Philip Morris
Long Range Plan 890000 - 910000
Fields
- Type
- MREP, MARKET RESEARCH PROPOSAL
- BUDG, BUDGET, BUDGET REVIEW
- CHAR, CHART, GRAPH, TABLE, MAPS
- Area
- IZANT,JULIAN/OFFICE
- Attachment
- 2501480053/2501480198
- Site
- E101
- Request
- Stmn/R1-093
- Stmn/Rl-004
- Named Organization
- Ali Gouraya
- Amer Tupakka
- Amer, American Tobacco
- Amerg, Amer Group
- Arab Boycott of Israel
- Arab Gulf Health Ministers Council
- Asfc Ca Comm
- Asfc Org
- Asfc, Assn Swisse Des Fabricants De Cigerettes
- Bat, British American Tobacco
- Batelle Inst
- Bm, Burson-Marstellar
- Brazil Sales Force
- Burrus
- Bw, Brown & Williamson
- C+B
- Cartel Commission
- Childrens Research Inst
- Childrens Research Unit
- Clearing the Air
- Comecon
- Congress
- Corporate Affairs Conference
- Council of Europe
- Covington Burling
- Csrr
- Custom Authorities
- Customs
- Denner
- Din Vornorm
- Dunhill Intl
- Duty Free
- Eatern
- Economic Community Commission
- Eec, European Economic Community
- Eema
- Eema Sales Force
- Efta
- Egil
- Egil Group
- Epsas Org
- European Conference on Tobacco Policy
- European Data Center
- European Regional Office
- Fas
- Federal Council
- Federal Dept of Economics
- Finnish Research Inst for Economics
- Finnish State Medical Board
- Finnish State Medical Board Og Health
- Fml
- Ftc, Federal Trade Commission
- Ftr Switzerland
- Ftr, Fabriques De Tabac Reunies S.A.
- Gallaher
- Gcc
- Gcc Reference Lab
- General Consumer Survey
- General Foods
- Godfrey Philips
- Godfrey Phillips
- Gulf Cooperation Council
- Health + Transportation Ministries
- Healthy Buildings
- Healthy Buildings 88
- Hoggar
- Houses of Parliament
- Hq
- Iaq
- Imperial
- Index Group
- Indian Government
- Infotabs
- Intl Advertising Assn
- Iocu
- Isak
- Itc, Industry Technical Comm
- Joint Venture Project Team
- Kettaneh Org
- Kothari
- Kraft
- Langaard
- Laurens
- Lig, Liggett
- Local Field Force
- Ltt
- Luks Tokat
- Magnusson Parliamentary Comm
- Magnusson Tobacco Commission
- Maltepe
- Maxwell House
- Meta Scientific Comm
- Middle East Tobacco Assn
- Ministry Finance + Customs
- Ministry of Finance
- Natl Trade + Industry Assn
- Nma
- Nordic Council
- Nordic Council Comm
- Nordic Countries Duty Free Assn
- Nordic Duty Free Assn
- Nordic Nma Working Group
- Norwegian Finance
- Onnens
- Order Du Marche
- Oscay Meyer
- PM Australia
- PM Brasil
- PM Brazil
- PM Companies
- PM Germany
- PM Merchandising Team
- PM Nigeria
- PM Richmond
- PM Washington Office
- PM-Eec, PM-Eec
- PM-Eema, PM-Eema
- Pme, Philip Morris, Europe
- Pmi, Philip Morris International
- Pmusa Salesforce
- Pmusa, Philip Morris Usa
- Pr Agency
- Price Surveilance Office
- Price Surveillance Office
- Project Team
- Quality Workshops
- R+D Neuchatel
- Reemtsma
- Regie
- Rettig
- Rinsoz Ormond
- RJR Nabisco
- RJR, R.J.Reynolds
- Rothmans
- Rss
- Sales Force
- Sap
- Sas
- Saso Lab
- Saudi Arabian Standards Org
- Saudi Authorities
- Scientific Consulting Group
- Seita
- Semi Governmental Testing Lab
- Sitabac
- Soviet Chamber of Commerce
- State Planning Office
- State Planning Org
- Sullana
- Sumer
- Suomen Tupakka
- Swedish Government
- Swedish Magnusson Commission
- Swedish Tobacco
- Swiss Cafe + Restaurant Assn
- Swiss Duty Free Assn
- Swiss Government
- Swiss Price Surveillance Office
- Taj Mahal
- Tang
- Target Group
- Tei
- Tekel
- Tekel 2000
- Tobacco Advisory Council
- Torgmortrans
- Tse
- Turkish Advertising Assn
- Turkish Airlines
- Turkish Standards Org
- Uae Customs Councils
- Uae Ruling Authorities
- Udeac
- US Ussr Trade Council
- Vat
- Ved Dresden
- Vovort
- West Africa Working Group
- Who Uicc Iocu
- Who, World Health Org
- Work Force
- 7 11
- Action Program Against Cancer
- Named Person
- Alomran
- Denner
- Ellemanjensen, P.
