PM History/2 - Legacy Tobacco Documents Library

PHILIP MORRIS HISTORY VIA CLIPS & DOCUMENTARY MATERIALS 

' --THIS IS PHILIP MORRIS, 10-67= Machines turn out a pack a second 

per machine . . .Bonsack produced 40X human hand-rollers . . .tob . seeds= 

350 .000 ver oz ., one tablespoon will plant 3-4 acres//US said to be 

world•s b3ggest tob . producer, not quite 2 billion lbs a yr, keenin~ 

1 1F~i/ "650 000 £arm families busy throua_hout most of the yr" (?), 4 . . .°THERE 

~~ IS NOTHING TOUGH OR HARDY ABOUT TOBACCO," it's highly temperamental in 

the field & sensitive to treatment in processing, weather & foreign odors 

hurt it . . .Americans " -uad_ flavorings in their cigs, 5//PM•S RELATIVELY 

~ ENLIGHTENED-VGEMENTs ;ya~L group insurance starting in •24, has hospitalization, 

welfare & retirement benefits + seasonal employees covered, 

too + college scholarships for workers' kids via work-scholarships at PM// 

FIRST TO DIVERSIFYs bought Nilprint, Inc ., a recognized leader in field 

of flexible packaging + Polymer Industries, makers of packaging adhesives 

& textile cYiemicals . . .ASR owns Burma-Vita Co ., makers of Burma Shave & 

men's toiletries//DEDICATEYf'Pf~FYESARCA CENTER IN '59, the "most advanced 

1ab . in the industry," 12 . . .//HISTORYs b earl 17th cent . S anish held 

~ir_tual_monopols on teb . trade, so r t . colon es are foo old & serve 

to break t e monopoly . . .Sohn Rolfe somehow obtained -- nobody seems to 

know exactly how, possibly via sailors -- seeds from Trinidad & Caracas/ 

the new Va . breed improved via ross-b & better , so that 

"Virginia" is much desired . . .TWO ARS RK) BREED CIG . INDUSTRYs Crimea 

where Brits . bring Russian variety home to London, Civil War//PHILIP 

MORRIS, VICTORIAN TOBACCONISTs recognized the oppty, had group of expert 

rollers from Russia, Turkey & Egypt, his brands were PM Cambridge (known 

as PM), Oxford Blues & Ovals . . .GUSTAV ECKMEYER, sole US agent, imports 

"Bond St" cigs in '72 & 30 urs later his firm helps organize the first 

NY PM corp ., among the choicest brands of which soon came to be MARLBORO/ 

re-incornorated in 'OZ, sold out in '19 & owned by US stockholderss keys 

were RUBEN M . ELLIS OF ALA . & L~lYARD B . MCKITTERICK OF IOWA + Alfred 

Lyon//PHILIP MORRIS ENGLISH BLEND introduced in '33, name changed to 

Special Blend & then just PM as of '48 . . .The PM line as of '67s PM 

Commander, unfiltered kings ; Marlboro, recessed filter Parliament, the 

menthol PAXTON in revolutionary Humiflex plastic pack, ALPINE filtered 

menthols in soft pack, B&H premium quality filtered + pipe tobs . Bond St 

& Revelation 

--THE ROAD TO MARLBORO COUNTRY by Scott Ellsworth, 8-87 (Smithsonian 

~ Marlboro adv . pro3ect)s the Marlboro Countr v camuaian debuted_in '63// 

' PM sold to elite clientele on as onable N ew Bond St . . .died '73 but 

his widow &'bro& kept the line going, by •85 this included MARLBOROUGH, 

said to be sold as "the ladies• favorite'• . . .incorporated in '87 as PM&Co . 

Ltd, pur veyors to Eng. gentry & in '01 named ROYAL TOBACCONIST FOR KING 

EDWARD VII, b3//AMERICAN BRANCH : Ec e begins, by '09 PM ad reads 

"Noblesse oblige -- you 1 smo e theml" suggesting it went after same 

carriage trade as in Ehg ., 25¢ £or box of 10 PM Cambridges "the one smoke 

that always •show_s cl_ass "' + after- nner size assa or at 35¢= catering 

~o very a.mited mkt as Amer Tob Trust would have assured anyway . . . 

after AT breakup GEO J WHELAN stock s eculator & ro e bizm , forms 

M®b-=Products Corp same yr, pioks up evervt in s av e£rom the 

breaku + other loose-£loatan s' ' . .Tob . P ds orp 

a comp ex o ng co . ri£t breaks out over ensuing decade et . those who 

an~ecr o exc e all St w/new corps & cash in and tob . men who liked to 

sell the products/stock deals, mergers, leasing agreements keep the co . 

in flux till two key tob . guys, Ellis & McKitteriok, wrested PM away from 

Whelan & his associates in '31-'34, b5 . . .MARLBOROS= reintroduied durina 

~ winter of '24-`25/had been officially registered as US brand n •08 but 

perhaps not reissued till Ellis did so under Whelan, launched in the 20¢ 

cate or in •20s, sold a respectable 400 million in its first two yrs (not 

clear w ether otal or per annum), then began to lag, t6 . . .THEN IN ' O 

E_LLSS INTRODUCES THE "IVORY TIP," replacing cork strip in use then because 

paper s~icc to smokers• lips + DIRECT PITCH TO WOMEN starti~7s , 

"Women -- when they smoke at all - quic y eve op scern~ .ng taste," 

showin~ upper-class women relaxin~g w/oi~, &"that is why Marlboros no .w:=: 

ri.de in so many mousines, a$~n3 so many bridge parties, repose in so ~p 

many hand bags," b6s trade press hails this significant breakthru/this p\ 

after "Mild as Ma •' slo an+ LM has already launched "Blow some my way" v 

re Chester .elds ear oP al re risal dur n PROHIBITIONIS t-P, 

bv '20s t g--aig;ar was routed mkt potential of ci~s was huge . . .the aN 

R3 rl oro campaign limite3i 20¢ for pack o£ 20 & dve .Gt p% 

women's s= got level of sales back up to 500 m .llion a yr (1) but 4~ 

s ayed on this plateau for next decade as A VERY MINOR BRAND -- bntà %O 

very profitable one, 8///INTRODUCTION OF THE PHILIP MORRIS, very fluid 

http://legacy.library.ucsf.edu/tid/fmw44c00/pdf

PM history/2 

mkt as 100 brands enter field/quoting Fortune on how distributors had 

to be courted till the Big Three began to dominate, shrinking solicitude 

for distributors as adv . budgets bulged//THE PINCH as chain stores sell 

cigs as loss leaders . . .price manipulation of Big 3 during Depression & 

10¢ brands led to almost no margin left for distributors . . .thus, jobbers 

& retailers receptive as PM DEBUTS IN_._7AN _'33, brown box reminiscent of 

older PM Turkish blends, suggesting :'s co costlier brands & adv " M N 

only fifteen cents"sDECEPTIVE since a diff . cig, really . . .HIRING JOHNNY . 

ho a "Iv'Fran ener etic cheerful ublie ersonalit ," b11 . . .Story of 

the hygroscop e agent & researc in Os, 12- . . .PM Eng. Blends pass 

Old Golds in '38 to become #4 seller//MARL OROs continues to be sold as . 

"America's luxury cig" & ads talk of "Par~icular people . . .careful to avoid 

cheap c gs mart debutantes (who) recognize Marlboros as a suitable 

accessory" & men who demand M's as "the cig. of distinction," b14 . . .j,n, 

'40 PM issues red-ti d to go w/plain & ivory version + adv "RED - to 

ma c yr ps & f ngertipst SMOOTH - to leave yr lipstick on yr lipst'/ 

Marlboro sales slip to 200 million during '30s vs . 35 billion for Big 3// 

WARTIME SHORTAGES, soldiers smoked twice as much as civilians, 15, so 

Marlboros fill the gaps, sales jump, but adv . eschews patriotism of other 

brands, showing women in watercolors, fashionable babes for whom the war 

"is primarily an inconvenience," bored & occasionally sinister they seem 

to be surviving the conflict on strength of their cigs, MUST USE EXAMPLES 

OF THE ADV COPY, 16-*-*-#"One delightful luxury she still with clear conscience 

demands" & ivory tips as "firm, smooth, utterly so gnee"+ "trans- 

Y'orming impatience into pleasure"~#~t17/war's end cut Marlboro gains// 

THE POSTWAR GL3LT failure to reconvert a i~ng from wartime leadingto 

nonse3Sin ove stoeT-t r .a~ wn~ s ale Lyon ~~ unloa~3e 

ne~llion stales 

in am s e expor mkt, '¢1 . . ._i "No ciE han&ov~er" c g,$ y' .~_ helps the 

cymebaclc + "nose test"//LYON~ PRAISE~-T E MILDNESS ~ S PITCH IN •57s 

it gets at the smoker's guilt complex, "the eeling the smkg is an indulgence 

he'd be better off w/o," b19i also good pitch to women who do 

most of the family buying, esp . now cigs at supermkts/mildness theme had 

dated back to Chesterfield's push in '33 slogan, Old Gold's "Not a cough 

' in a carload," etc ., b20//KINGS INTRODUCED TO INDUSTRY by fluke in £ed . 

'+ tax laws, allowing length tncrease of just over 20 provided diameter was 

reduced so in toto contained onlZ17~ more tobacco & wgt didn't exceed 

3 1bs per-M, t21//part of appea" LL es esT more o3 a smo es public perceptio-' 

n tT_a~E longer length filtered out nicotine, Pall Malls soar . . .in wake 

of kings come . . . . ///FILTERSs began in US in '30s w/Parliament, Viceroy 

& DuMaurier, smallish prewar . . . 1950 THRESHOLD YRe postwar comeback pushed 

sales over 40 billion & to 11,1% MKT SHARE, taking aim at L&M whose sales 

were dwindling & mkt share down to 17 .1%, hopeful to become "3 -- but ' 1 

is huge SHOCK a~ales, which had 'umved 25% _ in ' S0 ._ siip~ped1~, sales 

pitcTi-~urning stale,-3ohnny is ag ng & his call turning into "~+?t!i earache" 

. . .~MARLBORQ s sales were off, fashionplates in adv . scuttled & pitch 

was that n-a`yoie could afford 'em + pleasurability, t23/late '51 oomt~3.nn~ 

the two aPneals in ~Esca ~e~from the Commonplace" via Marl oro~ s .o .strong & 

interes~ing copy : "„hen smc~g-~s s op eH"'~ing a pleasure & becomes only 

a habit, it's time to freshen up yr taste" . . .BUTs by • vailable 

only in hotels, resorts, luxury-snecialtv shons . i s mkt share less t11 

nearing erm-9.nal-status .-_ . ._Pffmanagement has worse probs,-though, 

MALLS PASS PHILIP MORRIS in fourth place among sellers + FTC CASE 

NALI. DS after 10 O yrs in 2, much researc & testing to counter PM 

claims as competitors & glycerine makers balkt FTC forbids the mildness 

pitch=MAJOR BLOW, 25 . . . decisions to enter kings mkt, PM starts w/Dunhill 

in '52, weak, so after Chesterfield kings leads way well, PM offers king 

version, climbs to 4th among kings in first yr of '53 but not enough to 

offset slump in PM regs . . . . AWARENESS NOW THAT FILTERS WERE THE FUTURE, 

"You could feel it tryin to w," said Geo . Weissman who came to PM in 

' 2 . . . open m p ace as demonstrated by fast start for KENT introduced 

ix ffiarnh •5?i. . . BUYING IN WITH BENSON & HEDGES PURCHASE . Par~laml ent had held down No 

. 2 spot behind Viceroy for some yrs, 26/buying ]mow-how in 

filter area . . .B&Hs another London tobacconist's shop on Bond St (Richard 

Benson & Wm Hedges, props .), opened first retail shop in NYC in '99 . . .by ~ 

'52 B&H sales hit nearly 2 billion/LVOn & McComas exvlain the rationAie ~ 

- - • - - ---- - - - --- - --- ------- ------- --- - ~ 

I salesj '~ " w'~ sl V •kin yaty3+billionfin '53, c7% 

sales at 2 .7 billion in'54t . . .THE PROBLEM WAS THE P a prem um price,C7% 

odd-s3.zed pae , a-ted Sogo, seeme no to relate to smoker w/anxiety Cn 

looking for new-type cigs now proliferating . WINSTONS AND L&M DEBUT IN p 

'53, by '54 each was selling twice as much as Parliament, now 05 . . . 



OVERALL PM SALES DROPPED IN BOTH '53 &'54, mkt share off to 8 .7Y6 as 

Lorillard w/Kent shoots by it into 4th place=NEED TO TRY SOMETHING NEW, 30/ 

need £ arl riced new f ter . . .MeC mas gives Weissman the o 

o£ evelovina the new eitT in Jan •5 -- a step e a urged upon jo ning 

the co . e draws to ge er team from adv ., production & research, hired 

Roper researcg ou}I'i-E to survey the mkt, massive questionioning in '53 

& "The results of the thing were fabulous," t31e some 61% of resnondents 

had tried filters but reiected them because of lac o taste or because 

t ey were perceived as e££eminate & s ssyish, a key factor in era when 

male smokers heavily outnumbered £emale, thus "THE MISSION WAS TO CREATE 

STRONG FLAVOR, A MASCULINE LOOKING PACK, & A MACHO CAMPAIGN"#*'+'*#+''thus, 

giving up the old Marlboro brand & seizing up the name, it h~~a~~d~ne~_ bg- 

Come extinct//tests showed that Marlboro name was erfectl £ n-e ha 

mascul e rin + residue of hi h ual t from via its premum 

price , 32 . ., t so £ w t the B T - 

S 

ILT Winston as in Churchil , Kent though named for Lorillard 

CEO , and B&W's Viceroy . . .New adv agency hired, acct exec on PM was 

David Lyon, son oP PM's chairman, "a rustic, maverick genius" to Weissman 

who didn't ever receive enough credit/BQS~S_MILHISER_~Ts_COMES NEN~~31 

ADV MGR, m33 . . .hiring Frank Giannotto, NY industr3 .al designer, for "bold 

masculine-type package," picked out present version from early candidates 

though it had parallel lines & name wasn't capitalized, although type 

had the distinctive "1" and "b" ascenders + pic o£ cig on front bet . name 

& roof . . .MORE STRIKING= the hinged-lid or "flip-top" box, t34, not entirely 

novel since ten-cig packs had •em & a German brand had the fullsized 

pack//2uch internal opposition . Weis_sman recalled, old-fa~ :f- .~-.-- . .x-• a3 

w -~-d- ~'i~--- de~} packa i e~m e _ B : Marlboro nee ?~ _if#'eren De --t 

. ~ bein 

1àtento the mkt tw types o£ filtersa cork-t pped flush £ilter + 

w e- anded recessed filter . . . DENVER & DALLAS test-mkts/new tob . blend/ 

fabulous test results . . .Millhisers '•I was vious that the b 

to go . .Dallas cork-tippe mo el d d better NEW ADV . AGENCY as old one 

f~.3ed~during test-mkting, 35 . .•SEARCH FOR NEW AGENCY, 36, then better 

known for its bravado than size of its acets, invented the "Green Giant" 

for Minn Valley Canco in '35 . Kellogg's Tony (?) the Tiger & Lava soap, 

but still only a few steps beyond bein small midwe y when 

PM called -- u then a ar y a uggernaut i .tself just then, 37/ 

mutual apprehension is fruitful as desi of ack is refined : e ermint 

stri es come off the roof, capit ized name . .. i is e ad o e 

cres , feei ng 3.t woul tie the brand to smaller, urban sophisticate mkt, 

~'oo much of an old thing "& I was aimin at „ 38/B1JSa J4s. . 

Cullman & B ett wanted a e s+ Louis Cheskin of Co1orResearch Institute 

who tested it, deta ls on the test .m3.8 as 80% oP subjects gave 

it favorable rating : subconscious assn w eualitv & nreati~ei people will 

never tell you they prefer a pac age because o£ the erest#'~~'*'~"M'~'**'~use . . . 

vs . phallic symbol of the cig, acc . to Millhiser . . . thus, n.,~es softened 

a fairl hara~h deai_~ , angularity of the design aimed at men but no one 

wan~d a~3.enate-the female smoker + also a tie to the old Marlboro that 

had a crest on it . . .MARLBORO DEBUT JANUARY ' r no ing h ser s def - 

it on as a c desa men th t wom n "//four maj or elements 

in first campa gn . "Filter, Flavor, F1ip-top Box" was three o£ them . . . 

"the filter doesn't get bet . you & the flavor" + "this new Marlboro makes 

it easy to change to a£ilter" + 4th element of I~ASCULINITY 

. launehjns1 the Mar,lb2 ~Men/"Manly, con£ident, they were successes in their fields 

ye$ no ab ove getting their hands dirty, the ads seemed to say, depicting 

an array of cowboys, stevedores, golfers, librarians, bizmen, swim coaches, 

tree-trimmers, hunters, sailors . . .most memorable . their PACES, 40s men 

are middle-aged, not always clean-shaven, somet3mes spectacled, sometimes 

bald, often casually dressed -- A CONTRIVED ORDINARINESS about them that 

contrasted w/manicured features of av male model, . .the real idea was to 

show i o e'~ : rroug 

- ewn, craggy types, believable eo 1e vs 

'grett~y-boy models . . .as much a contrast to the compet on n s sexual 

pi~Ti to men as the 1208 cig had been in seeking women in '20s+'+#*#180 

degree turn ., .//THE TATOO COMES NEXT after serious consideration by t3-ie ~ 

acct group to showing M .M . with h s finger broken & in a splint . . . idea ~ 

was to distinguish M,Ms from other he-men illustrations + not yr usual v 

leggy pin-ups or "Mother" but m ressionistic likenesses s of miiitar~ ~ 

, suggesting these are I vets=the s=the older m e smo e & those ~ 

who might look up to him//ADV COPYs brief . strai~ht f_o_rward, mascu~3,ae. ~ 

& PURE VERNACULAR & distinct commercial cast ~ e copy, e> ., m 2 . . . ~ 

First print depicted cowboy, the second a guy in tuxedo w~tatoo//the ~ ., 

legend surrounding that first cowboy ad, b42 ff ., group sitting around 

Burnett•s office & trying to dredge up most universally accepted symbol 

of masculinity in America . . .Weissman's memory of last ads produced by 



the old Cecil & Presbrey agency w/David Lyon as campaign directors Ted 

Williams & rodeo champ . . .regardless, the first cowbov ad was tsa+-dlv an 

~ercise in originalitys came from old L33e c13p Burnett had in his file 

of cow oys ' e repr-ed as close as we could that picture," recalled 

acet exec Benson . . .INITIAL CAMPAIGN A SUCCESSs though slowed by hunt for 

box-making machines in England, so had to work its way across nation . . . 

big help was WEAKENED LOYALT S CAUSED CE by 

end of first yr, ar oro was #13 in US brands, selling nearly 6 billion, 

b43 . . .sales double in '56 & bv '57 it stands #8, PASSING THE FALTERING 

PHILIP MORRIS BRAND, sales hit nearly 20 billion, t44 . . .Winston first but 

early on there was sense by Burnett people that "we were headed straight 

for the top" . . .BUT= they weren't/durin •-' 8 Marlboro ru s 

steam so did other filters exce In o, wh ch slowed to growth, 

L&M an iceroy ec =ed, Marlboro ahead only 1J-0~ . . .even so, by end of 

'58 filters had captured nearly HALF THE MKT//KENT COMES BACK STRONG as 

Reader's Digest article in July '57 spotlights it w/tables on T/N ratings/ 

Ken soars from 2 .5 billion in • 6 b 11 b e d o ' 

Qf the f lter ml~ . . . .new er-tips designed Reader•e Digest artioles 

directly address anxieties that had been brewing, so filter revolution 

explodes by •58 . . .RD shows that of 26 nat'l Pegi;-~brandsy ;~PW37kihiksL;ranked 

#22 in T/N ., .of the 14 £i ter brands tests MARLBORO WAS 10th IN TA 

TIED FOR FIFTH IN NICOTINE . . .t ey had as much tar as 1 o t e unfiltereds 

in ~ e test & as much nic . as one half of them (unfiltered), thus "virtually 

nothing in the articles to recommend PM brands," m46//SOs 

A YR THE CO . RESPONDS as Marlboro droPS 28°b in tar content and 21 i~n 

na.cotine + new em7~hasia on t eir otTier £11ter S~RhTaMF'NT ~L6 made P 

co . entry ln ow-tar field as PM drops its ~N~44* respectively . . . 

nMARLBORO PRESENTED DSFF . PROB . since it was by then PM's leading brands 

ew £it -~c new ~~ were ed thou not t reduced T 

v e .'•Better makin's stressed + intro, of new so£t pack in summer 

of 'SB ., .more visible c an es in adv . with DIRECT APP TO WOMEN NO , 

as tatooe an s w ns gn £rom di£fa ranc of service on , female 

models looking toward unseen M .M . or older M.M. se~lit~htina ci~ of 

oun er female com anion . .JULIE LONDON APPEARS, sultry, smoky voice 

w sex appe , a" ere there's a man, there's a Marlboro" she beckoned 

on radio-TV, . .link to NFL by endorsements, televising their games . . .the 

owth continues but not s ectacularl s u 2 .4yb in 'S & 6 . ' vs 

W N• t ataona ly vo ume at more than twice 

Marlboro level : "IT WAS TENSE," Weissman recalls as much high-doming goes 

on for $ear the brnd-ha3 neked, b49//THE '6o SETTLEBACK CAMPAIGN vorra 

in a v t of inen including cow o~ ys lsiying ae to enjoy 

a Mar oro, "a little softer more relaxed" itch, probably result of 

concern re the who e&H controversy then, asking themselves whether they 

were "talking to the anxieties that the scared smokers had° ., .trying to 

offer some reassurance, t50 . . . Featuring some blacks in advs in black pubs 

in •60-'62 . . .class of men altered, more upscale at times, women disanpear 

xlow AS DOES THE TATOO : "Chrwe tried ever th' . said urnett•s 

Ma'rl orT acc=t exec Owen Smith, m50.~urne~ kt ept monitoring response to 

images all thru the first decade of the brand & every time there was a 

cowboy, "there'd be a blip in the research saying 'Hey, people liked 

seeing cowboys "'//PN •s Marlboro bxandz~gr came to same conclusion, see 

his MUST USE QUOTE {t51~ re cowboy as having most impact & recall of any 

of The images, vocat ons & avooations . . .so b la e'62 d 

to o with weste and focus strict on the eowbo - DIRTY WORK 

a n e e d, eissman recal e rumo ns - ~e~,~t were so strong & 

ea e been anne rom vA`"~àlss & mì3 ~ta "o 

answer ere"Fi'~d'"'~n a~'°~~34"ì'g wfTerever yoi7t w6}'"i~L` i-f1 `f'T5 ; dia were in rn 

Marlboro Country, 51-2 . . .first test in '62 showin c w ~ 

urban places : midtown Manhattan, Yankee Sta ium, Nob Hill, Hollywood -+~ 

Bowl,-d~eting lone cowboy visitor w/Marlboro Country logo across page/ ~ 

the basic idea holds though cowboy gets sent back to his own situ ., .the ~ 

campaign was not one "that's going to get somebody to jump up out of the N 

chair & run down to the corner & buy a pack of Marlboro," i ta es time 

because it's a personalitv camnai,,n,'• said Landry . who had backing o 

`(~y~~maM --~fT i Others had o IJOSe(~M -- thcmo nr 'roc-Tan wntfi•~aiastic 

about it s too macho too ~ig~,~„~,~e'd~in s~,~e_ .-- _ a.Dpeal & no - reacksyng £or 

women . . .K.EY TO-STS~`SUO`CESS WAS THE ~vl~~"si Elmer_` Be~~_rnstein's theme from 

'-''TFe-~4agnificent Seven" discovered by a Burnett creative d3 :r ., m53, b 

~~ousin~ & demure see Benson interview)/"ALL OF A SUDDEN, IT CAME TO ETHER• 

Landry recal ed, b'S j3 . . . result : SSMICITY~sp a~~~r_e eo w . P._1_a,y,~ RRX 

i premise= •' . . .a dumbell simple prsenta$i~- nF'~in retTOSpec`~--'~a s'~`ymio7 ., 

it's a line, it's a place,• t54 . . .took a while for the campaign to grow 

on people, took better part of a yr for the sales to respond . . .the line 



"Come to where the flavor is, come to Marlboro Country" didn't debut till 

'64 . . .then there were hoots o work' rapublic & private lands 

in the west as opposed to Hollywood backlot ranches . . .Burnett creative 

dir Neil McBain urged authenticity of cowboys rather than actors, then 

the late •60s discovery of Darrell Winfield by photog Jim Brady . . .all 

the key elements were in place by end of '60s & before the broadcast 

ban . . .NOTEs the Marlboro Country _campaign is SAME YR AS SG REPORT of 

',E 4 : a£ter modest 2 .3f. gain in •63; Pfarl or596 in '6W like most 

other brands, . .BUTs in !65 It iumned 12%#**+##*b end of decade it wa 

uv to #~3 in ~US,~g rowthaveraaine 10 a yr, and grow ept up n Os 

rigFit ru he rb oadcast bans ' is th ust ne er skipp ed , .P:ga.t//the 

line e andede Menthol introd n -"i'dr~"o'Ti~ 

ts ' .ffl and I BO O BEC M where it's stayed & 

keeps widening the gap, 55 . .by '8 it held nearly 23% of the mkt, twice 

that of #2 Winston//FOREIGN" grew rapidly in '60s &'70s & bv '~ p_"iR 

hailin lboro as world•s bestsellin ~cig, . .by •80s it's available in 

~T countr es . . .worldwide 7=~ sales es mated at 280 BILLIO 

--PHILIP MORRIS & CO ., Fortune 3-36s Hard to have n c ed a worse vr 

w PM E!~ Blend. Big 4 earningswere off_ 

more that yr but PM showed biggest prof t ever, -t en tr 

half-million net . . .PM no lon er a compared with Lorillard 

eiirl. Z.e ua2ed~.in ' ne m ll~.on 

mi111on) . . .noW a 

, favorite ue to rapad growth rate//sin 

ce Dr John B Watson demonstrated 

'J for JWalter Thompson in '23 that smokers can't really tell their cigs 

apart whem blindfolded, more important than blenders & chemists -- or as 

important, anyway -- are yr advertising men, package designers, sales 

force . . .PM has tried to launch some 50 brands in US/one of them -- 

Marlboro -- has tried to earn the $1 a share annual dividend almost singlehanded 

for past decade . . .but only the new PM Eng. Blend has become a 

bigtime cig property//ORIGINS OF U .S . FIRM: a kind of cor . scow oalled 

1~ob . Products Corn ., wh c he ma or~.ty interest ~.n eor e an s 

United Cigar-Stores . . .TP's first acquisition was Melachrino business, 

being made into a conspicuous success by ace salesmen Reuben Morris IIlis. 

