Tobacco Documents Online

record volume of 368.1 bil- lion units represented a gain of 15.5% over 1989-our highest percentage increase in 18 years. Our U.S. cigarette export unit volume grew nearly 25%. Our tobacco exports made a gross contribution of nearly $3 billion to the U.S. balance of payments, and our share of total U.S. ciga- rette exports reached 59%. The U.S. trade deficit would have been more than $5 bil- lion higher without the industry's tobacco exports. Marlboro further widened its lead as the world's best- selling cigarette with a 13% sales gain overseas. Among its 1990 successes, Marlboro became the top brand in Mexico and the best-selling international brand in the former East Germany. Its successes in Europe included volume gains of 28% in Spain, 17% in the Netherlands, 7% in the for- mer West Germany, and 7% in Belgium. Marlboro is growing throughout Latin America, and now accounts for 7% of all cigarette sales in this region. Marlboro Lights, the world's best- selling international light cigarette, increased volume by 21%. Approximately half our volume outside the United States comes from our many strong and growing interna- tional trademarks such as Lark, Parliament, Virginia Slims, Merit, L&M, Chester- field, and the Philip Morris brand, as well as from local brands such as Muratti, Mult i-Fi lter, and Peter Jack- son. This diversified brand portfolio gives us a broad base for future expansion. In the European Commu- nity, our aggregate market share increased to more than 22%. In the reunified German market, we led the industry with a market share of 32%. In Italy, we increased volume and achieved a 40%o market share. Volume in France grew 7%, and we now account for almost a quarter of the market. Our volume in Spain climbed 27%, and our market share rose to 13%. We also posted volume gains in Belgium, Luxembourg, and the Netherlands. Elsewhere on the Euro- pean continent, our market share reached nearly 42 % in Switzerland, and we registered higher volume in Austria and Sweden. We continued to perform well in the Middle East, particularly in Turkey, where our volume increased 33%. Eastern Europe and the Soviet Union together repre- sent the second-largest cigarette market in the world. Throughout the region, consumers have come to know-and want- Marlboro, and our other international trademarks have significant potential. We are planning aggressive expansion of our business in this part of the world. In 1990, we agreed to supply more than 20 billion cigarettes to the Russian Republic. We also doubled our business in both Poland and Yugoslavia. In addition, Merit is the most popular light cigarette in Italy, where our share of the market is 40%. 8

Philip Morris shipped more than 97 billion cigarettes from the United States in 1990, making a gross contribution of nearly $3 billion to the U.S. balance of payments. Clockwise, from top right: Lark and Merit both increased volume in Japan; a record-breaking trade agreement is bringing Marlboro to Moscow; low tar, low smoke Virginia Slims Superslims is the newest member of the Virginia Slims brand family. Philip Morris U.S. Cigarette Export Volume ~ 9

