Tobacco Documents Online

Industry Summary

Abstract

Buried inside this mostly-dull 195-page Philip Morris (PM) marketing report is some important information that should be noted by public health groups and authorities:

In noting the decline of smoking rates in the U.S., PM lists the major factors that have proven particularly effective at decreasing the demand for cigarettes: "the declining social acceptability of smoking, increased smoking restrictions, particularly in the workplace [and] rising excise taxes and prices..." Confirming that higher cigarette prices effectively decrease smoking rates, the report also says that lower-priced (discount) cigarettes help "keep some consumers in the marketplace" who otherwise would have quit.

The document also describes PM's opposition to fire-safe cigarettes:

"Anti-smoking groups endorse the 'self-extinguishing', or 'Fire Safe', cigarette as a way to...cause all cigarettes to look and taste the same. Such mandates could cripple the competitive advantage of leading brands and intensify the erosion of the overall cigarette market."

PM describes its strategy to fight fire-safe cigarette legislation on Page 150, Bates No. 2051363574:

"ISSUE: Efforts by anti-smoking groups to mandate a 'fire safe' cigarette could destroy the competitiveness of leading brands and increase the cost of manufacturing cigarettes. STRATEGY: ...PM-USA will expand coalitions among the fire prevention community and public policy makers to diffuse support for 'fire-safe' legislation at the state and federal level..."

PM also considered nicotine-replacement therapy aids (like the patch and gum) to be direct competitors. To fight the incursion of these products into the nicotine market, PM planned to develop a "proprietary alternative smoking product" called "Beta," which would "be marketed in direct response to such products as nicotine-releasing skin patches and chewing gum." [Page 37, Bates No. 2051363461]

The report also reveals the extreme importance of smoker databases to cigarette companies' continued ability to promote smoking--something public health authorities have largely ignored. As legal restrictions tighten on advertising and promotions, cigarette companies increasingly turn to huge databases of information that they gather on smokers to continue actively marketing cigarettes to large numbers of people:

"The marketing environment is likely to become more restrictive during the plan period, including additional restrictions on outdoor and event sponsorship. This necessitates creating alternative avenues of reaching the consumer. Developing a smoker name database will enable us to effectively reach a large number of smokers..."

Smoker databases are of such importance as promotional tools that PM girded itself to deflect any legislation that might restrict the company's ability to gather personal information on smokers:

"As the database becomes more critical to our marketing plans, it becomes essential that we protect it from legislated restrictions..." [Page 107, Bates No. 2051363531]

The document also makes it clear that PM fights restrictions on event sponsorship at least in part because these events provide the company with venues in whcih they can gather personal data on smokers (the company refers to gathering smoker information as "name generation.") The says PM should "Increase [the company's] presence at major events and use as source for name generation."

Also of interest to health authorities should be the information on Page 145 (Bates No. 2051363569) that describes PM's strategy to divert health department funds away from tobacco control and towards "support[ing] other health programs (pre-natal care, half-way houses, etc.)" (areas which don't threaten cigarette sales):

"Long Term Goals

• Counter ASSIST Program in 17 states: - Work with grass roots organizations to divert state health department funds, equivalent to the amount of ASSIST funding, to support other health programs (pre-natal care, half-way houses, etc.).

(Note: ASSIST was a widespread public health effort in the early to mid 1990's in the U.S. to reduce smoking rates in 19 states)

PM's plans also included efforts to eliminate public health restrictions on tobacco that were already in place:

"Rollback Program:

- Particularly in localities, introduce legislation to reinstate marketing activities, such as sampling and couponing, that have been banned or restricted.

- Pass state preemption."

The report also refers to African Americans as an "important volume opportunity" while simultaneously describing how to fight the idea that the industry targets minorities in their promotions,

This and much more information within this document shows that far beyond simply making and selling cigarettes, Philip Morris actively worked on a number of fronts to fight efforts to reduce the many public health threats the company poses.

Fields

Quotes

Industry volume of 509.2 billion in 1991 was down 12.6 billion versus 1990, continuing a declining trend which began in 1982. Over the past five years, U.S. cigarette volume has declined at a compounded annual rate of 2.6%. Factors which continue to negatively influence volume include the health controversy, the declining social acceptability of smoking, increased smoking restrictions, particularly in the work place, rising excise taxes and prices, and the decline in the number of new people reaching smoking age.

During the upcoming five years, we anticipate cigarette volume to continue to decline based on an additional excise tax increase in 1993 and the continued hostile smoking environment. Sales of cigarettes in the U.S. are projected to decrease an average of 2.7% per year between 1991 and 1996, reaching 443.5 billion in 1996...

Notwithstanding the forecasted industry decline, PM-USA will continue to address the challenge this forecast provides in order to lessen the effect on our volume and share. Corporate Affairs will continue to provide information and support issues concerning social and work place restrictions which have been placed on smokers. They will also continue to lobby for minimal state and federal excise tax increases, so as to lessen retail price increases. From a product development perspective, PM-USA will develop new products to meet the continued demands of our changing market, e.g. more flavorful, ultra low tar products. We will also continue to develop new and innovative products to address the perceived health and social issues surrounding the cigarette industry. Finally, PM-USA will continue to moderate price increases of our premium brands in order to make smoking less cost prohibitive.

