had occurred and action should be taken.
One incident concerned advertising in Chile. The advertising had stopped by the time of the ASH comments, and although it was compliant with local laws, we agreed that its content did not meet the spirit of our Standards, particularly when considered out of the local context. Marketing activity is now being approved at a more senior level of local management.
In a second incident, in the Philippines, promotional activities took place without the appropriate age verification processes and other controls being in place. The local company acknowledged the control failures and, since the appointment of a new General Manager, Corporate Affairs Manager and legal adviser, tighter controls have been implemented.
We invited ASH to discuss our findings but received no response.
What’s next?
We will continue working to ensure adherence by Group companies to our updated International Marketing Standards.
We are considering how we might develop further measures of adherence throughout the business to reassure both ourselves and our stakeholders.
Each year we will continue to report on any breaches and remedial action taken.
More information on both our updaed IMS and our approach to modern tobacoo marketing is available at www.bat.com/marketing 
© 2008 British American Tobacco