,..t r negotiated joint venture , id licensee agreements for -he production of Marlboro .tnd other brands in several Eastern European countries. In Asia, our total volume ;rew almost 18% -the largest increase for any of our regions. Much of this ,~rowth was driven by strong ..tins in Japan, where our volume rose more than 22%. All seven of our top brands posted volume increases, bringing our share of the Japanese market to nearly I1%-up from 9% last year, and more than all other for- ined. eign competitors combined. In Australia, Longbeach -10s, introduced in 1989, pushed our market share above 36%, making Philip Morris the industry leader. In Latin America, volume grew by more than 17%. We are well positioned to profit further from our large and growing.volume base in in the United States, and to Latin America when the supply quality leaf at com- local economies improve. petitive prices to the To satisfy expanding expanding global market. worldwide demand for Philip We also supported federal Morris brands, we continued legislation to increase pro- to modernize our Richmond duction of burley tobacco, and Louisville facilities, which is in short supply while investing in additional around the world. capacity internationally. Because the social Early in 1991, we announced plans to spend more than $400 million to expand our plant in Cabarrus, North Carolina. We expect to spend in excess of $2 billion over the next five years on ` further capacity improve- environment in many coun- tries is becoming hostile to cigarettes, we are actively arguing for tolerance, and we oppose neo-Prohibitionism. Budget deficits at all levels of government in the United States are prompting many ments and expansions. attempts to increase excise Quality tobacco is a key taxes on cigarettes. The 1990 factor in the worldwide pref- erence for American ciga- rettes. Our emphasis on purchasing domestically grown tobaccos has helped American leaf tobacco growers both to increase their share of tobacco sold Left: Benson & Hedges maintained its lead as the best-selling free-standing 100mm cigarette in the United States, Congressional budget agree- ment calls for an additional four cents per pack in 1991, and another four-cent hike in 1993. We are campaigning vigorously against further excise tax increases,which are regressive and discrimi- Lll 0 Left Our U.S. tobacco business continues to grow. In 1990. we sold one billion inore cigarettes than the -ar before. Right: Marlboro more than doubled its share in the growing Mexican market over the past seven years, and became the country's leading cigarette brand in 1990, ,9= PR ® 0 PARLIAMENT Above: In Turkey, Parliament and other Philip Morris brands have won nearly 90% of the market for imported cigarettes. Philip Morris International Operating Revenues ( by Geog rapnic Reg on ) 11 World Cigarette industry Unit Sales (Excsud ng U.S.A.j _  World Cigarette Industry Unit Sales  Philip Morris Share of the World Market i°a) ~ ,on un« 3000 1000 0 86 87 88 89 90 nate against consumers with lower incomes. In 1990, of the 139 state and local pro- posals to increase excise taxes, 115 were defeated or tabled. We are also combating attempts to restrict our mar-

keting activities. As industry analysts have pointed out, the elimination of cigarette advertising would do little to discourage smoking. It would, however, reduce competition, and make it dif- ficult for companies to introduce new products that might address the concerns of both smokers and non- smokers. We believe that efforts to restrict our market- ing are not consistent with free enterprise systems. We are supporting indus- try and trade initiatives to discourage underage con- sumers from using our products. We also are sup- porting legislation to establish a minimum age of 18 for the purchase of tobacco products in states currently without such a law. Over the past ten years, worldwide cigarette industry volume increased 20%- Operating Revenues (Percent of Total Operating Revenues) during the same period our cigarette volume grew by 53%. Our 1990 volume gain is the largest we've ever had, and gives us the momentum to continue building our share of the growing world- wide cigarette market. The expertise we first acquired in the United States has helped us satisfy millions of consumers with a wide range of local, regional, and global brands. We are already a major force in most of the world's important tobacco markets, and developments in Europe and Asia offer even greater expansion opportunities. Weenvision large and profit- able growth for many years to come. Food In 1990, Kraft General Foods, Inc. continued to build on its brand and other marketing Kraft Free Singles and other cheeses were the first fat free cheeses available in the United States, strengths. Of our food oper- ating revenues, 72% came from number one or two brands in their category, and our revenue and income growth put us among the top companies in the food industry. For the year, volume grew 6.5%, while operating reve- nues were up 17%, and operating companies income increased 24%. Excluding the acquisition of Jacobs Suchard, volume rose by 3.3%, operating rev- enues by 10%, and operating companies income by 18%. The diversity of our food operations yielded solid benefits, as superior per- formance in most of our businesses more than offset softness in a few segments. Our unique combination of strong brands in growing markets, rapid product development, cost savings and business opportunities realized through synergies, and technological creativity fueled steady growth even a~ we invested for the future. The acquisition of Jacobs Suchard was consistent with our strategy of building an ever stronger portfolio of brands and markets, whethe through development or acquisition-and whether inside or outside the United States. Including a full year of results from Jacobs Suchard on a pro forma basis, approximately 32% of KGF's 1990 revenues would have been generated outside the United States. With Jacobs Suchard, we are now Europe's leader in roast and ground coffee, the coffee segment with the greatest growth potential. Jacobs Suchard also increases our distribution capacity, while its Milka, The success of Post Honey Bunches of Oats helped bring Post cereals' category share back over 11 °ro. Consumer creativity making Jell-O Jigglers, a gelatin finger food, 12 2G~~~16 5~4J RightWith the acquisition of Jacobs Suchard, a Swiss coffee and confectionery company, Kraft General Foods tnterna- tional is now the leader in Germany's coffee market

