Tobacco Documents Online

Why can't you do an estimate of how many people cigarettes kill? Smoking is a risk factor in certain diseases. That is, there is a statistical association between smoking and those diseases. A causal link between smoking and disease has not been demonstrated. Why won't you fund sting operations to prevent retailers from selling cigarettes to minors? We are not a police organization, but a business. Also, we don't want to finance an activity that deliberately forces children to break the law in order to prove some point adults want to make. Why are you fighting the Waxman bill, when it seems logical, if second hand smoke is such a problem, to create separately ventilated smoking areas? The bill is based on unsound science. There is no evidence that environmental tobacco smoke is harmful to non-smokers. Moreover, there is no evidence that separately ventilated areas are more effective than simply having separate smoking areas. What is obvious, and something Mr. Waxman glossed over at his recent hearings, is that separately ventilated areas would be prohibitively expensive for most of those who would be required to provide them, so the Waxman bill would create a de facto smoking ban. Why are you misleading consumers in California with a petition that appears to support tougher smoking restrictions when, in fact, it would dilute local ordinances? We are not misleading consumers. We were approached by restaurant and lodging businesses and associations who were concerned by the patchwork of smoking restriction laws that was cropping up in "California. Acceptable, legal behavior regarding smoking was changing from town to town. The businesses preferred and supported uniformity, and so did we, so we joined in the petition drive for a uniform, state-wide smoking ordinance.

Why can't y, Smoking is a association I: smoking and Why won't y cigarettes We are not a an activity th~ some point au,,,,o ) cigarettes kill? here is a statistical causal link between ,tailers from selling we don't want to finance law in order to prove Why are you fighting the Waxman bill, when it seems logical, if second hand smoke is such a problem, to create separately ventilated smoking areas? The bill is based on unsound science. There is no evidence that environmental tobacco smoke is harmful to non-smokers. Moreover, there is no evidence that separately ventilated areas are more effective than simply having separate smoking areas. What is obvious, and something Mr. Waxman glossed over at his recent hearings, is that separately ventilated areas would be prohibitively expensive for most of those who would be required to provide them, so the Waxman bill would create a de facto smoking ban. Why are you misleading consumers in California with a petition that appears to support tougher smoking restrictions when, in fact, it would dilute local ordinances? We are not misleading consumers. We were approached by restaurant and lodging businesses and associations who were concerned by the patchwork of smoking restriction laws that was cropping up in "California. Acceptable, legal behavior regarding smoking was changing from town to town. The businesses preferred and supported uniformity, and so did we, so we joined in the petition drive for a uniform, state-wide smoking ordinance.

We have never hidden our involvement. Our name is right on the front page of the petition. In fact, although some localities might have to ease up on their more stringent laws to conform to the preemptive state-wide law, the majority of California communities would have to increase the stringency of their smoking restrictions, and the law would give California by far the strictest set of smoking restrictions in the country. We would have preferred less strict requirements, but agreed to compromise in order to achieve a uniform code that was not confusing to our consumers. How many kids smoke Marlboros? We don't market to children, and we don't measure smoking incidence among children. How much do you spend on programs to prevent kids from smoking? We spend multi-millions of dollars on a variety of programs including our lobbying efforts in support of minimum age of purchase legislation, the crime seminars we conduct, our "It's the Law" program and advertising efforts, and the industry wide efforts we participate in. Why aren't you more outspoken against the use of cartoon characters in cigarette advertising? This is a First Amendment issue. We don't tell R JR how to conduct their advertising and we don't expect them to tell us how to conduct ours. If you found that the Marlboro Cowboy did appeal to kids, would you get rid of the campaign? No, but we would continue to assure that we marketed only to adults, and that includes careful selection of where our advertising is placed, to minimize exposure to children. Now, it is true that kids will see a billboard from time to time, but, clearly, it is unrealistic to expect any business to reduce its advertising to some lowest common denominator of what is palatable to children. If tha~ were the standard, 99 percent of the advertising in this country -- including car and insurance ads -- would disappear.