[From page 6]:

These sociodemographic trends highlight the importance to PM-USA of maintaining its historic strength among entering smokers, retaining smokers as they age, and gaining share among older age groups so that we can continue to increase our market share to reach 49.7% in 1996.

Race/Ethnicity

...While smoking incidence varies considerably among these groups (ranging from 16% among Asians to 29.7% among Blacks), it is evident that they represent an important volume opportunity. During the plan period PM-USA will hold its near 50% share of Hispanics, and will increase its 19.8% share among Blacks primarily via the launch of B&H King Size. In addition, we will build upon our 61.3% share among Asians through intensified marketing programs.

[From Page 7]: INDUSTRY VOLUME DECLINES BY NIELSEN COUNTY SIZE

This industry erosion in major metros is being driven by smoking incidence declines and broader smoking restrictions, acting to offset population shifts which have favored cities and suburbs...

[From Page 9]: Smoking continues to be skewed more heavily toward the less educated. Approximately 38% of smokers (age 25-54) have attained some college education, whereas approximately 55% of non-smokers in that same age group have some college education. Similarly, 20.9%, of smokers (age 25-54) did not graduate from high school compared to 10.7% of non-smokers.

[From Page 24]:

SOCIETY SUMMARY

Cigarette smoking has evolved from a majority adult habit to a minority act, enjoyed by a weakened social constituency. Consequently, the political and social base of the smoker has eroded and opinion leaders have begun turning against the industry, supporting legislation, litigation, and non-profit anti-smoking groups that seek to restrict smoking. During the plan period, the cigarette industry will be required to defend and protect its rights as a result of:

• States increasing state excise taxes to compensate for weak local economies and fiscal budgets.

• Employers adopting employment practices that discriminate against individuals based on legal lifestyle decisions pursued off premises during non-working hours.

• Anti-smoking forces continuing using the environmental tobacco smoke controversy to restrict people's right to smoke.

• States and local governments legislating restrictions and bans on the sales and marketing activities for tobacco products.

• Legislations requiring that cigarettes be self-extinguishing.

• Environmentalists mandating product specifications on the marketplace.

• Attitudes towards smoking.

[From Page 27]: SMOKING RESTRICTIONS

The environmental tobacco smoke (ETS) controversy continues to be used by anti-smoking forces to restrict the opportunity to smoke. In recent years, despite success in defeating state-wide bans, the number and scope of these restrictions have increased significantly in the private sector and they are expected to continue to grow. Because of this success at halting or modifying state legislation restricting smoking, anti-smoking activists have turned to federal agencies and localities to push for additional restrictions.

[From Page 30]: MARKETING RESTRICTIONS

During the plan period, attacks on the tobacco industry's marketing practices will focus on the allegations that industry marketing activities are aimed at encouraging youth to smoke, as well as women and minorities. Also, federal funds will be used to force local communities to restrict tobacco marketing practices. U.S. Health and Human Services Secretary Louis Sullivan's American Stop Smoking Intervention Study program (ASSIST) will provide $135 million over seven years to seventeen state health departments "...to change attitudes about smoking and counter the sinister marketing strategies of the tobacco industry. "ASSIST will be augmented by the American Cancer Society which will provide $25-$30 million in additional funds for lobbying and smoking cessation campaigns.

[From Page 144]: Marketing and Sales Restrictions

The organized anti-smoking movement is attempting to restrict or ban our ability to reach existing smokers with marketing and sales vehicles considered legitimate tools for virtually all other products. Restrictions on advertising, sponsorship, sampling, couponing and sales practices limit our efforts to increase market-share. By restricting the industry's ability to use widely accepted marketing and sales techniques, the anti-smoking forces are attempting to reduce public acceptability of cigarettes.

PM-USA's goal is to defeat proposed marketing and sales restrictions or bans. PM-USA is proactively supporting state legislation to preempt local restrictions, as well as to establish tobacco industry marketing and sales guidelines as state law...

ISSUe:

The anti-smoking movement is using false charges about the targetting of youth, women and minorities to advance legislation restricting or banning the marketing and sale of cigarettes.

Strategy:

| !

PM-USA will use two strategies to combat marketing restrictions. First, we will advance our position that smoking is an adult custom, that PM-USA does not want minors to smoke and is working in cooperation with retailers to prevent minors from purchasing cigarettes. Second, we will demonstrate to elected officials, public policy decision makers, the media and consumers that advertising, sampling and sponsorship are forms of free speech protected by the First Amendment. To increase awareness of company/industry initiatives we will use advertisements on the Youth Initiative in selected publications..

1992-1994

Marketing Freedoms

Develop state legal fellowship programs with the American Civil Liberties Union and

• Washington Legal Foundation to oppose bans or restrictions (Freedom of Speech).

