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Financial Highlights Operating Revenues Billions of Dollars 1991  Domestic tobacco  International tobacco 1990  North American food 1989  International food  Beer 1988  Financial Services & Real Estate 1987 Operating Companies Income 1991 Billions of Dollars  Domestic tobacco 1990 + International tobacco 1989  North American food  International food 1988  Beer  Financial Services & Real Estate 1987  Other Earnings Before Cumulative Effect of 1991 Accounting Change Billions of Dollars 1990 1989 1988 1987 Dividends Declared Per Share 1991 Dollars 1990 1989 1988 1987  Cash Flow Per Share From Operating 1991 Activities  Earnings Per Share 1990 Before Cumulative 1989 Effect of Accounting Change 1988 Dollars 1987 0 1 5 1 20% 0 I 0 I 10 10 1 I .25 1 10 2 I 15 1 3 I 489b 1 I 1.00 .50 2.00 20 1 25 4 I .75 1 3.00 i 30 35 40 45 50 55 60 I I I I I I 1 -1% 5 6 I 8 I 9 I 2 I 4.00 I 1.25 2.00 1 5.00 6.00 7.00 Contents Financial Highlights Letter to Stockholders I 2 Business Review 5 Corporate Citizenship 22 Board of Directors 24 ~ Officers 26 O Financial Review 28 00 General Corporate Information 57 Ul W 2196 `' 3 Registered trademarks and servicemarks of Philip Morris Companies Inc. and its subsidiaries are italicized in this report.

(in millions of dollars, except per share data) 1991 1990 1989 1988 1987 Operating revenues $56,458 $51,169 $44,080 $31,273 $27,650 Earnings before cumulative effect of accounting change 3,927 3,540 2,946 2,064 1,842 Net earnings 3,006 3,540 2,946 2,337 1,842 Earnings per share before cumulative effect of accounting change 4.24 3.83 3.18 2.22 1.94 Net earnings per share 3.25 3.83 3.18 2.51 1.94 Dividends declared per share 1.91 1.55 1.25 1.01 .79 Percent Increase Over Prior Year Operating revenues 10.3% 16.1% 41.0% 13.1% 8.3% Earnings before cumulative effect of accounting change 10.9% 20.2% 42.7% 12.1% 24.7% Net earnings (15.1)% 20.2% 26.1% 26.9% 24.7% Earnings per share before cumulative effect of accounting change 10.7% 20.4% 43.2% 14.4% 25.0% Net earnings per share (15.1)% 20.4% 26.7% 29.4% 25.0% Dividends declared per share 23.2% 24.0% 23.8% 28.6% 27.3% Operating Revenues Domestic tobacco $11,589 $10,370 $ 9,474 $ 8,491 $ 7,640 International tobacco 12,251 10,720 8,375 8,085 7,004 North American food 20,244 20,071 18,750 8,799 7,779 International food 7,934 6,014 3,623 2,099 1,702 Beer 4,056 3,534 3,342 3,177 3,037 Financial services and real estate 384 460 516 622 488 Total operating revenues $56,458 $51,169 $44,080 $31,273 $27,650 Operating Companies Income Domestic tobacco $ 4,774 $ 4,206 $ 3,606 $ 3,087 $ 2,715 International tobacco 1,694 1,394 1,007 774 582 North American food 2,071 1,984 1,769 684 621 International food 891 664 369 165 152 Beer 301 285 226 190 170 Financial services and real estate 179 197 173 163 68 Other - - - - 20 Operatingcompaniesincome 9,910 8,730 7,150 5,063 4,328 Gain on sale of Rothmans International p.l.c. - - 455 - - Restructurings of food operations (455) - (179) (348) (71) Amortization of goodwill (499) (448) (385) (125) (105) Unallocated corporate expenses (334) (336) (252) (193) (162) Interest and other debt expense, net (1,651) (1,635) (1,731) (670) (646) Earnings before income taxes and cumulative effect of accounting change $ 6,971 $ 6,311 $ 5,058 $ 3,727 $ 3,344 Compounded Average Annual Growth Rate 1991-1986 1991-1981 1991-1976 Operating revenues 17.2% 17.9% 18.7% Earnings before cumulative effect of accounting change 21.6% 19.5% 19.7% Net earnings - 15.3% 16.4% 17.5% Earnings per share before cumulative effect of accounting change 22.3% 20.4% 19.9% Net earnings per share 16.0% 17.3% - 17.8% Total return to stockholders 38.7% 33.2% 27.7% Certain prior years' amounts have been reclassified to conform with the Company include the operating results of Kraft, Inc. since its acquisition. current year's presentation. In 1988, the Company adopted the method of accounting for income taxes - d' th 1991 See notes to the consolidated financial statements regar mg e rescribed b SFAS No 96 resulting in a cumulative effect of accounting p y adoption of SFAS No. 106, the 1990 acquisition of Jacobs Suchard AG, the change which increased net eamings by $?73 million or $.29 per share. 1989 sale of the Company's equity investment in Rothmans International p.l.c. and the restructurings of food operations. Total return to stockholders includes stock appreciation and dividends. In 1988, the Company acquired Kraft, Inc. Consolidated results of the 1 e*+s+e+se !m"" M