& Leona d Burn brought in as vps & stockholders in •12 

as e an s vages all loose props . he can in wake of Amer Teb~e3:trust 

dissolution . . .by '19 Whelan latches on to Amer . versio o , m107 but 

stock was bough not~ he c DUT by stoc o ers including Ellis- 

McKitterick . . .in '23 TP dumps all its manufactarin~ units including Melachrino 

' - e to Am , McK retires for 7 yrs to Europe but - 

Whelan makes IIlis nres his first ste is to LAUNC 

2O _ remium ci ack, sells 40 mi on in its £irst two yrs (RK says 

a~~a1 oi , t en ags, ~11is gives it ivory tip, volume holds at under 

500~mi21ion till •30, then lures McK back from Europe . . .TP div___ id_ ed in 

~y„ w/Geo Whelans& his bro . devoted to developing props . e-can-s-ell on 

'L Wall St vs . tobacco salesmen . . . in ' 26 WJ~elan be .~ins flirtation w/DAVSD~ . 

SCHULTE, as the two chain-store tycoons try to mu-ruizaS' e thear a .nterests, 

foxim $M Consolidated, to be akrolding co . for Schulte•s Continental Tob . 

Co . & PM & Co . Ltd via exchange of stock, w/PM benefitt ;ng +''rom Cnntinen- 

, tal's 'plant & manufacturing personnel, and brands of both co .s to be 

/ enhanced thru favorable handling by the two chain outlets -- BUTs Whelan 

1 can scare up oT3J,~o3FID! s .ocT Ior new ho~ding co 7soon Whelan is off 

on new scheme, sharing w/Schulte in a cigar operation & buying into Beech- 

Nut, Lifesavers & Amer Saftey Razor in Union Tob . vehicle . . . Ellis more 

Interested in PM than TP by this time & as some of Whelan's sc e' m'a es become 

unglued, Scu1te emp ire trembles early in fateful ~7r of '29 and E2lis gets 

to pick up t~pieo£-PM-Consol ated . . .he adds a few brands to Mar1boros, 

Eng Ovals & expiring Turkish brands, Oxford Blues & Cambridge a/k/a 

PM . . . :Vllis was hands-on supersalesman . key contacts w/any store in an 

town oove o ooul cas chec n an of t m, m 09 + MeKit- 

{ terick•s 30 yrs of handshaking exper ence + e t PM vps as strong tob . 

men . . .ke~ is ALFRED E . LYON, head sales mgr out of NYCs "Extraordinarily 

affable, v _ d--~or aTilit~to win over 3obbers , dealers & ci~ e3-r_. 'rs at 

nlght clubs w equal succASa/Zln 

is s ra e e chan c 

m s Mar1 o T zoTa. &'SiigTT Dro i au ones - va.rtuallv_Mn 

rofit desp3t_e_ 2 billion in sales#*#L11 e was interest-e-d-in the 15¢ r; 

c mKZ wnere yv75 or ousiness was usuai .ty aone out »ig •+ naa cuz -co Z naaKs~ 

for ¢ . . .experimented in '31 w.Unis as in Eunice opped but he 

was convinced 15¢ was soundest balance bet . volume & profits . . . n goin _P~ 

to odd-nennv pricing, Big 4 were apparently hurting their distri u rs 0~, 

more than they were helping their consumers//3 ood reasons wh the ne 

PM could succeed at 150 ; (1 ) fluid condition of nll aste ~.n as ~ 

I U~ ran s ro -yr-owns cu~in, publ c willing to experiment, ¢2) the 

I P_RESTIGE OF PM__NAME associated w .expensive Turkish cigs for 30 yrs ; the 

same sep a m tation-wood wrapper that had distinguished the Turkish 

brands was selected for PM Eng Blend + opening advs nroclaimAna PM as 


PM history/ 6 

"NOW only fifteen cents" conce at new blend is uite dif . from 

01 , co . s INTAIN T , is a big break 

for reta ers in v ew of the Big Four's "TYRANNICAL DOMINATION OF THE 

RETAIL END OF THE TRADE," t111 . . .In old da,,,va t7,e co .s needed the distributors 

to sell wide range of products s ni ce no single brand was strong 

enough to support massive adv, campaigns of latter day, so there were many 

r , 

secret discounts, bonuses, free-goods deals, wide margins all became commons 

i was en possible for the tobacconist to_PUSH ONE BRAND OvfiR 

ANOTHER, thus possible or him to ma e a ecent living on the extra margins 

he ex-Er-acted . . . Co .s thus showed genuine interest in helping dealers maintain 

prices vs . cost-cutters, price-slashers, undercutting outlets like 

, the Liggett chain . . .BUTs uge 'um in consumtion + vast adv outla s since 

arlic _' 20s "reduced = Pm A*+*+ rer s s0 cltude - fOT the distr r' as 

Big 3 among em were oing some 90 of the cig u ese titans 

develo ed `?a ..su mri.sin wunanin their nrices to dealers" & indifference 

o tht e prices acompeting dealers forced each other to sell at, 

111 . . .thus Big 4 seemed to have formed monolithic opposition to all fo=i8 

( th co e~~3 150 s em cigTJDETAILBOF exce t e ~-DISCOUNT 

PHILIP MORRIS OFFERED as a resu , as A&P began selling cigs as loss 

leaders very tough to boost retailing margins or even to sell cigs at a 

r profit//the Bie Four "AST~.NISHED THE TRADE.BY ABRUPTLY RAISING THEIR 

PRICES TOGETHER" desp3te Palling ~eaf prices in June '31/acc ions of 

collusion ôw as prices fluctuate togethers perversion of the trus e 

pr ncip e of low prices & large volume t where co .s were gettin their 

distribut+nn v ;ri-nally ee#+-u#~x'~c'#t112/McKitter c re se 

rice-cu outlets his mar in amount 

double Bi as al 

he retail old Rube" & MeKitter 

Was 

o0 o1d Mac" LYO s embodiment of,•thedvelve - ove s es - 

n~a.g~ue, 2 th s price maintenance has made PM a favor te w ndependent 

retailers, preferential treatment in counter & window displays . . .but even 

I if the seller's margin was over a penny more than for Camels, per pack, 

not worth the s ecial treatme if the ci • ' ove .the 

jo ers oo mi on in Feb, up to 2 million in May, O million in 

July -- and it was off & running~-~##*tL114 . . .RICHMOND PLANT MODERNIZED, 

though not a big one & running only 8 hrs a day/smart moves bv 'Pne ieaf 

j~uver HatcYcer when leaf prices were v ruinousl lowTl'P I BIG G ENl)Bs 4 BL 

55 5 a br~gh o ar ,'2j Ky burley, 357.Purkish &~j as -brning 

leaf . . .various additives & casings cited, tR114, aromas adding to smell 

as well as taste of eigs//PM'S D~FF . HYGROSCOPIC AGENTs McK heard about 

diethylene glycol, "one of t e hi~gher mem e'~s of -tTF~amily of alcohols, 

said to be more effective than its distant relative, glycerin, used as 

moistener/gets his new chemist Richard Cone to try it out at the PM 

~ Richmond plant, who told boss not only was it better as humidifier but 

t also "chemiealk ~.a;•in a~ ab ~~e~.of givin o mb ' an irri.tant kn 

as ACROL . .so swi c ma e or 1 PM ci s MeK hires f rm of chem sts 

to tes Cone s repor & • ra io commercials w commendin 

sm s to " la safe w & avoid all c a ce e .t en c 

prevails on Dr ic ael Mulinas of Columbia's dept of pharmacology to 

devise tests on irritant properties of his cigs w/PM paying all his expenses 

penses & Dr M free to publish results, good or bad, DETAILS HERE A MUST_ 

tL116'~##*##->

PBfI history/6A 

--INFLUENCE OF HYGROSCOPIC AGENTS IN CIGS, LARYNGO3COPE 2/35 by 

Dr . Frederick R . F1inn : It's hard to isolate objective symptoms that 

cannot be attributed to some other pathologic conditions + in assessing 

effect of smkg on mucous membrane of nose & throat, no way to express 

degree of congestion . . .this study suggested by work of Mulinos 

& Osborne//bear in mind eo le smoke in differ nt w , e .g ., if you 

smoke down to the stub, more ea irritatin each.dr~pickQd 1'O" ._0 

mk atients usin o, brands w h rosco ic a ent symptoms associa 

ed w sm g& t eir cigs were rep ace w ose using DI-GLYCOL 

& instructed to smoke only these ; on avg they had been smkg 12 yrs & 

28 cigs a day . . .AT OUTSET : nearly 3/4 showed congested larynx & pharynx, 

2/3 had coughs, 20% had heart palpitation & 71- tongue irrtation . . . after 

smk~ DI-GLY cigs for 3-~ wk~ con~estion disappeared in nearly twothird~- 

ose w eem & s iowed "considerable improvement". ,,, 

the ,-aat + 3 of those w cough saw the condition disappear + tongues 

cleared up ; hearts not discussed in the paper//THENs diff . cigs given 

to patients w/glycerine as hygroscopic agent & in 80% of them congestion 

returned to larynx & pharynx & patients refused to smoke them 

anymore +"The glycerine cigs produced an irritation in the respiratory 

tract which is notably absent in the diethylene ones"//,at~ :end it says 

"This research was made possible thru a grant by PM & Co Ltd ._Inc ." 



L&M, next in line, has 20+% . . .but tron comeback from three s 

M:s//GOOD BACKGROUND ON AL LYQN, his s i ls a se zng Melachrinos 

back in '13, stopping by a shop at 7 :30 am to help dealer open up, 

g sweeping the floors, trimming his windows, helping him take inventory, 

buying dresses Tor twin girls on their third birthday, or sending them 

a graduation present/a great kidder, great salesman, great guy, using 

chalk on a dignified gent in a frock coat . . .rose to $124,000 CEO, 

his reward for the thousand-odd first-name friends he has in tob . in- 

dustry . .,PM occupies hq in five floorsO.f 8-storv vintage 1899 bld' 

at 119 Fifth Ave~ surprisingly smalltime, unore-possessine & casu 

slow & infrequent elevator service second-hand leather chai 

rece n rm . . . you ave o do to lure out e oss 3.s light up a 

rival bran & soon there will be "A TRIM, DEBONAIR, ELECTRIC EXTROVERT, 

wearing the ageless countenance of a purposeful Puck on the slightly 

stooped shoulders of a man of 63" loping along on the balls of his resilient 

feet/he'll try to sample you, see b113L as to how "the stranger 

is somehow charmed into believing he is doing a favor to two old friends, 

AL & himself, by exchanging his Chesterfields Tor couple of packs of 

PM, giving the latter "a fair try" . . .LvON KEY TO UNDERSTANDING ru'F'_ 

NOMENAL GROETH, ARRESTED DEVELOPMENT & RENEWED ADVANCE 1W 

u4~0 ;LfT: DME OL HE 

no a scient st . . .his compulsion to sell w/o letup, a kind of s es £or 

s~ es s sake, par£ly in r6 prtIy resZt o-f Fis bein ber o 

gret t_riumvirat~o£ P~.Lfounders in~.ts presebt incarnatio all great 

salesmen . . .AL's perf . in early '30s on the West 'C-oa were more than 

the small Richmond factory could handle/the simple selling cliche he 

learned at MeKitterick's £eet & practiced for 30-odd yrs sidewalkpounding 

on three continents & now drums into his own boyss "Rememhe,-_ 

pe~o~le don't buy yr roduc~t= thev buy vou & will sell yr produ" . . 

iu, xnown or ~~ging Tre & dressing up stories re app i psyc o ogy of 

salesmanship . . . .one of his charms is "this ability to put across apoccrypha 

on which he has first sold himsel£"###a''*'L113, e .g., how he connest 

the nightclu_b eig girls to sell PMs not matter what requested~ eea 

few men w2 rejec a pretty girl's mistake##'a'*'#'a'use . . .also : never ask 

an bod £or an~ hia until you have £irs o e him a se v , like 

check ng tobaccon st s s oc or us ing his shelves even as PM CEO he 

drops by now///BIO, begins L114, most o£ father's family in showbiz, 

identifies father's occupation as "antiquarian" unless it's his character 

he meant, migrated to Montreal at 20, worked as home-furnishin s 

salesman till becoming clerk at hotel cigar counter (Windsor Hotel)/ 

little more than this revealed, feels his real bio begins on reachi 

NYC as_2F,v,-oid in '12 & lands $15wk job as salesman or new y£ormed 

Tob Products Corp, selling Melachrinos, see R114 Tor career course, 

his ~~_ as fro '19 toi '31 working abroad, Europe & India-China, adding 

to his e t erce t on o t~3.versaY ' custome & learned 

inYluence peop e in five Langu ages Inc u ing Industan3. 1is 8c Mc 

brin nome Tor ,OOO a yr, check him out to see if he can get back 

into faster Amer . swing o£ things, dispatch him to West Coast, starting 

w/two salesmen, office boy & bookkeeper, in two s built bi u to 40 

salesmen as the PM comes on st , even w o adv push Tor the new brand/ 

rec 1ed to N in as vn-sales . . .AL 2nd in command to McK's successor, 

tall rese~-ve _irgi-'n~.an__atwas Hebron Chalkl~y . . .pushing the 

medical story re PM's mildness & Johnny as L~.I~1putian into status of 

anînternational earache", always hammered away at preserving PM's 

bac og o e er r en ship/rate of sales gain strong in '30s as Big 3 

£alter, PM a firm #4 in the pack as WWII begins//POSTWARs sales peak at 

32 billion in FY March '45 w/PM at 9 .5% o£ mkt, caof vo u 

o arme forces + Marlboros so co . sales veakdt 35 .5.billion, extreme 

nrn 

D-stOB . TRUSY_MERlBLRS HAVE-HAD SINCE THE TRUST 

AS BUSTED IN • 11*#*###~use AL as everybo y s s esman, an ar is , 

limit o co . s o-shift canacitv//strain on co . to ee we l-aged tob . 

aue zo rationing oasea on mxt percentage & purcnases in prewar yrs, 

all co .s dipped heavily into inventories, HOW LYON GOES AFTER AX .TON- 

FISHER CO . for .its inventories & plant capacity, old but workable, t~i42 

paying top dollar Tor equivalent of twice price of '45 crops the age 

A-F tob . saved PM's day . . .PM had had no need of outside capital till ~ 

'38 when had to add to lea£ nven ories as s es marc e p ar , so ~ 

added s ueeze £rom hi her lea£ costs, A-F purchase etc . & frozen sales V 

e w s m de on bv en 0 

arch oo . wi help of its bankers, Lehman Bros ., went to financial 0% 

mkt, deta" combo of preferred stock + 2Oyr debentures to ~' 

raise Y $30 million, almost all nearl subscribed when word circulates~ 

of precipitous drop in earnings//LYON'S VERSION bL144s we were c t~ 

undressins w/the shades up -- but at's not quite right SALESMAN'S 

MbNT ITY OVERCAME PROPER CAUTION as jobbers' orders piled up at end 



of war, geatly overestimatin g hithe to u s tisfied t r cusdemand, 

decision to ackage in war aEes of no cellonhane or Foil so he 

rew st e~F ~ves/had to exchange res1~ cigs for stale ~ ove- rstoc 1 

Ah bizes 

real PM is no Tn a-ao'"6 

ecisio_ n e . .'t1i.~T wineed as 

e 0re c oRer r r ~en e e et r ini~ànt uire s -orodigy had become 

bi bus -- and managemen~~dy w success, was o usy to notice, 

thus M7NTSmRAmTVE B F'AKDOWN . . .AL "damn fool in attem ti d ever - 

thin~ . includin man tasks di know ~rthin a o t"'"'e *Ri 

THE MZSTAKES ET start3ng bl s takin~-~c'e~ off allocations 

be£ore planta had reconverted, ~2) acceptin~ Fantas$3ca1Z.v Trd~ 

~orde ~industrx knew iobbers were~ar~in~ vs . anticipa ed_O_PA inerease 

n~ manuf ctu • riees~~~~ oorZ iaison bet . to . m g en an sales & 

a in . in NYC . . .A~was of' two minds torn bet lone& close friendst~+i 

. &_his own better ~}~gf 

~w/dealer_s~at had proven so valuable to the co 

ment_. 3 manazement's failure ~dv~.se un erwriters of e c drop 

i.n Nov sales-earnings w c oi dicTn't disclose on SEC registration 

statements this was admin . irresponsible . . . subscribers to issue 

jettisoned it, but ehman was able to ace it ivatel w/Equitable Life// 

HEIR APPARENTs O . PARKER MeCO geas mannere tt+tinkle~d__b_ut 

toughminded banker~"'•tl , of impecca~-~i5_y, t~St background, . 

rrince on,ia been vp at Bankers Trust, dealing w/commercial & foreign 

depts, int oduced to L on b Lehman Bros in '4 , hired as exec vp in 

'46//REMEDIAL ST s c osing aison holes bet . sales & mfg that 

had le to • 5 overproduction + clarification o£ job responsibilities 

from the top down + cutting 200 turnover of sales staff via be++ar 

salaries & bene£itss lea ing to cut in s`Fa_3T'_handi3.ne 1/ 3 more 

s ness w one- ir ewer ', ~gT e~s• buT'Te~,~inventory controls 

+ FULL DISCLOSURE OF O . ~o rewin confidence of biz community 

+ new promotional blood & Johnny now has four midget understudies + 

most a essive adv in PM histor w/'•No C' er" campaign 

'~BY DEFY NG THE FTC, WHI H HAS HAD VS . PM'S 'LESS IRRITATION' 

THEME $IN 2 as FT argues via its own studies that nobody has ever 

roroven one brand to be less irritating or otherwise dele erious '~o-Tne 

human system than any other . . .qv ' PM back in stride under Lyon-MeComas 

dynamic duo 

--BENSON & HEDGES Fortune 5-59s See nice pic oF Joe III w/right hand 

on his father s right s oulder in filial devotion . . .Parliaments account 

for ca 8 of B&H inco e . . .earnings went up 67% previous yr as stock 

price tops 100 at $6 .22 per share net/many remember it as specialty house 

playing w/twenty-odd varieties of Turkish, Russian, Brit . gold-tipped, 

monogrammed, magnolia-scented brands . . .JosCullman Jr denies suggestions 

his co . is fixing to put on roomier britches . . .in its best vr_e3cer3t 

made only 1/5 of 1_ ~ of US-consumed ci s . . .its t.n earr,9ngs o iv 600 .000, 

e e t from the ab~ le or the biw, boys ISTORY : orig . Brit co . sold 

out to Amer cans in M, a openeZ its - first retail shop at 288 Fifth 

in •99, moved ead3lv uptown :Lo !F35 Fifth c9r o~ '3oth . DETAILS ON THE 

VEDDY BRITISH TONE OF THE FLACE, m .R9 s mornin~ coats, uniformed messengers, 

etc . . . .slow, s eawth tTia even epression coul n i, wealthy 

carriage trade customers like theatrical promoter EFAlbee, who settled 

his $12,000-15,000 bill each Dec 15 . . . _during first 15 Yr_s of 20th ent ., 

fashion was for hand-rolled Turkish & Russian ci s+ Havana ci in the 

45- range . . . in same ends Turkish 

& American to brin ou-E~ ENTS w Elzropean-type mouthpiece, un peu 

bizarree rst yr 00,000 cigs, ten yrs later sold 95 million at premium 

price w/o adv . . .all of which attracts Jos Cullman, known in the trade as 

Joe Junior, who bought control for $850,00 in name of Tobacco & Allied 

Stocks, Inc .// out JOE'S~fD'1eA-r R-R~, who emigrated from Germany in 

mid-19th cent. + his muc pub a.c ze younger bro . Howard, the theatrical 

angel & Port of NY Authority . . .Joe always silent partner in theater deals, 

the family also owns sev theaters, substantial holdings in two banks, 

also grows & packs Conn tob for cigar wrappers//now 68 (born '82), became 

B&H pres . in '43, sma11, informal outfit . . .retail shop, later closed 1p 

avoid comvetine w/B&H distributors & dealers:~'ac orWa er °t. .HAD ~~ 

TO AIT TO EXPS~OIT PARLIAMENT eeause o1 war, hard to get cardboard for o` 

its boxes, did B&H Va Rounds, all cigs sold like crazy so by '4~5 g_ross ~ 

is $5 9 million that same yr FTC makes B&H remove drawin s o3 aes ~ 

oF Parliament £rom box ~redraw B r~'TemazTT" o Less resem le Br . coat CN 

of arms o . ropean-type mouthpiece & cotton filter & sold for about 01% 

100 above standard pack price/KEY WAS SNOB APPEALe "Be Lady Astor for an ~ 

extra dime•'//the mild ble_nd helned, a ma .- nimum of_mo?stAn ;n 0aP-.+s x: 

~lavorin~s, perceived as less damagin- ohealth than most other thrands// 

Jos ullman Jr moves for wi3er ml"rt but by nat'1 adv, a.3n't scatter 

his shots nor hire large sales force (only 11 men), cultivates high-income 


I 

I ! 

I 


mkts . . .Adv . follows rather than creates mkts, limited adv to-selected 

cities, NYC TV spots . Cue & The NYer map~s, very well-bred copy ("keeps 

all loose bits of tob . from reaching yr lips"), whole approach low-key 

even after Reader's Digest article plugging filterss "Cullman, an old 

tob . man w/investments in many cigar & cig cos ., rebels at drawing att . 

to anti-tob . propaganda"~*#* ~mC98, seeks no endorsements/his pitchs 

. .any citizen who knows enough not to eat w/a trwoel will naturally 

elect to smoke the gentleman's cig"'"'""*#health anxiety in general may 

help his cig, selling at 30d/a few smaller new competitors like DuMaurier, 

Encore and Lordso ., .' sales up 25%b •49 sales up 47qb with net isi 

con 'derabl £aster in eacti case an expens e cig o makes though the 

~o_b_~_£illed par o it is about_5/8" shorter than the-ordinarY ci~ . . . 

Cullman ~~ore`- gets kidded by his old friend Al Lyon of P~4`-'"IYOTE -that 

tob . prices are oi no concern to nce t has to do is 

lengthen the filter if prices rise . . .but the mouthpiece involves moro 

comvlex nrocess the cigs have to be han pac e vac aee ~ .tseT~~far more 

costlyZ$T¢ o make -& apclc ea~one . . .BUTs Parl iament profit is 'io~ ner 

pack vs . 1 .2¢ for recs//Joe Jr unwilling to make an re ict ons re his 

~3.z, eays he Is "happily marriea-~- '~ie marriage r~^ & do~es NOT INTEND 

TO DESERT IT FOR THE ROUGH & TUMBLE OF THE MAS5 :, c i~:- 

--PHILIP MORRISe OUTSTRZPPTRG-'17iEEPA, BW 5-17-52s PM has just added 

$10 million wing to Louisville Pactory . . .Pivi's pace of growth has been 

faster than the Big 3 since WWII/recounting the immediate postwar crisis 

when PM was "still being run like a one-man operation" & the SHREWD 

.vnN uAG BEEN THE KEY MAN TO PM'S GROWTH since '33*##**to . DAPPER A'r r save 

the ship, he brings in McComas, freeing AL of administrative duties to 

concentrate on his strength, sales//his tougher ad campaigns the drumbeats 

became hammer blows as the "No Cig Hangover" & nose test copy are 

pushed harder, more bucks per unit spent than Big 3, more salesmen ., .Does 

PM adv . work?/other brands using the same test pitch now//since there are 

scant product diffs ., there :s more im ulse & irrationalit involved 'n 

cig u in us a av . s s a i is real . . .BUTs unimpressed w 

e i ence as ordered cease & desist ; PM appealing . . .PM was fast 

into TV adv . . .AL's ac of in atiatin himself & PM to retaile s 

been taat.ed -- & real v out a e -- bv~_m_pe~rson superm selling . . .Now 

PM LOSING A BIT OF GROUND, concern is that kings & filters are coming 

on as part of smokers' concern, so PM has dusted off its own laneuishin€, 

king. DUNHILL, and is giving it exposure + new research program to use 

more of the leaf (nothing said about S&H here) . . .see 'L'YOhinQYl GUILT 

--IN A RABBIT'S EYE Time undated but plainly '52e FTC's slow burn 

over co . claims, in past yrs it has forbidden Old Gold claim it contains 

less nic . ' Camel suggestion that i aids diees on or ves 

fat3E'ue Luck~.es ` elaim if~ s nre~ r+rra~~men whc- -cicw f.i~Fi 

nowe s~PR!-'Sc aimits cigs are TELY LESS IRRITATIEO•"/notng 

-Enathis - Tm has DNn elvl's stock in trade $or yrs . . .tests by competitors 

& makers of glycerin to rebut, measuring edema in rabbits' eyelids, 

weighing them, etc . . . . M ied to um smoke into animals' 

rabbits died PM said it was us n s spurns all 

buthesre these t tests as nconc usive 

--2 BOARD APPROVE CIG . MERGER, NYT 10-23- //see JFCIII file 

--CULLMANATION, Forbes 11-53s Early in 53 AL aave u_p_adv its flop-_ 

~ng Dunhilhs pr_emium brand & kinge3its-PMe industry wondered when 

when it would launch its own 300 filter . . .meanwhile L&M appears at that 

price & Viceroy gets lengthened, selling it ca . 25¢ & it's running away, 

being rationed . . .last~3onth Lvon settles on.B& small potatoes : pusher3 

by 30 bi ci~t salesmen & ad bud~et under_half-millio negotiatXons 

handled PM pres,-O'=iver Parker McComas . . .deal is paying 4kX B&H net 

worth w/PM stock ($22 .4 million worth) . . .Joe Jr will chair PM exec comm . 

