Brand Management Project Report on
Marlboro
By
SHAUNAK GOSWAMI
Enrollment No. 10BSPHH010718
TABLE OF CONTENTS
1.
The origin and genesis of the Marlboro brand
2
Corporate ownership of the Marlboro brand and the operating style of the
company
3.
Global footprint of Philip Morris
4.
Brand Portfolio of Philip Morris with detailed descriptions and product
features
5
Marketing environment of the world cigarette industry, major players and
their share in the market
6.
Competitors of Marlboro
7
Strategic Pricing analysis for Marlboro
8
Understanding the Marlboro customer
9.
Brand improvisations attempted by Marlboro, Brand Ambassadors
and its current brand equity
10
Future Branding strategy of Marlboro
11
References
Chapter 1
The origin and genesis of the Marlboro Brand
History of the “Marlboro” brand of cigarettes
Marlboro is the largest selling brand of cigarettes in the world. It is made by Philip Morris USA (a
branch of Altria) within the US, and by Philip Morris International outside the US. It is famous for
the “Marlboro Man” of advertisements.
The brand is named after Great Marlborough Street, the location of its original London factory.
Richmond, Virginia is now the location of the largest Marlboro cigarette manufacturing plant.
Philip Morris launched the Marlboro brand in 1924 as a woman’s cigarette, based on the slogan
“Mild As May”. In the 1920s, advertising for the cigarette was primarily based around how lady
like the cigarette was. To this end, the filter had a printed red band around it to hide lipstick
stains, calling it “Beauty Tips to Keep the Paper from Your Lips”. It faced trouble in the 1930s
and attempted to rejuvenate itself with a clever advertising gimmick, changing the ivory tip to red
in order not to smear ladies' lipstick.
The brand was sold in this capacity until World War II when the brand faltered and was
temporarily removed from the market. At the end of the war, three brands emerged that would
establish a firm hold on the cigarette market: Camel, Lucy Strike, and Chesterfield. These
brands were supplied to US soldiers during the war, creating an instant market upon their
return.
After scientists published a major study linking smoking to lung cancer in the 1950s, Philip
Morris repositioned Marlboro as a men’s cigarette in order to fit a market niche of men who
were concerned about lung cancer, but not wanting to admit it. At the time, filtered cigarettes
were considered safer than unfiltered cigarettes, but had been until that time only marketed to
women. Men at the time indicated that while they would consider switching to a filtered
cigarette, they were concerned about being seen smoking a cigarette marketed to women.
The repositioning of Marlboro as a men’s cigarette was handled by Chicago advertiser Leo
Burnett. The proposed campaign was to present a lineup of manly figures: sea captains,
weightlifters, war correspondents, construction workers, etc. The cowboy was to have been the
first in this series. While Philip Morris was concerned about the campaign, they eventually
greenlighted the campaign.
Within a year, Marlboro’s market share rose from less than one percent to the fourth best-selling
brand. This convinced Philip Morris to drop the lineup of manly figures and stick with the cowboy
imagery.
In mid-August of 2006, a federal district court ruled that the names 'Light', 'Ultralight', 'Natural',
or 'Mild' could not be used. The judge said that these names were misleading to smokers in the
sense that they conveyed some positive health effect. The ruling further stipulated that names
changes must occur at the beginning of 2007.
Tentatively, Philip Morris has decided to use a color naming scheme for their products that
previously used the banned words in the name of their product. Given that, they have decided
that Marlboro Lights would be called Marlboro Golds and that Marlboro Ultralights would be
named Marlboro Silvers.
Marlboro cigarettes packs
Timeline of Marlboro Ads
Marlboro “Mild as May” advertisement targeted at women smokers in the early 1920s
Repositioning of Marlboro as a Men’s cigarette in the 1950s
The New “Safer” filter cigarette (1968)
The Marlboro “Cowboy” Ad in the 1980s
Chapter 2
Corporate ownership of the Marlboro Brand and
operating style of the company
Marlboro (Corporate Ownership)
Marlboro, the largest selling brand of cigarettes in the world. It is made by Philip Morris USA (a
branch of Altria) within the US, and by Philip Morris International (now separate from Altria)
outside the US.
Philip Morris USA (PM USA)- PM USA is an operating company of Altria Group, Inc., a Virginia
corporation whose stock is traded on the New York Stock Exchange (MO).
PM USA is more than 160 years old and the history of company can be traced back to Philip
Morris' 1847 opening of a single shop on London's Bond Street, selling tobacco and readymade cigarettes. In 1902, Philip Morris & Co., Ltd. incorporated as a small tobacco company in
New York City. In 1960, Philip Morris was the smallest among the six major tobacco companies
in the United States but by 1983, PM USA had become the largest cigarette company in the
country. Today, PM USA is a wholly-owned subsidiary of Altria. In the fall of 2003, Philip Morris
USA moved its headquarters from New York City to Richmond, Virginia. Philip Morris USA split
from Philip Morris International in 2004. This has caused a drop in the needed cigarette
production due to no need for export product. Philip Morris shut down its Concord, North
Carolina manufacturing facility in 2008 and moved all domestic production to Richmond.
William F. Gifford
President and Chief Executive Officer
Craig G. Schwartz
Senior Vice President
Smokeable Manufacturing
Cliff B. Fleet
Vice President & General Manager, Marlboro
Philip Morris International (PMI) (NYSE: PM) is an international cigarette and tobacco
company, with products sold in over 160 countries with 15.6% of the international cigarette
market outside the United States. Because tobacco, the main constituent of cigarettes, is
considered the single greatest cause of preventable death globally and is considered addictive,
the company's operations (and its competitors) are highly controversial and are increasingly the
subject of litigation and restrictive legislation from governments concerned about the health
impacts of its products.
Until a spin-off in March 2008, Philip Morris International was an operating company of the
Altria group. Altria explained the spin-off, arguing PMI would have more "freedom" outside the
constraints of US corporate ownership in terms of potential litigation and legislative restrictions
to "pursue sales growth in emerging markets. The shareholders in Altria at the time were given
shares in PMI, which was listed on the London Stock Exchange and other markets.
The company is headquartered in New York City, but operates through its operational
headquarters in Switzerland and does not operate in the United States, with Philip Morris brands
there still owned by PMI's former owner Altria. PMI owns 7 of the top 15 tobacco brands in the
world and has a mix of international and local products, which are produced in more than 50
factories around the world. PMI employs 75,600 people worldwide.
Its main brands are Marlboro, Longbeach, L&M, Philip Morris, Red & White, Bond Street,
Chesterfield, Parliament, Lark, A-Mild, Morven Gold, Muratti, DJI Sam Soe, Rög, Multifilter
and Virginia Slim
Philip Morris International
Type
Industry
Headquarters
Public (NYSE: PM)
S&P 500 Component
Tobacco
New York City, USA
Key People
Products
Revenue
Operating Income
Employees
Website
Lausanne, Switzerland
Louis C. Camilleri, Chairman & CEO
Cigarettes
$27.208 billion USD (2010)
$11.200 billion USD (2010)
78,300 (2010)
www.pmi.com
Altria Group, Inc. (NYSE: MO) (previously named Philip Morris Companies Inc.) is based in
Henrico County, Virginia, and is the parent company of Philip Morris USA, John Middleton,
Inc., U.S. Smokeless Tobacco Company, Inc., Philip Morris Capital Corporation, and Chateau
Ste. Michelle Wine Estates. It is one of the world's largest tobacco corporations. Philip Morris
International was spun off in 2008. In addition, Altria Group, Inc. has a 28.7% economic and
voting interest in one of the world's largest brewing companies, UK based SABMiller plc, where
it has 3 seats on the 11-person board of directors. It is a component of the S&P 500 and was a
component of the Dow Jones Industrial Average until February 19, 2008. The company has its
headquarters in an unincorporated area within Henrico County, less than five miles west of the
city limits of Richmond and less than ten miles from its downtown Richmond buildings.
On January 27, 2003, Philip Morris Companies Inc. changed its name to Altria Group, Inc. On
March 30, 2007, a spin out of Kraft Foods subsidiary (publicly traded since 2001) was concluded
through distribution of the remaining stake of shares (88.1%) to Altria shareholders. As a result,
