This Philip Morris (PM) Corporate Affairs plan discusses the company's goals, objectives and strategies for achieving them during 1994-1996 in the areas of Eastern Europe, Middle East and Africa (EEMA).
One objective of PM's Corporate Affair plan was nothing short of "Stop the decline in, and start re-building to social acceptability of smokers and smoking in society." Reasons given for PM's concern about the declining social acceptability of smoking were the threat this situation posed to PM's profits, as well as the effect it had on the company's ability to recruit allies and influence government:
"While the ultimate threat is widespread public smoking bans...we also risk consumption decreases due to shrinking possibilities to smoke at the workplace as well as a deterioration of the social acceptability of smokers and smoking. With the lack of social acceptability, we will face further problems in ally-building and Government Relations work."
As part of its '94-96 plan on the secondhand smoke issue in this region, PM hoped to "...influence the setting of indoor air quality and ventilation standards."
PM also sought to take the focus of the secondhand smoke issue off of science and health: "The messages on ETS related issues will focus on solutions and accommodation, rather than on a scientific debate," and "We will encourage [Philip Morris Inc.] to initiate and fund research into the causes and consequences of social intolerance, aiming at broadening the political debate about bans / laws / tolerance in our societies."
The document also discusses PM's corporate activities on topics of excise taxes, fighting restrictions on advertising and sponsorship, strategies for corporate contributions and more, in the countries of Switzerland, Sweden, Norway, the Czech Republic, the Slovak Republic, Poland, Egypt, Denmark Austria, Hungary, Russia, Kazakhstan, the Gulf Council Countries (GCC), Baltic States and Syria.
This document is labeled "strictly confidential."
[From pages 1 and 2, Bates No.2500118564 and -8565]
...Counter-act attempts to restrict the company's right to produce and market cigarettes.
Work to preserve existing freedoms; develop and secure these fights in markets which are developing "first-time" legislation; and, achieve a sustainable relaxation of total restrictions in those countries where they currently exist...
Stop the decline in, and start re-building the social acceptability of smokers and smoking in society.
...Strengthen employee morale, enhance PM's Corporate image, and create a positive business environment for management throughout the Region.
[From page 14, Bates No. 2500118577]:
5.5 ETS Issues and Smoker Discrimination
ETS claims are rapidly becoming the major driving force behind anti-smoking activities in EEMA markets, and ETS-driven proposals for smoking bans and restrictions are no longer limited to the industdalised world. Public place smoking bans are in place in certain African and Middle Eastern countries and far-reaching work and public place smoking restrictions have been discussed in Turkey, Hungary,
Poland, Egypt and Lithuania. While severe workplace smoking restrictions have been defeated in markets like Sweden, the anti-smoking movement is re-focusing their attention on new markets, including Finland for restaurant and workplace smoking restrictions, Eastern Europe and also Northern Africa. The WHO appears to be focusing its efforts on Russia, Poland, Hungary, the Czech Republic, Slovakia and
The EPA classification of ETS as a "Class A carcinogen" in the US, was widely reported in the Region's media and will influence both the public debate on smoking issues as well as decision and policy makers throughout EEMA in the future. The possibility of litigation in this area (e.g. employees suing employers) also generates wide media interest (e.g. the recent case in the UK) and lead to similar litigation in EEMA markets. In Switzerland, this fear has led to the Central Federation of employees supporting smoking bans at workplaces.
While the ultimate threat is widespread public smoking bans, possibly driven by EC legislation, or global indoor air quality and ventilation standards that penalise
smoking, we also risk consumption decreases due to shrinking possibilities to smoke at the workplace as well as a deterioration of the social acceptability of smokers and smoking. With the lack of social acceptability, we will face further problems in ally-building and Government Relations work.
EEMA is in the forefront of moving toward political messages and solutions based on accommodation rather than focusing on the scientific debate. In the Nordic countries
free-standing smokers' rights groups have successfully joined the fight for reasonable smoking freedoms (e.g. by defeating a smoking ban on all European SAS flights).
Prevent legislation detrimental to smokers' rights in society; i.e. defend the rights of consumers to purchase, consume and receive information about cigarettes. Also, secure PM's (and the industry's) rights to participate as an
equal member of society in cultural events and the social debate...
...The messages on ETS related issues will focus on solutions and accommodation, rather than on a scientific debate.
[From Page 16, Bates No. 2500118579]
...EEMA is, together with PMI and PMCS, aiming at intensifying the work to influence the setting of indoor air quality and ventilation standards...
5.6 Smoking and Tobacco Industry Social Acceptability
A vast majority of anti-smoking measures have been made possible, directly or indirectly, due to the decline in the social acceptability of smoking and the tobacco
industry. Marketing conduct issues, the ETS misconceptions including the adverse publicity created by the US EPA issue, misinformation about tobacco and marketing
in the Third World and alleged sales to minors have been systematically used by the opponents of the industry to create a suspicion about tobacco related issues.
PM, and the tobacco industry in general, must find practical and long-lasting solutions to relations between smokers and non-smokers. This is not unrealistic,
especially not in the new and emerging markets where PM has made major investments.
Philip Morris Corporate Affairs Department, presumed
Used to support freedom of commercial speech. Group that shares ideas with Philip Morris (e.g., freedom from government regulation) that Philip Morris supported as a third party ally to help push their agenda.
The purpose of the Institute was to defeat legislation unfavorable to the industry, put a positive spin on the tobacco industry, bolster the industry's credibility with legislators and the public, and help maintain the controversy over "the primary issue" (the health issue).
The giving of money to causes by a company, usually in a manner that makes the company appear altruistic to the public. Corporate philanthropy is usually done to achieve public relations or political gains.