& Joe III will run B&H divisi 

--"19fR . =S1D I7T"s vro ie on McComas, Forbes undated but '54s heir Cy\ 

to tob raiser on Chesapeake in late 17th cent ., now 58, PrincetonTT6, v 

won Silver Star io' rn7IIJI gal antry, worked on Wall St in sales & manage- ~ 

ment, then shift for 18 yrs at Bankers Trust, had become top man in 

011 

Paris office . . .swayed by AL to join PM as vp, didn't know tob . but knew 

co . operations via loans he'd made them . . .u to exec . v r, then ~ 

p res . "growing in '49• ..he pains•• tended . . . " " to by home v' ~p 

office 200 employees he knows by name//THOUGH SPONSORING "I LOVE LUCY" 

(#1 TV show), sales skidded off $22 million in 'S3/blame is on the cancer 

gfare + PM's "wait-and-see" attitue on ~EF-ie'3'3S~er . . .so : he roug ~in 

B&H in Feb of '54 + opened PM plant in Australia to make PMs using the 

native tob . 1eaf . . .he's one of rotating chairmen of TIRC, he sa s est- 

1 s IF THEINDUSTRY LEADERS REALLY BELIEVED THAT CIGS CAUSE ANRF.Ix_ 

T ,• ODLSr smQ,j_er, from 



I Camel to PM) . . .believes that filters, now w/2% of the.mkt, have a big 

ifuture, eventualls will command 8 TO 9% OF THE MKT (see the low fore- 

' cast)* ~-~*+'##use 

--MAX SHULMAN'S SUBDUED •SELL• CALLS COLLEGIANS TO PM, Sales Management, 

2-1-559 the subdued pitch sometimes hard to find but extraordinarily 

-, well read in 132 college paners/good example of his yuks on , ow 

elns o c trate_"when you are~tud ;ons ." socialize when sportive 

& is a means of blow~ng smoke rings to impress girls . . .62~ readershi 

67% sponsor ~.denti£ication, poll shows//this tally close to 2 of college 

uncTer-g`ra3s saiff to be smokers . . .PM concentrated on eollege_mkt from the_ 

start train3ng specialists on its sales staff . . .to keep push3.ng in col- 

I leg3e e mkt, special mtg in Jan ' 54 to figure out how to sell somewhat 

sophisticated & sTep$ies-1. coZ eZ-ge`mS~t//answer : humor b well-known write , 

it's done w/sales promo on campus, which is name of t e column, pus ing 

"the intelligent man's & woman's smoke" . . .Sonnenberg pushes PR aspects 

of Shulman column . . .so successful that some college papers not on the list 

are running it (free) . . .BUTc see 11- -60 tem in Nation be1 

--BOXING CHAMP, Forbes -- e repic ag ng, tosse out its old 

~ brown PM pack in '55 for modern red, white & gold//within 12mo . period 

in '56 PM had put on mkt five new or beefed up brands, all but B&H which 

inherited the old Parliament box, all were in crush-proof, flip-top box . . . 

new adv. pitch as Johnn is re laced by female bell-toned voice while 

Marlboro features sweating cow oys tatooed spotrsmen//result : ' 6 sales 

15% over-'S5 to record $326 .8 million, best gain in the industry 

also . PUROHASE OF MILPH-LNT via stock swapj $55 million in sales but it 

doesn't make boxest/its research lab also wanted 

--SNAPS, TIPS, FLIPS, WHAT NEXT?, report on mkting changes at PM w/ 

stress on Weissman, NYT 1-12-58//see GeoW file 

--THOSE PARLIAMENT ADS, CR 3-58s Parliament ad discreetly calls att 

;}1KV+1( ~ to CR 1-58 issue report on filters, CU raises hal .l (RK : how can it prevent 

anyone from citing it or quoting t in a s or anywhere else?) ; a 

press kit serit out by Sonnenberg office 

~ -- HE PITC -1 -6 : JFCII~t_for overselling analysts_ 

~ on PM ver . its net while up O over past five yrs s actually down 

from decade ago + sub-par profit margin (RJR's said to be 3X higher), 

return on net worth is lowest of Big 5 + PM MKT SHARE OF 9 .496 IN °59 is 

DOWN FROM ; ; . 1% IN~~( #~#~~-*#see Cullman' s e£ o~~o ra ionaSize, comes 

over lamely, says _today's PM is entirely diff . co . from '54 so last 5 yrs 

is the key ydstick 

Id ShOrnm) --CATCH ' EM ON THF. CAnrtPUS . Nation 11-5-60 : Ironic piece on ACS as 

spoilsport, pushing its "morbid propaganda," hope here that "not too many 

young persons will be deprived of the pleasure & solace of smkg" . . .not 

to worry since ACS ed . budget is only $113,000//URting PM'S INGENIOUS 

TECHNIQUES in exploiting the college mkt, big supervisory force 

. MAN INE, NYT Personality piece 1-22-61//see JFCIII 

--ON THE THRESHOLD= PM thinks its in sight of silver lining renontob 

. purchases, Forbes undated •62 : sales & net of MO's non-tob, vrovs 

down for 2nd straight .yr/Milprint was frst to print on cellophane . . .ASR 

T has never adve+-t_seo e_=nongh, but now it has Pal blade out w/more to come . . . 

LESSON OF MARLBOROt spend at beginning when product is hot, $1 then worth 

much more ian 5 later when product is on plateau*****use 

--CLOSE SHAVE?/is the stainless steel blade a threat to Gilette?, 

Forbes 2-1-63 : Gilette is one of smartest, most profitable outfits in 

US . . .threat from Wilkinson's Sword/Gilette has 707 4 or so of he wP+- 

` shaving t,5zin UASR to enter dbl-edge blade b°lz for first time w/ 

' stainless, tremendous improvement in sales expected 

--AT LONG LAST : PM had industry's only profit gain last yr, Forbes 

ti-1-63 : the standard PM brand ke t falling but earlv concentr at;on on 

il s saved PM from disaster fo on time PM had been P OF 

THE INDU TRY w owest prof t mar n& retu on e u . . .now that's 

o~3g .:.b~r or'~ o~Siaments keep advancing, €Ilters are 8046 of PM 

biz VS . OSLLY 56°o_FOR RRST OF TNnr :cTRY + BREAKTHROUG~I OVERSEAS as PM now 

exports to 10 countries & thru affiliates or icenses sells in 17 otherss 

new prosperity in overseas mkts "bringing us customers who couldn't 

afford to smoke until recently" . . .also Milprint & ASR "beginning to pay ~ 

off"//recently purchased BURMA-VITA CO . OF MINNEAPOLIS, so within 5 yrs ~ 

PM has become the most diversified tob . co . as 17% of sales came from y :a 

outside CN 

--CANCER-LINK EXONERATION SEEN BY PM HEAD, NYT 4-10-63//see JFCIII ~ 

--SUMMER OFFENSIVE, PM thinks Gilette has given it clear shot at its ~ 

I blade mkt, Forbes 6-15-63= PM-ASR has brief lead to push its stainless %0 

new Personna & Pal injector stainless before Gilette debuts its brand . . . 

ASR sales ca. $35 million, Gem is only single-edged . . .$UT : big vroduction 



~ probs ., high re3ection ratg, can't meet supply demand nationally 

~ --1QM CHIEF QUESTIONS FSNDINGS OF US SMKG STUDY, NYT 4-15-64, esp . 

noting sc en-F3.sts stating that fil er e s NOT PROPERLY TAKEN IN 

ACCT & that's where 6Og of mkt now s see J le 

--THE G~'1. --6 s Joe Jr . born 6-25-82, tossed himself 

,'S2, big 70t b r day blast at Waldorf w/rm turned into a tob . tent, the 

Perroquet Suite, big crowd including those relatives from "Our Crowd" 

German Jewish set, Lehmans, Loebs, Bloomingdales, Rothschilds . . .a family 

of wealth & quiet influence, their controlling or important interest 

in PM, #2 General Cigar, interest in Bankers Trust, Underwriters Trust/ 

wealth for four generations but they're only modest multimillionaires 

t'~orth maybe $50 million all in all . . 

.family has preferred to remain working bizmen rat er t an ig-scale "dealsters" & have not thinned out 

into playboys . .,started by grandpa in 1852//key link now is CULLMAN 13ROS ., 

fa_m~il _~hol~din co . estab . 1890 as supplier of cigar wrappers to mfrs, 

stil~` 1 1o3ze~ n a one-story Federal-st}yle bld~ at 161 Front St a block 

from wharves of lower an a an now it s stric y an investment tuGt 

w/bulk of it in tob . securities, real estate & blue oniips . . .pres . & 

patriarch of family now is HOWARD CULLMAN (since Joe 

note this as torch passes to Jos III , now 74, frien ,sof pols li'ke Ike 

& Rocky, ex-chairman of Port of NY Authority, he & wife were heart of 

robabl most successful 'ro_up of Bwaty angels ever ("Life w Father," 

_ I'Arsenic & 15 d Lace, ^'N(r . R.~er~" 'Fiddler on the Roof" ), have netted 

$2 million from showbiz . . . III UIET S F-EFFACING no : his 

/ bro . Edgar, 47, is pres . of Gen Cigar w sales of m ion in '64 (vs . 

$638 million for PM in '64) . . .~ii7GH_ CULLMAN, 4 L a PM dir . & active~ 

its forei o erations seen as cessor ~os lYl']`f~SbE JR` a very 

s ron ,p,erson~7._~S "we all fought w him at one me or ,•" he had 

great drive & instill- d 3ove o3'nizf in sons -( our of them , as children 

"we ate & slept the tob . business, morning, noon & night," tR31/was tou~h 

& hard-minded w/his sons eve he was e - o3.ng & extrava ant w othe ss 

HE WENT OUT OF H1S' WAY NOT-TO SP L THEM, TO TOU . e& Howard 

were Yale men, so would his sons be . . . Kullmans from Germany had name 

& sp . changed on emigrating from German Rev, of '48 after being prosperous 

wine merchants in Bingen-en-am-Rhein . . .Ferdinand came to US, eked out 

living selling wine & cigars/his two sons were Jos Sr & Jacob, who formed 

Cullman Bros . near end of cent ., importers of Havana, Indonesian leaf 

(old Dutch East Indies) + raising domestic leaf . . .essentiilv th v wPrP 

MIDDLEMENbu JOE . . JR WAS THE AMBSTIOUS D IVING VOL 

ON . an ex„e .'t I ea 

. uver who knew the auction circuit he decided family 

would do better growing its own leaf than just dealing in otherss "The 

middleman was always too vulnerable" as whole character of tob . biz was 

changing . . .started w/20 acres of tob, land in Conn Valley in •10, the 

family eventually became one of largest growers in the valley, eventually 

sold holding to Gen Cigar for $3 million + family buying into tob . stocks 

& setting up Tob . & Allied Stocks, Inc . in '28s great fortunes are made 

by buying & keeping -- not selling . . .Cullmans weathe D - 

~ somel~*, HAVING BOUGHT NOTHING ON MARGI ouotin Ferdinand (Howard is 

speaking s"' en times are~goo the to'~ bus. s fine . When times ar 

bad, it is be er" . ;-'P~ZuSlmans marry we , e ai s t w en Edgar 

Cullman bid successfully for Gen Cigar in •61, he could call upon resources 

of his wife's father, 92yrold Saml J . Bloomin~da~.~., founder of 

~. the dept store . . .JOE JRs salv ' ar o ~in '2- in 11 s 

not onl weat ut drove u gross from mi lion 

hen s~d it & went and g 1zafter 

ou or B&H s 

13 yrs after for 224 million of'"F stoc .,a-C 't3me PM s earnings had 

ro~ior four sTr3.gFt yrs . . .In 11 yrs of assn w/PM, sales have risen 

every yr (RK not quitej see first yr)s sales up 125%, earnings up 70% 

per share . . .Edgar's love of the leafs "I just like to look at it, smell 

it & feel it in my an s" en Cigars Robt Burns & White Owl leading 

brandsg its sales have almost quadrupled in 4 yrs since Cullman family 

interests moved in) + SIDEBAR ON "THOSE CULLMAN WOMEN"s erittv, active 

in community//Jos III's mother was CardozoTS co~ug n . . .Marguerite ("Peggy") 

~ ullman is family expert on Bway, experscr ip-reader . . .Joe's wife Susan 

is a Lehman, niece of the Senator, an amateur cryptologist act vin 

hilanthro v k 

--WHY Q_1 G MAKERS DIVERBIFY, Printers Ink 12-13-65s PM bu Mil ri ~ 

'•,~7, Polymer--n uc3es '58, ASR •60, Burma-Vita & Clark Gum '~ . .RJR p N 

goes into food in '63 w/Pacific Hawaiian Products & in '65 expands to v 

Penick & Ford (Vermont Maid syrup , My-T-Fine desserts, etc .) . . .Lorillard 4~ 

goes heavily into cat food in '64, then candy in •65 . . .L&M goes into 0N 

A1po dogfood in •64 .1 cT 

` j --CIG STUDY DRAWS REBUTT2/ Data Again Challen ~cr y ~P~.' wh~ch ac- O~ 

'~II knowledEes hazards of smk~ serious cues$ion, 'NYT 4-14~6//see JFCIII O 



--CIG EXPORTS RISE SHARPLY, NYT 12-65, PM leading the way//see 

GeoW file 

--LIKE GIVING UP SMKG, troubles w/PM diversi ' ' v tur~es, 

Forbes 7-15-66s 16°~ of PM ne sales from nontob . in '65 . . .PM doing fine 

as '65 sales gained 9% vs . 3 .59b for the industry & earnings were up 

nearly 18%, best in industry . . .PM even gained in '64 when cancer scare 

caused overall drop in sales//FO11$F.TnN doing very well, mkts its cigs 

in 40 countries & makes them in five others, these sales contribute 

18% of PM revs, 25% of pro£its . . .BUTs grobs w/_diversificatloxi/ASR 

captured 224 of stainless mkt, then Iell to 1 as Gilette invaded . . . 

triea to yo e'ersonna '67a3es & Burma's shaving prods . as a package but 

w/o loss leader there was no incentive . . .Clark•s gum share up from 

1 .5p to 5% of mkt . . .o_ther mistakess vuttine~ its ASR_~ades in someone 

else's -- raz_or nstead ., merely repac~g~urma-Shave of innovating 

line 

- PERSONALITYe A PUBLICITY MAN MAKES GOOD, 11-20-66 NYT profile 

on GeoW, see his file 

--CULLMAN LETTER CHALLENGES NYS DEPT OF HEALTH for using improper 

science, data etc ., letter to NYT 3-4-67//see JFCIII file 

--1967 PROFITABILITY RANKINGS, Forbes 1-1-68= RJR 37th, up from 

68 in '66 . . .20 .7 for •66 vs . 19 .3 5Yr avg RETURN ON EQUITY RANKING . . . 

PM ranks 6 u from #11 yr before w/17 .9°~ vs . 5yr avg of 14 .5 . . .but 

ranks in both 5Yr avg sales growth (9 .5%) & earnings growth (13 .6i6), 

well ahea of RJR rates . . .Lorillard is #88, up from #112 w/5 yr 

earnings avg increase of 14 .6% . . .Amer Tobacco #141, up from #210, but 

sales & earnings growth of just a little over 4% each on avg for past 

5 yrs . . .L&M #314, up from #345, but its earnings avg is off by a bit 

~~ `} over 2% for past 5yr perf 

--BAD NEWS CAN MEAN GOOD GROWTH, PM has ros e ed not in s' 

but because of cancer-ci s e, Forbes 11-- z Smokers are creatures 

of habit unless provo e-- which the health scare did, sending them 

first to long cigs, then filtered & menthols & the lower T/N brand of 

the week . . ."`'HE FILTER REVOLUTION CAI7SFD MORE SWITCHING," says Ross 

R. Millhiser, pres PM USA, "THAN ALL OF ;THM CIGtASFRS W/ALL OF THEI B 

MONFV COULD HA . TNDUCED . . .all o£ whic has been good for PRf, which was 

6th in the industry 10 yrs ago, now it's 4th & growing twice as fast 

as any of its competitors . . .diversification helped w/17% of sales . . . 

90% OF VOLUME AT PM IN BRANDS THAT DIDN'T EXIST 10 YRS AGO//seemed that 

rivals could have overwhelmed PM making only about $20 million 5 yrs 

~ ago, & that's what RJR & ATob have tried to do . INTRODUCING SEV BRANDS 

t A YR IN PAST FEW YR vs . one brand a yr for & trying to have one big 

bran in each main field . . .LAUNCHING MARLBORO= Winston doing well by 

then but PM felt that for all their feelings of fear, many males smokers 

couldn't see themselves using filter brands . . .its old Marlboro had a 

sissy image that had to be changed w/hvy TV adv, virile cowboys, etc . . 

. "MARLBORO NEVER CAUGHT UP WITH WINSTON," but by •66 had overtaken Kent 

for #2/repackaged Parliament in '58 . . .in •66 REPACKAGES B&H AS 100mm . 

' brand promoted by unusuall sophisticated TV campaign by Wells Rich & 

1111 Greenes funny, se_ e_e .g. mR50 #~#*~soon grabs 2% OF MKT worth $200 million 

in sales// 61 m-arke s art of major effort abroad//DIVE FTIO s 

' the gackaging cos vrofitable but too sm to make muc p'f in oye,•ai_ 

'+ resul~s~LSF~ g~~a en a y y ile te in s ai ess mkt, down now 

to 14% share . .,so : NEW BRANDS ARE KEY TO ITS SUCCESS, and a new one ~ 

in •68 is VA SLIMS, shape is extra thin ~ 

--THE JILTED AMERICAN, PM flops in try for Canadian Rothmans, Forbes v 

7-1-69+ lede says So African millionaire Dr Anton Rupert is step closer ~ 

to launching assault on US tob, beer & packaged goods mkts thanks to 

JFCIIL . .in Ma •69 he d tender o£fer £or Canadian B weries, owner~~ 

of Carling & itreest Canadian b ewer, 11 owned bv Ruvert•s Rembrandt ~ 

Controlling Inves ia~n=tL d . . . .3 ays a ter M ten er offer, RupertTs 

main Canadian co . began buying up CB on open mkt till it had 50% & 

drove Cullman away, leaving him to buy the smaller MILLER BREWING/details 

of how Rothmans of Pall Mall Canada Ltd got Provoked while Rupert was in 

Zuricj holding annual mtg of his top execs//Rupert-Rothmans has ~756r,-F 

Canadian cig mkt now, 501of Australia•s . . .Ruper~ so owns two small 

U-`S ob £lrms ~~ culd be nucleus of new efforts in US, Larus & Riggio 

--INDUSTRY PTOPOSES END TO TV ADS, NYT 7-27-69, Cullman is spokesman 

for the industry//see JFCIII file 

--THE PROMOTER, Sports of the Times NYT 8-23-69, how Cullman has 

been big help in USLTA & used tennis to push product//see JFCIII £ile 

--CULLMAN LETTER TO NYT EDIT PAGE ED . OAKES, complaining NYT requirement 

of warning box is "punitive in spirit"/flall pg ad 9-6-69//see JFCIII 

--THE GREAT RAZOR BLADE WAR, Forbes 10-15-6Q : EWersharp emerged as #2 

challenger to Gillette w/ASR & Wilkinson as "poor also-rans" 


I 

INSERT PM history/12 

--THE MKTG MERLINS OF PHILIP MORRIS, Dun!s Review 4/68s They have 

parlayec-their sel3~ng magic into-tFie ei industr 's fast t 

JosIII part of the Loeb-Lehman-Rothsch ld ar stocracy by inj;ermarriage, 

he has a "hue" huou e in J . .he's soft-s oken alw s his 

fin~er on e-oulse ofthe mktplac , stopp ng by o c at w vending machine 

operators or mgrs of cut-rate dig stores or small jobbers//PM's growth 

rate of 5% a yr in sales in twice the industry avg as it hits 12 4a/ of 

mkt xn~'67 . .adopting the Wee Willie Keeler Approach, as GW puts its 

" eV~ can't hit the big boys head on . We just don't have the financial 

resources, so we have to hit them where they ain't" . . .PM NOW #LY IN THE 

INDUSTRY . . .its innovativeness seen most prominently in the flip-top box 

& Mar3Uoro Man/Country approach/Parliament became its #2 brand for a 

time, was #15 nationally now . . .B&H introduced in '66 & almost at once 

became a hot item w/amusing adv approach//LAUNCHES OF NEW BRANDS, cost 

about $8 million now, means a new brand has ABOUT 3 MOS TO MAKE IT or 

perish##+++**~PM ALSO WAS CASH-SHORT UNTIL RECENTLY, as recently as '66 

its tob . inventories came to 60% of its total assets . . .given these limitat 

ons, PM HAS BEEN G D, BY "A DEE~. CO, . NATION~,O~F.CAUT~O &~. . ~,,~ ~,~~n,,,x 

vs . AT &aiuce°"~t~'b~~ea num~i"e`~r o~'~rar~4s' 

vumpe3"`To'~s of Uromo money inc- en-E2~i waited to see w ic ones made it -- 

but as Jim Bowli , group vp-PMUSA, sez "We can't afford to nromote like 

thev do . Inswe nrobablv have more mao 3ne on than an .y otFer 

Go __.«#~#~ 

ey cos maybe 0, - , er//80% OF ADV BUDGET INTO - 

NETWORK TV + onlv .2Q0_3a7:.asmsn. ..ixr~£iel.d/// M INTLs bloomin like no 0 

else's an the dus$ry, account Xor about 1 o P s wor vo ume . . . 

before '60, PM, like others, too short of management & money to try to 

tap into foreign mkts . . .GW takes over this_fundtion i .+ •6n & things 

haunen, quadrupled over next 6 yrs & up 15$ in '7 . . ."1pTE WENT INTO THE 

INTL FIELD BECAUSE THE OTHER U .S . CO .S WEREN'T THERE . Now we have at 

least a_5-vr lead on them"#~+'* . .Jos III concentrates on planning & 

long-range probs almost exclusively while GW runs day-to-day//PLANNING 

FOR DIVERSIFICATIONs Jos III has set 1975 as target date for PM nontobacco 

volume to hit 25% of sales & 40% OF EARNINGS*+f#####(RKs haS) . . . 

the complexities of other goods vs . cigs : GW concedes_that cigs ear~, .s 

"a FAIRLY SIMP " in which customer uyTa a pred~.ctabl amt of 

t e pro uct every day . BUT THE INDUSTRIAL MKT HAS A nSF'R . PACE TO ITs 

slower lon~er lea_d times & ver Tiî ica ital c~ostg per unit of output . 

1-E-RR5d7S A~fS~TO THR T PR B1A-;M~i . Now. finally, our 

industrial products are A SUCCESSFUL ATTEMPT AT DIVERSIFICATION"**~#~#* 

must use . . .article is skevtical . noting only $3 million in '67 nrofits/ 

see THE ASR STORY~~'"'~'erratic at best, bought in-T60, it "carved out a 

huge~f the consumer razor mkt when it introduced stainless steel 

blades (Personna had single & dbl-edge + Gem, big w/rural customers), 

got up to 22% mkt share -- BUT GILLETTE COUNTERATTACKED & drove ASR dow~ . 

to 12°. &. ~alline fast . . .BURI7~TA LINE OF MEN'S TOILETR s mos~is- 

appoint}ing to PM management, sales have barely stirred since '63 aequi- 

sition//CLARK GUMs a small wonder since '64 purchase, sales up sixfold 

& mkt share up from 1% "- o, . . . VERALL, DIVERSIFICATIONs "less than eno- 

mously impressive" & 5EZ GWs "We'd S SOMETHING SPEC TACULA R . 

But our diversi£ication has been disappointing . We would have pre£erred 

more diversi3ication at this stage"#*#,**//THE S&H ISSUEs GW concedes that 

2t is JOR PROBLEM FCR MANAGEMENTs 

11 

A G OF OUR CON- 

SUMED BY HAR MEN~ -- TIME THAT WE C ~"rmC m0 riD ~ Oim 

B INESS"~~#~~3f~~#####*#~~#-z~#MUST USE but the co . £eels the "cancer 

scare will not worsen & "No clearcut case vs . cig smkg has been made 

despite million spent on research" . . ." LONGER THESE TESTS GO " 

sez, "THE BETTER OUR CASE BECOMES"~-###~#*-,c R s the ima e bravado) 


I 


--MORE THAN SMOKE, Forbes 11-15-69 : In last 15 yrs JFCIII has acquired 

some 20 cos ., PM per-share profits have more than doubled in last 

5 yrs on sales gain of just over 50% (RK : making up for Forbes needle of 

nearly decade earlier re PM boast not backed by facts) . . .notin PM now 

gaining foothold in real estate by purcP3ase of Mission Viejo w~11,000acre 

holding in SoCal bet LA & SanDiego 

--WORTH FIGHTING OVER, how Pepsi trying to get hold of Miller Brewing, 

one of fastest-growing, Forbes 12-1 9 : Grace had nearly sold its 

53% interest in Miller to Pepsi for 120 million, $84 million more than 

it had paid just 3yrs before . . .couple days later Grace cancels deal & sells 

to PM for $130 million, this is midyear . . .now Miller anticipating record 

sales of nearly $200 million or over . . .its r sales growth is 71% vs . 