Altria no longer holds any interest in Kraft Foods. On March 28, 2008, a similar spin out of
Philip Morris International was completed with 100% of shares being distributed to Altria
shareholders.
On January 6, 2009, Altria Group, Inc. completed the acquisition of UST Inc. a moist smokeless
tobacco manufacturer; UST owned Ste Michelle Wine Estates, a wine company. Altria Group,
Inc. owns 100 percent of Philip Morris USA, John Middleton, Inc. and Philip Morris Capital
Corporation. It also owns 28.7% of SABMiller PLC
Activity
Net revenue
Net revenue Operating
in 2006
in 2006
income
(millions USD) (%)
in 2006
(millions USD)
USA tobacco
18,474
18.2%
4,812
International tobacco 48,260
47.6%
8,458
North American food 23,118
22.8%
3,753
International food
11,238
11.1%
964
Financial services
317
0.3%
176
Total
101,407
100%
18,163
Brands
Tobacco
Philip Morris International brands:
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Alpine
Assos
Basic
Benson & Hedges (American Version)
Best
Bristol
Bond Street
Boston
Bucks
Cambridge
Chesterfield
Classic
Collector's Choice
Commander
Diana
Delicados
English Ovals
F6
Lark
Operating
income
in 2006
(%)
26.5%
46.5%
20.7%
5.3%
1.0%
100%
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Long Beach
L&M
Marlboro
Merit
Muratti
Multifilter
Morven Gold
Next
Optima
Parliament
Peter Jackson
Philip Morris
Players
Petra
Red & White
Saratoga
SG
Sparta
Start
Sampoerna (a brand of Indonesian kreteks)
Virginia Slims
Wine
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Chateau Ste Michelle
Columbia Crest
Stag's Leap Wine Cellars
Conn Creek
Red Diamond
Snoqualmie
Spring Valley
Villa Mt Eden
Erath
Col Solare
Northstar
Villa Antinori
Tormaresca
Tignanello
Antica Napa Valley
Solaia
Santa Cristina
Haras di Pirque
La Bracessca
Montenisa
Hawk Crest
Fourteen Hands
Altria Group, Inc.
Type
Traded as
Industry
Founded
Founders
Headquarters
Area Served
Key People
Public
S&P 500 Component
NYSE: MO
Tobacco
1985
Philip Morris, Kraft Foods, Nabisco Holdings Corporation
Henrico County, VA, US
Worldwide
Michael E. Szymanczyk
(Chairman) & (CEO)
Tobacco & Wine
Products
US$23.6 Billion (FY 2009)
Revenue
US$4.86 Billion (FY 2009)
Operating Income
US$3.21 Billion (FY 2009)
Net Income
US$36.7 Billion (FY 2009)
Total Assets
US$4.07 Billion (FY 2009)
Total Equity
10,400 - March 2009
Employees
Altria.com
Website
How Philip Morris operates
Philip Morris has two subsidiaries- Philip Morris USA and Philip Morris International. Philip
Morris USA caters to the United States market whereas Philip Morris International caters to the
overseas markets.
Being a global company with manufacturing and sales facilities throughout the world.
Wherever we manufacture, it applies the same exacting standards to ensure the premium
quality that smokers of its brands have come to expect.
The day to day operations at Philip Morris involve more than just making cigarettes; they are
also about the way it does business and interacts with the world outside its offices, both locally
and globally.
In every country where its cigarettes are sold, it is guided by the same basic principles.
One of its principal goals is to be a socially responsible company, at both a local and global
level. Because of this, it is careful about its image in the society:
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It communicates the serious health effects of smoking.
Advocating for comprehensive tobacco regulation focused on harm reduction.
Supporting the enactment and strict enforcement of laws that set a minimum age to
purchase tobacco products.
Working closely with retailers and other partners to implement youth smoking
prevention programs.
Working with regulators, law enforcement agencies, and retailers to combat the illicit
trade in counterfeit and contraband cigarettes.
Adopting policies and implementing programs to consistently reduce its environmental
impact, using fewer natural resources, reducing greenhouse gas emissions, and
producing less waste.
Working with growers and suppliers to promote sustainable tobacco farming.
Working with suppliers, interest groups, and governments to address the problems of
child labor and other abuses in labor markets related to its supply chain.
Contributing to improving the local communities through charitable giving, volunteer
activities, and supporting of a wide network of non-profit organizations.
Philip Morris believes that good corporate governance is a cornerstone of strong business
performance. It strives to be transparent in its governance practices and policies and is
responsive to its shareholders, while managing the Company for long-term success.
Chapter 3
Global foot print of Philip Morris
Best global spread and biggest footprint
Philip Morris International (PMI) products are sold in approximately 180 countries. In 2010 it
held an estimated 16.0 percent share of the international cigarette market outside of the U.S.
and 42 % outside the United States.
Regional involvement :Asia Pacific, Middle East and Africa,Western Europe, Eastern
Europe,Australasia, Latin America,Australasia
PMI has the best global positioning, with amarket volume share of over 30% in 36 markets,
including the major markets of Germany, France, Turkey and Mexico.
The company has its largest regional share in Western Europe and Latin America. This is not
ideal because Western Europe is in decline and BAT has a bigger share in Latin America.
PMI was the only one of the four international companies which recorded
volume growth over 2009-2010.
Chapter 4
Brand Portfolio of Marlboro with detailed descriptions
and Product features
Varieties of Marlboro Cigarettes:
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Marlboro Reds (Full Flavor): Kings, 100s and 72 mm box
Marlboro Medium: Kings and 100s
Marlboro Lights: Kings, 100s, and 72 mm box
Marlboro Ultra Lights: Kings and 100s
Marlboro Menthol: Kings,100s, and 72 mm box
Marlboro Menthol Lights: Kings and 100s
Marlboro Menthol Ultra Lights: Kings and 100s
Marlboro Menthol Milds: Kings,100s, and 72 mm box
Marlboro Blend 29
Marlboro Wides
Marlboro Filter Plus
Marlboro Reds
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Marlboro Full Flavored cigarettes, or Marlboro Reds as they are commonly known because of
the red crest on the white pack, are the original Marlboro cigarette and still the most
recognizable. They are available in king size (the standard cigarette size) and in 100s (a slightly
thinner, longer cigarette).
Marlboro Mediums
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Marlboro Medium cigarettes were created to form a middle ground between Marlboro Reds and
Marlboro Lights. They have the same signature Marlboro tobacco blend but with slightly less tar
and nicotine than the Reds. They are marketed in a white pack with a smaller red Marlboro crest
than Reds. They are available in king size and 100s.
Marlboro Lights
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Marlboro Lights feature the same tobacco blend as Marlboro Reds but with less concentration of
tar and nicotine. Marlboro Lights come in a white pack with a gold Marlboro crest. Lights are
available in king size and 100s.
Marlboro Ultra Light
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As a concession to rising health concerns, Marlboro developed an Ultra Light brand. Just like
the Light cigarette, it features the same blend of tobacco as the Full Flavored Marlboros but with
even less tar and nicotine. Ultra Lights come in a white pack with a silver Marlboro crest. Ultra
Lights are available in king size and 100s.
Marlboro Menthol
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Marlboro also markets cigarettes flavored with menthol. These are marketed in white packs with
green detailing and are available in Full Flavored and Light variations.
Marlboro Smooth
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Marlboro also markets a second brand of nicotine cigarette with a different flavor blend. They
are marketed in a pack with a blue Marlboro crest. Full Flavor king size cigarettes are on the
market.
Chapter 5
Marketing environment of the world cigarette industry,
major players and their shares in the market
Market environment
The market environment is a marketing term and refers to factors and forces that affect a
firm’s ability to build and maintain successful relationships with customers.Three levels of the
environment are: Micro (internal) environment - forces within the company that affect its ability
to serve its customers. Meso environment – the industry in which a company operates and the
industry’s market(s). Macro (national) environment - larger societal forces that affect the
microenvironment.
MICROENVIRONMENT of the Cigarette Industry
The microenvironment refers to the forces that are close to the company and affect its ability to
serve its customers. It includes the company itself, its suppliers, marketing intermediaries,
customer markets, competitors, and publics.