TYP 1994-1996 - SGC, September 1993
E E M A REGIONAL CORPORATE AFFAIRS
1. MISSION STATEMENT
The Corporate Affairs department is responsible for optimising the existing as well as
obtainable resources within and outside the Corporation that can together positively
influence the operating environment (internally and externally) of the Corporation
and support the business objectives of the Region.
The biggest managerial challenge for CA will continue to be the extraordinary
geographic, cultural and political diversity of the Region. EEMA comprises 107
countries ranging from the highly sophisticated and mature markets of present EFTA
to the emerging free-market economies of Central & Eastern Europe; Turkey & the
Middle East; and the continent of Africa which, itself, contains huge diversity.
Local CA staff are already in place in many of the Region's key markets and new CA
units will be established as appropriate. However, HQ will have to continue to
provide "fire fighting" assistance to many markets as they gradually open up to us for
business. In addition, HQ will continue to provide support services for the Field CA
units particularly in those markets where the CA function and techniques are
relatively new and undeveloped (especially Central/Eastern Europe, longer-term also
North & sub-Saharan Africaa and the Levant), as well as on specific projects where
CA HQ has accumulated significant know-how.
The Objectives of EEMA Region Corporate Affairs can be summarised as
(i) Work with other HQ departments (principally Planning) and the Areas to
maintain or introduce reform of excise tax and import duty structures and
levels which are favourable to the Region's volume and income growth
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EEMA countries which are applying for EC Membership will have to adopt EC
tobacco tax law; the EC rules will also influence the tax policies of countries
which aspire to EC Membership; particularly Turkey and the Central European
nations. In emerging markets, e.g. Eastern Europe and Turkey, the fiscal
changes required and the opportunities for reform will often be linked with the mere privatization
processes. Elsewhere, i.e. the Middle East, North Africa
and Sub-Saharan Africa there exist a range of tax and fiscal issues which will
need constant review, attention and pro-active measures in order to both protect
and enhance our differing businesses in these areas.
(ii) Counter-act attempts to restrict the company's right to produce and
Work to preserve existing freedoms; develop and secure these rights in markets
which are developing "first-time" legislation; and, achieve a sustainable
relaxation of total restrictions in those countries where they currently exist.
The systematic attacks on the tobacco industry has forced PM to improve
monitoring and action readiness also on new issues, like the vast ingredients
(iii) Stop the decline in, and start re-building the social acceptability of smokers
and smoking in society.
Prevent legislation detrimental to smokers' rights in society; i.e. defend the
rights of consumers' to purchase, consume and receive information about
cigarettes. Also, secure PM's (and the industry's) rights to participate as an
equal member of society in cultural events and the social debate.
Significant results have been achieved in emerging markets thanks to early
engagements and locally relevant Cultural and Society programs. The internal
challenge continues to be pro-active work, sustainability and sensitivity for the
(iv) Strengthen employee morale, enhance PM's Corporate image, and create a
positive business environment for management throughout the Region.
Communicate information about the Company's business, policies and
contributions programmes to the employees and their families, the general
public and decision makers through internal communications channels, press
and public relations.
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(v) Provide HQ project-specific support as necessary to new / developing
Participate in PM EEMA's business efforts on all level requested, including
assisting in increasing PM's competitiveness in bids for newly privatised
(vi) Recruit and train CA staff for new markets.
The managerial Strategies for the CA function to achieve these objectives are:
In parallel, continue to develop ourGovernment Relations capabilities market
per market, including continuous CA training (e.g. argumentation,
spokesperson training) of PM management. Hire/keep on board top level fiscal
and political consultants and further increase the lateral co-operation with
expert units, especially Planning. On each key fiscal project in each key
EEMA market the local country/area manager should be an integrated part of
the CA project team and actively monitor events and pursue our objectives and
strategies at the local level.
More actively seek opportunities to communicate with key decision makers and
the media through well-trained and briefed PM or external spokespersons.
Sustain a pro-active media relations programme by building on the success of
the Nordic, Turkish and Czech programmes; exploit the huge interest in PM as
a(potential) investor in "new" markets. In co-ordination with PMI, ensure that
the positive news from the region is channelled into Corporate press releases,
Annual Reports, Reports to Shareholders, etc. as well as to EEMA journalists
resident in the US.
Further develop argumentation and messages on key issues to ensure that they
are factual, relevant, persuasive and interesting. Ensure that these "messages"
are accessible to and understood by our in-market management as well as our
employees. Find a discipline where by PM's combined size, relevance etc.
(e.g. as a purchaser of raw material, employer, etc.) in key markets can be
obtained and constantly updated.
Review and streamline the flow of information both internally (Weekly
Highlights, Corporate Publications; video material;) and externally (TDC; TI;
Press monitoring, etc.); develop a joint "Facts bank" with the Legal
Department and greater use of Information Technology in consultation with ICS
in order to provide CA staff with fast and reliable access to facts and
appropriate background documentation about the company, the industry and
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(v) Ensure that at least all major factories have a trained Community Relations
head to maximise the benefit of having PM manufacturing plants in
Switzerland, Turkey and Central and Eastern Europe. This will improve the
effectiveness of our pro-active Government and media relations programmes.
The role of senior management in Community Relations activities should be
Ensure more strategic and systematic use of existing CA "tools" such as access
to Corporate and branded sponsored events (also outside the Region); Corporate
sponsorship of organisations such as Libertad and the AECA; and Corporate
briefings to the financial analysts. Approach the dialogue and co-operation
with key suppliers systematically, as a part of theGovernment Relations
projects. Have ongoing information exchanges and develop alliances with allies
such as packaging raw material suppliers, distributors, HoReCA, etc.