18°b for beer industry, moving from #11 to .y a wounded bv 'S~ 

strike of 77 ays took 11 yrs to recover lost volume try'ing to make 

vir te or ne"-cesit=ys ffixleT r has longes s e~ life of maiora because 

}i


WOMEN SALESPEOPLE NOW -- "and not just gals who go in & arrange retail 

displays," men are more attentive to female salesperson//REAPPRAISING 

ADV EXPENDITURESs w/o TV, Landry observes, you wind un w sm 

co rner' oT f the-consumer's mind via print ads, etc . "YOU ARE NO LONGER 

AS V I O , AU , ETERGENTS, & OTHER PRODUCTS HE WILL SEE ON 

ITV" . .,PAINFUL PROOF OF THIS . intro of Marlboro Li ts in f ' some 

Ir20 mos after TV ban & despite hvy spen ing onl 2 . oY Ne g . test mkt 

were aware of the new product vs 8 e Va Slims 

v(as i.ntrndVced w/TV,splash~ ..in .,'. 8 .ADV,RATIQS : 80 per carton for strong 

, branda ; 12¢ for weaker'ones,"t4-28¢ for nevi'ones . . .MARLBORO SUCCESSs the 

whole thrust is "to re9nf'a+-ce the image,•" which is why it never slowed 

1'/I 

after the TV ban, mL3s the ads translated easily from TV to print vs . 

RJR WENT WRONG W/W_INSTONSs it kept changing its ad theme, 3X in last 

2fyrs, losing whatever image & vitality they had . . .MARLBORO PROMOS= a 

5-trailer Marlboro Chuct&wagon carayB.n serving authentic Western dishes 

(2,000 a day a state & regional fairs -- was this free?), Marlboro 

Country Store w/14 items of clothing from coffee cups to sheepskin coats// 

Va Slims Amer Women's Opinion Poll thru Louis Harris . . .JFCIII currently 

chairman of USOpen Tennis championships & ranked Ai -60 astern LTA// 

PACKAGINGs one of PM's biggest promo tools, 'S PHS . NO HAT 

PROBABLY NO CONSUMER PRODUCT IS BOUGHT MORE OFTEN THAN PACK OF CIGS or 

displayed more often, 20X a day for avg smoker, when you & other people 

will see it, "So this is one of the biggest pluses going for us . . .VERY 

CLOSE INVENTORY CONTROL, keeping tabs on daily shipments for each brand, 

also using 100-jobber sample to project nat'l sales trends to within one 

or two percentage pts of accuracy -- "And Mr . Cullman ads & watches 

those numbers . He keeps them right there in the top l re 

, older, 

eft-hand drawer of 

his desk," & if there's anything in there he doesn't like he gets right 

~~ on the horn/most analysts-giv . F' ITT h ;gh marks £or shrewd . ef'f'ective 

mana ement-acfministrat but some say his eye too much )n the trees 

& no enou on the forest//concern of TOO MUCH DEPENDENCY ON MAR'r .nORn 

w/its concentration among vounger . urban smokers vs . RJR, which is Southern- 

ase grew c7osest to rural mkts in S-outh & West cl o ser to 

. lower-income, blue-collar mkts . . .PM and L&M both cater to more 

affluent & white-collar//DIVERSIFICATIONS : none has set the world afire 

yet . . .realizati n ASR would never make an serious inroads vs . 

T?f' 

. . Gillette Schin then„tried t e surg~ .c - ospital supply business & 

uc 

'i v, .i s, ., . .,. + .+ ~ .+ ..+ 11!nr cn ... :i 1 : .... 4 ..- na.n - flc,,, ..+ + .. U .. .... 

V. llup w/J&J technology & others, so they dropped out fast~##~#~#CLARK GUMe 

~') .the mk roved too sms11," says GeoW, "& we discovered that our pro- 

fits in chocolates depen e more on the cocoa crop than our mktg expertise 

. AND WE SIMPLY DID NOT WANT TO BECO RAD S^//many 

claimed the buyout prlce on Miller Brewing of 200 million was too 

high (was equal to about 1 yr's operating revs), £3~rst~yr's mkt share 

slipped from 4 .5% to 4 though volume edged up but profits tumbled to 

near zero, tR4 ; higher m£g & packaging costs + hvy new adv outlays/need 

to re osition the roduct entirely as the old "Champagne of Bottled 

eers pi c~pe e e occasional drinker, but fact is that 20% 

of beer-quaffers co sumer O of the s uff . . . ULLMAN WAXES PHILOSOPHICAL 

ON DIVERSIFICATION : "I don't think anyone in biz can adequately £orecast 

what will happen when you buy a biz and try to expand its size, 

improve its mkt share, and increase its profitability . Some work out . 

Some don't. The challenge is to uickl reco ize th se that w' 

work out so vou can concen ra e r ere have the best 

hance 'to get ahead"*###~ he considers PM's forei es as a 

/filters now= O of industry & 97 of PM's 

sales new $80 mill on p ant rising in Richmond that will eventually 

produce 25% of all cigs consumed in US . . .TABLEs RJR mkt share is 31 .4 

vs . PM 20 .0, Marlboros 15 billion behind Winstons for '72 vs . 22 .6 yr 

before 

--THE TOP 100, Forbes 5-1 - 2 (out of sequence) : PM has more than 

i quadrupled earnings since -/z;!5 &-its 5vr avg return on eguit.v oY 21% 

1111 was hiahest in the industry 

--LEADER OF' THE PACK : MARLBORO NOW 19ORLD•S BESTSELLING CIG, Barron's 

10-29-73 by John C Maxwell Jr . . . Rothmans Group of Canada recently bought 

700,000 shares of L&M to gain some 10% interest + bonds-preferred/PM's ~ 

Australian & Swiss operations doing beautifully p~ 

j --THE TWO-TIER MKT SiILL LIVES, or Wh Does Wal1 St Give 

PM a 19__ V 

p/E & RJR a 7? . Fbrbes 3-1- 4 : Marlboro ~~~ rand r sing ca . 15% ~a 

a yr vs . mkt ris- -e- o'-ca:_1has almost overtaken Winstons . . .yet ~ 

Wall St seems to have forgotten all about PM's "failures in shaving C7\ 

products, candy, hospital supplies and (to date) beer as INSTITUTIONAL ~ 

~ 



INVESTORS HAVE GRABBED CLOSE TO 40% OF PM STOCK/Geo W sayss "WALL ST 

DOESN'T KNOW ITS ASS FROM ITS ELBOW" . . .Marlboro almost alone has lifted 

PM mkt share to 21 .3% as RJR holds fast at 31 .2% . . .worldwides cu-Gells 

RJR. 247 billion to 210#~#*~down in Winston-Salem "the quiet, conservative 

men w o run RJR" have studied the Marlboro phenomenon every which 

way CEO Colin Stokes sa s"S can't rea11 put m fin e on anythin 

concrete that would explaxn t e of growth Marlboro d . 

T• S 

DSd 

C_"Hj!CPPENED WE HAD O A FEW YRS BACK WITH 

WINSTON ; now it's their turn . . . . ." tL26//WEISSMAN_.ON MARLBORO IMAGEs says 

i t's ke~ _ w u der-40s who are its big custnme,-s but he can~t ezTain the 

logic o1 © pe ran mager does work as in Mustang vs . Edsel/ 

but w_hy- Naa ma 

S 

Winston/says James ~owling "Helll we dnn't know^###*###and JFCIII says 

" t wasn't the adver13sang -- at least not to the extent that Mad Ave 

would have you believe"//PM execs don't claim to be mktg geniuses & 

4 readily concede-th&Y!ve missed some trends- e .g . . MENTHOL~S . growing 

twice as fast as rest of fi er mTc nc ow acc ing$' for 25% of US mkt . . . 

Kools & Salem dominate, PM has a weak Alpine + low-volume mentholated 

versions of Marlboro, VS & BH . . .PM also la s behind "n the emer ing/ 

1ow-tar mkt, where RJR's Vantage is outse ing arlboio Lights /2 

RJR HAS HAD ITS OWN TROUBLESs a lot with its biggest non-tob . acquisition, 

Sea-Land Services, gobbling capital to rebuild its fleet, add terminals, 

containers . . .yet Wall St has been inclined to ignore PM's similar troubles 

& "the beer_biz is a tough ao "/PM to spend $175 m3 .llion on Mii=1 -~~-~n 

ext few ew t in NE & to modernize ex s ing~ plant. . .PM's 

whole d v~ss_ificat on record "in fact is a POOR ONE, esp . for a'premier 

l consumer pro ucts marke ter "s AS as ma e' li little - headway/PM's 

20% non-tob . sales return perhaps 1 on the sales dollar vs . RJR's 5/0/ 

RJR operating profit on tob . is 19% of sales vs PM's 16, RJR has slightly 

, higher return on invested capital, 13 .5% to 12 .9 . . .t'M Eoin~ into heavic:r 

I cagital snendine• inci>>d ;ng $5>no mili ;en f' ,^ entic new~,e~ nlant in 

~9.chmond- computer-controlled//the p/E differential seems ABSURD TO 

FORBES 

1 --GUSSIE BUSCH'S BITTER BREW, Forbes 6-1-74, Schlitz is far more 

t profitable despite Busch's big sales lead . . .Gussie Busch forged way 

ahead in '50s w/excellent management team & big spending for modern, 

efficient breweries, automated . . .but then grew too cautious, trying to 

keep debt-to-equity ratio low & failing to expand as fast as it could 

have//it surprisingly sts Schl' s to produce 

than A-B because it has biEger breweries, w ic require no more personnel 

than smaller ones, 2 men in mod . plant vs . 24 per shift + 

Schlitz's brewing methods less labor intensive, uses corn syrup now 

instead of corn grits that are more costly vs . A-B uses rice + natural 

hops w/some imported vs . Schlitz using cheaper hop extract & is switching 

to still cheaper hop pellets, etc .=A-B paying more for its raw 

materials than Schlitz//smaller breweries doomed, e .g . Ballantine, 

Ruppert . . .an efficient new brewery costs $70-130 million/Miller is 

building one now 

--NEW PHILIP MORRIS BRAND BOWS : MERIT STORY, NYT t2-17-75//JFCIII file 

must get & use [St.C . &A&o JMSSRT' êiai' PV93 

--JOS . F- c rr .7.ma_N III, top exec, featured in Financial World 3 1 ~ 76• 

associates credit him w/host of key decisions, startinz w/vlacine a1Tthe 

chi s on FILTERS oin int'l big & to market i41arlboro to US eualitv 

s an ar a desp te ocal taste pre£erences . . .His mana ement stvles 

informal, trying to run things like a small biz ~ .mself a man of few 

wordsx "That's part o our abilitv to move ranidly -- short lines of 

communication" . . .he ries for a consensus : "It s a thoughtful, gentle 

art THAT LEAVES EVERYBODY FAC " says an associate//he's an avid, 

expert tennis player but his recrea ' the outd , he 

loves to fish & hunt, his o fice hung w antlope e heads & elephant tusks 

in his corp . suite e . . e's taken 7 safaris to Africa . . .GREAT TR_ONYe iaDyr 

~ • animal oo servat , ci ing nee to "stem the tiae of excessive ~ 

killing" of endangered species"//PMs Miller's sales have more than p~ 

-~ripled bet 1&'75 via its own management team aggress3 .ve mktg, y 

moaereTT'p~ ,'improved-~ ri~~ion as "A tavern-oriented beer .p, 

was etar eted at the su ermkts" . . . litterin debut for low-ta -~ 

taste Merit m t s are up from 10 . 0 2 in deca e w i e pre-tax pr 

earnings advanced at COMPOUNDED 21% a yr//at PM hq Whitney Museum pro- c7 ., 

vides rotating exhibit in recognition of annual arts grant 6.M 

--MAKE WAY FOR MIh,E_R, Forbes 5-15-76 : w the nation's fastes - 

~ y g~row~in beer co . as well as cigs, jumping Miller from 7 to ehind 

(, A=B-, Sc i z& Pabst, passing highly tout~HC'oor`s : : . . 

.Miller 

. 

was sickly co . 

.. ..,.~_ . 

run by aging management group when PM took it over, sen ~in ts^'~'a4719"t :rew . _.~ 


PM history/15 INSERT 

--PM ANNOUNCES 'MAJOR SCIENTIFIC BREAKTHROUGH, LEADING TO HIGH FLAVOR, 

LOW TAR CIG,' 12-Yr research effort isolates high flavor constituents 

in tob . smoke . . .9 mg. Merit introduced by PM following "most exhaustive 

taste tests ever conducted by co," . .,Qress conf . 1__2-16-Zi= JFCIII introduces 

w/plug for "full & satisfying flavor" adding " erit is lower in tar 

than 98° of all cigs sold in US" ., . D center in Richmond did it d s 

W~akeh ~ : , .-t~gb s~„~ . 

y3""employing mod . filtration technology & rea.~oduca.ng thoseh £lavor 

components s back into the blend, PM has achieved a full flavor in a 9 mg . 

cig." I 

(RK= ask EW re this) . . .Wakeham says a key to PM's going beyond prior 

knowledge was "by innovativel~employing_the tecnoogy hl available thru 

1 the mg_2e of two i,};s rumnts. w ~ 

nti£ 

nsxm'•:. 

lat~_,n,_~g~m~o~s o'~ he i 

s e exis~ . ~~ in 

"'- moka~ e _ ---ie EI' 

as chromato ravh & mass s ectrometer *~ u~ 

mean anything . * e a s tha,~ , gisolaing 

the v~ .~,j,o : in 

"WE LEARNED THATTHERE AR~ ~ M R ' . ~'~'A'S'2C"i+tiA'Vli`12"'t7N7 

~ 

.'T ~~ 

TASTE WAY OUT OF PRO~RmtoN TO TAR," etd . ., e frui s of PM's mi lion 

Research Tower on grounds of its giant operations center, Industrial Research 

search mag dubs it Lab of the Yr for '74//WAKEHAM'S TEXTs as longas.~5 

yrs earli.e ('60) "we beEan to reco ise a. t,-end to lower tare+-v cig,. 

GUESSED THAT UNDRR_PR RE FROM HEALTH RITICS THE DOWNWARD 

TREND WOULD CONTINUE ; so we addressed ourselves to the,p€obe of making 

a low tar ci that was acce table to a broad spectrum of the smoking 

public . . .panel tes ing en s owed that even a 15 mg cig "would meet a 

lot of sales resistance becaise of its poor taste" & thus "IT WAS CLEAR 

THAT IF WE WERE EVER GOING TO PRODUCE A LOW TAR CIG W/THE FULL BODIED 

~ TRADITIONSL TOB . FZAVOR . . ,lye wo_ __haue tR.. Slo [cro s~-y~basic rese h~ 

brands w/10 mg or less were selling poorly . . .big team effort require~ 

see t3 how they broke down the task, evaluating various blend components 

romf- arou~t e world, rhemis~s separatin4 smoke elements by smel 

t~aste.flavor experts fòcu . . .aoouz ~ yrs ago we oegan to see some''Alime5n 

r o2' light," they observe that much of mainstream smoke "is not the product 

of combustion processes (but) . . .rather the result of a distillation 

process in which the high temp of the burning coal cooks out of the tob . 

~ behind it many of the substances in the tob leaf . . . We began heating 

t4_.~e~pbe1Qwo the,.k~ki?c~ .~J.rig 

~ were . . . in extremel the ~esiraUle hi h aroma &`31 avor com on nts," etc ., 

' so oun a~'~~iese same'"`~Yav'or" components- "'coul~"be` ~oun~ in a volatile 

fraction of the so-called tar" (RK : they'd isolated it)/next breakthrough : 

ble to uantitativel evalua e the flavor intensit of the com on s 

in he flavor fraction of the smo e (the fractionation eing carried out 

by a high resolution gas c roma ograph) . next ste e determined thQ 

chemical structures of these flavor substan6~~°°'jT~3ng mxz xor low tars 

was r~ying orow-u~s~~by taste failure, "We were also challenged 

in this direction by a number of critics of the industry" who said 

co .s had failed to respond to "the needs of the smoker as they saw them"/ 

to make Merit, PM sought tobaccos high in flavor, low in tar + "the total 

engineering of the cig to yield low tar required efficient filtration, 

k 

the uee,,,,t2~,oorol7:w„Ix~?,ge aerating filtration systems" . . . "IN THIS ENTIRE 

~ Pk"SC~L`'E:I3L~RE NOTHING NEW OR FOREIGN HAS BEEN ADDED -- JUST MORE OF THE -PRE- 

FERRED ELEMENTS T T AL EXISTED N TOB . SMO "& calls dev . of Merit 

~ "a grea s ep forward in tob . research" RE RCH CENTER : 250,000 sq ft, 

has miniature production lines . . .430 scientrs s ec i i s 

& admin personnel, O P R&D ept estab . 'S2, one o£ key contribution 

was a 2opart smkg mac'Ine which established basic uniformity for worldwide 

industry testing of cigs (in 'S9)///TASTE TEamTNG by firm of Canter, 

Achenbaum, Heekin, Ine „ remarks by Alvin Achenbaum, says PM undertook 

"what may well be of x carefully condticted consIImeT"'Yn=uRSe 

p"ro3LY~'~"esting programs on a single program in commercial 

history," . . .says he ws of "no co hat has ever retained i ed, 

~ im 32 artialth' a researeh project for the sole purpose 

of making sure" everything's on the up & up/interesting details b2 : how 

cigs~,w~e~„re~acked~,,,~~es A,~.d~g~~ ..,,,,abuut--3 QOf~ &makers tPG+P~ & Merit reg . 

~"VJàs perceivea"~i~` reg, ~'il~er smokers to have more taste than the five 

leading reg low tar filter brands tested, which deliver as much as 60% ~p 

more tar/54ib of testees felt reg . Merit had more taste, 13% perceived p~ 

no diff ., 33% thought other brands tested had more taste . . .with Merit ~7 

Menthol, ~O% thought Merit had more taste than others vs . which it was ._p 

tested while 39% thought other brands had-more taste///Wash Post 5-6-76 p~ 

PM THRUSTS NEW CIG BRAND INTO FRAY : hvy promotion of low tars to make rn 

money but also "to get off the defensive" . . .noting the ~i200 mi~~inn PM O~ 

~ p~lant in Richmond desi~ned by Gordor B+~nshaf+, every worker gets a free O~ 

? car~on biwee y, t ey can shop in co . store . . .HUOTING GORIi "I'm going 

to take the bull by the horns & say yes, a person who smokes a cig of 5 mg 


15 INSERT (cont .) 

of chemical components & using "an olfactometer, which rates odor by intensity," 

flavor experts selected the most intense of those components 

& from this group they also selected out those low in weight which thus 

produced less tar when burned . . ."THEN THE FLAVOR EXPERTS TRIED TO FIND 

LABORATORY-PRODUCED SUBSTANCES WHOSE CHEMICAL STRUCTURE WAS IDENTICAL TO 

OR CLOSELY RESEMBLED THE STRUCTURE OF THE HIGH-FLAVOR, LOW-TAR COMPONENTS 

OF SMOKE . TZU;'5, qI-AII~,„,QA~TIY„~S CAi~,LED .F~}(, . 

TO THE A a -c °" vnv-- . s :. ~ . .c : 

.,,~57~; .' FRK: ndte how tis differs from state- 

.,r~n~,~~ 

men~by ~Q~ 

or less & LIMITS HIS INTAKE TO 100 MGS . DAILY PROBABLY WOULDN'T BE EX- 

POSED TO ANY APPRECIABLE HEALTH HAZARDS"**~*'*"*j''#-a~#~###~###--must use/ 

PM has launched Merit w/$40 million campaign in adv & promo including 

st corner giveaways/all the top five brands in low tar field (Now, Merit, 

Carlton, True & Vantage) claim theirs is best but PM "is making a more 

persistent, and unusual, p¢tch" claiming itself to be unique among the 

45 low-tar brands on mkt, "a triumph of science, not just copywriting" 

because of its flavor . . .a prob . for smokers &"Etren Dr Gori said low-tar 

cigs produced at the NCI's lab were 'nothing but hot air "' . .N~g~st of t~ 

tas THE ODO OF BURNING . B./details on the v~Ie~ess 

rom Helmut R .R . ake am, w o sa SC e"nt#ats broke smoke into hundreds 

Wakeham at PNT`piress conf in '75 , thus "When the souped-up tob . 

was burned, more flavor was able to get thru the filter, Wakeham claimed, 

because the added chemicals didn't carry a hvy burden of tar . Thus was 

born 'EYiriched avorr" .to w iT cri saysa °It is a mixture of science 

~'~ & hyQerbole, There are techniques of flavor frti3'ication t a~ot 

bee riused 

by tob . co .s . But they are not so esoteric that these co .s 

can't use them" & "IT IS POSSIBLE THE PM PEOPLE HAVE HIT THE JACKPOT BY 

PUTTING THE RIGHT COMBINATION OF FLAVORS TOGETHER . . ."//RJR makes the topselling 

low-tar cig in Vantage, says its scientists have used the equipment 

ment & techniques PM is now claiming unique for yrs 

KEY TOBACCO FLAVOR & AROMA MATERIAIS FOU~, Chem . & Engineering News, 

10- --~d . . . 

--Announcement by researchers at IFF (Intl Flavors & Fragrances) that 

key constituents responsible for aroma & flavor were not identified clearly 

in the past* i .e ., what makes tob . smell & smoke like tob . & not like a 

gardenia or cabbage leaf . . .IFF has now in ointed the nts & its 

scientists have developed "t e first commercially .feasible routes to manufacture 

of these components," & IFF now offerina a"new generation° of ob . 

flavorants usin these chemicals . . .i-3+`Fseientists analyse~~a, '~ley, 

s& b ac leaf to see what components they had in common & how they 

differed . . .t " OL TILE CflNSTI LLY 

SAME IN ALL VART~E , but differ substant ally in relative amts in each tob 

type, e .g ., urley has most nic . (5•3%) while Turkish has least (0 .6%) . . . 

BUT : all 4 varieties have SIMILAR CONCENTRATIONS OF "SEV . KEY TOBACCO- 

CHARACTE t '1;SRU C~OI PITUEI~'iS . . . t ehTieart of the tobaccoi responsible 

for ts "una.que organo ept c properties" . .(asides Turkish high in the 

powerful valeric acid, giving it somewhat sot}g,-t~ste & aroma) . . . CITING THE 

KEY CHEMICALS in commons the megastigmatrienones, sa)El'dne, norsolanadione, 

etc ., exotic names (methylthio-beta-damascone . . .IFF has vatented SYNTHETIC 

METH(fTS F(1RPRRPARTN(. Gf1MF. OF 4WFSR & now offering ''custom-blended 

fla~voran_ts, CONTAINING A MIXTURE OF THE KEY CHEMIC i wi not sell 

just tTie individual chemicals)," the developers call-them a new generation 

"FAR SUPERIOR TO THE SUBSTANCES WINO PARTICULAR_RELATION AT HAVE 

BE] D-TO TOB . IN THEP'AST: honey, woody odor et al . . . . main purposes 

0 ENHANCE TOB . CHARACTERISTICS of so-called low-d iv rv (T/N) cig-s, since 

re~3n'eval oI S e uces e qua ty & quantity of the tob . . . .a.Lso -to heln 

add flavor to RTS, shredded from stems & other non-leaf parts of the plant 



of cigmen to revamp, mkt share up From 4~ .1 to 8 .6%, can't keep up w/ 

demand . . .BUTa such growth is expens ve to generate & cap . needed to sustain 

it, so fart25O million in mostl borrowed funds to more than 

double Miller capacity & build its own can-ma ing plants//finally sales 

reaping profit gain, up from $6 million in '74 to $29 million in '75// 

THE COMMON LINK BET . CIGS & BEERs both low-priced pleasurable products 

ma e£rom agricultural commo a.ties processed & packaged on high-speed 

machinery, advertised the same way & sold to many of the same customers 

thru similar distribution channels . . .ADV . IMAGEs before PM, main Miller 

emblem was jazz trumpeter Al Hirt, "absolutely the wrong image," says 

QeQy . who switched acct to McCann-Erickson which came up w/Zi~.,,,ra wq,r lt~ 

'~_ a, .rd . ~p,~.,yt~}},~_r „a_, beer as ~ye reward -- NOT ORIGINAL BUT "MILLER fl'YY~^ 

IS ON TARGET, hammered`hiome w/same consistency & intensity~ the 

Marlboro Man was used . . .then the 7 oz bottle thought to be a packaging 

innovation//TRYING SAME STRATEGY IN BEER AS IN CIGS= PM brings out sister 

brands Miller Malt Miller Ale & popular-priced Milwaukee Extra, but 

none of e three ma e na ionwide despite some regional success/but 

IS RM= LITE LID WINNER/bought name from failing 

Mea;sterbrau, s ent o s reformulatin & mkt-testing, INTRODUCED IN 

JAN ,~contains 2 ca,,1 oxa.e.s,.of xeg„~b,Q;~.r 

.um sales//due .,~& price slightly above prem3 to 

PM!s huge cash flow, Miller is more formidable contender than some other 

#4 might be, big expansion plans ahead . . .more stress could be placed 

on Miller as Marlboro's growth in sales slowed to 6,°U in •75, a worry 

in view o£ its . share o£ PM's cig vo ume, so antage the low-tar 

leader after 6 yrs but Merit answering the challenge after its into 

previous Dec -- BUT : too early to say what long-term effects of low-tars 

might be= could reverse trend down for per-capita consumption &^THEY 

IGHT EVE SMOKERS TO GIVE UP CI " 

--PM WILL STAY IN NY, NYT 8-2 -7 see JFCIII file 

--PHILIP MORRISs THE HOT HAND IN CIGS . BW 12-6-76s Key stuff about 

how John Landry unveil~~.s Merit plan 1 mos ago to the PM products 

comm ., more than usual tension intent5.on to distribute nationally w/o 

us g + O million in adv-promo i.n PirsT -yr . . MARLBORO 

HAD NOW JUMPED INTO #1 SPOT NATIONALLY -- still, they could see that 

overall mkt was headed to lower T/N brands (vs . Marlboro as "full-flavored 

standard) needed strong contender in this field/Cullman waves it 

,ahead. one of best decisions in ~Jast 15 yrst hottest brand debut since 

Winston 20 yrs earlier----ori te, Sales o£ .ISion place it among 

top 20 & will be in making money in '77//yr by yr PM is be inni to 

I dominate alon w RJR : the two taking larger & larger s are of a static 

mkt low-tar is wave of the future . . .for 15 yrs~ industry "has fought 

antismkg forces at almost every turn .'. .BU IT QUIETLY HAS MnvED TO COM- 

PLY W/SOME OF THEIR SUGGESTIONS," push to low tars urged by experts in 

healt field like GIO GORI, NCI VIROLOGIST, see his quote & MUST USE : 

"Since public persists . . .THE ONLY COURSE OF ACTION THAT REMAINS IS TO 

DEVELOP LESS HAZARDOUS CIGS"#~*#~*~~~~perfect as pro-industry 

philosophy/he notes big drop in T/Ns over past 20 yrs . . .ADV OF LOW T/Nss 

rests heavily on text, Vantage says "Think" while Merit stresses the 

tastep neither do awin in li£est le ads . . .whereas £or the "full-flavor" 

brands, cos s ick to glamous ero-worship as PM discovers that nearly 

35% of its customers are in the 18-24 age bracket//PM responding to 

critics most of them at RJR, who sa "• e-bran co . up to 

2 .2 o m vs a . ., 3 at 16 .5 worldwide PM #2 to BAT . . . 