Dear Stockholder: In 1991, your company continued to grow strongly despite a weak eco- nomic environment in much of the industrialized world. We also posi- tioned ourselves for further profit- able expansion through the rest of the decade. Our overall business performed well, and our interna- tional operations are on the way to achieving the size and profitability of our domestic businesses. 1991 Results Consolidated operating revenues rose to $56.5 billion, 10% higher than in 1990. Operating companies income grew 14%, to $9.9 billion. Principally due to a charge taken in 1991 for postretirement health care costs in accordance with Statement of Financial Accounting Standards No. 106, net earnings of $3 billion and net earnings per share of $3.25 were both down 15%. We also pro- vided for the restructuring of our food business, which should gener- ate approximately $750 million in pretax savings through 1996. Excluding the impact of these charges, operating companies income grew 15%, and net earnings and net earnings per share both climbed 21%. Our tobacco operations enjoyed continued sales and profit growth. We sold almost 200 million more cigarettes in the United States than in 1990, while U.S. industry volume, based on shipments, declined 13 bil- lion units. Outside the United States, we sold 417 billion units, 13% more than in 1990. Volume in our worldwide food business grew 3% for the full year. Despite many bright spots, particu- larly in fat free products, beverages, and breakfast cereals, overall results r ir in our North American food busi- ness were lower than expected. In our international food operations, volume grew strongly, even after excluding the effect of our 1990 acquisition of Jacobs Suchard. Volume in our brewing business grew 0.4%, despite the doubling of the federal excise tax on beer at the beginning of the year. Our overall performance in 1991 enabled us to increase our dividend by 22.1%, to an annualized rate of $2.10 per share, marking the 24th consecutive year of dividend increases. During 1991, we purchased 10 million shares of our common stock for an average price of $70.04 per share, including 2.5 million shares bought under our new, two-year repurchase program announced in November. Even after the impact of the change in accounting and the restructuring charge on stockholders' equity, the ratio of our consumer products debt to stockholders' equity improved from 1.44 to 1 at the beginning of 1991 William Murray to 1.22 to I at the end of the year-its lowest level since the acquisition of Kraft, Inc. in 1988. We increased our revolving credit facility to permit us to borrow up to $15 billion. We regard our debt capacity as an indication of our flexibility in building stockholder wealth. Management and Board of Directors Nineteen ninety-one marked the completion of Hamish Maxwell's terms as Chairman of the Board of Directors, and as Chief Executive Officer, of Philip Morris Companies Inc. Mr. Maxwell will continue to serve as a member of the Board of Directors and as Chairman of its Executive Committee. John A. Murphy, who helped build our international tobacco business and led the revitalization of Miller Brewing Company, retired from his position as Vice Chairman of the Board, and will not stand for reelection in April. Both men were instrumental in the growth of your company, and we Michael A. Miles 0 I > 2

thank them for their years of service and leadership. Having reached the mandatory retirement age, Alfred Brittain III, Dr. Elizabeth J. McCormack, and Margaret B. Young also stepped down from your Board. Each made substantial contributions to your company, and we thank them for their time, dedication, and commit- ment. They all will be missed. In November 1991, Roger S. Penske, President of Penske Corporation and Chief Executive Officer of both the Detroit Diesel Corporation and the Penske Truck Leasing Company, joined the Philip Morris Board of Directors. Social and Legislative Issues Our manufacturing and marketing activities involve us in a wide variety of public policy issues in every country in which we do business. Tobacco use is one of the most widely discussed health issues around the world. Given the general availability of information concern- ing that issue, we regard smoking as a voluntary lifestyle decision that need not be subjected to new mar- keting or use restrictions. While we believe that consumers are aware of the claimed health risks of smoking, nonetheless, in February 1992, we took actions to begin placing the U.S. Surgeon Gen- eral's health warning on all our cigarette packages worldwide where warnings are not currently required. This initiative applies to brands manufactured in the United States for export, as well as to those pro- duced overseas by our affiliates and affected licensees. We are taking these steps because the lack of a warning on a relatively small num- ber of packages-approximately 10% of our volume-has become an issue out of proportion to its importance. Moreover, in the United States, we are acting to increase awareness and enforcement of minimum-age purchase restrictions on our tobacco and beer products through multimillion-dollar programs involv ing advertising, trade relations, and family education. In the area of smoking and health litigation, the number of cases pending against the U.S. cigarette industry stood at 50 at December 31, employees, investors, and commu- nities. A more detailed account of our corporate citizenship programs begins on page 22 of this report. The Outlook Our mission has been, and remains, to be the most successful consumer packaged goods company in the world. Some of our strategies to achieve this goal take advantage of opportu- 1991, as compared with a peak of nities to answer consumer demand. 