- Liikanen
- Ottander
- Philipsson, C.
- Quweiz, A.A.
- Surgeon General
- Author (Organization)
- PM-Eema, PM-Eema
- Pmi, Philip Morris International
- Characteristic
- CONF, CONFIDENTIAL
- Litigation
- Stmn/Produced
- Date Loaded
- 07 Jun 1999
- Brand
- Above Premium
- Ambassador
- American
- App Light
- Arlette
- Baku
- Barclay
- Belmont
- Benson & Hedges
- Best
- Bond Street
- Boss
- Bridon
- Brunette
- Camel
- Capri
- Carlton
- Cartier
- Chesterfield
- Cleopatra
- Colt
- Congress
- Craven
- Dunhill
- Flint
- Gece Mavisi
- Gold Coast
- Hakinson
- John Player Special
- Kent
- Kental
- Kim
- London
- Lucky Strike
- L&M
- Maltepe
- Marble Arch
- Marlboro
- Merit
- Multifilter
- Muratti
- Night Blue
- North Pole
- Park
- Parliament
- Pgl
- Philip Morris
- Players Gold Leaf
- Project Paradox
- Project Sauna
- Ramlosa
- Rettig
- Rothmans
- Roy
- Sabanci
- Sauna
- Silk Cut
- Star
- State Express
- Suomen Tuppakka
- Viceroy
- Virginia Slims
- Visa
- Winfield
- Winston
- Yava
Document Images
---
~ PI-m~ MORRIS
EFFA, Eastern Europe, Middle East, Africa
[] Scandinavia/Finland
[] Eastern Europe
[] Turkey
[] Switzerland
[] Levant
[] Middle East
[] Africa
Copy No,
13
EEMA REGIO~
LONG RANGE PLAN 1989-1991
TABLE OF CONTENTS
Ae
HIGHLIGHTS
Objectives
Competition
Priority Strategies
Assistance from PMI
i
I
2
6
Bt
MARKETS
I. Finland
2. Switzerland
3. Saudi Arabia
4. Kuwait
5. Turkey
7
18
29
42
53
Co
BUSINESS INITIATIVES
I. Iraq
2. USSR
63
65
D. CORPORATE AFFAIRS
67
OPERATIONS & INFORMATION SYSTEMS
Operations
Information Systems
78
88
F. PROGRESS IN 1988
89
Go
REGIONAL SCHEDULES
NEW BRAND SCHEDULES FOR MAJOR MARKETS
100
108
c~
0
0
0
DECEMBER 1988
HIGHLIGHTS
-I-
THE EEMA REGION
HIGHLIGHTS
OBOECTIVES
~CAG
LE OB ~988LE
~988 1989 1990 1991 ~
Unit Volume (billions)
51.2 55.7 60.4 65.3 8.4%
($ millions)
Net Operating Revenues
Net Marg. Contribution
Income from Operations
Net Income
$868.6 $968.7 $1052.1 $1128.5 9.1%
$547.0 $609.9 $653.4 $690.5 8.1%
$260.8 $300.2 $325.9 $363.1 11.7%
$171.8 $197.6 $214.6 $238.6 11.6%
Based on latest estimates for 1988, the Region will show growth ~ver the
1988 to 1991 period of 8.4% per annum in unit volume and 11.6~ per annum
growth in net income.
These projections for the Region represent a slowdown compared'to previous
plans. There is increasing pressure on profitability in our major markets,
due to adverse developments in taxation and price control, combined with the
greater use of price by our competitors as a weapon to fight for market
volume. Nevertheless, our five major markets - Turkey, Switzerland,
Finland, Saudi Arabia and Kuwait - which today account for fully three
quarters of the Region's Income from Operations, will contribute 39% of the
Region's total income gain from 1988 to 1991, and 34% of the unit volume
gain. As such, these markets will represent two-thirds of the Region's
Income from Operations in 1991. Other important contributors to the
Region's income growth will be the Eastern Europe duty free business, the
Levant, and our local manufacture ventures in North, West and Central
Africa. Africa is planned to provide 19% of the income gain from 1988 to
1991. Total Eastern Europe will generate an additional 17% of the income
gain, with the Levant contributing 11%.
