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SOCIOPOLITICAL STRATF)GY I 1 I I I I I I I I 0 I I In the next five years the assault on cigarettes and smking is expected to reach a level comparable to the anti-alcohol drive of the pre-Prohibition years. Led by Surgeon General Yx)cp, virtually all public health associations and various politicians, the anti-smoking imvement has three main goals: • Make smoking an unacceptable behavior in any social context. • Make cigarette promotion and advertising illegal. • Make cigarettes themselves more expensive through heavier taxation. During the plan period, we will face legislation to increase the federal cigarette excise tax, to ban print and outdoor advertising, to prohibit sanpling and promotion and to forbid smoking in any public place, office, comron carrier, restaurant or acccmrodation. The most recent Surgeon General's Report on enviromrental tobacco smoke has further demonstrated that the anti-smoking forces are willing to prostitute science in their single-minded quest to alienate srokers from society. . Even when they return to their residences, smokers are accused of causing lung cancer in their spouses and abusing their children if they light up at home. The :mvement against smoking and smokers enjoys sanction from the nedia, business leaders and government akin to that accorded Prohibition after World War I and anti-camrnznism in the early 1950's. Scientists are actually blacklisted for statements or research findings at variance with the party line of the health bureaucracy. History offers some reason for hope since the pendulum swung back against Prohibition and the McCaxthy brand of anti-conmmulism. Our strategy then needs to be a sustained holding action with aggressive counterattacks whenever we have the opportunity to demonstrate weakness or fanaticism in our opponents. In the U.S. particularly, we also have powerful traditions operating in our favor: • Americans do not like taxes on anything though some taxes are less objectionable than others. • Americans ~o not like goverrmnnt interference in an individual `s life though what is acceptable in practice is often at variance with the overall principle. • Americans value free speech even for those they dislike though they would rather have those they dislike speak quietly. By molding our efforts against the anti-smoking rrovement in accord with these traditions we have been able to blunt some attacks: , I • Since 1983, we have kept the federal excise tax at $8.00 per thousand and the growth of aggregate cigarette excise taxes below ~ the inflation rate. Of_the 32 states that considered tax increases ~ in 1986, only six enacted an increase. Thus, cigarette taxes ~ continued to decline as a percent of retail price. ~ ~ ~ A-35 ~ ~

s GROW'PH IN FEDERAL AND STATE EXCISE TAXES Cents Per Pack Fiscal Average Year* Federal Excise State Excise % Increase in State 1982 8C 13.5G 1983 16~ 14.7~ +8.9% 1984 16(~ 15.3G +4.1% 1985 16~ 15.9(~ +3.8% 1986 16C 16.2G +1.9% * July 1 of previous year through June 30 of year indicated. • Although states considered nearly 70 bills to restrict tobacco marketing, none enacted restrictions on cigarette advertising, pramtions or sampling in 1986. Atlanta, however, did ban cigarette sampling in public places. • We have slowed the increase in statewide restrictions on smoking: 35 states considered such restrictions in 1986, but only six enacted some form of smoking restriction. Because of their sheer number, localities remain a problem: 189 cities and counties considered such restrictions last year and 78 adopted some form of restriction. • We successfully blunted the anti-smoking media fest of Smokeout Day with a Great American Smoker's Program. According to the Cancer Society's own figures, participation in the Smokeout dropped by six million in 1986. Unless we continue to act forcefully against our opponents, the cigarette market will be fundamentally changed. Since PM-USA coimiands nearly 37 percent of industry sales, 47 percent of estimated industry profits and continues to grow one share point each year, we have the most to lose fran that change. Thus, we must be willing to lead the fight against the anti-smoking movement and spend considerable resources to defeat or mitigate their initiatives. O&7ECI'IVES FOR THE PLAN PERIOD Our strategic objective is to maximize industry volume by aggressively blunting attacks from anti-smoking advocates and improving public perceptions of smoking. We now have underway several major programs to influence political decision-makers, smokers and non-smokers and the mass media. We have identified four primary fields of battle: • The social ostracism of smokers and consequent inhibitions about when and where to smoke caused by health-risk perceptions, effective lobbying by anti-smoking groups, restrictive smoking policies (public and private) and biased media coverage. A-36 I I I I I I I I I I I I I I 11 m