The company aspect of microenvironment refers to the internal environment of the company.
This includes all departments, such as management, finance, research and development,
purchasing, operations and accounting. Each of these departments has an impact on marketing
decisions. For example, research and development have input as to the features a product can
perform and accounting approves the financial side of marketing plans and budgets.
The suppliers of a company are also an important aspect of the microenvironment because
even the slightest delay in receiving supplies can result in customer dissatisfaction. Marketing
managers must watch supply availability and other trends dealing with suppliers to ensure that
product will be delivered to customers in the time frame required in order to maintain a strong
customer relationship.
Marketing intermediaries refers to resellers, physical distribution firms, marketing services
agencies, and financial intermediaries. These are the people that help the company promote,
sell, and distribute its products to final buyers. Resellers are those that hold and sell the
company’s product. They match the distribution to the customers and include places such as
Convinience stores, retail stores, and supermarkets. Physical distribution firms are places such
as warehouses that store and transport the company’s product from its origin to its destination.
Marketing services agencies are companies that offer services such as conducting marketing
research, advertising, and consulting. Financial intermediaries are institutions such as banks,
credit companies and insurance companies
Another aspect of microenvironment is the customers. There are different types of customer
markets including consumer markets, business markets, government markets, international
markets, and reseller markets. The consumer market is made up of individuals who buy goods
and services for their own personal use or use in their household. Business markets include
those that buy goods and services for use in producing their own products to sell. This is
different from the reseller market which includes businesses that purchase goods to resell as is
for a profit. These are the same companies mentioned as market intermediaries. The
government market consists of government agencies that buy goods to produce public services
or transfer goods to others who need them. International markets include buyers in other
countries and includes customers from the previous categories.
Competitors are also a factor in the microenvironment and include companies with similar
offerings for goods and services. To remain competitive a company must consider who their
biggest competitors are while considering its own size and position in the industry. The
company should develop a strategic advantage over their competitors.
The final aspect of the microenvironment is publics, which is any group that has an interest in or
impact on the organization’s ability to meet its goals. For example, financial publics can hinder a
company’s ability to obtain funds affecting the level of credit a company has. Media publics
include newspapers and magazines that can publish articles of interest regarding the company
and editorials that may influence customers’ opinions. Government publics can affect the
company by passing legislation and laws that put restrictions on the company’s actions. Citizenaction publics include environmental groups and minority groups and can question the actions
of a company and put them in the public spotlight. Local publics are neighborhood and
community organizations and will also question a company’s impact on the local area and the
level of responsibility of their actions. The general public can greatly affect the company as any
change in their attitude, whether positive or negative, can cause sales to go up or down
because the general public is often the company’s customer base. And finallythose who are
employed within the company and deal with the organization and construction of the company’s
product.
MACROENVIRONMENT of the Cigarette Industry
The macroenvironment refers to all forces that are part of the larger society and affect the
microenvironment. It includes concepts such as demography, economy, natural forces,
technology, politics, and culture.
Demography refers to studying human populations in terms of size, density, location, age,
gender, race, and occupation. This is a very important factor to study for marketers and helps to
divide the population into market segments and target markets. An example of demography is
classifying groups of people according to the year they were born. These classifications can be
referred to as baby boomers, who are born between 1946 and 1964, generation X, who are
born between 1965 and 1976, and generation Y, who are born between 1977 and 1994. Each
classification has different characteristics and causes they find important. This can be beneficial
to a marketer as they can decide who their product would benefit most and tailor their marketing
plan to attract that segment. Demography covers many aspects that are important to marketers
including family dynamics, geographic shifts, work force changes, and levels of diversity in any
given area.
Another aspect of the macroenvironment is the economic environment. This refers to the
purchasing power of potential customers and the ways in which people spend their money.
Within this area are two different economies, subsistence and industrialized. Subsistence
economies are based more in agriculture and consume their own industrial output. Industrial
economies have markets that are diverse and carry many different types of goods. Each is
important to the marketer because each has a highly different spending pattern as well as
different distribution of wealth.
The natural environment is another important factor of the macro environment. This includes the
natural resources that a company uses as inputs and affects their marketing activities. The
concern in this area is the increased pollution, shortages of raw materials and increased
governmental intervention. As raw materials become increasingly scarcer, the ability to create a
company’s product gets much harder. Also, pollution can go as far as negatively affecting a
company’s reputation if they are known for damaging the environment. The last concern,
government intervention can make it increasingly harder for a company to fulfill their goals as
requirements get more stringent.
The technological environment is perhaps one of the fastest changing factors in the macro
environment.. As technology develops it can create new markets and new uses for products. It
also requires a company to stay ahead of others and update their own technology as it becomes
outdated. They must stay informed of trends so they can be part of the next big thing, rather
than becoming outdated and suffering the consequences financially.
The political environment includes all laws, government agencies, and groups that influence or
limit cigarette advertisements, sales and distribution . It is important for marketers to be aware of
these restrictions as they can be complex. Some products are regulated by both state and
federal laws. There are even restrictions as to who the target market may be, for example,
cigarettes should not be marketed to younger children. and. As laws and regulations change
often, this is a very important aspect for a marketer to monitor.
The final aspect of the macro environment is the cultural environment, which consists of
institutions and basic values and beliefs of a group of people. The values can also be further
categorized into core beliefs, which passed on from generation to generation and very difficult to
change, and secondary beliefs, which tend to be easier to influence. As a marketer, it is
important to know the difference between the two and to focus your marketing campaign to
reflect the values of a target audience
When dealing with the marketing environment it is important for a company to become
proactive. By doing so, they can create the kind of environment that they will prosper in and can
become more efficient by marketing in areas with the greatest customer potential. It is important
to place equal emphasis on both the macro and microenvironment and to react accordingly to
changes within them.
MESO-ENVIRONMENT Marketing intermediaries help to sell, promote, and distribute goods.
Intermediaries take many forms. Resellers Physical distribution firms ,Marketing services
agencies, Financial intermediaries.
Market Environment of a firm/Industry
Macro Environment Analysis
The Macro environment analysis of the cigarette industry shall be done using:
1) PESTEL Framework
2) PF5 Analysis
3) SWOT Analysis
PESTEL Framework for the cigarette industry
Political- Strict rules & regulations related to advertising, age etc
Economic- Cigarettes, Tobacco products can fair the Economic recession
