Anne Landman's Collection
GOALS: Where do we HAVE to be in the year 2000?
Abstract
This Philip Morris (PM) document is a brass-tacks discussion of concessions the embattled tobacco industry is willing to make, and for what gains. For bargaining purposes, the list is divided into "must haves," "Must haves-plus," and "want to haves." "Must Haves" include keeping cigarettes legal, making sure smoking remains a "tolerated social activity," maintaining a retail distribution infrastructure for cigarettes and eliminating lawsuit liability threats from "the primary issue" (the health issue) and the ETS issue (environmental tobacco smoke). To get these "must-haves," PM is willing to concede to "incremental, intermittent tax increases, ingredients disclosure...smoking bans in transient and common areas...bans on sampling...bans on vending machines, industry marketing code, youth no-smoking advertising...industry marketing code written into law."
The paper describes the circumstances under which the company (or the industry) would trade a "want to have" in order to keep a "must have." Many of their "want to have" items have already been traded away for the 1998 Master Settlement Agreement (MSA). Those concessions included bans on sampling through the mail, bans on vending machines and some forms of advertising, incorporating youth no-smoking advertising, etc.
The document indicates exactly where government needs to step in to regulate the industry:
"All give-ups should have a legislative or specific business purpose--only law can destroy must-haves or want-to-haves."
Government can, then look at PM's list of "must-haves" and see where it needs to take action against cigarette companies to improve public health.
Another PM statement is that "Public opinion and media coverage are only important insofar as they affect government." This can be interpreted as meaning that PM's "feel good" advertising (ads that show PM feeding the hungry, aiding domestic violence victims, etc.) is ultimately aimed at the government.
The paper makes some interesting observations about the significance of advertising in American vs. European culture:
"Commercial advertising in Europe is less central to culture than in U.S. -- ads in Europe are more a mark of 'illegitimacy' than 'legitimacy."
and...
"In Europe, overall media coverage of arcane risks is less sensational and smoking among social elite is more widespread making social acceptability of smoking higher..."
This is a very rich document about the tobacco industry's strategies to defeat public health efforts on all fronts--public and private. It also shows that the tobacco industry "thinks" and plans about a decade ahead of public health advocates and government authorities to plan how to head off actions these groups will take against it. It also shows that the industry has a very clear game plan for how to deal with actions that threaten their profits and control of their product.
Fields
- Quotes
Our strategy MUST be designed to maintain and create the political conditions to attain our primary goal [still be a viable, profitable business] and SHOULD be designed to maintain the political conditions to attain our secondary goal [continue income and share growth rates...]
THE ELEMENTS NECESSARY TO REACH THESE GOALS CAN BE DIVIDED INTO WHAT WE MUST HAVE AND WHAT WE WANT TO HAVE:
MUST HAVE: Means those variables essential to maintaining a profitable viable business, thereby meeting our primary goal.
WANT TO HAVE: Means those variables essential to maintaining a profitable, viable business with sustainable doubel-digit income growth and corresponding shre growth thereby meeting our secondary goal.
WHAT WE MUST HAVE TO ATTAIN PRIMARY GOAL:
(1) Cigarettes AS THEY EXIST TODAY today still a legal product (i.e., no law or regulation which would effectively ban current product, pricing or packaging).
(2) Smoking a tolerated SOCIAL activity -- i.e., smokers not ecluded from employment, obtaining insurance, etc.
(3) 400 billion cigarettes consumed by 40 million adults annually.
(4) Retail presence and sufficient distribution outlets to sustain widespread availability of product to consumers.
(5) Stability in product liability litigation on the primary issue [health] and ETS [environmental tobacco smoke]--i.e., no perceived threat of significant or excalating financial losses in court cases.
THE MUST-HAVES PLUS:
(1) Advertising to spread value-added "news" about the product.
(2) Tax rates equal to a stable or declining percentage of retail product price.