Continue to build and support industry working groups, independent and
socially sound consumers' rights and tax-payers movements groups; and
establish effective PM and industry positions and solutions on all issues which
create conflict between smokers and non-smokers.
(viii) Develop relevant social and cultural contribution programmes, which are
carried out with sufficient frequency. Focus on encouraging local culture in the
various EEMA markets (including support for countries to "export" their
culture overseas) and ensure that philanthropic contributions are matched to
relevant social needs and respect local culture.
In cooperation with PMCS, KJS and PM Co. Corporate Affairs, find a format
for a less bureaucratic and more flexible contributions project planning process.
(ix) On all issues, where relevant, continue to develop ongoing relations with
affiliated PM companies in individual markets to enhance overall effectiveness
of CA programmes. Build further on the practical examples that have included
joint GR briefings, joint cultural/contributions with JS; joint media briefings
with KGFI (Norway; Lithuania).
Utilise PM's leverage as a major economic player by developing facts banks
about the global impact of the Corporation in key markets (in co-ordination
with the food and beer businesses).
(x) Strengthen internal communication systems to ensure that employees are kept
informed about Corporate news and policies; provide EEMA input to Corporate
newspaper and video; assist Areas with establishment of employee publications
in local languages in countries where we invest - such as the Czech Republic
A project with Legal and ICS has been initiated in 1993 to offer more accurate
and faster facts banks for our CA staff.
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(xi) Establish relevant working groups to monitor and deal with environmental and
ecological issues, including contingency planning and response training, in co-
ordination with S&T Neuchatel, PMCS, PMI, KGFI and Miller Brewing.
Continue to improve the ability of Corporate Affairs personnel to respond
effectively to all issues, by
on-going and relevant training programmes;
increasing headcount in key markets where necessary;
limited strengthening of HQ unit to provide support services particularly
to "new" CA markets with an emphasis on skills in taxation, ally-
building, communications, ETS and environmental issues;
further upgrading the daily lateral co-operation with other EEMA
departments, such as Legal, Marketing and Planning.
co-ordination with PMI, PMCS and other Regions and PM operating
(xiii) Timetable projection:
The hiring of in-market CA talent for new markets such as Russia should be
concluded in 1993. The in-market staff will be sufficiently trained in
Western/PM CA techniques towards the end of 1994.
Our efforts to create a more effective facts bank and information flow system
5 is critical to the efficiency of CA. The HQ part of the work will be ready
early 1994, whilst the in-market teams are not estimated to get access to our
Facts and Info Flow System (FIFS) before 1995.
The crucial build-up of a PMC "arguments bank" (including information about
raw material purchases, profits generated to allies such as HoReCa's, etc) will
need a global effort, presumably also outside resources. The initial work
should be done within 1994.
5. KEY ISSUES AND ACTION PLANS
5.1 Taxation and Fiscal Issues
The issues under this heading include tax structure, import duties and penal taxation.
Penal taxation can be expected to be driven not only by Government revenue
requirements in the wake of increasing budget deficits but also by pressure from
the Health Authorities using cost to society claims and the growing threat of
environmental claims. This will be especially true of the EFTA countries who have
the added alibi of EC tax alignment to rationalise any moves towards higher tax
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However a key issue in most, if not all markets, will be the tax structure for both
local and imported brands. Our objective, simply put, is to preserve specific taxation
in those markets where it predominates (Sweden, Switzerland, Norway, Czech and
Slovak Republics, Poland, Egypt, Denmark) and to push for a higher specific
component in countries with fully or mainly ad valorem tax (Austria, Turkey,
Bulgaria, Finland, Russia, Morocco). We will also defend fiscal structures that fairly
stimulate planned local investments and in every instance, we will work to minimise
the total tax burden on cigarettes.
The EFTA countries which have applied for EC membership, and/or will join the
EEA, will be guided and could be increasingly influenced by EC tax harmonisation.
Whilst the ECOFIN directive will be subject to review and possible change during
1994-1995 it will be a basis from which EFTA and to a lesser extent Eastern
European markets and Turkey will work.
Switzerland is likely to be a major target for tax increases over the plan period and
beyond. Today's incidence of 50% of RSP contrasts with an incidence of more than
70% in surrounding EC countries. Furthermore, there are growing signs that a
widening Federal Budget deficit will intensify the need for additional revenues from
In October 1992 the industry submitted a detailed and comprehensive paper to the
Ministry of Finance outlining the dangers of a rapid increase in the tax level and
arguing strongly for a maintenance of today's predominately specific regime. In light
of Switzerland adopting more and more EC legislation a detailed review of
alternative tax structures will be prepared for the authorities which would move
them more in line with EC practice whilst preserving mainly specific taxation.
After a long process of pressure from the industry led by PM, and in the face of
declining state revenues, the Government finally announced a change in the tax
system as of September lst 1992. A specific element of FIM 50 per 000 (US$ 8.5
per 000) was introduced into the previously fully ad valorem system. Whilst full EC
membership is not imminent, Finland almost satisfies the ECOFIN requirement on
tax incidence and structure already. However our clear objective is to push for an
increase in the specific to total tax ratio (currently 7%) towards the EC maximum of
55%. Importantly, we will push vigorously to retain and increase the current
minimum excise tax applied to cigarettes arguing that this is allowed under EC laws
and will ensure Government revenues and a healthy domestic industry. Finally since
VAT is well above EC norms we will argue for a reduction with a compensatory
adjustment to the excise tax. We will also strive to keep cigarettes in the basket of
goods used to measure consumer price inflation, as well as to decrease the tax gap
between RYO and manufactured cigarettes.