KEYS TO PM SUCCESSs it's NOT AN INNOVATOR h ioneered in no brand, 

i wais a nt for com etition to esta a a e orv k& then movea 

to capitalize on mistthees of others . . .now has 5 brands in top 20 by 

is strategy/S TEST MKTG prefers taste-te 

& can thus better shield results & p ans from compet3. ors ENCOURAGES 

~10 

ITS R&D TO OFFER IDEAS . . .RJR passed AT in '55///PM TARGETS '89 AS 

"OUTSIDE YR THAT WE'LL PASS REYNOLDS," sense that it was coming & only v 

a matter o im~e . .~JR chairman Hobbs sna s back have no inte ~ 

of' vi.eldin lea in '83 or any other time, tL 3'"'#'tt' *"n"#"K"**'~USE the ~ 

ba~tle for 1 is clearly on & other cos losing ground to the titans ., . p~ 

until recently, TWO DISTTN Tr .Y DIFF . MANAGEMENT PHILOSOPHIESs RJR had p~ 

hu e 2 000 s e o ce & elied d-nose3-s esmans ' to move ~ 

e goods . gave li.ttle ought to well-rounded m g program & left this 

mostly to its adv agency, WM ESTY CO ., for 30 yrs, they dreamt up "I'D 

WALK A MILE FOR A CAMEL" while the co . concentrated on manufacturing 

& pushing the brands into retail outlets/all of which worked so long 

as TV adv was available -- BUT : probs after that, NOTING HOW THE FAMOUS 

WINSTON JINGLE COULD NOT BE TRANSFERRED EFFECTIVELY TO PRINT & brand's 

leadership began to wane . . .Hobbs concedes too much left to agency, RJR 


I 


' had to build mktg program almost from scratch//PM takes KEY STEP IN '73 

+J BUILDING $200 MILLION PLANT to give it vitally needed capacity making 

Merit burst possible (of 8 billion more cigs)//Landry got word that RJR 

was readying its own new ultra-low brand, Now, so no time to dawdle, 

retailers' display space highly limited & key sales go to whoever gets 

there first . . .thus, need to su t the 1 000-man field force, 

how they HIRED TEMPORARI , bR 3/NON-PIONEERING MODEs it's high-cost, 

high-risk, so why do it?, so despite its agaressiveness in mktplace, 

PM has left pioneering to RJR while making sure RJR doesn't get o0 

b>_ a stregic a vant~e, says g37P~im Morgan . . .see what happened in 

•7 w en P marls SARATOGA to compete w/MORE, got to mktplace the 

same day w/o test-mktg the120mm . brand : More leads but Saratoga not far 

behind in #2 . . .RJR grudgingly concedes PM did good job w/Merit while 

noting that it created the category/Landry claims PM saw the mkt for 

Merit a dozen yrs earlier but it took that long to get the formulization 

right*'*'#'""*RK finds this ludicrous//Marlboro & Winstons agin , experts 

see Merit & Vantage as moving up to top . . .Morgan sees low T/Ns, now at 

13-15% of mkt moving to 35% in ten yrs//since •71 total of 105 new 

brands tried w/AmerTob alone doing 26 vs . 15 for PM & RJR each ., .TABLE 

ON TOP 20s N[arlboro now #1 by 2°~ billion over Winston, then it's Kool 

trailing by 30 nillon, Sa1em, Pa1 Mall, ent, B&H, 15 Va Slims, 

#17 Parliaments, #19 Merit 

--JOS . F . Ci7TT.M nr III, top exec, Financial World 3-15-77s great IRONY 

IN OPENING LINE, "I GUESS I'M SORT OF A PHYSICAL CULTIST,"###'*###adding 

"Someone who's fit can do a better j.Q~ . And in a complicated world, 

there s nothing better than an exposure to the outdoors"/he's tan, fit, 

relaxed & JUST BACK FROM HIS 8TH TRIP TO EAST AFRICA, hunting trophies, 

his secy sits anke two 7 ft ele hant t that belonged to rogue 

elephant that J III shot at y s while charging (RK : shades of Al 

Lyont) + "PEOPLE WHO HUNT ARE THE BEST CONSERVATIONISTS" (RK : this just 

like People w o se 1 cigs are mos e -consclous he's avid golfer & 

squashist as well as tennis . . .Miller Brewing moved past Pabst into #3 

last yr/key was to "distinauis vr vro uct in the nublic min~C"-mt 

~mportianz p1 oi ui=z, ne xeis oasic uatiz -- -casze 0 uni -- 

ut also PAC TATION "We resented Ma lb 

to the nublic w/STRENGTH & DIGNITY" + flip-top~box & vir ~.ty of imagery/ 

"Our ads don=t jar peo le & make them feel uncomfortable, Oi s 

verv nersonal thing'•/orldwide appeal of the-cowboy noted/Valim~s~a 

totally diff. storys '•WE•VE OF WOMEN'S LIBERAT ., . 

Merit emphasizes the taste MILLER'S PROGRESSet uala .t control a- 

gressive merchandisin better s n a 

arr-e_ _ 9__T__HE INDUSTRY AVERAQE*~*-#####*n'RKs key here is they 

just couldn' keep spen ing a hat ratio & get profits where they 

wanted them, artificial stimulation) . . .Mana ement st 1es short lines 

oY communication + keeping good people M : co . w as in 

put ln_,g _,.up the blrgA5i,Scala',s__ US :tq 

i~s'paint°•ingsfrom Whitney, ete M"`_eri 'saYes' uo 43°.~ in •76 vs 

for ;ndustry/Merits & Lites TWO HOTTEST SELLING BRANDS IPIePJJ!5 INDUSTRIES 

& Lite as mod~"'sucdes"'s3"u~"riew` beer'°'Srarii~'"'I:n 26~Yi" `c'en~ . i 'EYery~'hing you" 

always wan e . . . 

slated by '80 + purchase_~pr,',r„V,,,Q_~- .227 milli,~o- BUTi'o'ffier `brewers are 

a`Yso---exlsatid"i'fig soYNDUSTRY MAY A9ITU_P"EXCESS CAPACITY IN A YR 

OR TWO" . . .Cullman concedes tFe ris 

--IT'S MILLER VS . BUD IN BREWERS' WAR, NYT 8-7-77//see GeoW file 

--PM OFFER_IS ACCEPTED BY 7-UP . NYT 5-16-78//see JFCIII file 

_-ATSTT.TD MnDATC• VC(14 nL+ n- .n-*JS2 . !'!.. . .. .. . ..+.. 

drinks drinks + choosing Cullman's successor . . .JFCIII 66 & has declared this 

J to be his last yr, .,still doing daring thines : he 5ust naid $515 milli DE 

for 7-Up (IN CASH)//candidates to succeeds GeoWeissman, smart, self- 

( ma eTc -, ex-PE, named pres in '67 but not up as PM ran into troubles in 

''73= Clark Gum and Lightfoot Soap had to be sold, ASR was sick . . .so 

Y•en-rFani¢i»v Anna_ fSenW matla vino nhaiv.man w/n»lv nnn-ria .inna t0 

0nnana-F 

ortin - .,,Ross Millhiser takes over as res - , ~ 

Yale-educated & to the manor b orn : of PM vol from cigs & 80 of its ~ 

. profits, RM "a MASTER OF MKT SEGMENTATION" as VaSlims shoots ahead, ~ 

gamble on Merit paying off . . .both GW & RM are K8/3rd candidate is John 

A . Murphy3 i~s, Villanova & Columbia LS, pres of Millera he caught Busch ~ 

as leep w oc -type adv ., bought up heavily network prime spots on TV, ~ 

did Lite, introduced domestically brewed Lowenbrau//7-Up PROSP~ .`LSs 

even tougher than the beer field . . .PM is good markete ,notes PepsiCo 

boss n en , u soi't drinks are not beer . History shows there 

aren't that many successful new products in soft drinks" . . .analyst 

at Goldman Sachs expects PM TO BRING OUT ITS OWN COLA SOON 



, 

~ 

--PM HISTORY IN BRIEF 7-24-78= Fateful decisions in mid-$OS to 

go national w/Marlboro early in filter game & to go overseas to 

establish first major affiliate (Australia) & signing of first licensing 

agreement + PURCHASE OF B&H=3 key moves that SET THE PATTERN 

FOR NEXT 30 YRS (RK : leading soon to diversi£ication) . . .UNDER JFCIII= 

~ PM HAS NEVER HAn a vR WHEN REVS & EARNINGS DIDN'T TOP .YR EARLIER, revs 

~C So ' des earnin s u 20~ for a COMPOUND AVG 

ANNUAL GROWTH RATE OF 13~ IN SALES & 1 o IN NET . . . .Cullman was named 

CEO of '76 by Financial World//among proudest achievements : inPusion 

of new ideas, methods, excitement into two of oldest & most traditionbound 

businesses (cigs & beer) . . ."EARLY COMMITMENT TO MINORITY GOALS 

& VIGOROUS LEADERSHIP IN THE WOMEN'S MOVEMENT that predated NOW & 

ERA" ; natronaze of the arts & humanities' beautification of vlants & 

facilities~~-~~#*~###NOTE THESE as answer to S&H, which gets NO MENTION 

WHATEVER OF RESEARCHING . . .Miller now #2 i beer industr~V~. PM expe~$~d 

-~ "have a maior ef£ect on e future of the so£t rink in~custrv"###~'tt' 

this"~ocumen v~-in e~resting because it is se~.f-portrait as it would 

like to be seen 

--TOP HAND IN MARLBORO COUNTRY, Fortune 8-28-78 : 4eoW as designated 

CEO, sees himself as quintessential Marlboro Man, "I'm no cowboy & 

I don't ride horseback, but I like to think I have the £reedom the 

M.M. exemplifies . He's the man who doesn't punch a cloc 's no 

Somputerized He's a~re` e sniri~° . .~o a e re ns in Nov . GW as "a 

big-city man, born, brea, educated in NYC," masters in MBA CCNY Baruch 

School . . .joined in '52 as p .r . director & asst to pres ./r~unnin a 1ean 

corn . staff of onlv 250, "not a lot of people stumbling over each 

~~ther 

dSERj --NOTES ON INTERVIEW W/PETER ENDERLIN, PM ANALYST FOR SMITH, BARNEY 

9-26-80 : Pricing flexibility of the industry remains outstanding though 

some speculated that a1l the promo for low tars would affect margins// 

Miller : a lot of new competition now for lite beers, esp . from A-B . . . 

7-Up : PM decided to reposition it as a mainstream brand & no longer a 

specialty, you lose some of reg customers & mkt share . . .adv here good 

but imitative/big dollar volume in the soft-drink business is in_ths 

bottliin the m~is sellin concentrate*~~~~~a~7~S~GrNFg~S-CALCULATION re 

profit margins + ugeness of oke & Pepsi , says RK 

--THE GEO . WEISSMAN ROAD SHOW, Forbes 11-10-80, excellent to show 

him in ac ion uring s es r~.p to Paris bankers & money mkt leaders . . . 

see his charter,~,~„ed je~t,~__Lond,qr~ .z~Fo~~~g . raincoat, pausing to light a cig £or 

photog w/pr'ào`~iced" move ~o revea7:'"~`tiran~3iame on pack (Marlboro )/just 

) under 6' , t~aces oY grav at the temnl es, ^'F' Tu .g~~~~a ~=.,-~s,._u~E 

ra 

=~~ o 

French mkt, un from 1 .tF~n~ as FY~enc's'~t~art 

Galoises Gitanes w the~ .r strong black tobs . . . 

__ GED_TFIAN 

' 

RJR ., ( , 30~ , ~ , deb-~ „ j ;e~ _, ~~ F_ 

s+ ~l~~ ~?s~-Rpe~ . 

- - er _ .~ ' ,1_ . ~ _ .of e~uit~~'*~*~-~* living more angerous° 

~y ` ' . . 

see is one-liners & wisecracks re his own 

smkg & drinking~'""~'#',hR~ R~ - .~.~CAMBRIDGE : new entry_ in ultra light field// 

growing toughness of A-B in ee~r field + RJR's new 1 billion plant + 

heftier adv . budget in '79 : NEARLY FULL CENT PER PACK MORE THAN PM IS 

. 

SPENDING/A,~~7as. . p~, Sc, fi.7.xxce '~''7 ""~RE . . . 

i 

-Up : rat~.on . e urchase was tF"a~' soi`~dr n s are like er both 

ermkts food stores . . .IS PM GeoW 

sp~f~-~"A MASADA COMPLEX ." tL~~~ : attacks of desperate nature from 

within the in us~try, ' en from govt & antismkg crusaders= this EMBATTLED 

PSYCHOLOGY SERVES TO DRAW EVERYONE TOGETHER, their loyalty to the cause 

heightened . . .~dIT`~T. GW & JFCIII, former's father came to NYC in 

. 

~~,,, at ,a~e_.~7.~,~.~pm, pe~t~,~ ..,,,, e via Liverpool, got edueated & became 

a mil~ine~r`, Geo'iria~bred in~a' c~c ~g at CCNY, worked nights at Ohrbach's 

picking up clothes women customers had dropped & studied on subway 

back to the Bronx, began working as police reporter on Star-Ledger, ~O 

enlisted in Navy day after Pear1 Harbor . . .hired b Sam Goldwyn as H-wood O~ 

ublicist, ot fired in disa reement, hook up w onnenberg, en asst ~~ 

o c omas, in 5 vrs makes pres ., then 3-way struggle for CEO//THE BIG -A 

PM INTERNATIONAL BR AKTHROUGH: , t enetratin _ ~ 

mono olies aboundi~~,start' Pari .~. ^ cap uri g w r m~ s rom~~AT ~ 

an thmans lnt'1, wh o~h ~ad faced~"`~soant US competition ti11 then . . . ~ 

w/light bud et he had to start bv licensin~ to foreign nroducers, who 

were o~ en the 1oca1 govt monopolies OUPLE OF GUTSY DE~,ISI N (1) 

price PM cigs a few cents above local ~an"~ to'suild a premium image 

&(2) he overruled mkt researchers who were adamant that cultivated 


PM history/18 INSERi 

LETTER FROM PM VP FOR CORP AFFAIRS HARTOGH IN PM-INTL TO KLOEPFER AT TI 

6-26-']9 . . .re report by Dr Ernst Brueckner on 4th World Conf re 8& :H .r. ;at 

Geneva . . . 

--Letter to all members of the Intl Committee on Smkg Issues Task 

Force l4th World Conf on S&H . . .Hartogh says he agrees w/"most of its 

111 contents" . . .memo by Brueckner monitoring the conf. to "task force" that 

1 was shadoawing_-the proceedings for industry . . .begins "At the 4th World 

` Conf spiritual leaders of the anti-smkg front were showing their vision 

of a smoke free world & trying to demonstrate the rd to go there" adding 

that WHO head Haftan Mahler was in particular "a powerful visionalist,' 

adding his stress on the SOCIAL AUG~PTABSLII'Y'ZSSIIE w~iio-will henceforth 

be 4the central battleground in which our case in the long run will be 

lost or won"//also stress on the Third World issue, i .e ., the imperialistic 

& colonialistic white man "exports . . .exports or at least sells 

death to the people in the underdeveloped countries . . .3rd world speakers 

were welcomed "even if they could produce only the most flimsy scientific 

findings (observations of 5o pregnant women in China)" . .this introduction 

of "the emotional & political powers of 3rd world countries has 

"given the fight about the smkg issue a new dimension" . . ."1^(HO, HAS ALWAYS 

{ BEEN ON THE OTHER SIDE . For an org . which must look first for fields 

III of action which justify its own existence (& its ample budget), the smkg 

issue is an ideal target" . . ."FAO - although our natural ally - is showing 

signs of switching sides"*'#~'"*raises possibility "we might by one 

process or another become object of UN attention" like drug traffic & 

. slavery & don't underestimate because "we would be a comfortable scapegoat 

which everybody, red & free, black & white, rich & poor" could easily 

agree on . . .EMOTIONS NOT FACTS DECIDE 3RD WORLD ISSUES//Objectivese ^WE 

MUSS__TR_Y TO-STOP THE DEVELOPMENT TOWARDS A THIRD WORLD COMMITMENT_yi. 

TOB.," must try to get a substan i.a part of such countries "committed 

to our cause" . . .push BAO to take pro-tob . stand . . .push WHO "into a more 

objective & neutral position"/3rd world target countries should be made 

aware of eco . effects on them via antismkg movement//BRUCKNER's address 

at "Verband" of Cig Industry in Hamburg 


-A> 

I 

4 


Europeans would never accept the Marlboro cowboy image ; whole world 

has instead become Marlboro Country . . .PM has interests in 2 evereeaG 

plants, sells in 170 countries ~O% .m4.re_.units 30'> share 

iustralia, Switz. & y . . .evens Ital a e monopo ~t~ on necessarily ~ 

work vs . PMz in 

a bar a "' °"~- " 

. . . .e ..~ . .:~~.,, sSc,.o..25_ -:~..~fA.-.J 

. . . BACK('I~OIIND nN 

T I E SF~, muchY7-til' better hian earlier, must use*******the fight 

w Rothmans & Pepsi aired, tR184, Canadian Breweries went to Rothmans for 

a big price & didn't work out well/meanwhile PM se ented the be 

business as it did the ci biz . . .lite __ _ 

~QZ ti Y TO Z '.S 'T'E 't 

on1 d se1 or mo ; 'Ehey re~ 

cheaper to ma e more water - EFFORTSz new adv agency u z s mk 

s ~ê is of'-F` sin nu,^n ace /NEW PM HQ PLANNED, Manhattan tower w blocklong 

sculpture garden//PM ORGANIZA' ON1S GW is "strictly Navy" under the 

"one-ass-to-kick rinci le," staff & line commands are never mixed . . . 

LO U IS T MONTHLY MTG ON TUESDAY MORNINGS OF THE CORP_ PR -O 

DUCTS COMMITTEE, innocuous sounding~ no mjor product or its packaging 

or i s contents can be released to mkt anywhere in world w/o its 

OKs HIGHLY CENTRALIZED GOMMANZJ,,a .rgued that its field operations thus 

lack f e i y miss oppty . . .GW argues au contraire, the comm . 

exercises tremendous discipline internally on the co .//THE WAY GW LOOKS 

AT ITs PM is well placed in three huge, robust industries, each with a 

$16 billion mkt (note the symmetry) domestically & ARE VIRTUALLY IMMUNE 

TD FOREIGN THREAT . . .still no biz that can match cigs for pro£itaba .lity 

+~,'S PVT- OLIZI-ES(re TV ad ban & labeling laws) HAVE ENHANCED OLIGOPOLY, 

o t rohibitive now for new com etitors in tob-ci indust , at least 

a 1 billion en ry fee . . .so -RJR control i w also-rans . . .BUTz beer 

& soft drinks are another matter/A-B playin ver hard ball now, refused 

o alon w M' e . 'ca . 'kes . .. ur ast , forcing Miller_ 

sheep~shly._ .tp..„ w .specia promos&i S" 'a `~fi a-o--- m~ 

a . . MKT COULD KEEP 7-UP GAINS FOR SEV . YRS, operating profits 

skidded in first yr under PM, P&G has now entered d . . .//NOW 

BIG SURGE IN OVERSEAS CIG ACTIVITY : ca 2 o verall sales bu 

10% contribution to profits, but this misses fact that PM-USA gets 

bene3i of some half-bi]lion of export sales . . .Brazil & Britain are 

still in startup stage of operation . . .till now reliance has been heavily 

on licensing but ow more & more will be in local inve s, thus 

getting more profits for i se f AR ON "AN OLD ARGUMENT^z Spanish 

Inquisition quick to jail first man to smoke the heaten weed . . .noting 

that Chicago's Lucy Page Gaston DIED OF THROAT CANCER in '24 though 

never a smoker . . .even low T/N ef£orts mav be back£irin~, acc . to STANLEY 

SCHACHTER AT COLUMBIA : many smo ers learne3 to compensate by inhaling 

deeper & consuming more cigs . . .see cop-out lines here by way of answering 

"Is smkg good for you?" Answer : Prob . not, but neither are a lot of 

other things humans enjoy; you can warn people to take it easy, but you 

can't impose restrictions on their personal liberty which people just 

won't accept 

--PHILIP MORRIS UNDIVERSIFIES, Fortune 6-29-81s P °b 

mans Int' & Amer mktg rights to Rothmans brands for 350, deal done 

e'of Ma '81 free world's #2 & #4 . .convertible 

bonds could raise PM stake to 3 though both' sides deny merger intention 

. . .PM's return on Miller Brewing assets has been unthrilling 10%/ 

High Li e in trouble PM raised price-~-'S but a to d scount when 

A-B didn't follow s~ . .wors ws at -U w ts .4~ mk e 

cost it ~f3-dri~t loss to Dr Pe er butz PM-USA sales up over 8% 

in '80, rate of return on o .ssets since '77 adjusted for management 

overhead is glittering 25%/PRICES HAVE GONE UP TWICE 

DECADE, cost efficiencies cont nue=grea_t profit marg :ns . . .Mi 

of s~~ onl .y 11% of,pro£its/GsoW no longer talking of overtaking A-B 

a~l brewer : ' e're not opera now outs 

endin Mi11 n ~"f3T'e`1°a9~UPz long period of "hard, hard ~p 

work" needed as Geo conc~des PM didn't reall understand structure of ~ 

so£t-d~~nk biz/effor now to float TriTi o mains ream & away from v 

~.mage as "a grandma, .quaf£:or a mixer . . .expectation of imminent move by ~ . 

PM into cola field . which makes up 2/3 of the so£t-drinkmkt///THE DEALfT 

WITH ROTHMANSz picking up smo e signal s rom ~ !FJ . w3.ch announces it t~N 

was en aged in d " t " es of coo e t' " 1-3 

w/the . i ion-a-yr boons o wze-&-tob . Rembr 

tab 

andt Group=panic & pique at fV 

PM, which for yrs had been courting Rupert/he was willing 

to sei~ h~if' 

o 'n st i Rothm thdebt convertibleto another 18% but 

never control . . .£aced w possibility of RJR stealing a march, PM opts 


I 

A>, 

I PM-history/20 

for the passive interest, leak from Rupert's 3Oyrold banker son Johann 

to Lehman Bros that RJR deal wasn't closed . . .GW phones Rupert to say 

PM would gladly take the deal & pledge not to butt in w/Rothman management 

-- same deal GW had made yr earlier -- BUTs "I just didn't believe 

or understand, if I may put it that way, that Mr . W. really would be 

willing to work in partnership" . . .young Rupert, acting w/o his father's 

knowledge (he says), invited GW to SoAfrica to present his suit in 

person . . .so he goes over April 11 weekend unbeknownst to RJR, interrupting 

long planned weekend of fishing off Key Largo to stay at private 

guest mansion outside town of Stellenbosch where Rembrandt hq is//GW & 

his bankers & mktg team studied the numbers overnight, offers $275 million 

compared w/the $350 million price asked for 22% of Rothmans stock, 

half its convertible debt & right to sell main int'l R . brands in US & 

SOUTH AMERICA ., .following afternoon the two principals met & parted on 

a handshake for the original $350 million asking price/said one party to 

the deal of Weismans "I've never seen anyone',so crazy to sign a deal// 

RJR;s CEO Sticht outraged & all but accused Rupert of a dbl-cross though 

Rupert said his talks w/RJR were merely exploratory, foundering on 

RJ'R insistence that their eaY be "part ers iien I was alive & control 

when I died"/each side has first option to buy out the other in 

Rothmans-PM deal . . ."We've never gone wrong investing in the cig business," 

says GW, $120 million + royalties for American (less Canada) 

rights to Dunhill, Peter Stuyvesant & Rothmans brands, which have 

negligible sales in these mktss Brit-made Va blend cigs have never sold 

that well in US . . . ARTNERS HA E MFG & D F CILI S IN 

VARIOUS FOREIGN MKTS where it's to their mutual benefit KEY TO DEAL : 

PM has first & best shot at deal to control Rothmans . . .Rupert is 64 now 

(born in '18?) & likely to yield control as he gets more involved in 

philanthropies - 

--WHAT BLEW THE HEAD OFF MILLER'S PROFITS, BW 2-1 -82s its mk 

shareY rocketed from .4%_in '70 to 22% in '$1~~"'' u rea uosed to 

,-B's supremacy has dropped in face of fiercely aggressive counterattack 

&'81 Miller net off 20 % sales 'n 2nd strai h dro in 

rofit om 8 . ., REASONS s unc~,a~a .-r-te-$9~' ~ 

ca11y 

poor pricing ecisionss„ + what now appears f"d"11a~i~`beeri ill-tini'e~'aii'~itions 

~-capaa'3~~7-MiT2br as price leader in '80 had pushed thru two hefty price increases as economy was heading into recession, Busch stalls & 

High Life brand esp . slows, Miller sales barely outpace industry's & 

net is off 20% . . .rather than yi-eld or sacri£ce volume again, Miller 

gave _up b price e ing e~c~gr.:.-- the B'I1'1's~A-B "" ---'-"`-' 

made it`s pricè`3um~` s'~ick 

~~V ~ime MSTY~ex-"Wa:Sreadv to follow, industrv was j*+ G~ar-p discounting 

war w/prlceZpromo as x~e~y~V_jeapon . . .but sales um s c utdn't Kee ac 

~$3.~-bi'Ttion ivr~ 6 plants . . . 2 mi ion plant in Trenton Ohio 

due to begin operating in 18'.3//A-B' s mkt share nears 30% &-BTID . h,JQH`s` _ TS 

DUE OUT IN JUNF= 

-""=-FM'S SAVVY SALES TOOL, Fortune 6-82 : All about the Merit Report, 

travelling poll cum computer to promote the brand/$3 million gambit a 

yr, GOOD EXAMPLE OF INNOVATION IN PROMO after the TV ad ban 

--PM BATTLES BEER & SMOKE RIVALS AS IT ENTERS COLA WAR . WSJ 6-30-8~: 

usually buoyant Weissman fee_l_ing the counterpush . saYing E'VE ALW 

BEEN A DAVID VS . L . .debutin LIKE LOW-CAFFEINE COLA DRI , an 

idea orrowed from others who didn't make it now ~,azze up w hardhitting 

adv . + new buildup £or 7-Up//CAN PM PREVAIL. VS . GIANT RIVALS? 