151 in 1986. The appeal of the These strategies include develop- Cipollone case to the U.S. Supreme ing new products to meet emerging Court, undecided as this report goes consumer trends, expanding to press, involves the question of geographically, and manufacturing whether federally imposed health and marketing globally. We also warnings prevent plaintiffs from plan to generate continuous asserting certain liability claims improvement in all aspects of our against cigarette manufacturers in operations. By turning concepts like state and federal courts. We believe synergy and total quality manage- that, whatever the outcome, juries ment into active disciplines, we will continue to find in favor of the expect to improve our bottom line - cigarette companies, understanding , substantially eaclr ear. that people who smoke are aware of the claimed health risks. In debates over environmental tobacco smoke, we understand the interests of smokers and non- smokers alike. We therefore con- tinue to press for accommodation of both groups. Nearly 60% of our revenues come from our food and beer operations. These businesses are not as con- troversial as tobacco, but they are involved in similarly complex and highly charged social issues, includ- ing the safety of product use, label- ing, and environmental impact. Our public policy positions, like our phil- anthropic activities, are determined by the interests of our consumers, To satisfy growing worldwide demand for American-blend ciga- rettes, we have begun a series of expansions and upgrades of our tobacco facilities, from Virginia and North Carolina to Germany and the Netherlands. As our U.S. exports continue to climb, we are strength- ening our positions in large and growing markets abroad by invest- ing in tobacco businesses in Eastern Europe and Turkey. We are also investing in our future by adjusting our food and beer operations to reflect changes in consumer demand. In 1991, we reopened our Trenton, Ohio, brew ery; resumed construction at our Jonesboro, Arkansas, Post cereals factory; and expanded our beverage business by acquiring Capri Sun all natural juice drinks and by adding capacity for our new Kool Aid Kool Bursts drinks. 3 (0

 r r In 1991, our capital expenditures amounted to $1.6 billion; from 1992 to 1996, we expect to spend another $9 billion. These expenditures, like continued investments in new product development, are essential for the long-term growth of your company. Our People There are human factors, however, that transcend money and market- ing plans. Our brands were built by entrepreneurial men and women; they are the results of creativity, courage, and vision. To cultivate these qualities in our people, we are determined to keep Philip Morris an exciting, challenging, and eminently fair place to work. This report is dedicated to all our employees, and it reflects their commitment to building the Philip Morris family. Their strength, skills, and ambition can make us the most successful consumer packaged products company in this-and the next-century. Michael A. Miles Chairman of the Board and Chief Executive Officer William Murray President and Chief Operating Officer N a 0 Hamish Maxwell At the end of 1984, the year Hamish Maxwell became Chairman and Chief Executive Officer of your com- pany, Philip Morris common stock, adjusted for subsequent splits, was trading at $10.125 per share. Within a relatively short period of time, the new Chairman had presided over the sale of Seven-Up and Philip Morris Industrial, and the purchase of General Foods Corpor- ation. By the end of 1986, we were focused on our three consumer businesses: tobacco, food, and beer. In 1988 and 1990, we further strengthened our food operations with the acquisitions of Kraft, Inc. and Jacobs Suchard. At the end of 1991, as Mr. Maxwell's term as Chair- man came to a close, the value of our stock had multiplied nearly eight-fold. Hamish Maxwell came to his position as Chairman from a back- ground in U.S. and international tobacco. He joined Philip Morris as a salesman in 1954, just as we were repositioning the Marlboro brand as a filter cigarette for men. He grew with the company. As large and successful as Philip Morris has become, however, Hamish has primarily been known by his colleagues for his ambition for improvement. He repeatedly made clear his distrust of size alone, warning against the complacency that afflicts many large companies. He based his actions on a deep conviction that a little humility serves both the bottom line-and the soul -better than the pride that accompanies most forms of corpo- rate success. A large company's prosperity is never the result of just one person's efforts. It is safe to say, however, that Hamish Maxwell has put his stamp on Philip Morris. His legacy is solid management, a clear strategic focus, and a dedication to excellence. 4