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Our key to success will highly depend on PM's control of AmerGovernment
The emergency budget package of October 1992 included a big increase in excise tax
levied on both snuff and RYO. The fiscal changes, effective December 1, 1992
which reflected intensive PM lobbying efforts, reduced the relative tax advantage of
STA's snuff and RYO products versus cigarettes. However, the increased total tax
level has made all tobacco products less affordable.
In light of Sweden probably joining the EC by the mid-to-late 1990s and therefore
realigning excise tax in line with ECOFIN, our objective is to argue for a gradual
derogation towards the required excise incidence of 57% and also for the continued
dominance of specific tax.
Given that Sweden will have to eliminate the weight tax classes and introduce an ad-
valorem component into today's fully specific regime, there is a clear need for
reform which we should pro-actively influence. The possibilities for success are
strongly linked to our local cooperation with Swedish Tobacco (ST).
As before, we will continue to work for annual rectification of the present imbalance
between cigarettes and RYO taxation and strive to preserve the fully specific excise
tax system for as long as it is practical. As Norway will have to accommodate
ECOFIN requirements as conditions of EC membership, we will lobby and argue
for a derogation in terms of the 57 % excise tax requirement whilst preserving the
predominance of specific taxation. As in Sweden we will argue for a VAT reduction
towards the EC minimum of 15 %.
Our Norwegian CA efforts are PM specific and very sensitive due to our opposing
strategic interest with the NMA member companies, e.g. Tiedemanns.
In the wake of the ECOFIN directive we have the opportunity to move today's fully
ad valorem system to one which incorporates a specific element. We plan to open up
a dialogue with ATW as a first step and demonstrate the benefits of a mixed system.
On July 5th 1993, in tandem with the implementation of a VAT system (at a rate of
22%), a four-tiered specific tax structure was introduced for an unspecified length of
time. This is a very favourable event in light of the fully ad valorem system formerly in
place and given that the proposed tax system previously under discussion in Parliament
would have included a complex mixed structure linked to usage of domestic tobacco in
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PM's objective will be to limit the overall incidence of taxation and to encourage the
maintenance of a predominantly specific tax structure. Whilst the newly adopted four-
tier system is not without it's problems, it does give PM a competitive advantage and we
will work to reduce the gaps between the tiers over time while also working to avoid a
linkage between tax incidence and the usage of domestic tobacco in cigarette
In addition we have to convince the authorities to tax tobacco rolls as cigarettes and not
as RYO and to strongly make the case against further increases in the import duty on
tobacco (currently 30%).
Czech & Slovak Republics
We have so far achieved our objective of maintaining the current specific structure and
to narrow the gap between the two tiers by raising the tax burden on 70mm products.
We will continue to work over the plan period to finally eliminate the tax difference
between 70mm and KS products. In addition PM will work towards securing the
implementation of a minimum specific import duty as well as the establishment of a
system of fiscal marks to stem the flow of contraband.
Our long-term strategy in the Czech Republic will be to capitalise on our positive
dialogue with MoF officials and key parliamentary committees to ensure we meet these
objectives whilst building up our contacts in the Slovak Republic.
Additionally, in Slovakia we will work jointly with SIT/Reemtsma to introduce
proposals to establish a fiscal markings system aimed at stemming the flow of
contraband and independently with the Ministry of Economy to mitigate the impact
of new customs duties between the Republics on our business in Slovakia.
PM's objective is to preserve the current mixed excise tax system, increasing the
proportion of specific tax and to ensure that any future tax increases are applied solely
to the specific component at a rate which does not exceed inflation. In addition, PM
will seek reductions in the current levels of import duties on tobacco leaf and the
introduction of a significant minimum specific import duty on finished cigarette
products. Finally, we have to convince the Ministry of Finance to tax tobacco rolls
on the same basis as cigarettes. (See Poland).
PM's strategy will continue to focus on mobilising support within the relevant Ministries
and among tobacco growers and other grass-roots organisations as well as targeted
MP's in support of its objectives. A key factor will be to cope, inGovernment Relations
terms, with the anticipated changes in the Hungarian political scene.
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The current excise tax system is fully ad-valorem based on the gross ex-factory price
and has three tiers depending on the class of cigarette. In addition a VAT of 20% is
applied to both imported and locally produced brands.
Imports are subject to a fairly modest import duty of 15% and the excise tax, whilst
attracting the highest rate within the three tier system, is applied to a much lower
base (i.e. C.I.F.) compared with locally produced brands. In effect, therefore, it is
currently more economic to import rather than locally manufacture premium priced
Our objective, given our short to mid-term reliance on the relatively profitable import
sector, is to re-structure the excise tax on locally produced brands without drawing
attention to the relatively favourable treatment of imports. Ideally, the three tiered
ad-valorem system should be replaced by a mixed system with a specific element
introduced for all filter brands. This is in line with our already successful proposal
for Lithuania and the one put forward in Kazakhstan.
We should strive to establish the appropriate starting dialogue within the Ministry of
Finance and the Russian State Tax Service and highlight the benefits of such a change
in the context of our local investments in Russia. A monumental Corporate Affairs
challenge is to run effective Corporate Affairs activities while avoiding the programs
being too personality-bound.
The tax systems for both locally produced and imported products are different and in
the case of local brands predominantly ad valorem. We started our tax change efforts
by presenting a detailed proposal to the Ministry of Finance and Customs (November
1992) which argues for a simplification and stream-lining of today's structures, a
higher ratio of specific tax on local brands and a system which moves Turkey more
in line with EC. With Turkey seemingly committed to Customs-Union with the EC
by end 1995 we are actively following up and updating our proposal on overall tax
Intermediate goals include the need to convince the Government to increase Tekel
consumer prices of oriental brands to economic and market driven levels, as well as
to postpone the planned phased reduction on cigarette import duties. We also need to
build a wider monitoring andGovernment Relations network in Ankara to secure
timely and accurate information about potential privatization plans for the state
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Our objectives and action plans remain as previously detailed: to delay any increase
in the duty level, especially in those states where duty remains at 30 %(Saudi,
Kuwait, UAE) and to argue for a high specific duty in all states. We will continue to
lobby vigorously with the GCC Secretariat, Health, Finance and Customs officials
and the USTR for a change in the duty structure while working with UAE officials to
delay the, eventually inevitable, duty increase and to insist that if such a increase
prevails it be accompanied by a high minimum specific duty.