Develop Sports Sponsorship Coalition to promote/defend corporate right of sponsorship.

• Coordinate with minority interest groups to counter anti-smoker's claims on "targeting".

Long Term Goals

• Counter ASSIST Program in 17 states: - Work with grass roots organizations to divert state health department funds, equivalent to the amount of ASSIST funding, to support other health programs (pre-natal care, half-way houses, etc.).

Rollback Program: - Particularly in localities, introduce legisla- tion to reinstate marketing activities, such as sampling and couponing, that have been banned or restricted. - Pass state preemption.

Company

Philip Morris

Author

Presumed corporate author, Philip Morris

Recipient

Presumed corporate recipient, Philip Morris

Region

United States

Named Organization

Abco Markets

Alza

Amcon Dist

Amer, American Tobacco

American Cancer Society

American Lung Assn

Assist, Assist

Bakery Confectionery + Tobacco Workers I

Bat, British American Tobacco

Big D Drug

Brooke Group

Brooke Partners

Business Week

Bw, Brown & Williamson

Carolina Cigarette

Chicago Tribune

Church Dwight

Ciba Geigy

Circle K

Citicorp Consumer Banking

Clark Oil

Coalition for Solid Waste Solutions

Colonial Heights Packaging

Conference of North East Governors

Core Mark

Cygnus

Dmk Holding

Dominicks Finer Foods

Eagle Star

Eby Brown

Elan

Eli Witt

Emro Marketing

Epa, Environmental Protection Agency

Executive Steering Comm

Fareway Stores

Fays Drugs

FDA, Food and Drug Administration

Fleming Companies

Ftc, Federal Trade Commission

Gallaher

General Foods

Globe

Grand Union

Grocery Mfg

Hhs, Dept of Health and Human Services

House

Impel Marketing

Japan Tobacco

Kmart

Kohlberg Kravis

Kroger

Lederle

Liggett Ducat

Lm, Liggett & Myers

Loews

Lor, Lorillard

M Sosnick

Ma Legislature

Mai Basic Four

Managed Care Networks

Management Steering Comm

Marion Merrill Dow

Maverick Markets

Mays Druag Stores

Mclane

Medic Discount Drug Stores

Mitsubishi

Mobil

Mobilizations

Moodys

Msa

Natl Assn Mfg

Natl Conference of State Legislatures

Natl Consumer League

Natl Waste Management Assn

New Valley

Nielsen

Niosh, Natl Inst for Occupational Safety & Health

Ny Times

Old Dominion

OSHA, Occupational Safety & Health Administration

Pace Membership Clubss

Pharmarcia

Piggly Wiggly

Pillsbury

PM Customer Advisory Council

PM Magazine

PM-Eec, PM-Eec

Price Chopper

Public Interest Research Group

Quaker Oats

Quick Trip

Rh Macy

Richmond Blue Cross Blue Shield

RJR Nabisco

RJR Nabisco Holdings

RJR, R.J.Reynolds

Roper, Roper Org

Samelson Leon

Sams

Save Mart

Scientific Advisory Board

Sheetz

Simon Schuster

Smokers Advocate

Smokers Caucus

Solid Waste Task Force

Southland

Spectrum Stores

Standard Poors

Steering Comm

TI, Tobacco Inst

Time

Trade Council

Tripfoods

Tropicana Products

Tsg, Technical Study Group

US Census

US Congress

US Senate

Volk Group

Walmart Stores

Warner Lambert

Western Union

Wetterau

White House Competitiveness Council

York Engineering

Litigation

Stmn/Produced

Named Person

Allen, R.J.

Anderson, D.

Buno, T.

Campbell, W.I.

Dangoor, D.

Dimarco, R.

Fitzmaurice, R.A.

Ford, Y., J.R.

Gorden, R.

Griscom, T.

Gunzenhauser, G.R.

Halset, W.G.

Hendrix, R.S.

Higgens, H.E.

Iauco, D.

Isbister, D.

Jarett, J.

Johnson, C.

Johnston, J.W.

Juchatz, W.

Kauffeld, R.W.

Laux, F.

Lebow, B.S.

Mau, T.

Merlo, E.

Moore, W.

Nelson, J.

Newlin, L.

Ockers, J.M.

Oglesby, M.

Orlowsky, M.

Ridgeway, S.

Robinson, R.W.

Schindler, A.

Schindler, A.J.

Schroer, J.

Spears, A.W.

Steele, H.

Stewart, M.

Surgeon General

Szymanczyk, M.

Tedder, D.R.

Tisch, L.

Turner, J.C.

Volk, S.J.

Welsh, D.M.

Wexler, L.

Type

REPT, REPORT, OTHER

CHAR, CHART, GRAPH, TABLE, MAPS

DRAW, DRAWING

Subject

marketing

marketing strategy

Corporate strategy

legislation

public health policy

public smoking law

Fire Safe Cigarettes (Products)

promotions

marketing restrictions

advertising

Youth Smoking Prevention Programs (Industry-sponsored youth smoking prevention programs)

Designed to stave off further legislated marketing restrictions