COMPETITION
Our competition is becoming increasingly aggressive, in terms of product
offerings, pricing and marketing investments in local markets. Region-wide,
Rothmans is the competitor suffering the most from volume erosion. This has
prompted their use of price to maintain volumes, while RJR continues to use
price to establish market presence. Further, Brown & Williamson is becoming
increasingly active in its strategy to develop its international business.
We are seeing growing emphasis on Lucky Strike and Viceroy, where price is
regularly used to support the brands. These strategies are affecting
profitability in Saudi Arabia, with Kuwait expected to suffer similar
onslaughts during the Plan period; the imminent hike in customs duties in
these markets aggravates the problem.
In Finland and Switzerland, we encounter de facto price control, together
with stable market size and the reluctance of weak, local competitors to
support industry price increases. Thus, we are constrained in our ability
to achieve price increases which we know our products can support. Further,
in Switzerland Rothmans and BAT/B&W have initiated value propositions;
Rothmans with its Winfield 25s and BAT/B&W with a low price positioning for
Lucky Strike, also supported by heavy marketing spending.
In Turkey, where PM has 85.5 % of the international segment, we face severe
price constraints; and, moreover Tekel has the clear objective to reduce its"
2501480057
-2-
dependence on Philip Morris. The enforced move to local manufacture will
further change the fundamental economics of our business in that market.
Until recently, we have been able to achieve growth built primarily on our
premium priced strategy, notably with Marlboro. While we have been
successful in expanding our premium portfolio, for example, Parliament in
Turkey and Philip Morris in Switzerland, we must respond to these
regulatory/competitive threats in order to secure our long term fortunes.
This means meeting the competition with tightly targeted below premium price
strategies. The Region's primary objective is to optimize unit volume,
market share and income growth under these changing conditions.
PRIORITY STRATEGIES
People - Good people will remain fundamental to our success, and ,therefore
our most important resource. Increasingly, the successful fiel~ manager, in
addition to selling cigarettes and beating the competition, mCst deal with
other industry issues. Interaction with regulatory officials is key in most
markets and direct communication with consumers on defendinl their rights
and smoking acceptability is now a major concern. Superior performance
under broader requirements will be achieved through issue-oriented training
and well-focused support from our HQ departments, combined with specific
performance goals. An efficient organization ensuring speed of decision
making is critical.
Pricin~
Our long-term objective is to retain our position of pricing leadership
Region-wide. This means effecting price increases which improve our unit
margins and exploit any weakening of the dollar in our export markets.
In markets which are subject to de facto price control, our clear aim is to
maximize prices, as in Finland, Switzerland, Norway and Sweden, such that we
at least recoup cost base, tax and exchange rate impacts, while avoiding
undesired margin scrutiny by the authorities.
For selected markets, we will use flexible pricing to retain the
affordability and competitiveness of our products, as in Turkey, Saudi
Arabia and the Levant, or to establish our presence in growth markets where
we are underrepresented, for example in West Africa and UAE exports. In a
number of instances, this requires expanding our product portfolio to
compete in the mid price and low price segments. This has become a vital
strategy in Saudi Arabia, where lower consumer purchasing power and fierce
price competition from RJR has prompted us to use retaliatory pricing
tactics. Further, we are seriously considering absorbing the impact of the
duty increase budgeted in July 1989 in order to maintain our competitive
position. Indeed, the duty increase could potentially come earlier.
Marlboro
We shall continue to exploit Marlboro's international image, today
unequalled by any competitive product. We will use Marlboro Red to
spearhead market penetration, as in Turkey, North Africa and elsewhere. In
markets where Marlboro is well established, we will maintain its drawing
power through high impact consumer communications, including promotions, and
by launching line extensions to compete in all flavor segments. In addition
to the multiple formats we offer for Marlboro Red, this includes Marlboro
Lights, Marlboro Menthol, and Marlboro Lights Menthol. The launch of
Marlboro Superlights, planned for the EFTA and GCC markets in 1990, will b~
critical in ensuring Marlboro's ability to compete in all major market
segments. By 1991, Marlboro variants other than Red will account for 14% of
2501480058
-3-
the total Marlboro volume, versus 10% today and 5% as recently as 1983.
~ew products
New product launches and line extensions figure heavily in our ~hree year
Plan, with new products and line extensions introduced from 1989 onwards
accounting for 5% of the Region's total unit volume in 1991. This amounts
to 3.3 billion units, of which Chesterfield will represent 41% and L&M an
additional 13%; new Marlboro introductions will generate 10% of this volume.