We have been active both in convincing Eastern Tobacco and the Ministry of
Industry (responsible for the tobacco industry) of the merits of retaining today's fully
specific (two-tiered) cigarette tax system. With the probable introduction of VAT in
1994 we will lobby to maintain reasonable tax levels, the continuance of a two-tier
specific element and argue vigorously against any potential IMF proposals to
introduce an ad-valorem system. Further, we plan to monitor and maintain
protective import duties on finished cigarettes and be ready to argue against increases
in import duty rates on cut-filler and BBS.
5.2 Marketing Freedoms
PM EEMA is being strongly influenced by the outcome of the debate within the EC
Council about the proposed tobacco advertising ban in the EC. Individual EC
countries, notably France, have taken unilateral action at national level and
introduced a ban. Branded sponsorships as well as Cultural & Society Contributions
programmes, all essential in ourGovernment Relations work, have come into the risk
zone, as has the right for third parties to purchase and use tobacco trademarks in
other fields. EEMA also has the challenge of securing and maintaining relevant
marketing freedoms in Switzerland, Turkey, Austria, Egypt and in the emerging
markets in Central and Eastern Europe, as well as in the Baltic States. Future
challenges will also include gradual introductions of marketing possibilities in the
Levant, e.g. Syria.
Action Plans ( rioritYmarkets)
A popular initiative aiming for a total ban on tobacco advertising, and a Federal
counter project which would only allow point-of-sale advertising and corporate
contributions have been successfully defeated in Parliament and the matter will now
be put to a national referendum in either November of 1993 or Spring 1994. Our pro-
active approach included extensive lobbying of Members of Parliament and a nation-
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wide advertising campaign to promote the benefits of both advertising and
sponsorship. These contacts and their public support need to be secured also ahead of
the referendum. The successful adoption of an industry voluntary code on marketing,
was also a major strength in our efforts and compliance by all NMA members is
The focus has now shifted to the national referendum campaign. Organisations and
individuals who benefit from industry advertising and sponsorship have been
mobilised and all media opportunities to put the industry's case to the public will
continue to be taken. An increasing weight is now put on theGovernment Relations
efforts on a cantonal level. Certain advertising allocations have been shifted to local
and regional newspapers. Finally, the pro-freedom ad campaign has been
complemented by a parallel courtesy and tolerance ad campaign.
Czech and Slovak Republics
In the Czech Republic, we in July 1993, following 9 months of activities, in
Parliament reversed the ad ban contained in the Consumer Protection Act which was
adopted by the former Federal Parliament. A broad coalition of allies had been
established and pursued all available means to obtain the favourable amendment of
the existing legislation. Lobbying of politicians will continue with a view to secure
the new legislation.
Similarly, in the Slovak Republic, we are working with allies and the Ministry of
Economy to achieve a reasonable interpretation or amendment of the CPA.
Following an extensive and successful lobbying campaign in Poland which included
mobilising a coalition of interested third parties; an advocacy advertising campaign;
support from the Tobacco Growers Association and the local tobacco manufacturers,
the Polish Parliament adopted the Law on Unfair Competition which excludes
tobacco advertising only from TV and Radio and in youth press from 1995, otherwise
allowing considerable marketing freedoms.
The priority now is to ensure that Parliament does not adopt any new legislation
which would introduce more severe restrictions. Further action by the organised anti-
tobacco lobby is expected after the General Election (scheduled for September 19)
and PM will have to maintain opposition to any further restrictions.
In Hungary, we will seek through direct lobbying and action with third party allies to
amend obsolete tobacco advertising legislation which restricts communications with
consumers. Our plans include support of "Libertad" type movements and pro-
marketing coalitions also in Hungary. For this project we will use the valuable
experience gained during the Polish and Czech operations. Significant CA HQ
manpower is needed to support the Hungarian team over the next 12-18 months
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An anti-smoking bill which included an advertising ban and public smoking
restrictions was vetoed by late President Ozal in 1991. Virtually identical legislation
was re-introduced to Parliament in 1992. This draft legislation is currently being
examined by various Parliamentary Committees. Our aim is to defeat this legislation
and establish a self-regulatory or, alternatively, legal code which allows reasonable
advertising and marketing freedoms over the next 5 years. The local publishers' and
advertisers' associations have submitted a counter proposal allowing for point-of-sale,
press, cinema and branded promotions and sponsorships . We have also created
within the association of foreign investors ("Yased"), a tobacco working group to
leverage the entire business community. Furthermore, we have enlisted the support of
the tobacco farmers' lobby, to argue that a ban would destabilise tobacco farming and
thereby jeopardise Turkey's major agricultural export product. A "Libertad" type
event is scheduled for end 1993 with an ambition to form a permanent local chapter.
The PM strategy includes a plan to introduce, within a larger framework of
modernized Turkish legislation, a balanced pro-actively cigarette marketing
legislation, which should be more lasting than short-term defeats of specific tobacco
Lithuania / Baltics
A WHO initiated Tobacco Law draft banning all tobacco advertising as well as
advertising of brand diversification is driven within the administration. No official
proposal has yet been officially published by the Government.