Social- Acceptance in society decreasing, cognitive dissonance, negative association
Technological - Important to develop manufacturing facilities, product innovation etc.
Porter’s Five forces (PF5) analysis for Cigarette industry
Bargaining power of buyers –High ( Lot of competitors with similar options)
Bargaining power of suppliers – Low (Paper, Tobacco used for cigarette manufacturing
are simple commodities
Threat From substitutes - High (Availability of substitutes like bidis, snus etc.)
Current category rivalry- Very High (Differentiation largely by branding, distribution)
Threat of New Entrants – Low to moderate (Maturing Market, distribution problem, punitive
legislations etc.)
SWOT Analysis of Marlboro
Strengths
Weaknesses
1.Competition:Marlboro is a
giant in the industry and has a favourable
1)Customer: The customers have
advantage vis a vis competitors.
become savvy and they are obsessed to
seek out value in their transaction
2.Supplier: Company (Philip
M o r r i s ) e n j o y s good relationship
withsuppliers.
2)Organizational: The strategic
direction of the company needs
improvement
3.Labor: Company is
m a i n t a i n i n g harmonious relationship
through collective bargaining and HR
policies
3) M a r k e t : M a r k e t i n g management
needs significant improvement.
4.Financially: Philip Morris is
financially sound.
4)HRM: Philips Morris needs
improvement in HRM.
5.Production: All the systems
v i z . operational, management, quality
assurance are in place.
Oppurtunities
1) Emerging markets like India are a
Threats
1) Political- Strict rules & regulations related
lucrative option
to advertising, Target market etc
2) Innovative Products like low tar,
nicotine and electronic cigarettes
2) Social- Acceptance in society is
decreasing, cognitive
dissonance, negative association
Measuring the attractiveness of the Cigarette/Tobacco Industry
Category Size -Declining industry, Languishing Demand & Health concerns
Category Growth –Negative (Increasing consumer awareness about the ill effects of
Tobacco)Death toll from tobacco estimated to reach 10M annually
Sales Cyclicity -Not directly impacted by GDP variations
Seasonality -Weather Condition, Timing of quitting efforts (e.g. new year resolutions)
Profit Levels -High Competition & Declining margins leading to lowering of profits
Distribution -Very critical, difficult to emulate, High Costs
Capital Requirements -High Distribution costs, Differentiation through branding, flavor
&packaging
Factors
Attractiveness
Category Size
-
Category Growth
-
Sales Cyclicity
+
Seasonality
+
Profit Level
-
Threat of new entrants
+
Distribution
-
Capital Requirements
-
Bargaining power of buyers
-
Bargaining power of suppliers Threat from substitutes
-
Current category rivalry
-
Technological
+
Economic
+
Political
-
Social
-
PLC of Marlboro
Marlboro is in the Maturity phase of the product life cycle and is considered a cash cow for
Philip Morris
Points of differentiation and points of parity for Marlboro
Points of Differentiation:
Brand Imagery and attitude - Rugged, Macho and Independent.
Packing and Logo - High in recall due to the red colour.
Distinctive Flavor - Nicotine levels are constant, Strong in taste and superior quality.
Points of Parity
Increasing Brand and Product innovation by rival firms
Reducing Brand appeal due to ban on cigarette advertising
Major players in the Cigarette/Tobacco industry
The major players in the cigarette/Tobacco industry are:
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Philip Morris (Philip Morris USA and Philip Morris International)
British American Tobacco (BAT)
Japan Tobacco and Japan Tobacco International
Imperial Tobacco
Altria
R.J. Reynolds
Philip Morris USA is the United States tobacco division of Altria Group, Inc. Philip Morris USA
brands include Marlboro, Virginia Slims, Benson and Hedges, Merit Parliament, Alpine
Basic Cambridge, Bucks Dave's, Chesterfield, Collector's Choice, Commander, English
Ovals, Lark, L&M, Players and Saratoga. On January 27, 2003, Philip Morris Companies Inc.
changed its name to Altria Group, Inc. Even under this new name, Altria continues to own 100%
of Philip Morris USA (abbreviated PM USA). Some view this name change as an effort by Altria
to deemphasize its historical association with tobacco products .Philip Morris USA Inc. home
offices and facilities include headquarters, manufacturing, processing and support facilities in
the Richmond, Virginia area; sales offices crisscrossing the U.S.; and an office in The
Commonwealth of Puerto Rico. Philip Morris USA split from Philip Morris International in 2004.
Philip Morris International (PMI) (NYSE: PM) is an international cigarette and tobacco
company, with products sold in over 160 countries with 15.6% of the international cigarette
market outside the United States. Because tobacco, the main constituent of cigarettes, is
considered the single greatest cause of preventable death globally and is considered addictive,
the company's operations (and its competitors) are highly controversial and are increasingly the
subject of litigation and restrictive legislation from governments concerned about the health
impacts of its products. Until a spin-off in March 2008, Philip Morris International was an
operating company of Altria Group. Altria explained the spin-off, arguing PMI would have more
"freedom" outside the constraints of US corporate ownership in terms of potential litigation and
legislative restrictions to "pursue sales growth in emerging markets. The shareholders in Altria
at the time were given shares in PMI, which was listed on the London Stock Exchange and
other markets
.
The company is headquartered in New York City, but operates through its operational
headquarters in Switzerland.. It owns 7 of the top 15 tobacco brands in the world and has a mix
of international and local products, which are produced in more than 50 factories around the
world. PMI employs 75,600 people worldwide.
Its main brands are Marlboro, Longbeach , L&M, Philip Morris, Red & White, Bond
Street, Chesterfield, Parliament, Lark, A-Mild, Morven Gold, Muratti, DJI Sam Soe, Rög,
Multifilter and Virginia Slims
. British American Tobacco p.l.c. (informally BAT) (LSE: BATS, AMEX: BTI, JSE: BTI) is a
British multinational tobacco company headquartered in London, United Kingdom. It is the
world’s second-largest quoted tobacco company by market share (after Philip Morris
International), and has a leading position in over 50 countries and operations in more than 180
countries.[2][4] Its brands include Dunhill, Kent, Lucky Strike and Pall Mall.
Local brands owned by British American Tobacco include Benson & Hedges (Bangladesh)
Belmont (Colombia, Chile and Venezuela), Jockey Club (Argentina), Stradbroke
(Australia), Hollywood (Brazil), du
Maurier (Canada), Prince (Denmark),
North
State
(Finland), HB (Germany),Sopianae (Hungary), Wills (India), Ardath (Indonesia), Carrolls,
Carrolls Kings, Grand Parade, Black Allen (Germany), Sweet Afton, Major (Ireland), Boots, Alas
(Mexico), Gold Leaf (Bangladesh, Pakistan), Jan III Sobieski (Poland), Yava Gold (Russia),
Courtleigh (South Africa),Parisienne (Switzerland), Maltepe (Turkey) and Xon (Uzbekistan),
Marlboro (Bangladesh) Craven A (Vietnam and Jamaica) as well as BAT snus, Holiday,
Freedom and Park Drive (New Zealand) Royals (UK), Embassy (Kenya), Viceroy, Newport,
Lucky Strike in Dominican Republic and Delta in El Salvador.
BAT has a primary listing on the London Stock Exchange and is a constituent of the FTSE 100
Index. As of 26 December 2011 it had a market capitalisation of £59.2 billion, the sixth-largest of
any company listed on the London Stock Exchange. It has a secondary listing on
the Johannesburg Stock Exchange.
Japan Tobacco Inc. (日本たばこ産業株式会社 Nihon Tabako Sangyō Kabushiki-gaisha),
abbreviated JT, is a cigarette manufacturing company. It is part of the Nikkei 225 index. In 2009
the company was listed at number 312 on the Fortune 500 list. The company is headquartered
in Toranomon, Minato, Tokyo The international headquarters are in Geneva, Switzerland. The
company traces its origins to 1898. Incorporated in 1949 as the Japan Tobacco and Salt Public
Corporation (日本専売公社 Nippon Senbai Kōsha), Japan Tobacco was a state monopoly until
1985, when it became a public company.
It was two-thirds owned by the Japanese Ministry of Finance until June 2004, and the Japanese
government share is presently 50%. JT International (JTI), acquired in 1999 from R.J.
Reynolds, is an operating division of Japan Tobacco Inc., handling the international production,
marketing and sales of the group's cigarette brands. It sells Camel, Salem, and Winston brands
outside the USA.
Japan Tobacco also operates in foods, pharmaceuticals, agribusiness, engineering, and real
estate. Japan Tobacco completed the largest ever foreign takeover in Japanese history through
acquisition of Gallaher Group plc in April 2007.
Japan Tobacco runs the Tobacco and Salt Museum in Tokyo.
JT flagship brands

