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USC Tobacco Industry Monitoring Project Collection

Marlboro Story

Date: Mar 1990 (est.)
Length: 89 pages
2504035344-5432
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Fields

Type
Brre, Brand Review
Chart, Graph, Table, Maps
Author
Humphreys, M.
Named Person
Arrivabene, M.
Barrial, R.
Becker, Wilfried (PM GmBH European employee)
Begin
Bellot, A.
Brandt, W.
Braun, H.
Brinkmann, M.
Butson, E.
Carter, J.E.
Cooper, G.
Cullman, J.F. III
Davinci, L.
Deuchler, W.
Dodson, C.
Guillaume
Gunnarson, S.
Hallauer, J.
Hans, T.
Heymann, J.
Holmes, S.
Jensen, B.
Jones, R.
Jungschlaeger, K.H.
Krause, I.
Landry, J.
Lindsay, J.
Lyon
Maxwell, H.
Mix, T.
Moessenger, F.
Monroe, R.
Muse, N.
Nixon, R.
Pirkl, H.
Ponto, J.
Prokop, J.
Rosenback, L.
Rosentreter, R.
Russell, C.M.
Sadat
Schildwachter, H.
Defense
Schleyer, H.M.
Schmidt, H.
Seppi, K.
Spell, B.
Storr, H.
Stout, R.I.
Wayne, J.
Weissman, G.
Welles, O.
Wolff, T.
Named Organization
Advertising Club of Metropolitan Wa
American Cancer Society
American Navy
American Tobacco
American Troops
Anti Smoking Groups
Austria Tabakwerke
BMW
British Cunard Line
Bulgartabak
BW, Brown&Williamson
CA Ferntouristik
Call News
Coca Cola
Congress
DIE Berliner
Dresdner Bank
Duty Free
Eger Tobacco Factory
Fabrika Duvana Sarajeva
Federal Communications Commission (U.S. government agency regulating TV, radio)
Enforced the Fairness Doctrine against the tobacco companies; required time be provided on TV, radio for anti-smoking commercials.
Federal Union of German Employers
Financial Comm
FTR, Fabriques De Tabac Reunies S.A.
Glorious 7
Intl Team
Krakauer
LEO Burnett Agency
Life
Loews
Lorillard
Marlboro Adventure Team
Military Sea Transport Service
Miller Brewing Co. (Subsidiary of Philip Morris Co.)
Subsidiary of Philip Morris Co.
Newsweek
Paris Match
Peugeot
Philip Morris Gift Club
Philip Morris Overseas
PM Germany
PME, Philip Morris, Europe
PMI, Philip Morris International
Pmusa, Philip Morris Usa
RED Army Faction
RJR, R.J.Reynolds
Schroder Wagner
Stern
Time
Triplex
Univ of Va
US Lines
US Navy
USO Clubs
Vietnam
Wells, Rich and Green
Works Comm
World Tobacco
ZPI
Brand
Barclay
Benson & Hedges (PM)
Cambridge (PM)
Camel (RJR)
Carlton (ATC)
Chesterfield (Liggett)
Cool
HB Mannchen
Kent (Lorillard)
Kool (BW (1933-2003)/RJR (2003-present))
First Menthol cigarette line, released in 1933. Premium priced brand.