The following discussion of the 1991 per- formance of operating companies excludes the effects of the adoption of SFAS No.106 Tobacco In 1991, we strengthened our posi- tion as the leader in the growing worldwide cigarette industry. Our volume, share, revenues, and income grew in nearly all of our major markets. We continued to invest for future growth by broaden- ing the global scale of our manufac- turing and marketing. In a year when the worldwide cig- arette industry grew by 2.5%, our total volume rose 8.3%, to reach 640 billion units. Our share of the world- wide market now stands at 11.6%. The Marlboro brand alone holds more than twice the worldwide mar- ket share of its closest competitor. In the domestic tobacco business, despite increased excise taxes and a difficult economy, Philip Morris U.S.A. increased volume to 220.7 bil- lion units, and gained 1.1 share points, to account for 43.3% of the market. Revenues grew 12%, and income rose 14%. We widened our lead in the premium segment to attain a 48% share, and we took the lead in the growing discount segment for the first time as our share approached 30%. Marlboro cigarettes continued to account for more than one out of every four cigarettes sold in the United States, and the brand's share of premium-priced cigarettes rose to 34.3%. Its share of adult smokers under age 35-the largest group of purchasers of premium-priced ciga- rettes-stands at 46%. Our large share of this group provides a solid base for our business in the future. The Marlboro line was further strengthened by the national intro- duction of Marlboro Medium ciga- rettes. The brand achieved a 1.4% share by the end of the year, and it is attracting a significant number of smokers from competitors' brands outside the Marlboro family. To continue building the Marlboro brand, we are using adver- tising and sponsorships combining its classic Western heritage with contemporary, high-impact events like auto racing. We are also com- plementing these image efforts with quality promotions to reinforce the brand's competitiveness. Supporting our other premium brands, we developed new advertis- ing and fashion promotions for [/irginia Slims cigarettes, and sharp- ened advertising for Benson & Hedges cigarettes. Early in 1992, we introduced Merit Ultima ciga- rettes in the lowest tar and nicotine segment. In the growing discount category, which now accounts for 25% of the U.S. industry, our Cambridge, Bristol, and Bucks cigarettes grew strongly. As retailers continued to consoli- date, we reorganized our sales force to improve our presence in-and relationships with-key, high- volume channels such as super- markets, convenience stores, and wholesale clubs. Philip Morris U.S.A. has a unique and powerful portfolio of trade- marks, and we are committed to competing vigorously in every mar- ket segment offering opportunities for profitable growth or strategic advantage. At the same time, with improvements in productivity and efficiency, we are moving toward our goal of becoming the low-cost pro- ducer in each category. We are 6 On preceding page: Experienced leaf inspec- tors like Thomas Jeffery Vice help make sure that we buy only the best tobacco. Top: Bob Maher and Michael Mullins, at our Richmond, Virginia, facility, research a pack inspection system. Above: Lynwood Jones helps us meet climbing export demand for our cigarettes. Right (I to r): Marlboro Brand Group members Stephen Piskor, James Taylor, and Jim Raporte plan creative strategy to support the launch of Marlboro Mediumcigarettes. U.S. Cigarette Industry Unit Sales (Based on Sbipments)  U.S. Cigarette Industry Unit Sales  Philip Morris Share of the U.S. Industry (%) W 0

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i Left: Yeonghwa Chung has guided our introduction of Virginia Slims cigarettes in Korea. Top: Marisa Campagnaro sets up a meeting in Italy, where Merit cigarettes have become the best-selling low tar and nicotine brand. Above: Using a laptop computer, Laurent Bogeat updates a customer file in Paris, France. World Cigarette Industry Unit Sales (Exduding U.S.A.) 1! World Cigarette Industry Unit Sales  Philip Morris Share of the World Market (%) confident that these strengths will continue to enhance our profitability and our position as the U.S. industry leader. Outside the United States, Philip Morris International had an excel- lent year, with volume rising 13.4%, to reach 417.3 billion units. The upward trend of our interna- tional cigarette sales remained strong. Our export