Cabin (link to Japanese Wikipedia)

Camel (outside the USA)

Caster

Hope

Mild Seven

Peace

Pianissimo Peche

Sakura

Salem (outside the USA)

Seven Stars

Winston (outside the USA)

Hamlet

Benson & Hedges
Other brands

Amadis

Amber Leaf

Arsenal

Aspen

Belomorkanal

Contessa

Crescent & Star

Death

Doral
Imperial Tobacco (officially Imperial Tobacco Group plc) (LSE: IMT) is a
global tobacco company headquartered in Bristol, United Kingdom. It is the world’s fourthlargest cigarette company measured by market share (after Philip Morris International, British
American Tobacco and Japan Tobacco), and the world's largest producer of cigars, fine-cut
tobacco and tobacco papers. It produces over 320 billion cigarettes per year, has 51 factories
worldwide and its products are sold in over 160 countries. Its brands
include Davidoff, West,Gauloises Blondes, Montecristo, Drum (the world's second-largestselling fine-cut tobacco) and Rizla (the world’s best-selling rolling paper).
Imperial Tobacco is listed on the London Stock Exchange and is a constituent of the FTSE 100
Index. It had a market capitalisation of approximately £24.3 billion as of 23 December 2011,
making it the 19th-largest company on the London Stock Exchange.
Imperial Tobacco brands include:
Tobacco

All JTI products in Australia – Camel, More, Mild Seven, etc.

Ducados

Brandon's

Crowns

Davidoff

Embassy

Escort

Excellence

Fortuna

Gauloises

Gitanes

Horizon

John Player Special (JPS)

Lambert & Butler (the UK's best-selling cigarette brand)