L&M
Lark
LORD EXTRA
Lucky Strike (ATC (until 1996)/ BW (1996-2004)/ RJR (2004 on))
Marlboro (PM)
Merit (PM)
More
Newport (Lorillard)
Now (RJR)
Pall Mall (ATC)
Parliament (PM)
Philip Morris
Raleigh (BW)
REEMTSMA
Salem (RJR)
Seita
Tareyton (ATC)
Triumph
True (Lor)
Vantage (RJR)
Viceroy (bw)
Virginia Slims (PM)
Winston (RJR)

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Page 1: jor02a00
y SA I j I I II with Philip Morris in 1962, was quite different. With great success they inserted the American advertising campaign without changing it and very quickly achieved large shares of the market. In response to the question of whether it was not risky for a licenser to disclose to the licensee the complete composition of the cigarette, Albert Bellot said, "Naturally this problem exists, but we thereby got rid of the problem and became successful. First of_all, there is the so-called Marlboro sauce, as we call it. This sauce consists of all the ingredients that contribute to having the tobacco acquire the quite specific-flavor. Every American cigarette has its own sauce_ At Fhilip t•iorris it was the policy that at any given time never more than two persons know this secret formula, which is kept in a safe to which only these two employees have access. "So at the beginning only the finished sauce was sent to our licensees_ In addition, they were supplied by us with the various kinds of tobacco and precise details about the mixing proportions. Although we were very careful in the choice of our licensees, we of course first had to get to know these good people better. At the beginning, we supplied them with cut f.iller, whi.cti .is tobacco that has already been cut and mixed. The recipient had only to feed it into-his cigarette machines, and perfect t•larlhoro cigarettc>_s would emerge at the end of the production l. ine. "In this manner, no secrets were disclosed. At a later period, licensees wero provided with blend strips. These strips
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are the part of the leaf that is left over after the stem has been r.emnved_ The various kinds of leaves are then mixed and shipped in large, pressed blocks. With this arrangement, the licensee has to cut the strips and mix them with the sauce. This was the second step after a period of time when a relationship of greater trust had been established. .1 After f urther close cooperation we took the third step that I I I ~ 1 i involved real confidence in the licensee. We told them that since they lived in Germany.or Greece it makes little sense to send them Greek or Turkish tobacco from America. At this point they should instead purchase the Greek and Turkish tobacco themselves_ We indicated the appropriate_quality level and offered them the possibility of doing their purchasing through our own rur.cha ,in,i :,yGtern. our licensees were supplied from this purchasing pool at the cost price, which resulted in significantly reducing their-expenses. "The last step involved making it possible for them to do their buying of the various kinds of tobacco that must be used in the manufacture of Marlboro cigarettes through our purchasing system. They themselves then remove the stem from the tobacco leaves and make the desired mixture. A licensee entrusted with this much responsibility had usually been working with our experts for five or six years. Despite this intimate knowledge, no licensee has either attempted nor'succeeded in copying the unique flavor'of Marlboro." In 1963 a licensing agreement was made with the Italian cigarette monopoly and with the Austria Tabakwerke AG of Austria
Page 3: jor02a00
'7 6 I for the manufacture and distribution of Marlboro. In late_1963 the Swiss company, Fabriques de Tabac Reunies SA, became the first subsidiary that manufactured Philip Morris cigarettes in Europe. That same year,the Marlboro country campaign was - launched in the U.S. A year later, 1964, Finnland became the first country in all of l;uropn to use the American Marlboro country campaign, while Switzerland, Sweden, Germany, France, Austria, and Italy also hesitated to make the change. Both licenser and licensee were themselves not certain whether the time had come for this change. Albert Bellot: "After all, we didn't want to make a mistake. We were of the opinion that our public was not yet able to deal with this change. We didn't want to introduce a change that would turn out badly, necessitating still another change. An experienced marketing man knows that something that is not yet right today can be absolutely right within two years. For this reason, we retained the two campaigns, one in Germany and onein Switzerland, that were already running_ ,tIn Swi t::er larrcj a typical jet-set campaign was used--fast cars, beautiful women, well-dressed men, all vacationing in ~ Acapulco, Monte Carlo, St. Tropez, or some exclusive spot--that N j t ~ was very sexy, very colorful, very contemporary, chic, including Lrl Q -~ somewhat avant garde clothing for the women. The Swiss campaign C W C11 also ran in Sweden, France, Spain, Italy, and Austria, while the W -.G CN German campaigri also ran in Holland. "At that time, things were somewhat more bourgeois in Germany, where it was said that the Germans were more interested