Our objective is to achieve acceptable rules on tobacco advertising, either through
legislation or a voluntary code. We are also establishing an industry co-operation
(basically with STC & ST) to monitor developments in the rest of the Baltic region
(both Estonian and Latvian Health Authorities have announced ad bans, though the
Parliaments have not yet sanctioned such action).
In Russia (and other republics), there is an emerging threat of anti-smoking
legislation (including advertising restrictions at nationwide, alternatively municipal
levels), to which we will respond. The Russian Parliament has already accepted a
mass media ad ban in Russia. Priority countries are Russia, Kazakhstan and Ukraine.
Within late 1994, and definitively in 1995 we will expect anti-tobacco drives in
Bulgaria and Rumania. Within our restricted human and fiscal resources, we will
aim at introducing balanced legislation prior to the expected WHO-driven attacks.
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5.3 Product Restrictions
EC legislation on labelling and maximum constituent levels will be applied in EFTA
countries which join the EEA (all EFTA countries except Switzerland). This
legislation is already being cited as a model for other markets, especially in Central
and Eastern Europe. The MCL and HWL legislations constitute an opportunity in
Scandinavian markets and also Iceland, where much stricter rules have been
repeatedly proposed, but represents a challenge in many Central and Eastern
European markets where operational constraints will require a gradual adoption of
such requirements. In light of these difficulties, PM is actively proposing alternatives
to EC mandated timetable requirements.
We will emphasise PMI's new global labelling policy in EEMA markets when this is
In the Gulf states, where mandated tar and nicotine levels at 12 and 0.8 mg
respectively are the lowest in the world we will forestall any further reductions and
will seek adoption of revised ISO sampling standards.
In Central and Eastern Europe imposition of T&N limits implies increased quality
assurance measures in manufacturing, and potentially also puts limits on use of local
tobaccos. These issues along with labelling requirements will be the subject of
negotiations with regulatory authorities with the aim of securing an orderly and
realistic transaction for product specifications.
Furthermore, we expect intensified pressure to disclose ingredients and to counter
this potential threat, we will work to ensure the adoption of a positive list (COE) to
avoid disclosure of proprietary information on PM brands.
5.4 The Primar Issue
Litigation is still ongoing in Finland and news of litigation in the US gets fairly wide
publicity in the media throughout the Region. In many developing markets in EEMA
the debate about smoking & health is at a very early stage in comparison to the US
and Western Europe.
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Our priorities are to :
correct misinformation in the media about the outcome of litigation especially
in the US (e.g. the Cipollone case was widely misunderstood by the media);
discourage litigation in EEMA countries by pointing out the futility of such
action - i.e. the industry has never lost a case in the US and will continue to
vigorously defend every such case that is brought;
Critically debate the motifs of the anti-smoking movements and their (mis-)use
of the legal system, e.g. in Finland, where significant opposition has been
voiced against the leading anti-tobacco forces;
correct blatantly incorrect allegations about smoking which appear in the media
- particularly when such allegations are linked to US and especially PM
We will in conjunction with our legal department establish monitoring and early
warning systems for Central and Eastern Europe. In Third World countries,
especially in Africa, we will cooperate with the authorities, and support efforts for
the introduction of adequate and properly attributed health warning labels.
In Finland, we have established a PM working group which is assisting the Finnish
NMA to prepare a communications plan as well as providing legal advice and
expertise. A separate plan is being prepared to coordinate PM's response. The AHO
case is on appeal, and a final judgement is not expected before 1995. Three new
cases were initiated in September 1992 and one of the defendants is Amer's
5.5 ETS Issues and Smoker Discrimination
ETS claims are rapidly becoming the major driving force behind anti-smoking
activities in EEMA markets, and ETS-driven proposals for smoking bans and
restrictions are no longer limited to the industrialised world. Public place smoking
bans are in place in certain African and Middle Eastern countries and far-reaching
work and public place smoking restrictions have been discussed in Turkey, Hungary,
Poland, Egypt and Lithuania. While severe workplace smoking restrictions have been
defeated in markets like Sweden, the anti-smoking movement is re-focusing their
attention on new markets, including Finland for restaurant and workplace smoking
restrictions, Eastern Europe and also Northern Africa. The WHO appears to be
focusing its efforts on Russia, Poland, Hungary, the Czech Republic, Slovakia and
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The EPA classification of ETS as a "Class A carcinogen" in the US, was widely
reported in the Region's media and will influence both the public debate on smoking _
issues as well as decision and policy makers throughout EEMA in the future. The
possibility of litigation in this area (e.g. employees suing employers) also generates
wide media interest (e.g. the recent case in the UK) and lead to similar litigation in
EEMA markets. In Switzerland, this fear has led to the Central Federation of
employees supporting smoking bans at workplaces.
While the ultimate threat is widespread public smoking bans, possibly driven by EC
legislation, or global indoor air quality and ventilation standards that penalise
smoking, we also risk consumption decreases due to shrinking possibilities to smoke
at the workplace as well as a deterioration of the social acceptability of smokers and
smoking. With the lack of social acceptability, we will face further problems in
ally-building andGovernment Relations work.
EEMA is in the forefront of moving toward political messages and solutions based on
accommodation rather than focusing on the scientific debate. In the Nordic countries
free-standing smokers' rights groups have successfully joined the fight for reasonable
smoking freedoms (e.g. by defeating a smoking ban on all European SAS flights).
Continue to publicise the poor science that underlies the EPA Report i.e. market the
fact that the EPA decision was based on politics rather than science. Focus on key
markets such as Switzerland and the Nordic countries. Use the new Indoor Air
Quality video and special ETS/EPA brochures in local languages, as well as the
post-EPA video prepared by New York plus the company policy statement on the
EPA. We will continue our new focus on Labour Union channels.