Mark Fernyhough cigarettes

Moon

Peter Jackson

Peter Stuyvesant

Prima

R1

Regal

Richmond

Route 66

Royale

Superkings

West
Other products

Drum fine cut tobacco

Van Nelle fine cut tobacco

Golden Virginia fine cut tobacco

RizLa+ rolling paper

Skruf Snus
R. J. Reynolds Tobacco Company (RJR), based in Winston-Salem, North Carolina and
founded by R. J. Reynolds in 1875 is the second-largest tobacco company in the U.S.
(behind Altria Group). RJR is an indirect wholly owned subsidiary of Reynolds American Inc.
which in turn is 42% owned by British American Tobacco of the United Kingdom.
In 1999, R. J. Reynolds was spun out of RJR Nabisco. The same year, the company sold all its
non-US operations to Japan Tobacco, which made those operations into its international arm,
JT International. Consequently, any Camels, Winstons or Salems sold outside the US are now
actually Japanese cigarettes. On July 30, 2004, R. J. Reynolds merged with the U.S. operations
of British American Tobacco (operating under the name of Brown & Williamson). A new
parent holding company, Reynolds American Inc., was established as part of the transaction.
BRANDS
R. J. Reynolds brands include Camel, Kool, Winston, Salem, Doral, Eclipse ,and Pall Mall.
Brands still manufactured but no longer receiving significant marketing support include Barclay,
Belair, Capri, Carlton, GPC, Lucky Strike, Misty, Monarch, More, Now, Tareyton, Vantage,
and Viceroy. The company also manufactures certain private-label brands. Five of the
company's brands are among the top ten best selling cigarette brands in the United States, and
it is estimated that one in three cigarettes sold in the country were manufactured by R. J.
Reynolds Tobacco Company. In 2010 R. J. Reynolds acquired the rights to the smokeless
tobacco products Kodiak and Grizzly dip.
Global Market share of various Tobacco companies
Source: www.tobaccoatlas.org
Global market share of various companies excluding the Chinese Market
source: Credit Suisse
World’s top Cigarette brands
Source: blog.euromonitor.com
Company profitability and Market outlook
Source: tobaccoatlas.org
Source: euromonitor.com
Chapter 6
Competitors of Marlboro
Competitors to Marlboro
Brands like “Mild 7”, “Winston”, “Camel”, “LD” (Japan Tobacco) ; Kent, Pall Mall, Viceroy,
Dunhill (British American Tobacco) are some of the competitors to Marlboro. Mild 7, Winston,
Camel are some of the heaviest competitors to Marlboro.
Chapter 7
Strategic pricing analysis for Marlboro
Key elements of pricing and costing for a brand
When considering how a price should be set, there is one fundamental question to
address: What is the organization trying to achieve? In other words, what is the
objective of setting a price?
How we price a product is important because it will have a direct effect on the
success of our business. Though pricing strategy and computations can be complex,
the basic rules of pricing are straightforward:
1. All prices must cover costs.
2. The best and most effective way of lowering your sales prices is to lower costs.
3. The prices must reflect the dynamics of cost, demand, changes in the market and
response to your competition.
4. Prices must be established to assure sales. Don't price against a competitive
operation alone. Rather, price to sell.
5. Product utility, longevity, maintenance and end use must be judged continually,
and target prices adjusted accordingly.
6. Prices must be set to preserve order in the marketplace.
Pricing Strategies
Market Skimming – involves charging the highest possible price for a given product.
Basically, the provider is making a judgment as to how much customer value is
associated with the product. While charging a price premium, it is important that
the price is perceived as fair as opposed to exploitative. It is likely that the product
will be aimed only to a small section of the available market and will be perceived as
“exclusive” in nature.
Market Penetration – this strategy means keeping prices relatively low in order to
gain market share. A penetration strategy is likely when one, or more, of the
following apply:
No product differentiation possible – little to differentiate from competitors;
buyers see no added value.
Support other products/ services – prices are set low to support the sale of
other products. (e.g., supermarkets sell a few selective lines at cost to attract
customers).
Market presence – highly competitive prices tend to gain market share.
Organizations looking to establish a presence in the market or a dominant
position may opt for this strategy.
Price Adaptation – given that segmentation is the basis of much marketing
strategy, it is reasonable to expect segmentation to strongly influence pricing. Prices
may be adapted to meet the needs of various customer groups (e.g., student
discounts, off-peak travelers). However, one needs to be careful to be careful with this as those
paying full price may perceive this negatively.
Price adaptation often extends into discount policy. The creative use of discount
can be a major marketing tool. Discounts can stimulate demand and be applied
directly (e.g., a price reduction) or indirectly (e.g., interest free credit, extended
payment terms).
Cost-plus Pricing - Used mainly by manufacturers, cost-plus pricing assures that all
costs, both fixed and variable, are covered and the desired profit percentage is
attained. All the fixed and variable costs should be included while calculating
this; the cost of labor and materials are obvious, but one may also need
to include freight costs, administrative costs, and/or selling costs, for.
For example, our product costs $20 in raw materials and production costs, and at
current sales volume our fixed costs come to $30 per unit.Our total cost then is $50 per unit.
We decide that we want to operate at a 20% markup, so we add $10 (20% x $50)
to the cost and come up with a price of $60 per unit. So long as we have your costs
calculated correctly and have accurately predicted our sales volume, we will always
be operating at a profit.
Target Return Pricing - Setting the price to obtain a target return-on-investment
(ROI). For example, let us assume that we have $10,000 invested in the company. Our
expected sales volume is 1,000 units in the first year. We want to recoup all your
investment in the first year, so we need to make $10,000 profit on 1,000 units, or
$10 profit per unit.
Psychological Pricing - Ultimately, you must take into consideration the
consumer's perception of your price, figuring things like:
Positioning - If you want to be the "low-cost leader", you must be priced
lower than your competition. If we want to signal high quality, our product should
be priced higher than most of the competition.
Popular price points - There are certain "price points" at which people become
much more willing to buy a certain type of product. Dropping the price to a
popular price point might mean a lower margin, but more than enough
increase in sales to offset it. A good way to figure this popular price points is
to get pricing information from your competition or do a survey with some of
your potential customers.
Fair pricing - Sometimes it simply doesn't matter what the value of the
product is, even if you don't have any direct competition. There is simply a
limit to what consumers perceive as "fair". A little market testing will help you
determine the maximum price consumers will perceive as fair.
Finally one must remember that the prices should never be lower than the costs or
higher than what most consumers consider "fair".
Doing a strategic pricing analysis for Marlboro
Based on the above mentioned elements of pricing, costing of a brand and various pricing
strategies we would be taking three main scenarios/approaches to setting the price of Marlboro
cigarettes.
Cost-based pricing: price is determined by adding a profit element on top of the cost of making
the product.
Customer-based pricing: where prices are determined by what a firm believes customers will
be prepared to pay
Competitor-based pricing: where competitor prices are the main influence on the price set
Cost based pricing
When the customers are not too bothered what it costs to make the product – they are
interested in what value the product provides them.
This involves setting a price by adding a fixed amount or percentage to the cost of making or
buying the product. In some ways this is quite an old-fashioned and somewhat discredited
pricing strategy, although it is still widely used.
Cost-plus (or “mark-up”) pricing is widely used in retailing, where the retailer wants to know
with some certainty what the gross profit margin of each sale will be. An advantage of this
approach is that the business will know that its costs are being covered. The main
disadvantage is that cost-plus pricing may lead to products that are priced un-competitively.
Here is an example of cost-plus pricing, where a business wishes to ensure that it makes an
additional $50 of profit on top of the unit cost of production.
Unit cost
$100
Mark-up
50%
Selling price
$150
How high should the mark-up percentage be? That largely depends on the normal competitive