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in having beautiful homes with all the latest comforts and a nice family with lovely children. I am talking about the 50s I I I I 1 and 60s. It's different though today. Germany goes to greater extremes than elsewhere, but at that time Germany was not swinging at all_ The people there more interested in security and coziness, a good and honorable life, so we ran our campaign on this basis. It The_ motifs, for instance, showed a man at home, serving his friends a meal lovingly prepared by his wife. Nothing was too fashionable but was cozy and solid. Looking back, I believe our German agency made_ii mistake and that Germany was ready at an earlier period forr something more lively and exciting. But after all the men at the agency were_Germans, and they knew what we at Philip Morris had in mind. At that time I told my American colleagues that we were not in a position, in fact did " not have the right to tell them what to do or or_to doubt their judgment. But my inner voice told me even at that time that the decision was wrong." In 1965 Philip Morris made a licensing agreement with the French cigarette monopoloy, Seita. _ An important decision was made in Paris in 1969. At Albert Bellot's insti.gation there was a meeting between him and Joseph F. Cullman, who was chairman of the board at that time, at which Bellot outlined his plan to build a separate factory in Germany. Bellot had arranged for his Swedish friend, Stoffan Gunnarson, to be under contract with Philip Morris, partly r%J C11 Q because he spoke German fluently and was very familiar with .4 W C11 W ~ -~I
Page 5: jor02a00
I I I Germany. Together with him, Albert Bellot presented his five-year plan to Joseph Cullman. The goal of this strategic planning was to achieve a market share of five percent in Germany within five years. Albert Bellot: "He looked at us and laughed out loud. He told us straight out that we would never reach this goal. I replied, 'Maybe you are right that we really won't reach it, but we have set this goal because we believe we can reach it.y Cullman then asked for details. We explained to him how the project was to be financed and that because of the tax subsidies we wanted to build the first factory in Berlin. New York was to support us with all_ possible means, and in the meantime we would build up a team whose German technicians and machinists would be at least a= good if not better.than their American colleagues. "The presentation'of our strategy lasted almost a whole day. Cullman praised our work in preparing the plan but was still doubtful tha't we could reach the five percent goal within five years. At that time, the entire German market amounted to approximately 125 billion cigarettes annually. Our goal at that time was more than six billion Marlboro per year, which meant 500 million Marlboro per month. "Cullman asked us repeatedly whether we really believed that we could-increase the sales fivefold within this brief period of time. Fin mentioned that although Germany was a large marl:et, i:here Were many competitors, and they would certainly riot permit us to achieve such large market shares. Ultimately Cullman agroed to ourr plan, and five years laterr we had gained
Page 6: jor02a00
99 ; ; I I I I I six percent of the market share." A year after this discussion, the licensing agreement with Martin Brinkmann that had been in effect since 1969 expired. In 1971. the Philip Morris factory in Berlin started production, and once they started doing their own manufacturing the advertising campaign in Germany was changed. "What had been done up to that time was right. The Germans knew what they were doing. They had introduced a good campaign, but it was one without guts. It lacked a vivid presentation and didn't have enough character. Our first avertising campaign in Germany, which adopted the Marlboro country campaign, was called 'Freedom and Adventure.' With the introduction of the new advertising campaign, volume shot up right away to more than 300 billion-Marlboro per month. The decision to use in Europe the campaign that had been so successful in America was not easy for the European representatives. Albert Bellot.can recall several heated discussions i.n hi!~ T,ausanne office--at that time, the European headquarters of Philip Morris had moved from Paris to Switzerland--which basically came to the conclusion that in all of Europe there was quite a lot of anti-Americanism that would r1%) support the cowboy image. Ln O "We believed the cowboy was much too dare-devil and that ~ he too much incorporated the image of the dominat;~,qAmerican. ~ ~ z Today we know that our cowboy is not at all dominating, but at 1%D that time we thought that in order to sell a first-class product of a higher price category we would need a less brutal, less shocking subject with a less subtle effect. The Swiss campaign
Page 7: jor02a00
