TOBACCO FIRM TO BE GRILLED OVER TARGETING SMUGGLERS

MARKET researchers for one of the country's largest tobacco firms discussed
targeting smugglers in an attempt to boost sales, according to documents
seen by The Telegraph.

Briefing papers passed to the advertising firm M&C Saatchi set out a series
of bullet points to be considered when promoting Amber Leaf, a brand of
hand-rolling tobacco. A large proportion of loose tobacco on sale in
Britain is known to be smuggled from abroad to avoid high levels of duty.
Key issues for the brand, owned by Gallaher, were said to include its
"adoption by bootleggers". A "co-ordinated approach" to promoting the brand
would include "trial through bootleggers and Duty Free".

Peter Wilson, the chairman of Gallaher, which also makes Benson & Hedges
cigarettes, will be questioned by the House of Commons health select
committee on Thursday about the documents, which it obtained from M&C
Saatchi. The documents include an analysis of rolling tobacco consumption
throughout Britain which shows that in some areas up to 85 per cent of the
loose tobacco used is "smuggled".

But, other bullet points note, Amber Leaf is "not chosen by bootleggers"
and one aim is to focus on "UK distribution". Most of the bootleg tobacco
that finds its way into Britain comes from Belgium where tax on rolling
tobacco is five times lower. Another section refers to a strategy to
promote its brand there. This includes the "introduction of a 50g new
design from January 1998" and "free papers" from April 1998.

MPs will ask Mr Wilson what action, if any, was taken after the documents
were drawn up. The Liberal Democrat MP Peter Brand, a committee member,
said the implications of the document were "disgraceful". Gallaher has
publicly condemned smuggling and in its annual review the company said that
it was "working in partnership with HM Customs & Excise" and was
"vigorously tackling the trade in illegally imported cigarettes and
hand-rolling tobacco".

The company said last night that smuggling was a big problem with rolling
tobacco and that Belgium was a primary source of imported goods. It said
that it had sought repeatedly to raise the issue of high British tobacco
taxes with ministers. A spokesman said the company chairman would be
prepared to discuss the issue with MPs.

A spokesman said: "It would appear that the document probably is a
marketing presentation that has come from us to M&C Saatchi," said a
spokesman. Because the tax in this country is so high 80 per cent of all
hand-rolling tobacco is smuggled in the UK and bought outside the UK. It's
horrendous. "We are against smuggling. We want to sell the tobacco products
through the traditional retail trade but it is a nonsense to have border
controls removed when taxes haven't in any way been harmonised. The tax
difference is so horrendous that the incentive is there for people to
bootleg. The tax in the UK on rolling tobacco is five times that of Belgium."

Tobacco chiefs have been called to appear before the select committee as
part of their inquiry into the tobacco industry and the health risks of
smoking. On Thursday, Mr Wilson will be accompanied by Martin Broughton of
BAT, Gareth Davies of Imperial Tobacco, David Davies of Philip Morris and
Axel Gietz of Japan Tobacco.

M&C Saatchi, which has already been questioned by MPs, provided the papers
to the select committee after a request from MPs. The advertising firm
refused to comment last night. The Government loses UKP2.5 billion a year
in duty as a result of tobacco smuggling, and about UKP700 million of that
involves handrolling tobacco.

Small-scale bootleggers, who buy tobacco on the Continent and resell it in
UK shops, market stalls and pubs, are responsible for most of the illegal
handrolled tobacco trade in Britain. Cigarette smuggling tends to be on a
bigger scale with large lorry-load consignments coming into Britain.