Premium Products - In the premium segment, most of our new introductions
will exploit the Marlboro franchise, with Marlboro Superlights and Marlboro
Lights being the most significant. Chesterfield/Chesterfield Mild will also
be important, and will be introduced in Switzerland and Finland. Merit will
join Marlboro under local manufacture in Egypt, and the Ultra line extension
will be launched in Switzerland in 1990. The Philip Morris franchise will
be launched in Sweden and Finland, with line extensions planned-'for the GCC.
Chesterfield and L&M - Chesterfield will play an important part in our
premium price strategy for Switzerland and Finland, wher~ light line
extensions will also be launched before the end of the Plan period. It will
be specifically targeted against Camel. Likewise, in Turkey, Chesterfield
will be launched at the Camel price in 1990, under local manufacture. In
Africa, we will extend the Chesterfield franchise by introducing it at a
below premium price level in Morocco, Tunisia, Benito, Burkina Faso, Ivory
Coast and Reunion.
Similarly, L&M will be launched in West and Central African markets. As
with Chesterfield, L&M is a major element of our strategy to exploit local
manufacture to build our business in these markets. In Saudi Arabia and
Kuwait, we will line extend L&M with L&M Lights in 1989 to expand the appeal
of our mid/low price positioning of the family.
Visa and Congress - Visa is the cornerstone of our strategy for the
low/cheap segments in the GCC markets, primarily to contest the growth of
RJR's Gold Coast. A light line extension will also be offered in 1989.
Similarly, Congress, a full flavor product, will be positioned in the low
price segments in Lebanon and throughout much of Africa.
Other Activities - We are planning to use Norway as a pilot market for
Project Paradox, where success will likely encourage us to launch the brand
in Sweden, as well. The Region is actively working on finalizing the
development of a channel ventilated product with a maximum of 6 mg tar
(Project Sauna) for possible launch against Barclay in selected markets. We
will launch this product initially in Saudi Arabia and Kuwait. Well
established local brands will be exploited with line extensions, as with
Belmont Ultra in Finland and Muratti Mild in Switzerland. Given
Parliament's strong performance in Turkey and in selected markets outside
the Region, we will consider Parliament for launches or relaunches in some
of our markets.
D~stribution and salesforce performance
We will use a three-pronged approach to optimize the distribution and
salesforce activities in key markets merchandising strength, customer
relationships and logistics.
We will continue to develop the use ~f ~igh impact permanent POS displays
and focus our merchandising resources on direct consumer contact via"
sampling and promotions as well as against individual competition, in
particular RJR and B&W. In addition, we will exploit promotional activities
which also provide an incentive to our salesforce as well as to the trade,
2501480059
-4-
for example, our Brand Display Award which is increasingly being used in our
important markets. Futhermore, we are educating the trade in the superior
unit profitability of cigarettes, in particular PM's, to secure greater
support from the trade for our products. Salesforce training and
development are critical for achieving this.
We will continue to make concerted efforts to strengthen and regularize 6ur
relationships with our customers. Should alternative channels offer greater
opportunities, we are prepared to switch, for example in Sweden.
Understanding the cost of distribution is critical, especially in
Switzerland where discounting has started to emerge, and where the Ordre du
March~ will be restructured.
With respect to logistics, our objective is to ensure efficient product flow
to eliminate out of stock situations as well as to optimize the
order/production/delivery cycle and to reduce our receivables. ~ey markets
are Yugoslavia (hard currency shops), Turkey, the GCC and all markets using
Brazilian production. "
Products costs/sour¢inq
Product quality at the very top end of the competitive range is a goal that
will receive ongoing, active attention. Meanwhile, efficiencies and
subsequent savings in purchasing, blending and manufacturing are a key
objective for us. In FTR, rationalization of the Secondary Department has
been completed, with a review of the Primary and Logistics Departments now
underway. Product and blend standardization is key in FTR and in Finland.
Technical assistance to our licensees is also critical in terms of current
production and in developing our competitive advantage over the other major
international companies.
New business initiatives
Due to low growth prospects in our mature markets, future growth for the
Region will depend heavily on our pursuit of new opportunities. This will
include shifting from an export-based business to local manufacture, as in
Turkey, West & Central Africa, and Morocco, as well as penetration of new
markets, such as Iraq, UAE exports and the USSR.
Turkey - We shall negotiate favorable conditions with local authorities for
local manufacture, which we anticipate starting in 1990. We need to ensure
our control over retail pricing, equitable taxation, a favorable payment
period for excise taxes and considerable investment incentives. Until our
local venture can fully supply consumer demand for all our products, the
continuation of imports will be critical; we will likely be required to
accept a compromise on FAS pricing in order to ensure the necessary supply
until the transition phase is completed.