If you are complying with all government regulations like you say you are, why is Congress after you? There are politicians in Congress who really cannot begin to come up with answers to the major questions facing this country -- issues like crime, housing, drug abuse, hunger and education -- but they find they can grab headlines and get coverage on the 6 o'clock news in their home districts by attacking the tobacco industry. It's a no-risk deal for them, that makes it look like they're doing something, and so they do it. Why did you sue ABC for libel, when for years the media have called you and PM "Merchants of Death," "murderers" and killers of half a million people a year? The ABC suit is very narrowly focused on an issue of direct libel that had an immediate negative impact on PM's stock price. " Do the various law suits PM has recently launched indicate that you've opted for a more aggressive strategy than you've followed in the past in dealing with anti-smoker activity? I think we can all agree that the controversy surrounding the tobacco industry has heated up recently. We are firmly committed to &newer our critics and to get the facts out. We have been doing this through paid advertising. We've also taken legal action where we think we have been harmed by misrepresentation and falsehoods. We will continue to get the facts out in every effective way we can. Would you support legislation that raised the minimum age for purchasing cigarettes to 21? We think that because people are considered by a number of criteria to be adults at age 18 -- the age at which they can vote, drive, and join the armed forces among other things -- that is a reasonable age limit to set for the purchase of tobacco products. Does Philip Morris do any biological testing of cigarette smoke? Yes. We believe that it is responsible to understand our products and ensure their quality for our consumers.

What evidence would you require to prove that nicotine is addicting? The definition of addiction is undergoing significant changes, and there is no agreement in either the scientific or lay community about what addiction is. Claims even are being made that coffee and chocolate are addicting. Will I get less tar and nicotine if I switch from Marlboro to Marlboro Lights? Yes. Is the FTC method flawed? No. It provides a consistent method for comparing the smoke deliveries of different cigarettes. The FTC method is very similar to testing methods used around the world. Are your export cigarettes the same as cigarettes for domestic sale? Our export cigarettes are comparable to domestic cigarettes, and they meet the specifications required by the countries in which they are sold. What are you doing to produce a safer cigarette? We have worked with other manufacturers on the government study group to develop a viable method for testing fire safety. We are also working diligently to develop a fire safe cigarette. Why did the ingredient list change so much over the past few years? We are constantly doing research to improve the tastes of our brands, to manufacture them more efficiently, and to meet consumer preferences. As a result, we make changes in ingredients, and will continue to do so. In addition we have been consolidating the materials used in our products to reduce costs. Why are there any ingredients on the list that are not approved? Every ingredient has been approved and/or regulated by some government in the world.

The GRAS list is for substances that are consumed, why do you say they are safe to be burned? The assessment of ingredients conducted by outside experts determined that the ingredients are safe. Won't you go out of business if you don't get kids to smoke? The industry has been declining 2.5% per year and we expect it to continue to decline at that rate. We have been very successful at increasing our share of the Industry at the expense of our competitors. Our marketing efforts are focused on maintaining our existing consumer base and attracting competitive smokers. What controls do we have to prevent internal documents from getting out to the Public? We have policies and procedures in place for the handling and distribution of confidential documents. We can only trust that our employees will be responsible and adhere to these policies. There is nothing so far that would indicate that the majority of our employees are not honest and do not respect our policies, If you have nothing to hide and are interested in finding out if nicotine is addictive, why did you close your animal laboratory? (Under discussion with Legal.)

Why does it appear your sales volume went down more than consumer offtake? Did you continue loading in 1993 and how much? Why did you reduce the load if you previously stated it was good business practice? Our Premium price reduction last year was successful in reversing downward trends for Marlboro and our Other Premium brands and have impacted the way we market our products. Our trade program was reduced in 1993 -- (the impact was about 10.5 billion units). While our concerns about Marlboro's inventory and out-of-stock position at retail remain top of mind, we have modified our approach in dealing with these issues. Our Wholesale Masters and Retail Masters are designed to help us manage our inventories and product availability to our consumers without the need for large periodic buy-ins. These programs will increase our flexibility to address a dynamic market place smarter and faster. If you're only chasing competitors' volume, why spend so much money? We estimate about 8% of consumers switch brands and a slightly higher level (12%) occasionally purchase alternate brands. Many of our programs are designed to encourage competitive smokers to switch to our brands which contributes to our share growth. More importantly, a large portion of our resources are focused on protecting our existing franchises -- like Marlboro. We consider this investment spending in the long-term viability of our brands. Programs like Marlboro Adventure Team are designed to keep our smokers in the franchise and encourage brand loyalty. Market share is up - when will we see IFO return to $5 billion? Given the declining trend of Marlboro and our other Premium brands in 1993, it is unlikely we would have made $5 billion last year. If we hadn't implemented our new strategy last April, we estimate Marlboro's share would have dropped to 18% or 19% in 1993. Our new strategy and the Premium price reduction have resulted in the restoration of Marlboro's growth which is the basis for our long-term profit growth.

