PHILLIP MORRIS
Dr: Mattson
Marketing Management
Presenting Team
Robert Fleming
Lindsey Johnson
Steve Mignogna
Nick Paradise
Janelle Wolfe
Table of Contents
PAGES
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Executive Summary
Mission Statement
4
Introduction
4
History 1902-1950
5
History 1950-Present
6
Marketing Strategies
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Looking into the Future
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SWOT Analysis
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Works Cited
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Executive Summary
Problem Statement
Tobacco sales have began to decline due to the decrease in tobacco
consumption.
Background
The American cigarette industry is declining two to three percent per year
(S&P’s Industry Survey). Phillip Morris (PM) has been primarily a tobacco
distributor with alcohol being the second leading source of revenues. With
consumers continuing to become more educated on the effects of tobacco use
the amount of sales continues to decrease.
Discussion
Phillip Morris is beginning to lose its consumers in their cigarette industry
which is their most profitable market, due to health concerns. It is necessary to
reintroduce themselves through advertising and safer products to continue to
grow in theses areas. Research efforts will be necessary in attempting to
promote this “safer cigarette”. While this will cost a great deal of money, it will
certainly help Philip Morris continue to achieve success.
Recommendation
By continuing to invest in research and development, Philip Morris can
continue to offer a “safer cigarette” and gain consumer trust and loyalty, while
maintaining a more ethical standard.
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Mission Statement
Our goal is to be the most responsible, effective and respected developer,
manufacturer and marketer of consumer products, especially products intended
for adults. Our core business is manufacturing and marketing the best quality
tobacco products to adults who use them.
We will support our mission by proactively engaging with our stakeholders
to enhance our ability to act in a way that is consistent with society’s expectations
of a responsible company. This includes continuing to deliver a better and
healthier product to the consumers.
Introduction
Philip Morris is a well known company with an admired name that is
headquartered in Richmond, Virginia. It has grown to be the largest cigarette
manufacturer and marketer in the United States. Over the past thirty years this
company has taken chances, made good decisions and profited tremendously.
Philip Morris has made a name for itself in the cigarette market and industries
such as beer, food and finances. Its most recent acquisition was the purchase of
Kraft Inc. for $12.9 billion dollars. Philip Morris has become successful ranking
second in both the packaged food and beer industries and has been able to
acquire names like Oscar Meyer, Jell-O, Miller and Miller Lite.
Philip Morris is under the leadership of Michael Miles and he has goals for
the company. Miles is the first non-smoking CEO of Philip Morris in 145 years.
He is placing emphasis on developing new products to meet new trends,
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expanding geographically and manufacturing and marketing globally. Miles has
goals of gaining profits by reaching more consumers. Philip Morris Company
was most recently rewarded seventh place by Fortune’s list of the largest
manufactures in the United States.
History (1902-1950)
According to the Marlboro Timelines, Philip Morris started out in 1902 as a
British cigarette manufacturer, which includes brands such as Cambridge, Derby,
and Marlboro. One of the original brands, Marlboro, was named after the street
Marlborough in London where the factory was located. Marlboro was originally
introduced in 1924 as a women’s cigarette and by 1926 the ads were specifically
targeting women. The advertisements were stylish and savvy and eventually by
1950 it became a household name.
Consumers were unaware of the deadly effects of tobacco until 1942.
Reader’s Digest exposed the health risks involved with smoking in an article that
linked smoking with lung cancer. After speculation, Philip Morris reintroduced
Marlboro as a “safer” filtered brand. This was a huge advantage for Philip Morris
because consumers switch from their original brands to the “safer” Marlboro
brand offered by Philip Morris.
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History (1950- Present)
Since the success of the Marlboro brand Philip Morris has a 42% market
share out of a 70 billion dollar total market. Philip Morris is now offering products
that range from beer, food and cigarettes, to financial services, and real estate.
Philip Morris’ products segments such as; cigarettes, packaged foods, and
beer have all gained brand recognition. The reason for this success is Philip
Morris’ aggressive approach towards acquiring new businesses. In 1967 Kwara
Tobacco Company was purchased by Philip Morris. In 1969 Philip Morris
acquired over half of the Miller Brewing Company. In 1977, we purchased 97%
of Seven-Up. In 1985, Philip Morris gained a significant advantage in the
packaged food industry by purchasing General Foods Corporation for 6.5 billion.
After this purchase Philip Morris then merged with Kraft Food Inc., in 1988.
Marketing Strategies
Philip Morris has had many obstacles to overcome since consumers found
out cigarettes were so harmful. It capitalized on this situation by concentrating
on marketing the “safer” filtered cigarette. Consumers were willing to switch
brands and establish brand loyalty during this time. According to Marlboro Times
in 1955 Philip Morris reintroduced the Marlboro image with the “Tattooed Man”
campaign. This campaign was targeted towards men who were already addicted
to smoking and scared of getting lung cancer. The image portrayed an AllAmerican, hardworking, highly respected, outdoorsman. This campaign gained
the trust of millions. Philip Morris captured the market with the Marlboro brand
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and became stronger than ever. This revolutionized the way consumers
perceived Marlboro, resulting in trust during a time when consumers needed
confidence and security in a cigarette company. This repositioning of the
company gave Marlboro a strong competitive advantage over other leading
cigarette manufacturers.
Despite this, Philip Morris is in a constant battle with the anti-smoking
agencies. Several states nation-wide began receiving monetary grants to
prevent smoking. These funds are starting to raise awareness among teens in
the anti-smoking campaign. The government began trying to regulate smoking
by issuing high taxes, forcing cigarette prices way up. Philip Morris is constantly
trying to overcome these obstacles, and continue to remain highly profitable.
Looking into the Future
The company had no plans to diversify outside of packaged goods as of
1990. Opportunities in tobacco were limited, therefore many predicted a major
food acquisition in Western Europe by 1992. Philip Morris had goals to reach
$85 billion in sales by 1995, including a net income of $9 billion. The future for
the tobacco industry at this point in time was starting to seem unclear. The
constant struggles with anti-smoking industries, and numerous lawsuits pending
were predicted to cause problems for Philip Morris. The thoughts of a “cigarette
free society” were becoming more and more realistic. Philip Morris knew that it
had to be very careful in its marketing in order to continue to prosper in the
cigarette industry.
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SWOT Analysis
Strengths