practice in a market and also whether the resulting price is acceptable to customers.
The main advantage of cost-based pricing is that selling prices are relatively easy to calculate.
If the mark-up percentage is applied consistently across product ranges, then the business can
also predict more reliably what the overall profit margin will be.
Customer-based pricing
Penetration pricing
If we want to grab market share from the competitors and encourage brand switching behavior
among smokers then Penetration pricing suits Marlboro
Penetration pricing is the pricing technique of setting a relatively low initial entry price,
usually lower than the intended established price, to attract new customers. The strategy aims
to encourage customers to switch to the new product because of the lower price.
Penetration pricing is most commonly associated with a marketing objective of increasing
market share or sales volume. In the short term, penetration pricing is likely to result in lower
profits than would be the case if price were set higher. However, there are some significant
benefits to long-term profitability of having a higher market share, so the pricing strategy can
often be justified.
Penetration pricing is often used to support the launch of a new product, and works best when a
product enters a market with relatively little product differentiation and where demand is price
elastic – so a lower price than rival products is a competitive weapon.
Price skimming
Skimming involves setting a high price before other competitors come into the market.
This is often used for the launch of a new product which faces little or no competition – usually
due to some technological features. Such products are often bought by “early adopters” who
are prepared to pay a higher price to have the latest or best product in the market.
Good examples of price skimming include innovative electronic products, such as the Apple
iPad and Sony PlayStation 3.
There are some other problems and challenges with this approach:
Price skimming as a strategy cannot last for long, as competitors soon launch rival products
which put pressure on the price (e.g. the launch of rival products to the iPhone or iPod).
Distribution (place) can also be a challenge for an innovative new product. It may be necessary
to give retailers higher margins to convince them to stock the product, reducing the improved
margins that can be delivered by price skimming.
A final problem is that by price skimming, a firm may slow down the volume growth of demand
for the product. This can give competitors more time to develop alternative products ready for
the time when market demand (measured in volume) is strongest.
Loss leaders
The use of loss leaders is a method of sales promotion. A loss leader is a product priced below
cost-price in order to attract consumers into a shop or online store. The purpose of making a
product a loss leader is to encourage customers to make further purchases of profitable goods
while they are in the shop. But does this strategy work?
Pricing is a key competitive weapon and a very flexible part of the marketing mix.
If a business undercuts its competitors on price, new customers may be attracted and existing
customers may become more loyal. So, using a loss leader can help drive customer loyalty.
One risk of using a loss leader is that customers may take the opportunity to “bulk-buy”. If the
price discount is sufficiently deep, then it makes sense for customers to buy as much as they
can (assuming the product is not perishable).
Using a loss leader is essentially a short-term pricing tactic for any one product. Customers will
soon get used to the tactic, so it makes sense to change the loss leader or its merchandising
every so often.
Psychological pricing
Sometimes prices are set at what seem to be unusual price points. For example, why are
DVD’s priced at £12.99 or £14.99? The answer is the perceived price barriers that customers
may have. They will buy something for £9.99, but think that £10 is a little too much. So a price
that is one pence lower can make the difference between closing the sale, or not!
The aim of psychological pricing is to make the customer believe the product is cheaper than
it really is. Pricing in this way is intended to attract customers who are looking for “value”.
Competitor-based pricing
If there is strong competition in a market, customers are faced with a wide choice of who to buy
from. They may buy from the cheapest provider or perhaps from the one which offers the best
customer service. But customers will certainly be mindful of what is a reasonable or normal
price in the market.
Most firms in a competitive market do not have sufficient power to be able to set prices above
their competitors. They tend to use “going-rate” pricing – i.e. setting a price that is in line
with the prices charged by direct competitors. In effect such businesses are “pricetakers” – they must accept the going market price as determined by the forces of demand and
supply.
An advantage of using competitive pricing is that selling prices should be line with rivals, so
price should not be a competitive disadvantage.
The main problem is that the business needs some other way to attract customers. It has to
use non-price methods to compete – e.g. providing distinct customer service or better
availability.
It is difficult to say which component of pricing is more important than another The right product
price is the price the consumer is willing to pay, while providing a profit to the firm and all other
marketing intermediaries.
Chapter 8
Understanding the Marlboro Customer
Origins of the first set of consumers to the current set of consumers
The amazing Marlboro cigarette brand began in England 1847 and was initially targeted at
female smokers. Aiming at this market segment was not successful, so in the 1920's Marlboro
was re-targeted to female smokers in the United States. In this campaign it was stressed
that Marlboro was a 'mild' cigarette. These efforts continued into World War II when the brand
was eventually taken off the market.
In the 1950's Marlboro was again introduced to the market, this time on the heels of a stories
about the negative health aspects of smoking. At the time, the vast majority of cigarettes being
sold were non-filtered. Marlboro was a filtered cigarette, so this clearly was an attempt to win
over the health conscience crowd.
Later, during the 50's, the company decided to dump the targeting of women and began
promoting Marlboro as a man's cigarette. The first icon of this new change in marketing was
the 'Tatooed Man' depicted on this page. Various images of healthy looking, outdoor type began
showing up in ads.
The images used in their ads evolved more and more into those depicting particularly macho
types. In the beginning, images of naval officers and livestock ranchers made the advertising
scene. In 1954, the now well known 'Marlboro Man' was introduced, and by 1963 was the sole
representative of Marlboro ads.
Around 1972, Marlboro cigarettes became the most popular brand, and have remained so, for
the most part since then.
Marlboro “Mild as May” advertisement targeted at women smokers in 1936
Repositioning of Marlboro as a Men’s cigarette in the 1960s
The Marlboro “Cowboy” Ad in the 1980s
The current status of Marlboro Customers
Geographic
Region
Worldwide
Demographic
Age- Young adult smoker,18+
Income- Upper middle class
Gender- Males (Primary Target) & Females (Secondary Target)
Occupation- Working professionals, employees, adult students, self
employed
Psychographic
Lifestyle- Adventurous, Freedom seeking, Non conformist,
Independent spirit
Behavioural
Benefits- Fun, thrill & Exhilaration
Brand Loyalty- High, Appeal to less price sensitive customers
Chapter 9
Brand Improvisations attempted by Marlboro, Brand
Ambassadors and its current Brand Equity
Brand Improvisations attempted by Marlboro
In the 1900's Marlboro was marketed as a cigarette for the ladies. The cigarette brands that
survived the end of World War II were the few that were distributed to the soldiers and Marlboro
was not one of them. The brand was somewhat revived several years later still being marketed
as a brand for the ladies. With the early 50's there began a suspicion that smoking cigarettes
had something to do with lung cancer. Filters were generally decided to be the answer but Real
Men, which was where the sales dollars were, didn't smoke a filter cigarette. The question then
became how to make this cigarette appeal to men? The Leo Burnett advertising agency in
Chicago was consulted and came up with campaigns that showed Real Men smoking
Marlboro. First came the series with men with a tattoo on their smoking hand, tattoos were
masculine then. Next came the long-running cowboy series, all in an attempt to convince the
public that men could demand a filter too. The Marlboro Man became as famous as other Leo
Burnett creations, the Pillsbury Dough Boy and the Jolly Green Giant. The repositioning of
Marlboro as a men’s cigarette presented a lineup of manly figures: sea captains, weightlifters,
war correspondents, construction workers, etc.
Brand Ambassadors of Marlboro and the rational in selecting them