, ~ .i i I I I i t Toblerone, Suchard, and Cote d'Or brands bring us a new core business in confectionery. In 1990, KGF Interna- tional's other core busi- nesses in coffee, cheese, and viscous dressings all showed volume growth, boosted by geographic expansion and line exten- sions for key brands. Successful new product introductions included Foods USA turned in an out- standing performance. Maxwell House and our other coffees returned to profitability, with continued quality and advertising improvements helping to build the business. Post cereals increased volume 10%, bringing category share back over 11%. The improvements were due to superior marketing of core Post brands such as Grape- Cheddarie spread, Vitalite Nuts, Pebbles, Honey Light margarine, and Max- Bunches of Oats, and the well House Classic premium introduction of Marsh- freeze-dried coffee in the mallow Alpha-Bits. United Kingdom; HAG Kool-Aid brand powdered Colombian Supremo coffee beverage volume grew 3%, in Germany; Kraft MayOliva maintaining an 80% share of mayonnaise and Saimaza the powdered soft drink cat- Premium soluble coffee in egory. The Jell-O Jigglers Spain; Kraft cholesterol free promotion helped to spur the mayonnaise in Belgium; largest gelatin category Gevalia Premium soluble gains in over 25 years. The coffee in Norway; Vegemite expansion of Entenmann's singles in Australia; and new fat free and cholesterol free flavors of Philadelphia Brand bakery line helped to cream cheese in several increase bakery volume countries. nearly 9% in 1990. Strong We also widened some of volume gains from Stove Top our major regional busi- stuffing, Shake 'n Bake, and nesses, bringing Miracoli Log Cabin syrup, as well as Italian sauces to Germany the regional introduction of and our Maxpax coffee vend- Kraft Microwave Entrees, ing system to Spain. New also contributed to General product development, dis- Foods USAs performance. tribution and marketing synergies, the continuing integration of European At Kraft USA, new product introductions helped to increase the appeal of lead- Foods o eratin~ companies Volume for Philadelphia Hn appecizira spreao nraTt s assorcej creeses se~•,~a 4ti•~ih osca~ P ~ ticaver ara E.oWs R.c^ urcr.eon meats on the Continent. General Brand cream cheese also > Among the Kraft General and Kraft Light Naturals. remain in North America. such as Kraft Light Singles ZK6111, markets, and increasing ing brands. In cheese, vol- prosperity in the Pacific Rim ume grew with the introduc- will drive KGF International's tion of such new ~ products further growth. as Spreadery spreadable Most of KGF's food vol- cheese. Cracker Barrel fla- ume, sales, and profits vors, and low fat cheeses f (t I~ 2V4S.i.v5 5 Ji

,', (wneral Foods can fill a fam- S K tchen with more number one _ and number two brands than any ;tner food company in the Jnited States. We have fat free foods in more categories than any other company: Sealtest Free nonfat frozen desserts, dessert bars, and frozen yogurts are part of this growing-but fat free-portfolio. i Kraft General Foods, Inc. Volume = ""n5 ot Pnunds Our Invernizzi cheese distributors deliver to food stores throughout Italy. 15