(a rival exec likens PM_ t_2 Brit Emnirg in colonial da-yss "They think 

they~r~ter, smarter & more sophisticated &, by God, they're going 

to have" what they want . . .but realisticallys PM isn't going to be able 

to generate the same 20% annual earnings growth they posted for the 

'past sterling decade/Mill & 7-U in r £or 2nd 

yr + Rothmans deal facing haggling w German & Common Nllct officials re 

monopoly . . .94's ongoing inabilit w menthol c now putting menthol ~p 

in its NORTHWIND minty brand"~i ~ - g~5oon CAMBRIDGE 'Pm ~ cb p~ 

at the ultra low mkt (6mg. of tar_ or less) "HAS CLEARTY FyOPPED" w/ v 

only 0 .2% of the mkt after 2 yrs_ ~& bi adv outlay + RJR stealing the ~, 

PCar oro macho image & giving i t~ o Cam~ .-~instons + RJR attack on rn 

Va Slims by softening More, putting the thin dark-brown cig in beige p\ 

wrapper & package//MILLER : PM cash ave it clo t to shake up beer in- V 

dustry, showed athle es swilling Lite to issipate the sissy image (asc.+4 

Marlboro did w/filters) . . .A-B s endin O t ion-.,nn._Bud. . .,h.' t intro, 

Lowenbrau failin~ to de~t ~ e~ ,Q ;~n n emi :m m aZ~n igY-e 

rand is strugg2'in SOFT-DRINK MKTs even tougher 

-sledding here, 7 Up has lost mkt share ever since PM took contr ~~#~ 

dispiriting track record so far, G eci ec'Tby summer o the slide 



~ had to stop/watched the unfolding reports of perils of caffeine, felt it 

could be used to sell 7-U one of the f w c Irl -f ee so . . 

Oct CR focused on this, lis ing caffeine contents of two dozen soft drinks, 

so adv camn~~,g~,__hg,1~Pched to push 7-Up, SLUGGING s~~,N ... . . .~a.,~r.ce 

~ -~GxY ou from comXetiti n' w~iic"Fi as newscasts cover the 

flap re cat'~"e`, .v ine hazar~s-of sodas . . . PERFECT BACKDROP TO INTROD3L~ Like, 

99~ ca£feine-free .< .Canada Dry had given up on pur three yrs earlier & 

~ oyal Crown's RC-100 did not too ba~d . .of mkt 

. hoPe is Like will for -U what Lite did for Mi11e // REAT IRO~Y'Yt` ,~u,,s,~ie in 8 

.t est mkts w emoton a s s ressing ca e'i .ne s potenta .a .ys ~,~naZarn'tcr"`Wung 

~ 

BPiY-Y'dx~eiY"'-"'~=E7i"tTtig3x-~GIt°ar^L-YcTe°"i;if'o cd~ 

1"oJump Y4o"persuasive evidence that moderate caffeine imbibing is bad for healthy 

people) . . .Distributio obs . loom due to £ranchising agreements re not 

handli e t an ss 7 cou ma e i se '+~y s 

bou uR.•_l] a$4~#7 ~3~ ~~~~ ?~ ~5e~} loca ~~ S~i?s ~o ~ukp ement 

use Miller' s, 8~0 ,p,g,gr._ c}~~,t~~,buto .r.,~ a- if' ILikegoes, Co~e &Pepsi cer ain 

cer£ai~°'C`~"'Tespond (there~y 'cYe~ying PM's tradition of non-pioneering 

;~ lines . . .except they didn't really pioneer w/this) . . .PM WILLING TO BE PATIE 

w-U it says here : ~t took 10 vrs to decide it couldn't make i w 

Clark Gum & 17 vR 'm =I __RA BL 

' .~' --S~P N-FS-UP'S SUDDEN TASTE FOR COLA . Fortune ~ 82r Like it or not, the 

~j~~' caffeine war "You ' caffeine . And neithe d s col;" 

goes t e LiXe commercial . . .Ha~. -U 's o ers . so d' st ibute . . . 

. 

~ . sO it w uld hu+-.t ~ . .7 IIp ead E~w Fr~, ~,gg~ees_~as ~reposterous" ing'~''less"=t'han ~+"`yrs ago 

. . .times are tough in the soda mkt, sales up iust 

~i 'j~ in '81 & Coke ~s nushing Spr~.t_e_harder in ~.ts own~,ds//the °Feelin' 

7-Up" campaign struck out, etter sui~ed-'to e~cigs, says a competitor 

. . .S.CSENT~FIG 77SSAG~~I~TT Off,,.~AFF~INE, whether it contributes to 

breast disease or panereatic cancer, but general agreement that . 1iXe 

icotine it constricts blood vessels spee-3s u th~F'e , stimulates 

t e bra n& o her organs a . 2 ozjcan o oXe conta ns 4~4mg. of caffeine 

*AA vs . a 5-oz . cu,P of coffee being loaded w/146mg . (but two Excedrins had 

; 130 m, too)//Ra1 Crown's RG-1O0 was SUGAR-FREE AS W AS CAFFEINE- 

FREE/ Company-ownetTSo$ ers pro uce on y of 7-Up vs . 20 for eps1 

& 12 for Coke . . .60J of the country_can,r4q~,a_dil,y_ .~b~ covered for Like 

~ . b~*. using,,,,~bottle"Y's, - too"i fiot"nec~gssary~ò nation 

f'o the new product to suePM seen as unswerving" in determination 

maXe 7- n a~•~ 1 iin soda o ., av~.ng bou ouis o er with 

to a root beer brand & No American rights to Vinto, English black currant 

& raspberry drink 

~ --BONN CHALLENGES PM MOVE, Rothmans Bid Runs Afoul Cartel Office 

SSSI NYT 3-4-82s Reason is that Rothmans owns share said to be less +„p*+ 

S04G- of Martin-Brin~lan n Germany~s'3 o co ., w sales o 1 .5 billion, 

slightly ahead of PM's #~F sales of $1 .2 billion 

--DOYLE DANE CIG BAN ENDED, accepts Parliament account from PM, NYT 

12-20-82, decision follows by less than 3 mos death of Wm Bernbach, the 

founding creative dir of the firm, who had instituted the ban vs . its 

handling cig accts . . .had worked on Alpine and B&H in '61 

--CLOSING -~.NN_BJR. PM NARROWS GAP, NYT 1-17 ~3 ~ khx.~bl~,re,. 

RJR h~s ed having overtaken ATob, an was so far ahead it had no need 

to 1oo7c~aofc: . .but the string may be about to end since PM has been 

gaining at a breathless pace, trailed bv onlv a fraction of a vt-. 33 .47b 

to 33 .0 . at end of "82/the two r vals profess there's no dogfight brewng 

. . .PM pres 1 fford H . Goldsmith says co .'s top mana ement "i~s__a~llerg ~i~c 

bein~ the biggest . It`s ptP~ Perv. IT MEANS NOTHTN3°~/vs . RJRTS-Edw - 

,~ A.~orriganJre as the ndustry leader, you "dont particularly single out 

ayiy one competitor. You go vs . the totai mkt"//RJR £iEhts back, rece3i~,y 

.Y.ag launched bia COUPON BLITZ of $1 .50-~2 off per carton, a~'a.`~"'hrandswftchi'n'g'''~e""tc"'sa1'ten 

onset o~"ste~per cig pr ces (excise taxes doubled 

on Jan 1) . .- ushin More harder in brown w er, + its new Bright . with ~ 

'~ minty flavor ; o a me °' 'fne ' "ON MARLBORO Y V : 

ver a in to urban dwellers + women s a e no on o ndenc 

ru ed & e ea ou oo s NT 

ENDENT. For some reason that cowboy struck a very responsive chord" . . . ~ 

U on jingle didn't translate well into print . . .RJR's bi~ slump in '70s ~ 

led to HORRIGAN*S ELEVATION IN '80 w/Gerald H . Long, mktg head, w o e- ~ 

~' s .gne~new master p1an z key idea was for ~.11 members of a brand family ~, 

to share the image + SUCCESSF[IS~ INTRO OF THE CAMEL R PM's Goldsmiths 

" is is not a complacent co . We're e o s acent -t 

e're nerv us orr gan : e are prou o our n ustry position . I 

we ose ; we'11 1ooX forward to the day we regain it" 



--WHITNEY AT PHILIP MORRIS SET TO OPEN, NYT 4-4-83//see Geo W file 

--THE NEW MEDICI, Forbes 5-9-83= alludes to PM's "massive" spending 

on the arts but NO NUMBER CITED . . .said to be one of most generous 

corp. patrons//but, $3 million £o Vatican art show of Feb-June In direct 

costs + robabl ano er m llion for v . . . o o elssman quo e 

on w a s e n e policye "By pu ting ourselves in a creative mode, 

we say something about ourselves"=encouraging PM to be creative, °to 

come up w/things like Miller Lite ., .and Va Slims . . . . "THERE ARE PRnPT•F' 

WHO TH BUSINESSES AS S N INDUST EVERY CORP . LIKES A GOOD 

IMAGE TO GET GOOD PEOPLE TO WORK FOR IT" . . .noting his craggy looks that 

make oro man look like a tenderfoot 

--ANOTHER RDBALL CAMPASGN FROM 7-UP, Fbrbes 6-6-83= New campaign 

promoting absence o3 artifioial ~ avors & colorings in 7-Up (RK : EVEN 

AS IT ADDS ARTIFICIAL FLAVORS TO MERIT) . . . comparing w/20 competitive 

brands/following up to '82 campaign vs . caffeine in rivals, who fought 

back with their own caffeine-free entries . . .also . : Like does ~p,~,kain 

g~ flavors _T~a .& it's even include3 i?r '~e`Tis~ of brands 

7-Up is com~5~ed`'toc~] . . .some, latitude for argumente CARAMEL, merely burnt 

sugar (1), is major ingredient in root beers & colas but is judged to 

be artificial by FDA//not a popular move, plainly, witness comment by , 

head of Wometco Enterprises, a bottling group w/a single 7-Up franchises 

^'17iis_tr.+.,nking ~ of every oroduct~round is BAD FOR THE ENTIRE SOFT- DR -- 

INDUSTAY", ___ 0 

. .BUT, -U has broke its slide & inched up in mkt share 

.~+~ last yr to 6 .5 -- BUT, co . still in red by $1 .2 (operating loss) 

& hasn't turned a vr_ofit si 

=--= ys PM, RAMA MO V DS DIRE BW - -8 = Last 

six mos called trauma c fo the ci indust w/fed . tax doubling, pushing 

prices past 1 in most cities cu Ing shipments ca . 8% In first 

qtr w/drop-off of 3-4% for yr expected + Congress may toughen the warning 

label + GENERIC C , pooh-P oohed when introduced 3yrs ago, have won 

nearly 3 of domestic mkt//a1l of which spurring new moves for the VALUE- 

ONSCIOUS SE TOR OF THE MKT : R.~$ haS O,,~ . e,~y 

line in 65 of nation while gM- has moved " upsac`le jbut notùp in pricee) 

oi"`r i`CS"BBdY°~'leivxe--U3tr~'T,ights and Players by fancy new packaging & 

adv . . . . Century features 25 CIG PACKSL or,_.a_ .,2Q~6,d3,sCp .u~t,,,ae. .76' .m„c,ig,,, .,e,pmpared 

T1~?t' ~C51Z GEIVERSC5 - ;-:RJR"pres Gerald tong says there•s 

new kind of customer "interestecT"-in getting something that's not cMeap, 

but e est value for his or her money" . . .Centur;y's constFuction re uires 

about 10% less tob, , than n3gst,_,~?ranS~S, plan is'~to"1'r`mY'`~' susta'iii3ng aIv= ' 

promo"~oir'entiiry"af~er"" ~ig intro=same profits as from core brands . . . 

Wall St rout followed announeement of Century over fea~ o~ ci rice war 

im?4~u~~E .it~__apgrcdaacTi>aa S~ia equ3va1sa3t o£ oi~eiin~C,~N~~fi° 

EER PRIC ~&Ii~ ISeluXe U tra Liahts came ou fG ~$Y °'88~ ~ .n iLver-~gold 

box emblazoxned w crest & `ned w embosse~ .~o~7,, ...-~rabb~e'~àn 3muressive 

o£ the mx 12,' 

.t .~t d~ ~, ek~ R.,^Sa~x ~~-~ ?n e. ng . 

rM decided ~ " ~ goar,tes 

e - YERS 

" - ` = te ~ " in 

ine 

:cr~es'~i~'Ys3~`°58~alne Sn Eold seriot, imparting ready LD, t sense 

of uxury -- US ciE in~ustrv has shied away from black "because o£_7 

erceived all In to the controvers over S&H . .,&H - e uxCpaek is 

aimed at q~rea those ~ ave it .ma wha . ~~-" 

mo"LSiI'E; `2'htter rushed Ti~~ ibution & seems to be starting well . . . 

RJ'R-aòl9TOwT'e`d~'e"s ~ii~l`ra ` c,mP„ nackagin~" & beat RJR into that mkt . . . but 

PM and B&W expected to join RJR in 25-cig packs//GENERICS =AT .& ,hg~ 

grabbed 96% of the m'~ k~~'~~"**#*2OOg6 sales growth in 182, L&M pres KV Dey \~O 

involved in generics "But we've doubled our CY\ 

share" w/them v 

--BOTTLENECK. 'rb 1-16-84s With a Miller man ned-h 

thègo for mkt share first for 7-Up, then go~for"co'~a mkt which is 63% of~ 

9~bil~ion ga'i:Y'om-°stiY-3"e'=drink mkt/after 5~ yrs 7-Up mkt share is 7~5% 

or ri ht where it was on the takeover + the ca3rfeine panic as major mktg~ 

coup rony .> .a__ vA,-, operation .-at_.best_now . . .Like not sold in big 

aszern mxts since moF ~ tn _ .,, hq~ ~g $ (4~l ;~~ , B€z~ 

g„k~ eometing 

~ ;, . . .options s put'y~ up cash'to- . ~ , colas buy major bottiers or put up'-ftb 'own 

re onal plants £or Like . . .58yro1d Edw Frantel, ..ex vn sales a. ..Mill er, 

~ .,I~';'A3~f?1~.~ . . . 

., .a ing US o . is aYso w horserae_ ei ht-conscious so soda mkt not boom- 

`- ~ "~ ~ ownrom f annu h grow thillif rate an ee van thd oe soa 

9.ndustr caffeine scare discussed . . .whereas B seh sa on its 

i e was intr duced eve one ' mnpiy_12~nn5_i,p „~& In'~'delastic floor 

space n supermkt_ Weissman= doesn't know if 7-Up can work_& ependsif Coke wents to drive everyone else to the wall 

. . .$620 million tied uD 

in 7-Up & not a penny of profits so far 


pm/23 

--CALL FOR HIGHER TAXES, Forbes 2-13-84 : RJR's 25-pack Century doing 

well, but in ca. 15 states like NY & Md cigs are taxed by the 10 so 

Century gets the 30 tax rate & there"s no consumer saving so RJR hasn't 

even tried in those states . .,the eco . mkt is about 5% of total//in Ohio 

where taxes are on the 10, the rate is 7¢ per 10 but if individually 

taxed, it would be a 17¢ tax per pack, so PM is in there fighting toothand-nail, 

but tried to keep a low profile in Columbus . . . PM's man argues 

state revs would be lost if Ohio changed . . .PM lost 

--NOT ON TOP, JUST ON TAP, profile of Geo Weissman as he retires, 

Charlotte Curtis in NYT 3-27-84 

--LINE OF SUCCESSION AT PMs Maxwell named . NYm ~2-1=8~ 

--PM TO BUY UP 4 MILLION SHARES, ST~5-31-84s Plans periodic buy up 

of common, of which 122 million outstanding for employee stock option 

program "and for other corpp purposes," unelaborated on 

--PM-U T U TS WS 6- -8 s Shepard P . Pollack to be replaced 

by Frank E . Resnic Pollack had been for 6 rs . . .Resnick is 55, 

reports to Hugh Cullman, c airman & CEO of the un t 

--AT PM, SODA & BEER ARE STILL FALLING FLAT . BW 12-17-81ys Cigs have 

best yr ever but-increasin vo~Eh nomv_=hurtine 7-Uv, about to report 

1--s 5th strai ht Ir o£ losses + writedown announced in late Nov of the 

new 7fi1 er 50 million brewery in Ohio ($140 million after taxes) . . .yet 

Wall St has not punished PM for its non-tob . failures (as HMax declines 

to be interviewed by BW) . . . . FM's share-of-cig mkt rises FOR 22ND STRAIGHT 

Y$***"'***it has increased didends 19 times n past 17 yrs pa~ .d down 

long-term debt to 26% of capitalization/capital spending is down so cash 

is abundant ., .MILLERs Hi h Life is hurting, the Miller Time message be- 

came generic, as in et s ave a dr3.~nTc'aive e a u*****ba 

Timong on price rises=H~igh~ ~i~fe shi ments off 3-5% in past Svrs . .a revitalization 

plan in wor sbran~s for economy mkt, low-alcohol & a 

draft-style brand + new ad agency/bia OVERSUP~'r,Y OF GAPACITY prob . . . 

7-UPs colas off to below 60% of mkt as fruity drinks rise, so 7-Up ought 

to be hel ed but Coke' up & avv+ôa hin o-iin & P vs'' 

Sl~.ce f to o t 

--LIVING W THE LIMITS OF AaARLBORO MAGIC, Fortune -18-~s PM's 35~ 

of cig mkt iggest share since Am~lob dominated 'n th-e-`74os ., .Miller's 

al r ro its ave covere onS the nterestton the rou 1 1 billion 

borrowed n Os ui reweries rumors on t t at PM wi 

7- n& M~ller ., HMax is o.n._ s quie ~ s3t-spoken, tenac~.ously 

protects his pr~va te' Li e, he wres ed CEO's job from "the boisterous 

& aggressive former Miller CEO JMurph, named PM pres . while HMax celebrated 

by buying a Maserati . . . HMax c~g,~,~ril].aant _H.nalvs'~ nos . ` a d 

of toug ec s ons, is £ather~exan er n c arge o rationin tob 

in UK during WWII/his .ear137.~iox Y~~es paring HQ corp staff by 13~, 

putting industrial packag ng un3"t on sales block & written down Miller's 

new unused plant//ENDURIN PARADOix .even as ci sales ta er off under 

soei ressures ~y" 

_oli Ro oy°^': ::~fo"new entriesin th"i'`s e er more~unpopu ar product mkt on 

grouncTs of who would want to enter & spend necessary bucks to penetrate 

a terminal-case mkt?//"THE MARLBORO COWBOY MAY BE THE GREATEST IMAGE 

EVER CREATED" says Waggoner of Bear Stearns, now is 21 .5% of US mkt . . . 

people who are willing to risk smkg say theyr want a real cig, £ull-flavored 

onei astonishing 40% of smkrs under 24 go for Maribo ..~os (to be 

continued . . .) 

--CIGS LIGHT UP PM, BW 10-29-84iPM stock rising because PM can keep ~o 

raising cig prices w/o hurting volumes hikes of 10~ in '84 a£tQ+~ 2% in ~ 

!83 ..,,a7.so costs are_do_wn & these factors matter more than declining or `3 

Ipla 

eaue -A 

--I°M'S NEW MENTHOL W/RED PACKAGING, WSJ 3-7-85s using Marlboro colors ~ 

fio lavnnh R~n 3 n Mi nh .& Fl a a4-F.or ci~a-voar~ ~hnw nnnai~mor hnrwAnm w i~i 1 iw -~T 

& reens PM h s onl . . _ - 1n.e t . .v . . . ' 

r oesn e '° 'aY! e'oressures are intensi . na 'k' * s g ./ 0N 

! surprise ahead)s "What I Peei is that LIVING IS HAZARDOUS . Most of the 

things you want to do are more hazardous than jus reathing . As time 

goes by, smkg will be seen more in that context"/92 .°6 of PM profits from 

tob . in '84 ., . -U narrowl in t 

--G IRMAN STUDI D SEV . OPTIONS, NYT 9-3O-85s 

.,bi~~,~~o~n in cash biggest merger outside the oil business . . .HMax 

has met~io"~~C`~1"`'~"~h'"&ffough approach" as he makes first bi after 

15 months as CF~., (and 3Oyrs w/PM) . . .PM had updated expanded its c g 

product on acilities, adding factories in Europe, modernizing US units, 

but that was 2 yrs ago & excess cash now had to be ut to k„

pm/z4 

tl- ' remaining dependent on cigs or adding small unit, decision was to try 

i' to broaden its earn' base extensivel . HMax "played a key role" in 

t e 2,5 PM purchase of Rothmans, as head of PM-Int'l he went to see 

Rupert & persuade them to consider PM instead of RJR/Maxwell "a ver ood 

~istener . He is very close to thin~s," says Hans Storr, c3.e n . m 

Max s father headed a ri~- oimporting firm & was tob . controller £or 

Brit. during WWII : Liverl,oo1 native, ge dro~ pout worked as tour . 

agent for Br . travel agency Thos Cook, o ned°"~l"~~:~"c"~'j~ as salesman/lives 

Jin Bklyn Heights w/wife & two daughters, smokes TWO PACKS A DAY, says 

he has no reservations about mktg cigs desp te health hazar s linked to 

ton~/comesERGoER LOANS CAME MOSTLY FROM ABRO&D, NYT 10-1-8 =execsthaeOtor 

operate in DEEP -ST'sC -- ~ couj~'.~,~,,,,r,~;~-- ~~~ co~ nor drop 

any revealirr g "cliY~~ ~fo~g~ 3~or past 3 mos GB rumored to `~a takeover 

candidate . . .P,~linked to., .t![o-Donald'.s .&. p3,1 sb.ur.v. ;< .large no . of for . banks 

involved because many omes c vnits "ivouldn't commit w/o knowledt_e o3 

the takeover target or owing if takeover was hostile or £r~ .endly (RK : 

anlc-3n view of PM's recent acquisitions, track record not encouraging)/ 

much talk & activity at PM hq last week, code ne~ $,r~.aX~," for the target 

in of. to Sanka & MaxHouse . . .secrecv cruc a eakag~ would 

cause run- 'n GF rices -- b~t~ t T,p~ .~ ;_ .. 27 :„~ gp,~,~y,v 

. "~",~~wee or about 30 eal one in $"o_'llara w for" `ban'ks so rYo e'c on the 

` s$rengtiof ° $h" e"~b11ar . . . s~o~iqi~v . .P--"~ 

. .F.,.~'~r~"~t~.,~ ~. a~aurt+i~ s--in do 

lars thev don!t .._know what t o o w - one eason it s relat~.vely easy 

~oTiorovi ' a road . . .PM'"'CSObWwirig about $5 billion of the $6 billion deal/// 

THE GENERAL FOODS DEAL MAY NOT BE SO SWEE BW 10-14-8$3 GF a premier 

pac ge oo s co . w_ - use & O"sc~.r. .as its stars but 

PM ma have over .a t- .~ue Ys:`'"R~ s~~ ~,~2X for Nabisco + GF 

has _ac ~ ~~1Wy s P,W a ~~ti°FiPYI r : . Wit- 

ters ~~w kind ewds u for M s ~°low 

profits but new p~es . "Svxias ~ tried to spark em u~~t~p~tas 

, 

Shtemanii s Ba~cec~T` Goo~s ~onzoni, ._ & Osear Me~!er + improving old line 

l~ke .~e"5_"`Puddìfig"s1'"dps, 6 ~"ee own"froiii ~of s es & Gaines 

PetFoods sold off last yr~lill~net up only 2 . on sa7_eS,gain 

p4 5RL' . . Wall St skepticism rè"'U~~'per"idf'sa~L"~`s~ &"~'a'Srs'~'x3's 

"_a ~reat co ." & satisfies PM need for a broa3 array of brand names & a 

gooc~distribution system/hints PM ma ac uire other £ood co s PM ha 

let a no . of s co .s occu too muc o s me e forts Miller has 

come c osest to a success o£ all acquisit~ .ons . . .Max goes to great lengths 

to avoid pitfalls this time, he says//t~k2y've so„ . ~ rtortoise it}st 

of a hare -- & a~}Sl wlittle~ ~~;s~k there may"b r'`~"'ee~~c~hat 

g~ves ~dates & re`cor# o'` otfier mergers : ASR so d' • a 

fru' aftf er US Gill soFt ette Clark sol • e s . . .Z Up 

kt o 

shareSEEKING TD 2TURN TI E, ATTACKS CSG OPPONENTS . WSJ 2-~-86 . PM 

feels public attitude toward tob . has grown more host3 .le during past yr 

& it•s tr in to ea essure on smok , being shunted away more & more 

and aceuse on harming nonsmo ers . . . actio s arguing co .s aren't 

getting fair shake from the media, smkg s own as civil rights rather than 

a health issue, publishing a_ ~f~ree q,u~a~~~rter_ly mag ho_S,j,7~g,_„t,"S~,R_reach 1 million 