USSR - We are in the process of negotiating terms for a new license venture
in the USSR to supply the seaman market (Torgmortrans) and to re-establish
supply to the domestic market. We are also pursuing a joint venture with
the USSR in a project with our Indian partner to supply the USSR market
under the bilateral trade agreement between these two countries.
Iraq - In order to penetrate this 18 billion unit market, we will pursue the
opportunity provided by a recent legal change allowing the importation and
distribution of cigarettes by the private sector, which Marlboro was the
first brand to exploit. We will also explore all opportunities which
would lead to a mutually beneficial cooperation agreement with the Iraqi
monopoly, and will leverage any possibilities to use US government"
assistance to our advantage. 2501480060
-5-
West and Central Africa - In Senegal, we currently produce only Marlboro Red
under license. We will move our other products to local production as of
1990. We will initiate a new license operation in 1990 in Burkina Faso and
in 1991 in Guinea. In Central Africa, our licensee in Cameroon is planned
to take over production to supply other UDEAC markets - Gabon, Central
African Republic and Congo, which is scheduled for next year.
Corporate Affairs
We will develop and mobilize all resources - internal PM, external agencies
and consultants, the industry and NMA's, and all potential allies - to fight
and to halt the deteriorating social and legislative trends against tobacco;
we will focus particularly on Scandinavia/Finland, Switzerland and the GCC,
and prepare to avert such trends in Turkey. We shall also work closely with
PMI in developing and implementing global strategies to confront our
internationally organized opponents like the WHO. Specific action~ 4nclude
the following. .-
Taxation: In the GCC, avert/delay duty increases, and secure a high minimum
specific element in the ad-valorem duty structure. In Switzerland, ensure
that the tax increases are small and phased, and that the present specific
tax element is retained should the Tobacco Law be revised.
In Finland, secure a change in the tax system to a predominantly specific
structure; and avoid health-driven increases in the Nordic area generally.
In Turkey, continue to lobby the authorities to modify the system towards a
specific structure for both imports and local manufacture.
Smokers and Restrictions: Resist the deterioration in the public attitud~
towards smoking. Concentrate upon the ETS issue and smoking restrictions,
especially in the Nordic markets. Undertake aggressive PR to counter
misinformation and bias, in Finland, Sweden and Switzerland, in particular.
Barclay: Achieve appropriate amendments to the cigarette testing
methodologies and constituent labeling requirements for Barclay in the
Region. The priorities are the GCC, Turkey and Finland. Develop and launch
product responses, as necessary.
Constituents and warning labels: Avert further reductions in the maximum
constituent levels in Finland and the GCC, or their introduction elsewhere.
Ensure acceptable tolerances for constituent levels in the GCC. Prevent any
legislation concerning ingredients and additives. Prevent the spread of
unacceptable health warning labeling. Ensure appropriate attribution and
where justified invoke legal action, as was successfully undertaken in
Sweden.
Marketing restrictions: Prevent the spread of marketing restrictions, with
priority going to Sweden, Switzerland, Kuwait and Turkey.
The Single European Market: Broadly monitor all events relating to the EEC's
"1992" project in order to pre-empt and exploit any potential impact in EEMA
markets.
Managemen~ Information Systems
We shall continue to install and upgrade the field and HQ equipment and
systems within the corporate policy umbrella to ensure fast, efficient
management information and decision support tools, including office
automation, the SCORE system and the FSP package. To achieve this, we will
2501480061
-6-
provide the necessary training and support, and ensure a smooth transition
to the European Data center. Reducing bureaucracy and unnecessary flow of
paper will also be addressed, including stringent criteria for document
retention. We will implement conclusions arising from the INDEX study.
ASSISTANCE FROM PMI
To help meet the Plan's objectives, the Region seeks specific PMI assistance
in the following areas:
I. Assistance in the staffing of the Turkey project.
2. Powerful international image campaign for Chesterfield.
no
Support on corporate affairs issues, particularly in mustering
international resources, enlisting the support of competitors, and
countering internationally organized opponents, like the WHO and IOCU.
Coordination of support from other Regions and international
competitors to achieve our objectives with regard to testing standards
for channel ventilated cigarettes.
Pressure on the US and EEC Leaf Departments to locate
additional quantities of Eastern European countertrade
acceptable quality at realistic cost.
and absorb
tobacco of
Support for synergistic cooperation with the General Foods' and Kraft
operations within the Region - countertrade, market intelligence, joint
marketing activities, e.g., the USSR.
Cost reduction of minor export brands manufactured in small runs in the
US; and ensuring the continuing supply of quality, low-cost product for
low price export markets.