tnc:reased. Following suc- ~,siul test marketing, Kraft's hrst nonfat process cheese product, Kraft Free Singles, has begun to expand geographically. The national introduction of Kraft Free nonfat salad dressings boosted the entire Kraft pourables line, build- ,;t~,, shareto414io;inarare__ new product achievement, the Kraft Free line included three of the five best-selling products in the entire pour- able dressing category. Both Miracle Whip salad dressing and Kraft mayon- rnaise increased their shares. '.t'e expect improvements from the introductions of .. Miracle Whip Free nonfat dressing and Kraft Free non- fat mayonnaise dressing, two fat free products announced in early 1991. Volume and share for Kraft tcl Parkay tablespreads . Oscar Mayer Zappetites microwave continued to grow, led by strong advances in the cultured products and top- pings categories. New products such as Sealtest Free nonfat frozen dessert, Breyers frozen yogurt, Cool Whip Lite whipped topping, and Light rf Lively Free non- fat yogurt all helped generate category share gains for the dairy division. - - _ All American Gourmet built its volume in 1990 by introducing Kraft Eating snacks continued to hit the target in 1990. Right frozen entrees and Budget Gourmet Light and Healthv Dinners, while Birds Eye improved its product mix by emphasizing its vegetable-and-sauce offer- ings. Aided by the introduc- tion of "soft" bagels and other marketing.effortss.._._. Lender's volume grew al- most 9%, with category . share climbing to i i%. Tombstone pizza continued to increase volume while expanding geographically, and is now sold in 25 states. Tombstone is the leader in the frozen pizza markets it now serves. Kraft General Foods Canada posted strong results across most of its major product lines, with volume gains helped by new product launches. Lunchables lunch combina- tions, Maxwell House Filter Packets, Cheese Pot cheese ~ Vegemite continues to be one of Australia's most popular products, and fat free products are also being offered. tou can nave your cake and eat it too-w+thout fat or cholesterol, from Entenmann's. also rose, and Touch of Oscar Maver introduced tur- Butter expanded nationallv. key bacon, and a range of Butter Volume for Kraft side dishes light, thin-sliced, and low- and dinners grew by 5°'o: salt meats. We look to these new shapes and flavors. as and other product introduc- well as microwave offerings, tions for future growth. are being tested for intro- Kraft General Foods duction in 1991. Frozen Products defended olume_.._.and built on its franchises. Total Oscar.Mayer v rose due to new products Volume for dairy products, such as Lunchables lunch which contributed more - - -- - combinations and Louis than half the group's operat- Kemp surimi seafood. ing revenues and income, Partially due to higher red meat commodity costs, oper- ating companies income declined. Oscar Mayer brand's num- b..er one position, together with Louis Rich's leadership position in the growing tur- key segment, accounted for 34% of the market for lun- cheon meats and a record 14% for bacon. We also. have . an 18% share of the hot dog market. To address changing consumer preferences, '~-''ocoiate from Jacobs Suchard y-ag c on a discerning consumer . IZ.erland. 17

spread, Honey Bunches of Oats cereals, Kraft Free salad dressings, and the Jell-O Jigglers promotion all con- tributed to volume and share growth in key categories. Kraft packaged dinners, the best-selling dry grocery item in the country, introduced Super Mario Bros. Pasta and Cheese in the children's seg- ment, and achieved a 14% volume improvement. Coffee volume grew almost 6%, aided by successful launches of General Foods International Coffees and Maxwell House 1892. KGF Canada also expanded its successful regional direct foodservice business to a leading position with the acquisition of Groupe Cafe in March 1990. Volume increased in both divisions of Kraft General Foods Commercial Products. Kraft Food Ingredients bene- fited from strong perfor- mances in the oil products and Specialty Ingredients businesses. Kraft Foodser- vice volumes for cheeses, oils, shortening products, and sauces also grew. Future foodservice performance gains will depend on an improved food-away-from- home market, greater pen- etration of new accounts, and further efficiencies from broadline distribution operations. Our strong overall perfor- mance at KGF was made possible by a broad array of shared innovations and mar- keting strategies to meet changing consumer tastes. Our established products still have significant growth 18 potential, as shown by the improvements at Maxwell House and Post. In addition, the Jell-O Jigglers promo- tion, one of the largest gelatin promotions ever, made Jell-O desserts a "top- of-mind" snack for children, boosting U.S. sales by 13% in 1990. As we develop and launch new products and promo- tions, we are benefiting from a unique set of synergies. Most of our savings through these synergies and productivity improvements were reinvested; for our goal is not to avoid spending, but to spend wisely. Our most important synergies create incremental business. Our fat free products are a good example of how we are becoming more than the sum of our companies. We recognize that lower fat and cholesterol now head the list of consumers' dietary con- cerns. And nearly every one of the KGF operating com- panies is replacing fats with other natural ingredients in at least one of its products - from cheeses and pourable salad dressings to cakes and frozen desserts. These inno- vative fat free products alone accounted for more than $275 million in revenues in -1990. We first introduced fat replacement technology in our U.S. markets, and now we are pooling our experi- ence to bring new fat free products to Canada, Europe, and Australia. We had fat free products in more categories than any other company in 1990, and we are Phitadefphia Brand cream cheese is one of our strongest international brands, sold in the United States. Germany-and35 other countries around the world 204S:LG555i