Largest cigarette and second largest beer brewer Company in the U.S.

Second largest food processing company in the world.

Seventh on Fortunes List of largest US manufactures.

Philip Morris is the leading cigarette exporter.

Philip Morris is consistently ranked as one of the more progressive
employers in the United States.
Weaknesses

Negative and lack of advertising because of government prohibition.

Philip Morris has a heavy dependency on tobacco.

Raising Prices in foreign countries, leading to decline in sales.
Opportunities

Smokers do not seem to decrease consumption despite price increases.

Food products revenues increased above tobacco in 1990.
Threats

Consumers are becoming more educated about the effects of tobacco.

Consumers are becoming more familiar with health issues pertaining to
food and other products Philip Morris manufactures.

Reynolds is closely behind with four of the top ten cigarette brands.

Increase in trade barriers for exporting.
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Works Cited
“History of Tobacco” Boston University Medical Center. 1999
http://academic.udayton.edu/health/syllabi/tobacco/history.htm
Mattson, Melvin. “Marketing Management Case Analysis by Teams” McGraw Hill
Custom Publishing. p.84-97, 2005.
Phillip Morris USA. 13 October 2005.
http://www.philipmorrisusa.com/en/home.asp
“The Marlboro Timelines.” Anthropology 226. Spring 2001.
http://www.courses.rochester.edu/foster/ANT226/Spring01/history.html
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