~;r r_ b~y .,Vnd of yr, inserts in~paclc's urg~ng revolt vs cig 

Resnick say's"'I'M"'inay be starting 10 yrs too late vs antismkg activists 

but is convinced it's possible to change minds -- and if any co . can do 

it, it's PM, "widely considered a brilliant creator of adv . images/to 

ush this drive PM brou ht i.n Guy L Smith who ran successful PR campRign 

at 7- p m a bu dy of JO , who says he's taking on toughest 

assignments "It's the Mt Everest of vublic relatinns /his hiring a ma3or 

denarture for industry that's taken a ri.gi ."_,~,z~. evasive, stance._t .ard 

he m partly becau e s awYers ve orr na-e ommen s 

be used vs . emt~i in cour-E, " . PM . willing to a e e ris Sm 

es 

~s ~c ief smokesman for co ., aiming. Yirst . atw "utop ians" 8ct wat hca1a,,s.w 

social engineers . . .wooing blacknewspaper pub~~sYiè'rs bq~bririging 93 to ~p 

'NYC-~ or"""Lwb'-days; Hugh Cullman vice chair . says •'Today, tolerance for my rn 

smkg may be under attack . Tomorrow, it may be tolerance for someone ~ 

else's right to pray or choose a place to live . So the real issue isn't -P 

smkg vs . non-smkg -- IT'S DISCRIMINATION VS . TOLERANCE"*##*~-*PM known for ~ 

its black college scholarships & fair-equita-5~ mployment of blacks// ~ 

tismk activists char e the alread don't et enou la in media & ~ 

pecen " ion n o 0o in us ry wi ma~e ~i ou~ e_r t e ~ 

battle arena has shifted Y~o~ta e e s a re~s where PM finds 

itself outgunned ; So . senators & Revs . "can't_heln us i_n M;nh,^ says 

Resnick//RJR's earfier campaign a dud, the ads were "dumb" says Lawrence 

White, esp . one claiming smkg had no effect on CVD~~+~-#+~#*Banzhafs the co .s 


pm/25 

lack all credibilitv because they refuse to concede that cigs pose any 

health hazards or dangers, "T~heir all-out den~ .al takes awav .he imgs.ct o~ 

anything they sas" . . .ALA-sponsore Tahup Poll n Nov of i,5 O showed 

8796 ~ avorban on smkg in workplace or creation of spe¢ial nonsmkg areas 

+ 32% favor ban on all cig adv 

--COODBYE TO THE MARLBORO MAN, Forbes 6-2-86s cig co .s steadily 

abandoning nat'l mags for adv „ preferring ooupons s onsorshi of s orts 

eventsi nt of sale disnlavs & sharply focused promotion devi ces seen 

as shift away from winning new smokers to - ose who already have the 

habit (see example o£ Camel adv from '30ss "You'll enjoy this pleasing 

'Energizing Effect• . . .Get a LIFT with a Camelt" (as part of the whole 

'3Os failure to warn, impliedwasranty . . .'85 mag ads off 12% from '8tY 

& trend worsening . . .sales off 7% over past 4 yrs, AMA has joined Wash 

kobby efforts to end cie~ ady altogether . . .women•s mags espa sFarcT~i3t 

as fYinds go to Va Sli.ms Tennis Tour & Marlboro Country Music Festival/ 

promo could ss~ be 80% of the budget & adv onlv 20 BUTs still a very 

4ro3"i a l~e business, four argesci co .s had 2 return on equilM 

over ast vs .I-Eo'-3Ts s a e un er 20 only grow mkt~ts are ieale 

n gener c-discount sector 

--DRAFT OR DAFT?/Forbes 6-90-86s Latest wrinkle is Genuine a t via 

*trade secret acquired from Japan to pour draft flavor in o es & 

canss no beer in recent yrs has successful sold itself as a draft surrogate 

. . . High Life off about 43$6 since '79 & looks like a dying label 

whereas ite has own fro arrels in ' to 1 m' 

'~ -- or near y O more than High Li£'e##s # ig mil on Miller 

adv drive in '86//secret behind Genuine Drafts a cold-filter technology 

from Sapporo Breweries -- but some industry observers think the diff . 

bet . GD & HL is inconsequential . . .could help Coors 

--HANGING TOUGHs PM Product Mix Lets It Resist Savings in Economy, 

Barron's 28-86s PM highly resistant to all but the worst swings in 

the economy add tion of GF's broad line should bolster that resistance . . . 

PM's eouitv return hit~$_~4~6, highest level in over a decade, & while 

GF•s return 3'o-~ en1-85, combo is expected to be over 250 for 

this yr// N'84 PM SUF TS T 

DEC In ' a te w" d o t but tob . leaf 

costs 20 in ' 5-' span . . .GF en"o in an excellent as 

doin ve has s~Miller expects 

8-10 increase In prof ts w net at ab SALES//debt-equity 

ratio was 1 .7s1 at end of '8 4er GF purchase but down to 1 .3s1 by end 

of yr following & due to be 1s1 end of '87//recent court,rulings on 

preemption thought to lessen litigation threats 

--PM SELLS - WS s Hicks & Haas become 

#3 US soft drink maker the closely held Dallas outfit in recent months 

has HTands big root bee outfit . ~ivina 

it w 7-Up 13 .5% of USmt~ . . .H&H has orit'ic~aiai n-bazce 

. . .earlier PM sold 7-Up Canad.t 

you nee more range in th-e s~`'o t=drInd~ z 

ian & int'l operations to Pepsico for $246 million . . .earlier ZTr, had 

blocked ro osed sale oP £-U to Pe si for 80 mi11 

-- TED NO E NTERVIEW W HUGH ULLMAN from Pbrbes files About 

PM overseas . . .US c ve hi h credibilit & vi ce" ed like 

Swiss watches tch Chocola e ian leather . . .US GIs helped develop 

t e wor d m n pos war . . .In EEC & deve oping countries you have to 

make the Product indigenously//initial thrust was export to independent 

importer/distributor . . .Australla was Pirst si~nif . ~f'f'+liste, installed 

PM equip, but bought Auss~.e eaf because you had to have at least h,aZf- 

Aus~~~gat . 

substitution as way to preserve balance of payments so onl com onents ..~p 

that can't be made locally are shipped,,,,.,,,~in Venezue a, a~p\ 

PNl~everpe~'~ig expoi'3 ;~mkt; gov~"rule gives 2-3 yrs to bring in raw y 

leaf but after that you ave to use nat"ve .//NOTE= GIGS NOT AN .A 

ADVANCED TECHNOLOGY INDUSTRY, not e transistor chip biz, so it can o1~ 

be readil tranel eds technolo t ainin mana ement skills . ., a\ 

Aust a1 mkt sha then writing license agreemen s£or 1-1 

Mar boros In Italy, Germany . . .but as brand progressed. PM went its own CO 

way, putting up factories . . .PM first co as re ared to license lar e 

fgreian~zn=c .s~r~ovidina ec , supervis~.on u m contro , mk a 

suvervision . . .Phi~lippine licensee a par acularly goo e .g„ 2 . . .PM-Int'1 

~ecentraliy_ad., depending on the country mgr/"It frankly takes some ime 

to e~p a cadre of experienced people who know our policies & procedures 

& who are also good cig men & good mktg men//US one of the few 

mkts w/single vricin~, wide range abroad where US co .s perform a taxco51 

ec'ting function, excise taxes can be as high as ten-to-one (RK?) . . . 


pm/26 

PM tries to sell at upper end o£ any £or . mkt, riding wave o£ jeans, 

Coke~ , US mu ic as r~.se in per capita consumption abroad helps cig 

sales.,,Germany : license in '60 built first vlant there in'_2 & 

put in cowboy image that wor ed . . .JAPA : very big monopolized mkt, 

imports about 5% o£ mkt, PM licenses Marlboro there//ITAL concern 

there was German co .s would have unfair advantage in t~mkt because 

more money to toss around, so deeisionsto stop adv . of all ti+~Anas 

a~s of '22/other than Latin America & Afr~_ca, t~to~inustry is basically 

off TV . . .PROFITS : licenses iust can't generate same degree 

ro£it se s at on t=" ~, PJZ , s_ o• 

iving sn t hi 

,, V 

. .as biggest tax collectors, ' ~ ne er areprof'i~~ .~e""~'o~~'e~r~a 

Si"E'byore ign govts . . .prices & profits higher in western Europe while 

rice in India is 1 0 a Pack . . By late '70s cigs were nearly 5 % share 

of wor mkt is this ust PM?) 

--T-RiRRTS_ Fhrfiesx 1 9-1-R/i : Mil l nr in 'Rn hnonvi +n hnil A 9'JJ.19 mil l i ..n 

~~ brewery in Trenton Ohi7o-arter decade of growth that saw t_s 

640L{ ' dustxy,,~ ..,a•-~rhole/b.y '82 as plant is ~i.one, U_5_beer 

th~rs`~fell for firs't time in 25yrs3 worse, ~ieuser-'8-wo e up spent 

Ion on i s own exrans on ripled its adv outlay -- and now : 

' A-B RULES SUPREME . . .I-Iigh Life sales off 50% 

--WEISSMAN ELECTED LINCOLN CENTER CHAIRMAN, NYT 'i-25-86 (see GW file) 

--HERE'S ONE TOUGH COW_BX, Forbes 2-9_87 : Its pack is the same & its 

tob . wTiile-'lig qu i yis no better than its competitors' yet this 

one brand accounts £ 28% of PM revs & more than half _its_net.s a 

m-Tc crow e w nearly 250 ranffs, se s nearly one out of every four 

US cigs sold . . .since '80 it's grown 3% a yr while industry as whole is 

losing 1 .5 to 2% a yr . . .orig . introduced as women's cig in '24 & at time 

it was converted 30 yrs later in male-oriented product, sales were down to 

paltry 18 million units a yr//key is B- O MAN £anc e 

d.ialogue (the MM never talks) seems to be en~ov ng his solitude . . .TV 

B BABLY BENEFITTED BY TV~S~SA because Its Imge product were 

already well known w/large mkt share whereas smaller brands & new ones 

had much tougher time breaking thru . . .onl Merit h s ed as a ma 

brand since TV b how to keep it growing, thou ? Answer was - 

NSI ,, mk g jargon for variations on the products details given mL109 

Harting w/softpack in '58 . . .MM has appeal worldwide as a person ty & 

sueeests adventure, freedom "being in charge of yr destinv," says PM 

'1 boss Murray arl~ros said in surbey ~o e stb- ronger than Camels 

& says a 42yrold electronics products maker : "When I inhale them, they 

make my lungs £eel fuller than w/any other cig"*****THE PACKAGE MAKES 

A STATEMENT 20-25X a day, consumer is expressing how he wanta to ~e 

1seen b~Fiers/Marls often appeal to THE SOC2 who use t 

~~E brand as nart o e r war ro i e costu_me _ewelry or a a c macho 

ima e work ab a3& says muc"h-a'~oC-ut user ~ s attitude toward US, 

oreigners associating cowboys w/Amer image, foreign ambivalence t w d 

US= admiration, resentment, emvyi Marlboro seems e cit the admiration 

part . . .as Americans want to be chic & buy expensive hliro, products like 

BMWsa it's easier for Europeans wanting to affect Amer . manner/even while 

critical of US foreign policy, many foreigners want to come to US & hit 

it big, thus Marlboros as downpayment or only step possible 

--GENERA'r• Fnnnc TO RF'ORGANI2E . NYT 8- - 7 : Most of corp . staff to be 

disappeared & three operat3 na unls created -- GF-USA, GF Coffee & Int'l, 

and Oscar . to allow divs, to faster & more flexible decisions, most 

of 2,000 at White Plains may be out, hope to save $150 million . .on staf_f_ 

cuts . . .first move to strengthenm_anagemen .v P_M, nation's largest consumer 

products co .lur TacT nearly O of M's sales in '86 but only about 

20% o£ net, . .GF chairman Smith denies PM has put pressure on to improve 

margins 

--STUART DAVIS PARIS PAINTINGS ON EXHIBIT AT WHITNEY-PM, press release 

10-1-87= Whitney & its programs at PM are funded by PM 

--PM TO ADD 2ND GLOBAL BRAND?/Adweek 11-9-87 : PM feverishly working 

to develop new brand abroad where mkt for US cigs is booming/Marlboro 

lis world's lar est-sellin acka ed ood of any kind w/vol at $7 billion/ 

=Marlo responsible for av ng near y 1/4 of the West German mkt, nearly 

19% in France, 75% of the Jap . import mkt . . .Eliz Butson, vp-mktg services 

of PM Int'l, says PM wants to support Marlboro w/2nd brand "but you ~ 

don't create a global trend ; it has to take off somewhere" . . .US brands 01~ 

labroad have two big advantagesc QUALITY & SSTATUS/Marlboro coming on now ~ 

in Brazil where 3avori e~3s sT43~ig;-3uTI=~~avored brands . . .Marlboro adv 'A 

campaign was $70 million in '86 . . .DifP. appeals as new brands test-mkted ~ 

like Star in Europe, some want low-tar, some value (price) . . . Tougher now ~ 

to introduce a brand w/o adv nermitted legally in many mkts//might have ~ 

to e a tech . breakthru or some ii$~'ng special to justify a new brand ~ 


pm/27 

--CAN A MKTG MAN MAKE IT MILLER TIME AGAIN?/BW 2-1-88s Miller's 

pres Wm Howell took early retirement at 57 as HMax says Miller's slow 

growth is "not a verformance we c .be satisfied with_" . . .Howell was 

Miller chie~~ 8 yrs & 32 w PM . . .new man 3.s heonard Goldstein, 60, 

sr vp-sales, to come up w/fresh ideas & strength ties to its 717 distributors/"EVERYTHING 

TECHNICALLY IS VERY GOOD AT MILLER -- EXCEPT 

FOR ADVERTISING & MKTG," sez Maxwell . . .irony since Miller revolutionized 

beer mktg . . .but after Lite rocketed to top, it grew only 1% in '87 

while Bud jumped 35 & Bud Li ht rocketed 20 .6%/Lite needs a shot in the 

1arm . . .High Life off 60 s nce u Genuine Draft is off to good start 

'& two lower-price brands, Miiwt6ikeetis,best & Meisterbrau, have helped// 

' COORS & A-B ASSAULT GENUINE DRAFT AS A CROCK . . .A-B has nearly 4056 of the 

mkt but Miller spends 1f3,aaore

I 

I 

i 

PM hnm*oJ~y/28 

--BEYOND MARLBORO COUNTRY, BW cover stor -- s PM net up 25% in 

•87 & 31% first half of '88 w 81 of that net from tob . "But beneath 

the profits & the public bravado, the worries are mounting as the 

drumbeats of bad news accelerate . .,PM had 7th largest ~rofit o£ v 

~lic US~corp la~t r//to defend the cig us3-ness in ~ .ncreasingly hostile 

environmen~, PM is wielding every legal, PR, & mktg weapon in its 

considerable arsenal" . . .On 7-25 GF CEO Philin Smith left,._to take the 

top iob at Pillsburv/GF was eroaninE uncTer weieht of sti£lina bureaucracv 

that sev shakeups couVn't-dislodge . ., as vac a ed for yrs over 

how to manage a string of expensive acquisitions, sometimes imposing 

its ci know-how on vastly diff products, sometimes adopting hands-off 

policy~/Maxwell a chain-smoker w/lingering trace of English accent . . . 

he installe~d~~Smith in '86 to move at GF & overcome its "( verana~v 

HMax . has tried to get them to move more qu c ~y 

"on things that really have to be done" . . anticipating a $10 billion 

cash surplus over next 5 yrs, PM is scouting for another big acquisition/ 

Maxwell still shudders thinking about the 7-Up effort, trying to turn it 

into another Pepsi, applying massive fundings & big nat'l promo, declining 

to back local promos by local bottlers, was slow to introduce new 

products, held up Cherry 7 ;Fp, a hit under new owners//mkt share had 

drouned-to eTTow TLw from high o .•'IT WAS NOT A O 

TO MAKE althoug a e me certainly didn't oppose it . . .aggressive 

adv . & local promos, 7-Up is now thriving under new owners//GF has shown 

- t11th ua no ow x va tiiiti ac usonsor mos £tf oe decade thdu 

r 

Ln whic coa d after having reigne or some 15 yrs . ., misse 

many oppor n ties, altho it owned Birds Eye veggies, it miss 

frozen meat boom . . ."While Stouffers was out there estab ishing Lean 

uisine, F was screwing around w/Pop Rocks," a now defunct novelty 

candy that fizzed in kids' mouths/for more than a yr PM was a patient 

parent while Maxwell & Co . were learning the food industry + breathing 

rm . . .but now t~ie word has come down : ston rt'cot-dragging & start grow~g/ 

Max . says he pushe3-GF -co invest in an expensive new natural ecaffe3 .nation 

system because he didn't think Sanka was good enough . . .in Jan '86 

Max . replaced longtime GF chairman James erguson, too much a deSegator & 

o£ten distracte-by outside interes s i e GOP work, with Phili S~i 

an intense exec who refocused att on packaged foods & sold oi'1' rgina~ 

operations like toys, seeds & Burger Chef chain . . .SYnith reorganized 

into 3 units & cut 2,000 jobs corp . & mfg. to save $75 million/each 

unit has its own CEO so Smith leapt at chance to run Pillsbury & Max . 

hasn't replaced him . . .GF volume moving ahead though probs w/Maxwell 

House/Oscar Ma e doin best of the trio . . .GF bought the Madison Wis 

cold-cuts producer in 181 s nce ts growth has been a compounded 

20% a yr . . .doing good things w/turkey via Louis Rich Co ., e .g ., turkey 

pastrami, also surimi, imitation seafood + new products like Zappetites 

microwave snacks & Lunchables convenience meals . . .combining resources 

like Jell-O hooking into Oscar Mayer•s refrigerated distrbution system 

to launch ready-to-eat refrigerated desserts (Jell-O instant pudding 

took time to prepare) thus Pudding Snacks) . . . coffee biz a nagging weakness 

though acctg for1./_'i-Qf _GF r~s, US demand decS'in3ng a ou a 

yr (RKs 1 ke cigs , fierce com etition, dropping mkt share & profits . . . 

ILLER= mkt share has an u she at 2-22% while A-B is wa out ont 

ougTt~ii -powered mktg to e rowsy eer iz5,~ segmenting 

the mkt -tobacco-style w/Lite & then flashy adv campaigns . . .A-B beat 

M~i_ll a~t its own game, but dependence on Bud seen as potebt~.al soft 

spo-t . . .b311er tFirowing~i3'3~a'83's' innE0 t~Tie~mktplace & better ads . . . 

uFt can a£ford to be patient : PM sales_keev boomine, int'l revs up 25 .4% 

in '87 & net up 28.2 ut depen ence st there : cigs pro~uce~53r- of 

P1Yf's_'8?,_,yo7.,,but 81~,of, profits//~BACKGRO .?TND,ON H.9NJISH MAXWELL : His 

~'g-~tEr ~ex: a~ £iY~st'g~ne'ration tob . ~.eaP~ea~er in`~on~on early in 

century . . .Cambridge grad . in history, Royal AF vet ., still wanted to 

aee the world so joined w/Thos Cook/married an Amer . & via £ather got 

salesman job in R'schmond w/PM . . .he helped get co . heavily into int'1 

~ in '60s -- PM•s First "and to some extent, most successful, diversifica- 

111 tion," he says . . .in Aust alia from '68-• 4 laid foundation for PM's 

strong presence in Asia he pus e the cowboy image everywhere desp te %10 

s ron" g resis ancicenseese "It was a great strategic move," says CN 

Weissman/"The co . is at a crossrds," says Geo Thompson of Prudential- -*-3 

Bache Securities & what HMax . does in next couple of yrs will set the 4~- 

decade's patterns i M can e e a e si ific s011 

J outside the tob . biz PERSONAL : not a flash , has soothing voice ~ 

~syo es Mar oros but tri.es competitors when no one 3.s oo ng . . .a ~ 

term thinker w eve for detail- . .PM•s art patronatrea ca . $13 million -' 

in '87 from Amer can Crafts Museum to an ce Theater of Harlem 



--AMERICA'S MOST ADMIRED CORPORATIONSt~ 1-30-89 Fortunes Merck & Rubbermaid 

remain #1 & 2 . 3M up from #6 to 9f3, P1y[ is #4, up from #7• . .noting 

Rubbermaid prospers on strong plan that weathers good times & bad, that 

3M is remarkably innovative . . . M rated thre for LONG-TERM 

JINVES'1'AfENT VALUE, FINANCIAL SOUNDNESS & ABILITY ATTRACT, DEVELOP & 

KEEP TALENT -- BUT ONLY 42ND FOR "WISE USE OF CORP . ASSETS," crit. over 

Miller & GF acquisitions . . .but its admirers cite & applau co .s use of 

its tob . earnings "to diversify into potentially synergistic businesses 

, & expand overseas" . . .in tot~l return to investors over most recent t_Ovr 

eriod annual fig was 23 r 22 5 or ere for Rubber- 

I I mI ~_I% T'nr 'I - n-< -r~r Rnc~na_ 'Jn_Q fnr r~rnn 

--PHILIP MORRIS'S BIG BITE, NYTimes Sun Mag 4-9-89s Maxwell Hans Storr 

1 & their investment bankers Wasserstein, Perella (RKs why they?5 had very 

carefully studied Kra£t . . .PM w'delY acknowledg_ed to be one of US's bestrun 

ma'o c .-- "le cock some woul s~a arro~dfSt~~e immense y 

'Qrof tabla. It is a patron o the ar s& a sponsor o wor -class sporting 

eventsi it gives generously to worthy causes & prides itself on its 

advanced social conscience, although there are those who say it is pride 

mingled in equal parts w/cynicism . . .its execs smoke & the bldg is one of 

few modern offices equipped w/ceiling fans . . .its 5 .0_00 so ft sculpture 

garden "has the dubious honor of providing the city's most luxus shelter 

for the homeless" (RKs enclosed, heated, chairs, food bar) . . .4~~co~ 

w1a small co attitude that never takes success for aranted . . .~cosmo olitan~ 

£~'la,~vo~,= CEO a Scot, COO an up-from-the-streets NYer o£ Irish extraction, 

ief fin . officer a German by birth, .int•Z PM headed by Australian & PM- 

USA by an Israeli . . .co . works to exhibit its social consciousness= from 

the Urban League to the local rescue squad in Va/"THIS BUSINESS OF .-6NSTANT- 

L`L.BEING_IINDRte AmTACK IS A MARVELOUS THING IN A EERTAIN WAY." savs GW.-" T 

MAKES OUR PEOPLE FEEL COHESIVE & PUT-UPON"// oass-roots cam a 

vs . Svnar in Oklaa getting little kids to write & say cer a n cultural 

events would be canceiled if his law went thru & tob . couldn't sponsor 

thems '•THEY RE NOT V PEOPLE AT P ABSOLUTELY N RE- 

SPECT FOR THE HEALTH OF AMERICA", . .Earlier diversifications went into 

lark's Gum because i was thought people would turn to gum upon giving up 

cigs*****but in earlv •6Os PM made extraordinary discoverv= "There was a 

'~remendous amount of mone to be made in tob .," even rising £ed, & stae 

taxes did-' t hurt demand so "e£oun tH-a-C-T7E COULD CHARGE A REALISTIC 

PRICE'•****~******(RK= and what is that?) . . ."Of course their customers kept 

buying cigs ; their customers are addicted," says Kenneth Heebner of Loomis, 

Sayles brokerage house, E~ tob . expert . . .thus, rofits sho e ed back into 

technolo~icaZlv efficient plants + TV ban of • gave establishe rands 

Sike Marlboro "a virtual lock on their territory•'*******nearls impossible 

for a new roduct to challen e//story of how Peter Grace called umn 

re z].ler beer, col 3 p O ee sold "in uch he s wa as ¢i s BOTH 

~ LARGELY IMMUNE TO ECO . FLUCTUATIONS +•'it might be possible to score impressive 

gains in mkt share w/aggressive nat'l adv on the Marlboro model"= 

MILLER TIME"//yet critics of their Miller perf .s "The reall had it in 

~F their hands, and they threw it awa ," says Emanuel man, e ot 

arro~ an ev i n count on euser's mktg clout" . . .Miller ho ding at 

aiou 20 of the mkt 7"._Uer clever a.av campaian in The Uncola but 

PM "did not understand the co,'s comp-l. .ex re ationship w/its bottlers and, 

once again, it underestimated the STRENGTH OF ITS COMPETITION"/GW notes how 

o e& Pepsi were making their money out of syrup & vending machines while 

7-Up was making it on store shelves & "That was where Coke & Pepsi began 

cutting their prices," citing a Calif chain where w/double coupons you 

could pick up a two-liter pack for nine cents . . ."ZUp was El Disaster," 

says Goldman//PM breaks up 7-Up & sells off -pie4es in 04 moves inTo 

the food biz in h~~ wavTv,r,a s,s'fi"red on1V sli ht dent in cash flow & 

a contusio ide, .,by '85 has GF & ecs no~~o 

in ervene or a 

w i e vs . 7-Up & errs anew b OVERESTIMATING MKTG SKILLS OF ITS N 

qUSSI heir k " ust g • says ohn McMillin of 

udential-Bache,' sty or ng en orserso products///by '88 PM again 

_ generating annual cash surplus o£ $1 .7 billion ($190,000 an hr), which 

made PM itself a likely takeover candidate so "There was only one thing ~ 

to do w/money like that . PM had to get rid of it" . . .Hamish Maxwell well ~ 

known for his abhorrence of waste . . .PM execs believe F Ross Tohnson "had_~ 

~ taken leave of his senses" & a similar leveraged buyout of PM would leave .., 

it where a been, trapped in tob biz KRAFT A BEAUTIFUL MESH W/GF, ~ 

tierv little overlap in food lines, i .e ., only in salad dressing -- and po 

Kra£'Ers came in Cottle wFile Lill's was powdered + Kraft's ood commercial N 

food business as supplier of restaurants & cafeterias . . .w~Kraft PM ready 

-to challenge Nestle as world's largest food mfr & Unilever as largest consumer 

products co . -- and KRAFT WAS A CO . "VIRTUALLY SET UP FOR A RAID"= hivh & stable earninss . vension nlan overfunded . iIttle Te1D_r. ts ~ 

- 

er ous un erv ue ' a t o n ic man we aware of the vulnerabil- 

2g ty bac buy its n stock as fast as it could, trying to drive up the 



pr9.ce . . .twice a yr Kraft called its officers, lawyers & bankers to a 

"fire d+-ill" in case he got that call one afternooni in their drills, 

thQ hvothetical enemv was PM#~,##ssmooth bargainin , deal done at Westin 

O'Hare Hotel at airport . . Kraft had fought back w/planned $114 billion 

recapitalization . . .CONGRESS CRITICALs tremendous new clout PM has in 

trying to~enc e its critics esp . in the pr_e~3s, dependent as it is on 

a~~ w th PM as the nation~~a~Twer£ ser now . . .PM now the 7th lar~est 

i_ndustrial en~rnr~se in US" --IS BIGGER BETTER FOR PHILIP MORRIS?, Fortune -~ 8-89e bet . Kraft 

,~ 'purchase for $12 .~billion in Dec '88 thru mid-Apri1 PM stock rose 23%/ 

•Ic~ ! interview w/engagsng cotsman Hamish Maxwell, 62, and a 35yr PM veteran// 

1~' »>!!! PM had r conside v ra ed ge a le uyou e d eb ar t y 1 in '88 b u t nie x d ita mo al st 

certainly it would have meant breakup of the co . & "This says everything 

you've done in the vast is wrong" . .it would mean liquicTa ing£~co to distribute 

proceeds to ehareho~ders & this isn't "necessa 9i1 co structive . 