volume increased nearly 10%, reaching 107 billion units. These exports made a gross contribution of $3.6 billion to the U.S. balance of payments, and repre- sented over 50% of all U.S. cigarette exports. The U.S. trade deficit would have been almost $5 billion higherr without the tobacco industry. With a 10% volume gain outside the United States, our Marlboro brand strengthened its position as the best-selling cigarette in the world. Approximately 22% of our volume outside the United States comes from our portfolio of other interna- tional brands, such as Merit, Virginia Slims, Parliament, Lark, Chesterfield, Philip Morris, and L&M cigarettes. Overall volume for these trademarks rose 8% last year. Volume of our locally produced brands, including Congress and Bond Street cigarettes, increased substantially because of exports to Russia. In the European Community, our market share increased almost two points, to reach approximately 25%. Our volume continued to grow in all 12 member states of the Community. . In Germany, volume increased 18%, aided by our 1990 acquisition of a leading cigarette manufacturer in the former East Germany. Our share of the unified market exceeded 34%. In Italy, where we are by far the leading foreign tobacco company, we gained share and now account for over 40% of the market. Volume in France grew nearly 9%, and our market share topped 25%. In Spain, volume grew almost 23%, and our share rose to nearly 16% of the market. In Eastern Europe and Russia, we benefited from economic liberaliza- tion. In the Middle East and Africa, we also posted volume gains. Our combined volume in these countries grew by one-third. Our market share increased by one point, to 43%, in Switzerland. Volume grew in Finland, Sweden, and Austria. As we completed ship- ments to Russia to fulfill our 22-bil- lion-unit export order for 1991, we negotiated a new, 11-billion-unit con- tract for 1992. In Poland, we gained nearly a 4% share of the market- the largest of any foreign competitor since the market opened in 1990. We established a joint venture for the manufacture of our brands with a local partner in Turkey, where we are the leading foreign competitor. We are continuing to invest in the tobacco industry in Eastern Europe. We purchased an 80% stake in Egri Dohanygyar, our licensee in Hun- gary. Egri is one of the highest- quality cigarette manufacturers in Hungary. We increased our market share in Saudi Arabia by over three points, to nearly 45%. In Kuwait, we were the first multinational cigarette com- pany to resume business after the Persian Gulf war, and our market share has climbed to 60%. Our volume increased in the Asia Pacific region, led by growth in Japan, Korea, and Indonesia. In Japan, volume rose 7%, and our market share grew to 11%. We now hold 64% of the international 9

7 1 Top: In Germany, Hartmut Wellmann inspects print quality for Philip Morris Ultra Lights cigarette cartons. Above: Yoshiko Hirao helps make sure Japanese smokers get the message about our American-blend cigarettes. Right: Irene Rosenfeld spearheaded our acquisition of Capri Sun all natural juice drinks. Philip Morris U.S. Cigarette Export Volume Billion Units 120 87 88 89 90 10 91 r ^ M V am a i N segment in Japan. We are also the leading foreign cigarette company in Korea, where we account for 38% of the growing import segment. In Indonesia, the world's fifth-largest cigarette market, our volume grew substantially. In Hong Kong, where we are the market leader, our share reached nearly 43%. In August, we began shipping cigarettes to Thailand, as this 40-billion-unit monopoly market opened to foreign competition. In Latin America, our volume grew by over 9%. Increased volume in Mexico raised our market share to nearly 29%. In Argentina, volume grew by 12%, and we increased our share to 47%. In Brazil, we increased volume over 7%. Else- where in the region, our market share reached 74% in the Domini- can Republic, 23% in Venezuela, and 19% in Puerto Rico. As worldwide demand for Philip Morris brands continues to rise, we are upgrading and expanding our manufacturing facilities around the globe. We plan more than $3 billion in capital expenditures from 1992 through 1996, including the 40- billion-unit-a-year expansion of our Cabarrus, North Carolina, facility. The growing worldwide prefer- ence for American leaf tobacco provides a much-needed boost for U.S. farmers and the U.S. export economy. We are the largest pur- chaser of U.S.