Tobacco Documents Online

2 3 4 5 7 ~ 8 0 ~ PHILIP MORRIS INCORpORATSD 195+! CI3RPOAAI'8 R"1R1R8 WORLD CONP31R8NGB RYB BROOR, MW YORK TRURSAAC' MOANTNO 8888TON 3eptember 13, 1984 - Stanley S. 8es,tt, presiding x N D X X Iastlat6s by Chaix70!{2'1 Scott . . Pa9's .....,... . . . . . . 2,14,33,34 3"sosaata4ti.vn t"Maicinq the World Safe tor Salesmsn" - xr. Vintaenfi J. Bucumllat4 . . . . Qusstion-and-Answer Period ..., ... . ... 14-.2 3 9 M 0 R s ~ R 10 ~ z Roundtable Disaussicins "Issuos tomnon +d Dis arate" 11 ~ ModeratAr Marl4in Ryan Sa].ey . . . . . . . . . . 25 - 27 12 cn z. Fanslfsts i 13 ~ ~ Stephen B. Bull . . . . . . . . . . . . . . . . 28 - 33 ca 14 I Alan G. Easton . . . . . . . . . • . . . 35-38,40,45,47.48,49 15 Q ~ Donald S. Harris . . . . . . . . . . . . . . . 38 - 40 16 0 z 17 18 19 20 21 22 23 24 Guy L. Smith . . . . . . . . . . . . . . 33, 34, 43-45, 51 Leslie C. Suks . . . . . . . . . . . . . 41 - 43, 46,,50,52,53 8vsamary Remarks by Moderator Haley . . . . . . 53,54 N 25

F2 I CMURMM Sfl0'i'T: Oat» again, good morning: 2 And thanks tort almost, being: on time. 3 Yesterday morning T talked about the essential 4 partnerships between oorporate affairs and all the other 5 co a) 6 00 ' ~ ~ 7 ~' ~ 8 entities at Philip Marris. x think we will a13, agree that after we've oonooptualised, after we've extended our hands in pastnership, with all of those entities within the compaay, •. ° the bottomline, the absolute bottomline, revolves around sales. r. 9 2 It's what it's all about. 10 ~ That is one reason that we've insisted that when 1} ~' our corporate affairs people arrive in the various functional 12 ~ ar+sas, that they spend time out on tobacco aountry, and the z. 13 [~other aspects get to the viee-president-for-sales office ~ 14 II and work out an arrangement to have our operatives go out 15 and spend time in the field, to find out something about that 16 z key important area of our operation. 17 0 And in that regard, we are exceptionally fortunate w 18 ~ this morning to have with us the very best expertise in that ~. 19 z' 0 area; not just for Philip Morris, but, I daresay, for our 20 ~' entire tobacco industry. So won't you give a big round of 21 z' applause " one of our bost corporate affairs welcomes, to H 22 23 24 25 Vincent Buoeellato, our Vioe-Presidant for Sales. (Applause) MR. VINCENT J. BUCC.BLLAT4s Thank you, Stan. I was beginning to wonder who you were going to introduce at that point:

1 2 3 4 7 9 10 11 12 r n ~ 22 23 24 25 C.0 N F3 Irsal.ly havo baen looking forwaYd to this aassion hoday, because 1 think the relationship that. has toen_ building between the oospoatatf affairs and the salts groups recently is such a aood sign of things to vome. I roilst:t co the>se of you that have studied some Americsan history who ss:y s+sss~m*+tr the words that Sen j amin Franklin used when he tried to ssiie some of the peopl. that were going to be ~ 0 ~ signing Ne-AaAar.-Wm These were people ~ that knew that if the Revolution failed, they would be facing ~ ~ z the gallows. He said: "O+antlem®n, we must all hang together ~ o,r, asswredly, we will all hang separately." w I think there are probably no two groups at Philip Morris that have better reason to hang together than sales and corporate affairs. You are the experts in identifying and thwastAAg:; legislation and legal moves which threaten our ability to sell, and we are the experts in selling two-hundr'rd billion cigarettes, thirty-eight million barrels of beer and 6,480 million cases -- and I did it without looking -- of soft drinks. Unit sales pay our salaries, of course, but our sales forces can and should be part of' your field troops. We can and we hope we do give you feedback on what' s happ.rsdng at the local leve ls . I think, additionally, sales and corporate affairs people have an added bond. Every day we both venture fotth into the world, outside of our stone and glass p.m. offices, where