® U m m O NOW ...... . ........ ._ . , ® ® ® ® ~t q !C! - y ~: ..~. ~ EE ~ d)EE .- n~. ~. `_ ' 3~.~~ 'EE tiB£E iEE ® 0 N ~ ! ,. .~ ~oi ~ ~Ih > ® G s72g 1 a S~ ~ ° Mazwell House~ TjIterPa` OEM :;roducts on sale in Korea ,~ Maxim and other ~es as well as Post cereals, above: Oscar Mayer applied the Luncnables concept to develop new Lours Rich Luncn Breaks, popular and convenient for parents and chil- dren alike. Top right'our foodservice division supplies US. restaurants, ^ospitals, and other institutions witn Kratt General Foods and Qther pi_Qd_,_ .rcts- Right. convenient Maxwe i House Fiiter Packs heiped our . U S, coffee busmesS reiu.rn t4 Frqfitabti tY. ... .. .,..

developing still more fat free products this year. In fact, crossing operating company borders to find synergies, KGF answered demand for nutrition, conve- nience, and variety by intro- ducing more than 300 new products in the United States during the year, and was named the new product company of the year by Prepared Foods Magazine. We bolstered our brands with double-digit increases in marketing expenditures in 1990 and plan similar increases in 1991. Our Holi- day Homecoming promotion in the United States, featur- ing 34 of our leading brands in December 1990, was another notable example of how our companies are working-and spending- together to build our business. We are backing up our investments in new markets, products, and packagings by investing in our people. We are enlisting all our employ- ees in a drive for continu- ous improvement in every company process, from pur- chasing and research to manufacturing and market- ing, to serve both customers and consumers better. Only by aiming for excellence in each aspect of our business can we lead our competition and begin to satisfy our own high standards. Kraft General Foods recorded solid business gains in 1990. We are deter- mined to deliver steadily bet- ter operating results over the years to come. Beer In 1990, for the fifth consecu- tive year, volume growth at Miller Brewing Company outperformed the U.S. brew- ing industry. Our total ship- ments of 43.5 million barrels, including Sharp's and exports, were up nearly 4% for the year. Our share of __ _ the total U.S. malt beverage industry grew to a record 22%. Our export volume rose more than 6%. Operating revenues and operating companies income also set new rec- ords. Growth in premium- priced brands helped boost revenues 6%, and lower costs contributed to a 26% gain in operating companies income. Shipments of Miller Genuine Draft grew by almost 30%, consolidating the brand's ninth-place posi- tion among U.S. beers. Combined with Miller High Life, Genuine Draft's contin- ued success gave Miller 16% of the more profitable full- calorie premium segment. Miller Lite, the country's second-best-selling beer, continued to gain volume, and accounted for more thai 45% of the premium low- calorie segment. We added to our presence in this seg- ment by bringing Miller Genuine Draft Light into ten western states. In the above-premium segment, the company is represented by Lowenbrau, and we brought both Miller Reserve, an all-barley pack- aged draft product, and Miller Reserve Light, a low- calorie line extension, into test markets in 1990. In the below-premium category, volume gains by Milwaukee Best made it the sixth-most- popular beer in the country. Miller Sharp's, first intro- duced in December 1989, fueled the growth of the non alcoholic brew segment, which nearly doubled its Operating Revenues tPercent of Total OpeaUno Revenues ~~n~rx.»~ Above: The full rich taste of Milter Sharp's benefited from an innovative technology, and Sharps became the country's best-selling non-..'.: : a alcoholic brew. Right: Miller Genuine Draft Light. a iow-caforie ffne exten- sion of Miller Genuine Draft, joined the Miller family in 1990. Far right M iier Genuine Draft, the countrv's ninth-most-popular beer. andonp pf tne fastest-growing premwm beers in the United States._ _ ------ ___ ..r 20