“Mild as May” Lady ( To appeal to women smokers)

Real Men (a lineup of manly figures: sea captains, weightlifters, war correspondents,
construction workers, etc) with a tattoo (considered masculine) on their smoking hand .

Perhaps the most iconic Brand Ambassador of Marlboro is the Marlboro Man- A rugged
Cowboy in natural settings with only a cigarette ( To appeal to Macho Men; a part of
repositioning strategy attempted by the Leo Burnett advertising agency).
The Marlboro Man
Harley Davidson Marlboro Man
Brand Equity of Marlboro
Chapter 10
Future branding strategy of Marlboro
What should be the future branding strategy of Marlboro
The Present holds the key to the future. Whatever Brand elements (Name, logo, shapes,
Graphics) a company chooses should help in sustaining and building equity. Since the current
branding strategy is working quite well for Marlboro and has made Marlboro the best-selling
brand of cigarettes in the world; a wise decision would be to continue with the existing branding
strategy.
Where the Brand is Headed 5-10 years down the line
Source: euromonitor.com
With these Industry projections indicating robust category growth and given Marboro’s
favourable brand equity; the Marlboro Brand must continue its market dominance for the next 510 years.
How Far Can The Marlboro Brand Stretch?
Given its strong image and personality (masculine, rugged individualism, independent spirit,
etc.), the Marlboro brand is capable of being extended into a variety of new product categories.
For instance Marlboro jeans and hats and belts could be successful. However, there are several
things one needs to consider prior to Brand extension. First, performing typical brand extension
research to understand how the brand’s associations are transferred to the new product
categories and vice versa.
Second, understanding how current Marlboro consumers, the consumers of the intended new
product categories and the general public feel about moving the Marlboro brand into those
product categories. It would also be important to determine how extending the brand into new
product categories would be perceived by the general public. Having said this, I think the
Marlboro brand is quite strong and could be extended into a variety of product categories for
which Marlboro’s distinct brand image and personality would seem to be a draw.
References
1) www.en.wikipedia.org
2) www.philipmorrisusa.com
3) www.pmi.com
4) blog.euromonitor.com
5) www.tobaccoatlas.org
6) http://tobaccocontrol.bmj.com