Our media strategy, involving major union IAQ science briefings, ETS briefings at
locations such as Imperial College in London and Science and Technology in
Neuchatel, as well as media briefings and articles for union media, reflects this
EEMA has developed, with the Science and Technology group at FTR, a new
presentation concerning ETS solutions.
We will encourage PMI to initiate and fund research into the causes and
consequences of social intolerance, aiming at broadening the political debate about
bans / laws / tolerance in our societies.
The messages on ETS related issues will focus on solutions and accommodation,
rather than on a scientific debate. The already proven strategy to take the initiative in
attitude surveys on issues such as workplace and restaurant smoking will be
upgraded. For 1994 and 1995 EEMA is looking at possibilities to steer the public
debate in the direction of tangible and practical solutions of the smokers versus
non-smokers relations by running advertising, along the EC "Basta" lines.
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EEMA is, together with PMI and PMCS, aiming at intensifying the work to
influence the setting of indoor air quality and ventilation standards. Parallel to this
outside advisors will focus more on standards and regulations and less on scientific
base work and science conferences. The existing scientific witness groups must be
upgrading their public work, for instance by forming more formal IAQ experts
groups or legal entities and communicating the expert viewpoints in public media.
The use of relevant publications will also continue in key EEMA markets, in co-
operation with PMI.
We will endeavour to develop allies particularly among our supplier companies and
in the HoReCa industry which have a real economic interest in the public smoking
debate. This will include ongoing support for and close practical cooperation with the
International HoReCa organisation in co-ordination with PMI as well as developing
links with national HoReCa groups in key markets.
PMI's ETS team will also need to find scientific witnesses for Central and Eastern
Europe, North Africa, Turkey and the Middle East, where increased ETS defence
activities will be needed during the Plan period. We must work to steer the debate
more toward solving the growing intolerance in the Western societies of today.
EEMA CA has 5 well-trained legally cleared ETS spokespersons. In the markets we
have ETS spokesperson training planned for further CA employees in 1994. A major
key to success is the efficiency of the new PMI ETS service team in supplying our in-
market CA teams with "ammunition" and support.
5.6 Smoking and Tobacco Industry Social Acce tability
A vast majority of anti-smoking measures have been made possible, directly or
indirectly, due to the decline in the social acceptability of smoking and the tobacco
industry. Marketing conduct issues, the ETS misconceptions including the adverse
publicity created by the US EPA issue, misinformation about tobacco and marketing
in the Third World and alleged sales to minors have been systematically used by the
opponents of the industry to create a suspicion about tobacco related issues.
PM, and the tobacco industry in general, must find practical and long-lasting
solutions to relations between smokers and non-smokers. This is not unrealistic,
especially not in the new and emerging markets where PM has made major
investments. The decisive factor is that our proposals are relevant, practical and
meaningful for all interested parties. Intensified information efforts regarding the
business aspects of PM as a company, correcting misinformation about Third World
issues, relevant and ongoing corporate contributions programmes and active media
andGovernment Relations programmes, with sufficient frequency and impact, will all
contribute to meeting our objectives. Our ability to work with allies to persuade
legislators and Government officials to resist efforts to persecute smokers.will also be
crucial to the maintenance of the social acceptability of smokers.
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We will continue to show an example to the entire industry in supporting spontaneous
and genuine consumer interest groups. Through the participation of high profile
delegates from labour unions, social welfare boards etc., smokers' rights groups will
attract international media attention on their call for tolerance and on examples of
practical solutions for workplace smoking, restaurant smoking, transit smoking
We have started an upgraded co-operation with farmers in the third world in
demanding a more realistic and fair debate on tobacco issues. The farmers,
particularly in the 3rd world, can form a second layer of grassroots opposition to the
global anti-smoking campaigns.
We will continue to publicise PM's policy on youth and smoking. We propose to
extend the concept of paid advertising campaigns on this issue based on the successful
experience in Finland.
EEMA has increased its experience in presenting PM as a business entity to high
level media representatives. The destination services in the US have been upgraded in
co-operation with PMI and we intend to repeat the economy media briefings during
the Plan period, with an increased focus on Eastern Europe and other emerging
markets such as Egypt. EEMA will also continue to use the proven destination
services such as Zimbabwe for media andGovernment Relations briefings. A short
slide/video presentation has been produced describing PM Companies and PM
EEMA, and highlighting our business and societal activities in our key markets.
Via the media, we will continue to focus on the intolerance of the anti-tobacco
movement especially in the US ("American Excess") but also increasingly hostile in
EEMA has studied Community Relations (CR) programmes in Germany and the US,
mainly with regard to the Turkish project. We mean to use the influence we are
gaining as an employer and locally important customer throughout the Region to
achieve increased impact for our programmes. To this end EEMA management has
committed itself to appointing CR heads at each PM factory, train these people and
integrate international and nationwide PM programmes with local needs.
The EEMA Cultural and Society Contributions (CSC) programme has been
systematised, with the aim of focusing on areas such as ballet, opera and arts where
PM is experienced and which offer continuity. We will also focus proportionally
more on new markets such as Turkey, Central and Eastern Europe and longer-term
Africa, where meaningful contributions ideas do not demand major financial
investments. The local contributions programmes will adhere to the policy of
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spending a minimum of 50% of the contributions funds to export indigenous arts,
thus putting PM's global competence in the service of the individual markets and
areas. Together these programmes will also serve the important goal of further
enhancing PM's corporate image, globally with material impact locally as well. For
Africa we suggest a 100% focus on society contributions, e.g. health and health
PM EEMA has suggested a PMI governed discipline where by planned (independent
from PM) guest performances by artists/ensembles/institutes from EEMA markets are
mapped 1 to 3 year in advance for potential local support.