How can PM-USA say that technology for fire safe cigarettes is proprietary? We are working to develop a fire safe cigarette and we consider information in the research and development stage to be proprietary. We do not have the technology for fire safe cigarettes - if we find the solution we would make it available to the Industry. Why do you sell Virginia Slims if they taste bad? Virginia Slims Superslims is the style of Virginia Slims referred to by the government study group. While the majority of smokers reject its taste, our testing showed that women interested in very slim cigarettes found its taste to compare favorably with competitive brands. With plans for massive layoffs, what will the impact be of disgruntled employees? Over the years, PM has maintained a strong relationship with its employees. PM respects that relationship, so in these times when the industry dictates downsizing, our employees realize that PM will act fairly and humanely in reducing its employment base. As a matter of fact, over 85% of our headcount reductions have been accomplished through some incentive program, primarily early retirement. Although more costly, we believe this is provides a kind way for employees to separate from the company. In turn, we end up with a group of ex- employees who are not disgruntled but still supportive of the company. Given the restrictions, etc. on the horizon, what impact will it have on IFO? What plans do you have to protect income? We are aware of increased anti-smoking forces that continue to seek ways to restrict our consumers' ability to enjoy our product. In light of the health controversy, eroding social acceptability of smoking, the economy, increasing excise taxes and the increasing number of bans and restrictions, we still anticipate profitability. [CAGR-6.6% over next five years.] We will continue to aggressively combat anti-tobacco legislation that restrict our ability to market our product as well as our consumers' right to use our product. We will push for accommodation instead of total smoking bans. We will continue to develop products to address social acceptability. In addil~ion, we will continue to implement additional cost savings measures to further protect our income.

Was it a good idea to reduce cigarette prices in light of the Clinton administration's proposals to increase the FET? Our decision to reduce prices was based on sound business reasons. The action was taken to improve the market position of our premium brand franchises and it. has accomplished what we set out to do. The government's proposal to increase the FET is a separate issue that we are committed to fighting. What would the impact be on PM-USA's unit volume and IFO of a $.75 FET increase, We estimate that an FET increase of $.75 a pack would impact unit volume and IFO by the following amounts in 1995: (Units in Billions) 1994 1995 % Change Industry Volume 471.0 384.4 (18.4)% PM-USA Volume 201.1 .166.4 (17.3)% PM-USA I FO $3,085.0 $2,541.3 (17.6)% Projecting through 1998, unit volume and IFO are forecast at: (Units in Billions) 1993 1998 % CAG 1993 -98 Industry Volume 461.6 356.3 (5.0)% PM-USA Volume 194.7 160.7 (3.8)% PM-USA IFO $2,808.0 $3,051.6 1.7% Is Philip Morris driving small wholesalers out of the business through its new Wholesale Masters program? Quite the contrary, the PM USA Wholesale Masters program will provide the smallest wholesalers (estimated between 100-200 accounts out of a total of 2,000 wholesalers; representing approximately 1% of the total annual industry volume) with the necessary tools to more effectively compete with larger size wholesalers.

Under the PM program, the smallest wholesaler would need to invest approximately $5,000 to $7,500 in computer hardware and software ( the difference will depend on whether or not the account already owns a computer terminal). In return, the wholesaler would receive free technical assistance and approximately $10,000 in annual payments from PM, additional payments are available from $5,000 to $6,000 from RJR's program. Is Philip Morris driving small retailers out of the business through its new Retail Masters program? This has never been an issue. PM USA offers a low volume program to small retailers, called Retail Associates. We are also running a six-month program with low volume accounts aimed to improve their business through increased promotional dollars/flex funds. Is Philip Morris driving small retailers out of the business through its new Retail Masters program? This has never been an issue. PM-USA offers a low volume program to small retailers, called Retail Associates. We are also running a six-month program with low volume accounts aimed to improve their business through increased promotional dollars/flex funds. Has PM-USA manipulated its income through trade loading? Checking with Legal.