1 2 3 4 F+t we meet our opponents and our crritias. And soiaettisms the listks between our two qroV4ssr4 not always all tbat obviow: So I would like to giv. you some examples of h<yv sales and corporate affairs are oovpledi how legislative changes and shifts in the climate of public opinion affect the Philip Morris sales force of soms 3, 300 people, and the hundreds of sales people that are employed at Miller and 7Up. Most of thes" people, regardless of the operating oompany, 5 II CO in 6 ~ 7 ~ ~ I 8 11 ~ 0 are, in effect, merchandising consultants to retailers, advisors on how to get the most profit from the space allocated to all of our produots. HelpinQ retailers helps us get distribution for all our Philf.p Morris produots and helps tis 10 ~ z 11 ,z • 13 ~ 14 15 ~ position them on retailer shelves, store aisles and at the U) I che©k-out land. For cigarettes, that ttrans dealing with some ~ ~ 240,000 independent retailers and chain stores. We do this 16 0 17 18 19 20 21 22 23 24 25 z every month. To do it, our saies reps oail on an average or P O- U w lZ retail outlets a day and travel some 23,000 miles a year. ac ~ z In that's 50 million miles a year, dedicated to personal link between our products, our retailers a importantly, our consumer. So how does the law, or shift in public and, most opinion, affect all of these people? As you know, sales are flatly depressed this year in the U.S. industry, but, onoe again, Philip Morris finds itself in the envtable position of out- performing the indutstry, and we expect that, even if it's only total,

1 2 3 4 a z 19 0 F 20 z x w F 21 z 22 23 24 25 rs by a unit or two, w+r will finish ahead of our last ysar's salea. But r+.oenffi ts+tuds in legislation anrtail Cbe opportunities for smokoss to enjoy owc product in airplanes and tralaas, in ras#rawraats or at work. Tax inoxaases have dr#.ven the prices of our produatup aad probably less visible to all of you in this rooa, they forced our whole- swlers to reduce their inventories of our product. Possibly the most visible of things that bave happened of late is a disjointed advocacy on !he part of the tobacco industry has angered our adversaries and, quite frankly, has confused a lot of our own consumers. in this declining total market environment, we must to fight to take sales away from our competitors. Our principal tactic involves gaining access to all sorts of consumers. Anything that reduces our access to their sars, their eyes, their tastebuds in one area forces us to compensate in another. Take our loss of access to television advertising. That came from a shift in public opinion and the resulting legislation, and it made us increase our competition at point-of-sale through special promotions. I think you are all familiar with the lighters and the sports bags that we've used at point-of--sala recently in support of Virginia Slims and Marlboro. Well, in addition to the cost of designing, manufacturing and advertis-

1 2 3 4 22 23 24 25 P6 ing thos+at itaM, there is the hidden cost in our sales r,rp's tims. To nraks tbose parti.og].ar px+asotioea work, in mmay oas.s, our salas s+sps have to go to local wholesalers, bring out produot, attaCh prOniums to each carton by hand and load the ass+r®bly into a special store display. our reps do this sort of thing, obviously, brcaust it enhances and inczeases the salos for the retailers and, quita obviously, for ourselves. 8ut as you might esp•ot, it also reduces the number of calls that our xeps can make in a given day, and that is significant. Recently, our opponents opened another front in their afforts to keep us from our consumers, attempts to prevent us from distributing free cigarette samples. I think we all realize that if consumers can't try us, they sure as haek won't switch to us. So bans on sampling rob us of one of our most efficient and .ffecotive ways to get our product into the hands and* quite frankly, tastobuds of consumers. Again, we can probably find ways to aomgensate for this loss of sampling, but I don't think anybody here has to be told that they're always more expensive and they'll always be less personalized than the direct contact afforded us through sampling. Or, take State bottle bills. They cut us off from our ovnsumers, too. The forced deposit laws have raised prices, and we know that depresses consumption. But the laws

F7 t have also given retailers a©oll.otive nightmare that in turn 2 interteran with our ability to inttrodbos nanr productop 3 since retailers usually have to sort out return bottles and 4 cans by brands, carrying a brand means creating a recycling 5 ~ area for it. ~iattucaliy, this makes the retailers more aD 6~ r.luatant to take on ne.r packing or even line ext.nsions ~ 7 I ~ 8 0 ~ 9 ~ ~ 10 ~y z ~ 11 12 z 13 ~ F En 14 I 15 ~ ~ 16 U z 17 9i 8 w 18 ~ ~ 19 0, F 20 ~ ~ z 21 22 23 24 25 of existing brands. Regulations that disrupt our links to consumers even extend to packaging. We are a marketing oompany and if the Qonstsaer says he or she wants a certain configuration of our psodnoti, then we'vs got to wakee sure that w' x+s ready to supply it. An •xample involwss the new 25-count cigarettes. Public Affairs, as you know, has a role in their introduction, because taxes in many states have to be changed before dis- tributing this particular package of our product becomes eoonomioal. I think all of you here also realize that the PM qams plan on 25 has changed dramatically over the last few mont,hs. We now find ourselves on the offensive with our Marlboro 25's rather than fighting a Delaney action, if you will, against competitive initiatives. I think the key hers, though, is not just in being able to react quickly to a changing marketing condition. I think the key is also in ooswqnioati.ng these changes quickly enough to people in this rooffi like yourselves, so that you have time to come up with crsdibie revived strategies