PM corporate events such as Formula 1 races, PMC supported performances/concerts
and exhibitions will be utilised more systematically for media andGovernment
Relations work by better co-ordination between PM companies and localities.
We will continue to identify and work with opinion leaders, as well as the
International Chamber of Commerce, the International Advertising Association and
their local chapters to fight legislative attempts to prevent tobacco products from
being consumed by, or marketed to informed adults, and to offer viable alternatives
through voluntary restraints and common courtesy.
We will work with libertarians, legislators, employers and workers' unions to prevent
job discrimination against smokers and include conditions in labour contracts which
allow workers to smoke in designated areas inside the workplace. PM also needs to
consider a wider ally building efforts, discussing opportunities with groups ranging
from the ILO to moderate environmental organizations.
5.7 Environmental and Ecological Issues
Several European markets are in the process of introducing or discussing
environmental legislation. The German legislation, demanding far-reaching
recyclability of packaging and transportation material, will no doubt influence EC
legislation currently being prepared which, in turn, will influence EEMA countries,
particularly those which aspire to EC membership.
In co-operation with the Legal Department we will monitor developments relating to
environmental issues - especially legislation which would affect our manufacturing
US destination briefings for EEMA journalists at Richmond and Champaigne now
include presentations on environmental progress made by PM. This programme will
continue to be available as an option (when appropriate).
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EEMA has opened a dialogue with the Environmental Faculty of Imperial College,
preparing itself for future facts briefings on environmental issues whenever relevant.
EEMA has requested a working session with PMI to agree how to approach
international organisations, such as WWF and the Red Cross/Crescent, which have
not yet taken a stance against the tobacco industry on environmental grounds.
All action should be coordinated with and be taken through the PM Co. E. & E.
issues head in Brussels.
The EC has agreed to allow intra-EC duty free to continue until 1999, an important
success. Our concern is to safeguard Duty Free in other markets, particularly ones set
to affiliate with the EC. We also need to defend the DF allowances in some areas,
We will with PMCS, re-establish the successful 1990-91 Duty Free working group in
1994-1995, and mobilise relevant Duty Free interest groups.
In co-operation with the European duty free associations, we plan to use
Scandinavia-Finland as a concrete example of vendor control methods already proven
effective in practice. The objective is to use this inGovernment Relations work to
extend the duty free business.
Through third party allies like the leading Nordic ferry lines we will work to increase
the quotas in key EEA member states, namely Finland and Sweden.
Via labour union contacts, EEC and EEMA jointly aim at deferring the abolition of
duty free in markets where the national income is heavily dependent on tourism, ship
building, ship chandelling, etc., such as Greece, Spain, Turkey, Finland (mainly
Aaland) and Norway.
5.9 Human Resources
The basic staffing strategy over the Plan period will be to maintain a core group of
professionals at Lausanne HQ, specialising in communications,Government Relations
and ETS related issues and project management. Simultaneously we must be
expanding in-market resources and expertise, particularly in Central and Eastern
Europe. In addition, PM Co. Corporate Affairs, PMI, as well as Covington and
Burling and Burson-Marsteller London, will continue to be needed for standardised
issues and basic spokesperson training. The formation of issue-specific Corporate
Affairs task forces, mainly with PMCS but also Kraft Jacobs Suchard in Zurich, will
also result in greater synergy and enhance the training and motivation of our staff.
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Two trainees will be appointed to HQ in 1993. The first, appointed to the
Communications Unit with effect from 2 August 1993, has a political expert
background and is longer-term targeted for the Czech/Polish market. The second,
arriving October 1, 1993 has a fiscal / taxation background and is mainly targeted for
Hungary & Central Europe South. Due to the increased need for project management
and "fire-fighting", mainly in the new markets, both are recommended to remain at
HQ in CA executive positions during 1994.
Realizing the increased need for project-specific and "fire-fighting" work in new
markets, the PM EEMA organization is being changed to a more action oriented
structure, run by the Director CA and the heads of the 2 professional functions, i.e.
the Government & Public Affairs and the Communications units. Functions such as
ETS will be incorporated under one of the main groups and each CA employee in
Government & Public Affairs and Communications is also expected to be a
professional, well trained project leader for a number of given markets/types of
The head of the Information Flow and Training Functions will report to the Director
The following EEMA CA training programmes have already been developed,
implemented and remain available to meet ongoing needs:
CA spokesperson's training (separate for CA and general management)
ETS issues training
EEMA introductory training for new CA staff
Basic CA skills ("tools of the trade") for new CA employees
Business spokesperson training for line management
Crisis management training
Strategic Planning (phase I) for CA staff.
With ICS we will develop CA data bases appropriate to CA needs and in co-
operation with PMI and PMCS. We will want to ensure access to these for the in-
market CA units by the end of 1994.
Our most immediate training needs 1994-1995 are expected to be in the areas of
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Final OB figures will be added after the Region's OB presentations.
In order to achieve optimal cost efficiency of the corporate Affairs work a separate
strategic recommendation has been worked out in August 1993.
The recommendations include issues such as:
Decrease in CA agency man-hours used in the field, with upgraded capacity and
skills for project work assistance from EEMA CA HQ;
Reduction of CA headcount in areas/markets where certain key projects have
Further increased lateral cooperation between on one hand EEMA functions such
as Legal & Planning and, on the other hand PMCS & Kraft Jacobs Suchard;
Changes in job descriptions in relevant markets, to allow Line
managers/Planning, etc., talent work part time as CA heads (used effectively in
the Czech Republic), with HQ offering quality training for these in-market
Focus more in Cultural and Society Contributions planning in the new and
emerging markets, where budget demands are more realistic. Carry out more
indigenous projects and optimize the number of projects shared with KJS.