/ 00 I came closest to meeting these qualifications. "At that time, the young people were absolutely receptive to Jeans and cowboy boots, but nobody was really willing to believe in t:lie success of the Marlboro country campaign." The decisive success in Germany laid all these doubts to rest. The sales exploded and 'the real money-earning started!'" Itist ead of $_`;c- 1,000 cigarettes, Philip Morris suddenly made $2.00-$2.50 with three to six times greater volume_ The higher. profit was mainly invested in training more personnel, which in time turned out to be a very successful strategy. Philip Morris drew their conclusions from the experiences in Germany. Between 1970 and 1975, a total of six separate factories were built in Europe--in Holland, Belgium, England, Germany (in Berlin and Munich), and Switzerland. By being able to shorten the delivery distance to the European market as a result of locally manufactured cigarettes, Western Europe grew into the second most important market in the entire world. This development can be partly attributed to the fact that in December. 1972 Marlboro became for the first time the best-selling cigarette in the world. Not until three years later did Marlboro get on the bestseller list on the American mar. ket-_ -- Albert Bellot recalls another milestone in the international distribution of Marlboro, mentioning that, "After having chalked up success with licensing agreements and the construction of our own factories in Western Europe, our
Page 8: jor02a00
r es 6 I I I The main export countries for raw tobacco.used by Philip Morris are: Virginia U.S. Argentina Brazil Italy Canada Korea Malawi Philippines Poland Tha.il and Fiungary Burley Oriental U.S. Greece Greece Soviet Union Guatemala Turkey Honduras Italy Malawi Mexico Zimbabwe Tobacco Cultivation Tobacco seed is very fine and can hardly be recognized with the naked eye. Approximately 12,000 grains weigh only one gram. To assure an even distribution, the small grains of seed are mixed with sand or ash and then put into the seed beds.- After six weeks, the small seedlings are replanted to assure sufficient space between the plants when they reach their mature growth of 6-k to 10 feet. For the cultivation of Virginia and Burley, approximately NJ u1 1,400 plants are set out in 10,*fb 0 square teet of land. The length of time from the seedling state to the mature tobacco plant is four moill-li^:
Page 9: jor02a00
: O i t i attention turned to the East European market. As early as 1960, I said that we didn't want to be content_with the modest imports that had to be paid in dollars. In this way the poor people would never achieve a suitable profit. Even at that time my deliberations focused on a suburban factory in Eastern Europe also." The only promising strategy was via the same route as in Western Europe--in other words, licensing agreements. To- make certain that the licensee had sufficient money to import the tobaccos needed for the manufacture of Marlboro, barter guilds had to be set up. With the aid of these three-corner deals, the- East European countries would get the possibility of earning foreign currency to pay for the tobaccos that were computed in dollars. There had been contacts with Eastern Europe since 1960, dating from the time when Albert Bellot, who considered himself the leading person in the tobacco industrry, travelled to Poland. After a trip that included stops in Danzig, Krakau, Posnau, and Warwaw, he made a contract-with a company called Valtona which delivered duty-free merchandise to the Polish ships in the harbor. The deal was made in terms of dollars since the products, which included whiskey as well as cigarettes, were resold at somewhat higher dollar amounts. Albert Bellot summarized the venture in~o Eastern European business, s:1yin(r "Is,> n resultt of this good profit, the Poles were fairly easily able to pay our exports in dollars," cheerfully adding, "Even if we occasionally had to wait a little
Page 10: jor02a00
f D Z 4 1 I I I longer for payment, it was and is business." The Polish market reached its highpoint with two billion Marlboro annunlly before the market lost purchasing power due to domestic political problems. The first licensing agreement in Yugoslavia was made in October 1969 with the Fabrika Duvana Sarajeva. Four years later, a licensing agreement was made with ZPI, the Polish cigarette industry, for the manufacture of Marlboro in Poland. --In September 1975, a similar licensing agreement was made with Bulgartabak, and in 1978 an agreement was,made with the. Eger Tobacco Factory in Hungary. Up to'.the present, Marlboro has only been -xG>or.ted to Russia from Richmond. "As a supplement we have begun to teach the Russians to plant good tobacco in some.parts,•particularly in Muldavia," according to Albert F?r--l 1,il_'s ript_ ion of the status at that time of _ business relations between Philip Morris and the USSR. "Muldavia formerly belonged to Rumania, that part of the East that was annexed by the Russians. We sent tobacco specialists into'this region to teach the Russians how to cultivate tobacco that could some day be used for manufacturing Marlboro. In our estimation, it is the only possibility within the foreseeable future of producing in the USSR by the year 2000, eliminating the necessity of Russia's having to buy our tobacco for dollars. Unforunately I myself was never in Russia, but have been told by:Triends that the young Russians now want this tobacco. The-young people there are not different from the ones in Germany, Switzerland, or France. All of them want the same

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