-grown flue-cured and burley tobacco. In addition to providing a market for this impor- tant cash crop, we support the farm community through a land grant university program, which helps farmers improve quality and productivity. In 1991, we continued to combat efforts to use prejudices against cigarettes as excuses to raise taxes. In the United States, we fought state and local government attempts to close budget gaps by increasing tobacco excise taxes. In Europe, although new tax structures under discussion would increase retail prices for premium-priced cigarettes more than for many local products, we expect to remain competitive. Unreasonable marketing restric- tions on tobacco have often been proposed in both Europe and the United States. We believe that legis- lators understand that advertising influences brand choice without affecting an informed adult's deci- sion to smoke. Tobacco is a growth industry, and we are gaining volume and share in large markets around the world. In the United States and Western Europe, we are continuing to build our established businesses. We are also growing in Japan, and expand- ing in the newly opened markets of Eastern Europe, the former Soviet Union, Latin America, and the rapidly industrializing nations of Asia. We expect profitable and sustainable growth in all these markets. Food At Kraft General Foods, successes in established brands in both North American and international opera- tions, together with strong new product introductions, raised volume 3%, revenues 8%, and income 14% above 1990 levels, excluding the 1991 restructuring charge. Given our aggressive targets and strong track record, however, 1991 was a disappointing year. As consumers became more price- sensitive, competition in many of our markets intensified. In North 86CS8p 1.6 i-°fd-s 7--i- r 1-41F '"1 .. N I

, i , , America, private-label brands were more popular and commodity costs were more volatile than expected. Toward the end of 1991, we acted to improve our performance on a number of fronts. We announced plans to close unprofitable facilities or otherwise cut costs. We also reduced the list prices for several of our most popular natural cheeses and process cheese slices by 8%, and lowered prices for certain red meats as well. These and related actions, together with more effective marketing programs, should make us more flexible and competitive in the years ahead. Our North American food opera- tions (KGF North America and KGF Commercial Products) posted revenue and income gains of 1% and 8%, respectively, while volume increased slightly. A large number of our grocery products performed well. Post cereals enjoyed a volume increase of nearly 5% in the United States, while continuing to gain vol- ume and share in Canada. Reaching an 11.5% U.S. category share, the Post brand continued to enjoy strong growth for the second consecutive year. In beverages, U.S. volume rose more than 8%, led by the introduc- tion of Kool Aid Kool Bursts ready- to-drink beverages in an innovative plastic squeeze bottle, as well as volume gains in Crystal Light and Country Time powdered soft drinks. Our acquisition of Capri Sun, Inc., the U.S. pioneer in single-serve fruit drinks, will help us build a stronger, broader portfolio of ready-to-drink products. The Maxwell House brand con- tinued its U.S. profit recovery, and 12 i W  m Is-M M a I" remained the clear leader in Can- ada. U.S. volume for the General Foods International Coffees line grew over 16%. Applying the "light" (caffeine-reduced) coffee concept established in Europe, we tested Maxwell House Lite caffeine- reduced ground coffee in 1991, and expanded it throughout the United States early this year. In our other grocery categories, we also benefited from U.S. volume gains of 8% in dinners and enhancers such as Minute rices, Stove Top stuffing mixes, Shake 'n Bake seasoned coatings, and Log Cabin syrups; and from our expansion of Boboli Italian bread shells from the West Coast. Building on our first-to-market position in fat free products, we launched Kraft Seven Seas Free pourable salad dressings, Miracle Whip Free nonfat dressing, and Kraft Free nonfat mayonnaise dressing in the United States. OurJell-0 brand remained strong, aided by the Jell-O gelatin Alphabet and HolidayJigglers promotions, as well as new flavors of both gelatin and pudding. In addition, we intro- duced ready-to-eat Jell-O Pudding shelf-stable snacks in Canada. In the refrigerated case, some of the factors discussed earlier, such as dramatic swings in dairy com- modity costs and competition from private-label products, lowered our U.S. results. We stepped up our marketing activities to defend our cheese brands in the United States, and we further strengthened our leadership position in Canada. We made Kraft Free Singles cheese slices available throughout the United States, began testing Philadelphia Brand Free nonfat cream cheese, and intro- duced Light n' Lively nonfat cottage cheese, snack-size cottage cheese, Top: Sergio Bardaji manages the Metro-New York territory for our foodservice business. Above: Antonio Setaro is on the line in Mount Royal, Qu6bec, for Kraft peanut butter, the most popular brand in Canada. Right (I to r): In Glen- view, Illinois, Jill Goldfarb, Vanessa Besteda, and Dan Tidwell discuss a storyboard for a com- mercial for Kraft Macaroni & Cheese dinners.