FS 1 2 3 4 5 22 23 24 25 that will help us overesmt all these legislatiw husdles. *w, ib's an easy thisg to say. I got it all !.n one 'seatences, bftt I knew ifi's a t©ng3i thing to do. I think .rr have all fousd ousselv+ss embarrass.d, stressed, strrained, pushed and pulled on this particular issue very recently, but abv3art~ly if we don't hang together on that one and talk to each other soon enough, we asm only going to get into worse trouble. I think these are scaae of the concrete ef feats that policy and legislation have at the levels where our sales efforts ei4her sucraed or, quite frankly, fail. And there is one mQStie effect which works in a slightly different way. We all know how the anti-smoking activists ignore the tremendous economic impact of the tobacco industry, but what we in sales s.e most vividly every day is the 24a, 000 retail outlets and all the people that work therm. We see what our products do for them. In the dry good category alone, cigarettes are the single- most profitable item that any store can carry. So we know very well that while the people behind the meat counter or in the stockrooms may not realize it, part of their salaries depends on the sale of our products, and that goes as well for the convenience store operator who uses part of his income to send his children to college.. I think we see very clearly by sales aall that in

1 3 4 7 f9 all the lobbying and legi.slat3,ng# hmaan livea are at stake. The antbi; sdoa' t like to think about the hwnan dislocations their pzWwois would catise+ All of us have to iias with that ewoty day. I said a few minutes ago that we' re eager to be part of your txoaps. I hope that in the last few minutes 0 N i yov'w eeeA wDy. I knoK our personal e3qperieAVe in sales ~r. e~ makes us angry and ww4ra rsaqy, more than ready, to help you 9 O` do something about it. Bnt we need Som help frou.f you, and 10 z fwould like to spend the next few minutes reviewing some 11 ~ sag98st~.f.ons that may or may not provide $ome insight. 12 ~ Ythink tAO first iUVOlves the i.nfo=wtion that z 13 ~' all of you send us. Please remember that our sales people CO 14 Ican't read while they're driving ttseir automobiles or while 15 E5 they' re working with cigarette displays in a supermarket. 16 ~ p~~1y, they are all too busy selling. So when you come 17 to us. please maihe suut+e that you know why you' r® coming, 8 18 ~ what your message is wad just how imporrtant it is. 19 z ~ Our people need answers to questions they get from store KC 20 ~ workers and customers, who buttonhole them while they're out w 21 there amid the cigarette, beer or soft drink displays. 22 23 24 25 ' l think ifu you all reflect on it, you'll realise that our field sales people probably receive more verba3l abuse every day than any other group of people in our entire corporation. In addition, we've got to remember that they' re

1 2 4 5 F1{? citizens of the CONSMAities iA wb~tath they live and are naturally omcsrtwd about avonrous issues that affe+vt their business parsers and+ qvitro fraaklyp the people they sha" their lives with. They obviQasly need information to reaoh ~ respectable pM sales :pc~ita~rpltrstan. Co 6 20 ~ osn.r the years rr.'vi tried to give our cigarette ~ ~. 7 8 9 i $ales #orQs in-dsptn aaswrs 16+a a lat af these questions ~ ~ oth+ty are faced with and we try to do it with this rather O weighty vo3.wa that we give to all owc nsw sales reps. 10 ~ But I am beginning to wonder whether for the daY-to-day give- 11 ~ and-take, this particulax book is just too big. For these 12 ~ purposes, I think a simple printed shoot with the answgrs z 13 r- to the 25 most asked questions might more readily suffice. H to 14 15 16 17 18 19 20 21 22 23 24 25 ~ My second request is that you keep up your @efforts to develop legislative aoaliti on with all the segments ~ z of the tobacco industry and its related businesses. Our .... O sow program with the la,tge whwleaale grocers, which many of you ~ have heard about, is a model that we'll be pursuing vigorously. O Many of thas` large wholesale grocers derive as much as 50$ ' E~ d a of their inCoMSs fs'osi the sale of tobacco products. The z good news is that t2ey`vr been coming to us asking how they can help us in our fight to win a proper and quite legal footing for our tobacco inte.restar. And you can be assured ,thBt we' i.l all be working together to give them all the +Oraative ideas that we can drsas up.