(3) Sponsorship and promotions to add value to the product.
(4) Flexibility to alter product attributes and packaging...
(5) Smoking still allowed in workplaces and indoor locations open to the public...
(6) Product liability litigation perceived to be no more a threat to PM than to Pfizer or PGG.
CONCESSIONS
(1) Incremental, intermittent tax increases. (2) Ingredients disclosure/labeling using food labeling as a model. (3) New and/or additional warning labels (size and location are main concern) (4) Smoking bans in transient and common areas (critical concern is preserving some accessible smoking area or section).
(5) Bans on sampling apart from a retail purchase or mail delivery.
(6) Bans on vending machines.
(7) Industry marketing code with private enforcement body (as in 60s and 70s).
(8) Youth no-smoking advertising in some ratio to brand ads.
(9) Licensing as enforcement mechanism to stop sales to minors.
(10) Industry Marketing code written into law.
STRATEGY PARAMETERS
--Must-haves CANNOT be traded or lost. --Want-to-Haves MAY be traded only to save a Must-have, otherwise they CANNOT be lost. --Concessions may be used to protect must-haves and want-to-haves. --No political magic bullets--only a product breakthough can change the basi situation, i.e., smoking is considered unhealthy and "rude."
--All give-ups should have a legislative or specific business purpose -- only law can destroy must-haves and want-to-haves.
--Public opinion and media coverage are only important insofar as they affect the government--we will never be liked and what we want is to be ignored.
--No "grand" compromise --antis are well-funded, enduring business.
NOT-SO-GRAND COMPROMISE
Proposal: Trade advertising for explicit tort preemption.
EFFECTS: (1) Remove litigation threat (2) Remove controversy caused by advertising.
DEFECTS:
(1) Declining core business lowers multiple as much as litigation threat.
(2) Litigation threat is not significant, just newsworthy.
(3) Threat can be effectively removed by changing state laws.
(4) Advertising is essential to secondary goals and surplus advertising dollars of competitors would worsen mix.
(5) Livelihoods of professional antis depend on critcizing the industry--they will not go away.
INTERNATIONAL EXPERIENCE "INDICATES":
(1) Consumers will pay much higher prices for cigarettes.
(2) Advertising of cigarettes not linked to social acceptability.
But U.S. may be different because:
--Sociodemographics are differentin Europe--cigarettes always a "luxury" due to post-war shortage and number of upscale smokers.
--Commercial advertising in Europe less central to culture than in U.S. --ads in Europe are more a mark of "illegitimacy" than "legitimacy."
--In Europe, overall media coverage of arcane risks is less sensational and smoking among social elite is more widespread making social acceptability of smoking higher and price elasticity of cigarettes lower.
KEY VULNERABILITIES
(1) Charge of marketing and selling to youth...
(2) Link of health care cost to supposed social cost of smoking...
(3) Continued fiscal problems in Washington and the states --Tax increases
(4) Federal regulatory bodies --FTC: all marketing activities --EPA and OSHA: smoking bans --HHS: disclosure of ingredients, ASSIST-type program --Justice: antitrust, broadcast of brand events, RICO --CPSC et sl: "fire safe" product
(5) State ballot initiatives --Large tax increases earmearked to antis
(6) Solid waste/environmental movement --packaging bans
(7) Statutory funding of antis, boycotts and general harassment...
(8) Tort litigation on primary issue, ETS and fire safety
--Loss of ability to provide balanced view on smoking and health issues. --Marketing activities curbed. --Product characteristics changed. --Costs
[Page 14]
STATE BALLOT INITIATIVES
Threat: Lare tax increases earmarked to the antis
Concession: Smaller increases with different or no earmarking.
Ongoing Programs: Reform state initiative process to make it more difficult to place tax initiatves on ballot.
- Company
- Philip Morris
- Author
- Presumed corporate author, Philip Morris
- Recipient
- Presumed corporate recipient, Philip Morris
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