r N ~ I I I I I I I I I I I I I • Restrictions on the type of cigarettes sold, haa they are sold, and where they are sold, including advertising bans, sampling restrictions, increases in legal age and "self-extinguishing" cigarette bills. • Pressure for higher excise taxes by federal, governments. state and local • Legislation on product liability. The short-term and long-term objectives for PM-USA's sociopolitical strategy are summarized below. SOCIOP(LrPICAL aBJDMM Issue 1987 Qbjective Excise Tax No federal excise tax increase, Increases aggregate state increases below inflation rate. Swking Prevent enaciment of new Restrictions restrictions and strengthening of existing restrictions. Advertising Prevent any further restriction Restrictions on advertising, sampling or prccmtions. Product Prevent canpulsory requix+euents Requirements regarding ingredient dis- ,closure or "self-extinguishing" cigarettes. Ad Valorem Replace Hawaii's ad valozen Taxation cigarette tax with a specific excise tax. Social Continue efforts to support Acceptability srokers against anti-smoking activities via PM Ma azine, SYmker's Day and aggressive media relations. Product Press ahead with reform Liability of product liability laws in New Jersey, Wisconsin, Texas and California. A-37 Long Range Cbjective Aggregate federal/state tax increases kept below inflation rate. Limit restrictions to segregating smokers, not banning snaking. Force restrictive laws and regulations to local and individual business level and away fran state/federal govermient. Link cigarette advertising and promotion to the First Amerrinent to prevent restrictions. Insure that any product requiretnents inpcsed by law do not have an adverse effect on consumer per- ceptions of cigarettes o"r cause significant production problems. Prevent passage of any ad valorem cigarette tax. Create a politically power- ful coalition of smokers to blunt assaults against smoking and cause problems for the instigators of such assaults. Work toward a legal envirorment in which we can defend ourselves against liability suits in federal or state oourts.

STRATEGIFS To combat the well-organized, well-funded anti-smoking movement in this country and abroad we have put into place programs that target three groups whose decisions and actions ultimately determine the long-term viability of our marketplace and product. Political Decision-Makers We have acted to improve our ability to participate directly in the political process. To influence federal, state and local politicians, a regional public affairs network has been established to imnitor and combat (in conjunction with the Tobacco Institute) legislation unfavorable to PNf-USA interests and coordinate our activity with the field sales force and other allies. State political action conmittees have been created to make contributions to key political decision-makers in states where direct corporate contributions are not permitted. At the federal level, the revised tobacco program has begun to improve farmer-matiufacturer relations. We are building a new tobacco coalition to strengthen our political base in Congress. We plan to reinforce our relationship with the agricultural conuuni'ty through an active outreach program under the auspices of the National Tobacco Education Council. Stmkers and Other Potential Allies Direct lobbying alone cannot stop the anti-smoking nuvement or influence an indifferent public and media who tolerate fanatical anti-srroking activities. To enlist public support, recruitirent, education, we have a ecnprehensive program of identification, conmunication and mobilization to reach out to the public, particularly program targets: snokers. Specifically, the constituency developrrent • Snakers we have identified through PM-USA's direct marketing and promotional activities. • Consimiers who commuuiicate directly with PM-USA. • Retailers, wholesalers tobacco products. and vendors who sell or profit from • Organizations that support or should support the industry. • Smokers and non-smokers identified through special political mobilizations and promotions. Another activity that is designed to both identify and educate smokers is the ft.tltifilter on-pack issues coupon, which we are expanding to Parliament carton inserts in February. We will consider using all our brands to connnunicate with snbkers in the future. We also solicit allies through select advocacy advertisements in newspapers. our database now includes nearly five million smokers and may eventually include one-third of the estimated 60 million UTnokers in the U.S., with whom we will comnun.icate in one way or another as we go forward. Once allies are identified, they participate in a comprehensive canmunication program on smoking issues designed to appeal to each group's concerns. The nnst visible cocrern-mication vehicle is Philip Morris Magazine. The fall issue went to rrore than five million households. We are planning regional smoker newsletters which will be precursors for smokers' clubs or associations. A-38 I I I I I

. As we gather nanes, they are entered into our conputerized political mobilization system to identify voting districts and elected representatives. When political threats arise, we irobilize groups to commimicate with political decision-sakers. Nbre than 300,000 persons have actively supported us in political battles over taxes and smoking restrictions since 1985 by writing or phoning their elected officials. I I i t 1986 MOBILIZATION SYSZEM UTIZIZATION Issue Outaome Repeal of deductibility Repeal proposal deleted for federal excise taxes fran tax reform bill Increase federal excise tax on cigarettes by 8~ Increase Florida (5% of PNF- USA market) excise tax by 84, Enact tough smoking restrictions in all federal buildings (GSA proposal) Enact ccxnprehensive srroking restriction law covering workplaces, restaurants and buildings in New York City I Continental Airlines 10% discount to non-sroking passengers Mass N3edia Increase proposal deleted fran budget bill Increase reduced to 3~ Final regulations significantly watered down Proposal bottled up in City Council Discount program dropped after one month The mass media, like political decision-makers, require a special program to achieve a more balanced presentation of smoking issues. The target audience is the print and broadcast editors who influence the general public. we have created a ccxnprehensive nbnitoring system to track articles and editorials on smoking in daily newspapers and periodicals throughout the U. S. This system allows us to detect energing issues and unbalanced reporting in order to respond accordingly. We have responded in several ways: • Rebuttal pieces, and advocacy advertising both by Philip Morris and non-industry allies. I 4 q • Letters to the editor fran allies. • Meetings with editorial boards and publishers. • Special press briefings and media events. • National Essay Contest on comrercial free speech. • PM Magazine "news wire" to disser,unate information to local nedia to show there is another side of the smoking issue. We have made progress with the media in forcing at least some attention to our side of the debate and convincing reporters to shoa the sane degree of skepticism toaard our antagonists as they shaa to us. A-39