I'd think differently about it if we cou n increase our earnings . . . ."/ 

PM's rowth not 'ust for sake of rowth . . . .earnings have followed + "Growth 

so ovPns h,n~G „u for your emn ovees" . . . .PM always ran scared, e .g ., 

BA~ 1 ~ 

. t sudde w more a ressive the bizs " T he cou 

wel ma e ci s, such as Kools," there y maybe hurting PM// 

"T E FOOD BUS . APPEALED IN PART BECAUSE IT'S ENTY OF ROOM FOJZ 

GROWTH" . . .w/benefit of hindsight, 7-Un was not an appropria r u ;s ;tion, 

though the idea behind it was OKe after all, Pensi was wav behind Coke 

when it ~ot into +heaame in •30s ; but to play catch-up in the '70s & 

rMs was a helluva lot harder, and 'ts ea 'n s were "too sm ke 

strate 'c s se S we sold it" . . .BUT= MILLER T OUR EXPECTATIONS" 

ough steam went out of it in 'SOs par y because A-B grew "more determined" 

&"PERHAPS WE OVERREACHED ON PRICING . So the business tailed off" 

so PM "started re er in VE BIT OUS - RM 

WAY," introducing new brands . . ." E'RE NOT GOING TO SELL IT" /General Foods 

perf. uneven.but some good new ideas . . .onl. .y real aroblem here is the 

goffee biz, partly due to rise in soft-drink mkt . . .coffee can improve w/ 

better mktg & packaging ideas & coffee ad "has been terrib " . . .GF had 

become more of "mandar' t e o o e ' n" (meaning bureacratized), 

too many people oing things too slowly w o anybody really knowing what 

the prob . was . . .g2od R&D~ maybe_best in indust~, but not yieldin$ enough, 

but they had the go-sense 'to leave~cr 1Pa er in place in Wis .//KRAFT 

"MUCH MORE LIKE PM" after making "a conscious decision to change the management 

in the early '8Os" . . .noting rehearsals vs . takeovers by Kraft 

' heads John Richman & Michael Miles . . .when takeover bid came, Richman ruled 

f+ out defense that wo id have branded PM as "merchant of death" . . .many new 

possibilities in the joint Kraft-GF operation, ,naybe one sales fo _^ce . . . 

. can cholesterol be taken from eggs as caffeine was from coffee?=could 

open vast new mkt . . .HM pushing for psychological synergy . . .Kraft has 

wessentiall ac uired GF . . .fantastic growth opportunities abroa seen by 

, who says ' eople have really i,ot to be conditioned NEVER TO BE SAT- 

ISFIED." he doesn't want his people expecting me a1s after a good yr but 

i 

to ask "How could we have done better? What did we miss?"//SIDEBAR ON 

TOB . OPERATIONSa Maxwell is pack-a-day smoker who says he quits "for a 

month or so, EVERY SO TEN, JUST TO SHOW bAN . IT•S NOT ADDICTIVE" * 

, tob . is abroad w/JAPAN AS THE REAL PRIZE, PM has grabbed 7 .5% of the mkt 

1 there in past two vrs 

##'rna'' 

a MUST USE LINE . . .w/a straight face e continues to argue ere is no 

scientific evidence to prove that smkg causes any deadly disease . . .he says 

ETS is "lar el a social i sue these da s, NOT A MEDICAL ONE" . . .industry 

sales sl pping at about 2 . a yr t ou _,OOicans begin each day . . . 

PM magazine touting co .'s philanthropies, e .g ., 71 tons of food sent to 

Armenian earthquake victims//Daynard on litigation status : Cip . verdict 

"has put everything in a state of suspended animation" . . .real oppty in 


I 

I 

PM HISTORY SUPPLEMENTARY FILE #1 (chronological) 


--FTC DECISION 12-31-39 RE "ENGLISHNPSS" OF PM PACKAGING as misleading 

//complaint filed s-5-39 . . .us~.n~ "LTD" 3n bi~eer tvne a ter 

its corn . name to stress British asvect . . .depictions on back which 

c7.osely resemtil~3t. Royal Coat of Arms . . .words "By Speaial" & 

"Appointment" as if the eig were endorsed by the royal family . . .terms 

"English Blend" & "English Ovals" . . .PM's use of Latakia in its blend 

not used to any appreciable extent by any other Amer mfr//also labels 

speak of "FACTORIES London, Cairo, Hamilton Canada, Richmond" on the 

Eng Ovals pack . . .on PM ~oack "Established Ove_r yrs" . . .MARLBORO pack 

had heraldic devices close y resem ng r ot of arms . . ."Player's Navy 

Cut" is close rip-off of the Imperial Tob Co's Navy-Cut pack in Gt Brit 

& TRUTH SS ALL FOUR B -(Ovals, PM, Marlboro & Nav C mad 

thus P nac ae r ye s see complaint 

at 2 O for noting on PM container how "Established over 80 yrs & Philip 

Morris & Co . Ltd ." are arranged in an arc "conspicuously placed & printed 

in hvy black type 6/32" while the "Incorporated" is 1/6th as large -- 

' i .e ., 1/32nd of an inch h igh -- & in ligh t faee . . .also address 

o£ 

"London, W ." . . .on Eng Ovals sez "Agents & Depots all over the world"// 

complaint sez "In truth & in fact respondent has not been established 

for So yrs, & is not an Eng . corp" . . .and the brand Player's Navy Cut 

are not made by John Player & Sons//PM biz office is 119Fifth Ave, not 

London, W .//HISTORY OF THE ENGLISH CO ., b286s PM conducted biz in London 

as early as 1846 but after his death in '73, ha :s wi ow ro . Leopold 

con uc ed bMz in partnership till '80 when Leopold bought her out . . . 

Leopold incorporated in '88 under named PM & Co ., Ltdt transferred to a 

new eorp . in '9jt w/same name but dominant fi ure then came Wm Curtis 

Thomson, who had previously been connected w/the enterprise . . . the biz 

was reincorporated under the same name in 1920 & continued under Thomson 

interests till 1937 . . .these diff . versions of the co . exported cigs 

to I35, starting not later than 18 2, thru exclusive sales agency, 

ECIfMEYE-R~.in~.~ba ITZ corp called PM & Co Ltd was organized w/ 

Eckmeyer & Eng . interests each owning or controlling half the stock . . . 

this co . continued to import English made "PM" cigs till 1932 & also 

began & continued manufacture of cigs in USs to this co . the Eng . co . 

assigned its business, labels, trademarks & good will in the US . . .in 

1_907 ANOTHER NY CO4 ., "also named PM & Co Ltd{ was organiz d & aequired 

all the assets or the predecessor co ., a5.3. o£ i~s s oc was owned Dy 

by the Eng . co . & Thomson interests & the bonds by the Eckmeyer interests 

. . .Mr Thomson was pres of the new co ., dominated its policies & 

I spent much time in NY attending to its biz . . .in '19 a Va corp . wa$ 

organized & aa uired all the assets of the NY c - except cash & marke 

a e securi ies . . .in , the co ., thrut'a_wholly . :owned .Bri~_ 's:ubsidiary, 

PM & Co Ltd, acquired the entire biz of the existing Eng . co . - so 

it can be claimed there was an unbroken (if tenuous) line of corp . history 

& commercial life, .to call it SO yrs old is "not w/o justification"// 

Player's Cut are made for PM by Amer Tob in US///order is for PM to 

answer in 60 days how it will comply 

I --PM EXPANDS PRESENCE IN LOUISVILLE, supplement in Courier-Journal 

in spring of '$2= Ca . 5i1$ . . .PM in Louisville sinee '4A . . .newly expanded 

$10 million plant, nation's most modern cig factory, largest cig plant ~O 

in I~y, also in Louisville are Lorillard . B&W and ATob . . .PM bought the ~ 

, Axton-Fish c er Toban sto ks ''44 . . .o 1 sin hift e i s b w e bl a t o ro 

~ 

+S/ duce 100 million ci s a d , an incre . . .necess~.tated because -~ 

T P sa es ave risen a in pas .rs says McComas . . .also addints some ~ 

20 acres o£ warehousing space to o d nearly T~S6 million lbs of tob .// ~ 

key to have year-round constant temp . & humidity, controlled on each ~ 

floor//THE GREAT TEAM OF LYON & MeCOMASs Background on orris's lit 

store in Oxford . . .sales up from $170 to $300 million sinae 7 . . . Morris 

I expands from Oxford to Cambridge, cornering the university mkt & soon 

alumni began to send in orders from remote outposts like Montreal & 

Nairobi (since all civil servants, counsellors & ambassadors tended to 

attend Oxbridge) . . .returning home from overseas outposts, these customers 

prevailed on Morris to paekage his cigs for sale all over . . .in •72 an 

I Amer . broker was given exclusive agency for PM imports & Co . for_med in 

NYC ~k-9-02 for uurvose of m~f~ PM_ ~c~i s~ in US . . .by '19 so wej .l esablished 

that group of Amer bizmen oli u~outright the entire interest of the 

Brit co in US . . .Al Lyon's famous sales credos "People don't buy your 

product ; they buy you -- and then sell yr product" (Lyon's Precept), a 

master at ingratiating himself & continues to sell/in '19 PM & Co 

~£ormed by stockholders of Tob Products to acquire Amer . ~.z o£ the Eng . 

1 PM Co Ltd . . .for next 11 yrs AL worked intl mkts (Europe, India, Burma, 

China t'or TobProd, claimined to learn many languages including Hindustani ; 


I 


in '30 Ellis & MeKittrick, co-£ounders of TP, gain working control of 

PM-US & AL returns to NY in key selling role . . .in '33 PM launches its 

new Special Blend for the mass mkt, dealers w/or w/o adv support give 

the new brand display space to challenge Bi 3(RKs of course the dime 

brands were also doing that by now) . . .by '3~ AL named s_a,_l~e~s . . .in '36 

McKittrick dies & AL named exec vp, becomes president in ~ . . . he sets 

~ out to build sales force disproportionate to co . size, pushed harder on 

adv w/its "hard-hitting sales message & expanding use of Johnny w/his 

famous call . . .distinctive to co .'s progress has been its "warm, human 

oharac~ra ter definite reflection of Lyon's own love f le . . ."The 

s egy worked, & n'3 jo ne e g Four" *'*"x'#???/recognizing the 

need for a top exec w/financial & admin . acumen, AL sought advice of 

counselors & banker McComas enlisted/McCOMASs a Wall St tra 

'20s, then joined Bankers Trust & starte e31.ng w foreign securities, 

t5tlmoved to Europe & handled bank's securities biz there, w/hq in 

~ Paris, by '32 was vp in charge of Paris office, returned to NYC by mide 

111 '30s, in charge of BT foreign dept, JOINS PM AS VP IN SPRING OF 'LY6 for 

purpose of strengthening its administrative setup, saw to it that sales 

efforts were backed w/solid production, financial, auditing, distribution 

& personnel procedures/see POLISH GOOSE FEATHERS STORY told in loving 

detail + other good stuff on ALs knows & remembers names o thousands of 

retailers & calls them b their ~.rs names, eeps appo~,ntmen s on e 

bu on . . . IBLY R TORY AL TRIED TO SAMPLE GEO WASH 

HILL who had been holding pack of Pall Malls at store in Pittsburgh, 

gets offered job at AT but declines w/good reasons " If I am worth twice 

what I am making, my own co . will give it to me . If I am not, you will 

find out & fire me" (displaying his high loyalty to PM), gets GWH's card 

& standing offer to come to work at AT//PEOPLE, NOT MACHINES= claim made 

PM was first in its field w/"a complete program of life insurance, hospital 

insurance, sickness benefits, a pension plan, paid vacations, & 

allowance for uniforms**"x'*#//JOHNNYi 47"S 59 lbs . in 19 yrs has become 

"the most widely publicized commercial figure in history" as only an 

Alaskan hermit can avoid a Johnn.y sign "jumping from store windows" all 

over America . . .attributing his inven~ion o3i'S~ori Siow, who'd ~ust 

gotten tTe F~i acct, attracted by the clear & be11-like voice of the callboy, 

audition lasts 10 mins "and the only living human commercial_tradetrade mark in Amer indust was born n- 

. . .made eountSess persona -appearances 

& 

during war visited ac or es, hospitals, military bases . . .has a life 

contraet &°HIS VOICE ALONE SS 2NSURED FOR $500gU00," life & health for 

same, his contract or ids h3s ridin planes, r ding subway in rus 

or appearing-"in public w o his compan on, who happens to be Fi3s normalsized 

bro . Freddie, hired by PM as his chauffeur & eseort . . .HIS VOIC_Es 

a real musical achievement, "tonal experts marvel at the way t is non- 

musT.c an can P IS CALL TO EX CT B-FLAT despite competition 

o'3~a sootl- a ing announcer & rumble of stu io orchestra or 

organ off in another key entirely . . .HE HAD SOLD NEWSPAPERS ALONG THE ~.o 

WIND-SWEPT BKLYN WATERFRONT, his parents two bros & sister all normal- ~ 

sized . . .owns a 26' cruiser berthed in Sheepshead Bay, rigged w .special ~ 

platforms & gear to enable J. to handle seamanship chores . . .his car is -c" 

special low-slung MG roadster, lives in his own miniaturized world of 01% 

clothes closets, furniture, towel racks, door handles all scaled down, 0N 

wears size 2 shoes, 8 shirts, 6Q hats, all his clothes bought in boys' ~ 

dept at Rogers Peet . . .no special diet, drinks 8 cups of coffee a day// 

CIG SALES WILL DOUBLE BY '70, McCOMAS PREDICTSs he means US sales of 400 

billion, his optimism based on rise of women smkrs . . .sees trend to kingsized 

brands, spelling out good news for tob . growers (RKs THIS ALSO 

WRONG since filters come in & are the trend, using less tob . per smoke), 

~ citing Gallup Poll that says OF B O Y more than 

half of a11 olled males vs . on1 1 of women . . .FDR as class c smkr . . . 

nice b t of motivat onal finding= ^SMKG IS SELF REWARD . Most of us are 

hungry for rewards . A cig is a reward you can romise rself AS OFTEN 

"O YOU WISH -- say ing_,, to yr e in sh this I 'll have a cia . ' 

Then -ere-' -s---tTie _f rs cig n e morna.ng a e ln1 e eg nning fora 

new days) & the last cig at night (to mark the ending of the day) ."*'""**~* 

RKs MUST USE as showing sev thingse valid statement but also no sense of 

moderation in urging the habit, in effect smoke yr brains out*****at end, 

page on TV-radio diet headed by "I Love Lucy/add to smkg as rewards "SMKG 

INTRODUCES THE HOLIDAY FEELING . AFTER A MEAL, for instance, it is another 

course" 

--PM NAMES WEISSMAN ASST TO PRES . MeCOMAS, 7-13-52s a pr counselor 

he will have general supervision o co .'s PR n addition to aiding pres . 

in exec management tasks 



--PM MAY MAKE FILTER CIG SOON, FIRM'S PRES . HIN25 (first word of the 

Marlboro), 7 19_53 :"PM may soon add a filter tip to its line of eigs," 

is simple declarative lead, hint of thi.s iven b Me Comas at stockho"- 

mt$ dav before . . .he notes fi er m is ncreas ng a O- a yr &"(o)ur 

research laboratories are directing a very substantial part of their efforts 

to -the filter-tip mkt" + "If & when we bring out a filter-tip-cig, 

it is our faitm-r~in~tention that it shall be consistent w/the standards of 

quality we have striven to maintain at PM"##*~#'""*'x'this comes after a first 

fiscal qtr ended June 30 in which total sales declined by $1 .3 million but 

earnings did $500,000 better . . .noting that sales growth is evident in 

king-size, cork-tip & filter mkts -- PM's answer was to launch PM king 

& new natl mktg of the DUNHILL both cork-tip & regular (RKz the big news 

I about to comej'"Y"x"'~""') 

--FEARS & JITTERS, BW 1s-14-53= Even as Marlboro is aborni , PM still 

trying o ma e the old PM ran go w o a v espJe e s ap y FTC, see fullpage 

ad w/big headline "The cig that takes the FEAR out of smk~l" & text 

that comes "as close as poseible to the wor cancer w/o actually using it," 

this soon after Wynder' mous -skin report RK believes . . .adding that 

~ tnaAKB -Is'C111) O S di-ethylene t 1~ s, g "GRe yco cig DOES NOT PROD V- 

TATING V ORS P CI "(RKe note ow this is 

.a,. . Vi- IN EVE Y OTHER LEADING 

at east as directly con£rontation wres of industry as the Kent dbl 

trucks ballyhooing the Micronite filter . . .noting PM already slapped down 

~ by FTC order of previous vr for its claims for Di-G1, but not ma e'f al 

ye~(Sf or er ,"FTC told PM to stop imp ying t~t [it) is an important 

. factor in reducing irritation~:from smkg, & to stop implied disparagement 

of other brands"#~r''E**'*-*,F#~r#"'~r~,(RKs this shows how bankrupt the old PM pitch 

had become'x'~'*~'"**''Fmust use this) 

-'55 ANNUAL MTG W/CHEERFUL NEWS ON NEW MARLBORO : at )i-13 55 mtg, Me- 

,'Comas sez Marlboro intro "HAS BEEN MOST ENCOURAGING & IT IS SELi,G gT_ A 

j RATE WE HAD NOT ANTICIPATED FOR MANY MONTHS," additional machnery has been 

1111' or ered & comp9.ete natl d~.stribution anticipated before the fal1 . . ."IN 

~ 

TIME, THE BRAND WILL BE PROFITABLE, but because of the hvy costs incurred 

in its introduction. we do not expect it to materially affect our '55 

earnings picture" . . .stressing every intention of exploiting great potential 

' abroad for PM products//Howard S . Cullman, chairman of Port of NY Authority 

& "one of America's most dis ngu s e business & civic leaders," elected 

to bd to fill vacancy created by the':i~ecen:t :i_death of his bro Jos Jr 

((({111 

--PM FACT SHEET 9-18-5~zs Plants listed in Richmond, Louisville, London 

& Melbourne . . . c omas res, Jos III exec , Clark Ames vp-production, 

Wirt Hatcher vp- ea , an er 1 ee, secy & treas & Robt W . Roper 

vp-industrial relations . . .chairman of bd Alfred E . Lvo,_, . . .brands listed : 

PM reg & king, Marlboro pop price filter ong slze, Parliament premium 

price filter reg & king, Dunhill pop price king, plain & cork tip, Eng 

/~ Ovals premium price reg//RECENT HILITES . Feb 'S4 ACQUISITION OF B&H . . . 

,~ April '54 McComas temp . chairman of new Tob Industry Research Committee ; 

Jan '55 ouening o~f cig factory in Austr_alia . . .Feb '55 PM establishment 

ment of production faci].it ies 3n Ph3lippines . . .also Feb '55 NATL DISTRI- 

BUTION OF MARLBORO w/flip-top, crush-proof box . . .$eut '55 PM introduces 

ew red, white & R1_d ack for its old mainstav, PM cigs, see cl p~net \0 

page spe ing of yrs rs or ' ~ researc , move away from the old tobacco- CN 

brown pack "recognizes a definite & recent transition in consumer color ~ 

preferences," sez MeC ~ 

-'~_STOCKHOLDER MTG . MILPRINT ACBUISITION OKAYED s Amendment ~ 

approved ~o ~a11ow PM to diversify in o3eT'ds n relt ated to tob/pic of ~ 

DuPuis succeeds Clark Ames at NY hq in production after research jpb . . . ~ 

McComas (AT HIS LAST ANNUAL MTG) tells stockholders co is increasing 

~~ adv & promo efforts esp behind its filter brands "to take full advantage 

of PM's commanding lead w/the flip-top box type of cig packaging"//deflects 

stockholder inquiry as to }vhether PM & Ford are two of "largest '6_ ~-' 

of the NAACP & he sez "It 3.8 ra. eta~r shockina 10 m~ as a southern corn . 

that this co . s ould be subjected to a oycott in the sou & no southern= : . 

voice (was) raised in our defense," said PM had NOT contributed to NAACP 

& added (crytically) . " outhern entlemen kee~ & let a southern corp . 

be boycotted by libel" sea 1 print as 1n egration as well as diversification 

in view of dramatic effect on PM biz of new packaging techniques in 

past 3 yrs, i .e ., the flip-top box 

--PARLIAMENT REYA~~9-58, Parliament to et new filter, new flavor, 

new rice . .e escribed as a"H1-F1" or hig 1 tration bran 

REDUCE T ' NTENT by as much as 25 &-o respective y, co o icials say 

+ new blend ~gve smkr MORE FLAVOR + lower ric to match other pop . 

filters . . .fu11-page ads to introduce new blen w reference to CR mag 

favorable report on it#~*#xr~##(see other cf . to this & CU's anger) . . . 

this develo result ' c d consumer dem d for a hi h-filter 

cir, STRIKINGLY EVIDENCED IN "THE SUDDEN RISE 3NPOPULAR2TY" OF NT cigs 


PM history/}4 

--POTPOURRI FROM "THE CALL NEWS" PM making definite contribut5ion 

to favorable US balance of trade by its intl cig sales . . .4,800 

employees share in PM profits, totals about $1 million+ for all who have 

24 mos exper3ence% ditorial "On the right track?" & key line is "Essentially 

. . .we are in the biz of selling manufactured products to consumers . 

This means we must change just as fast as people's tastes change"//JET 

'LINCO N THOUGHTS . How test mktg helps put brands into natl distributon 

I as w newest PM brand, the-GALAXY . . .wisdom of test-mktgi use small mkts, 

don't use more mkts than you need to do the job, don't try to test too 

many things at once, don't stay in test mkt too long//GLARK GUM CO ., in 

•64 Amers spent $300 million on chewing gum . . .mktplace un ergod.ng "taste 

revolution" requiring more & diff . tastes & flavors & smart packaging + 

most exciting adv . . .gurchased by PM in '63 & while_st_ill small vs . Wrigley, 

has real growth potentia1, new T`lavors e~Sour Lemon Teaberry & Cinna t 

w/diff packages for each/a lean orEan~ization under Gen ffigr S pPollacic, 

Clark first on mkt w/sovr fruit flavor though others have wor ed a ths . . . 

ow has natl distri fir t time & etti i la on PM' 

a s o a nc u eason -ow . . .new packag ng by award-winnang 

ter Landor & Associates of UF its other brands Tendermint & 

Di-et Sugarless Gum 

--PM TOLD TO REVISE JOB POLICY ON RACIAL BIAS ISSUE, 1-5-458 : US Dist 

Court Judge John D Butzner Jr upheld charges brought by two black PM 

employees on job discrimination . . .basically blacks have been restricted 

to one dept . & prevents them from carrying their seniority to another 

dept . . . . Douglas H . Quarles charged PM refused to accept his application 

for transfer from the pre£abricati•on dept to the shipping, receiving & 

warehousing dept where he could have qualified for a higher-paying job as 

a truck driver . . .court holds PM's is not a bona fide seniority system 

& non-transfer policy "has its genesis in racial discrimination" . . .order 

is that seniority be applied on plantwide & not deptl basis, as present 

arrangement nrevents Negroes from ~etting better obs/the restrictive 

departmental po icy was con oned by Tob or ers~ ~ntl Union local 203 . . . 

historically, assignment to depts has been by race so that w/relatively 

few exceptions blacks work only in prefabrication & stemmery depts while 

whites work in higher-paying fabrication & shipping depts/court says blacks 

not seeking to oust anyone or preferential treatment, only fairness in 

training & promotion to better-paying jobs/this ruling HAILED AS MOST 

SWEEPING & COMPREHENSIVE~ . :-EMP.LOYMENT RULING SINCE ENACTMENT OF TZTLE VII of 

'64 Civil Rights Act . . .also in few cases where blacks held jobs in other 

depts, they were paid less than whites doing same or comparable work 

--PM COMPLEX A 'VOTE OF CONFIDENCE,' on new plant LP-27-70, calling the 

move a ringing vote of confidence in "the beleaguered cig industry,° an 

y 180 million comnlex in-Sj .chm_ond_w/].._5 million sa ft, scheduled to open 

a~'in ^j3 . . .PM has plants in the 1900 block of E Main St & the 700 block 

~ of Stockton St + 8-story R&D tower overlooking Richmond-Petersburg Pike/ 

i Jos III calls this "clear & strong wvidence of our confidence in the future 

of our worldwide cig biz . . .new lant will make all ci s PM e ts/staying 

in Richmond because (1) PM's mfg home historic y, 2 proximity to tob 

, mkts, (3) improved communications & transport, (ly) city's "tobacco orayK 

ientation" . . . INCREASED UNIT SALES 88 IN REST O 

~f T~INDUSTRY ROSE ONLY . .# •~## RK: PM streaking now noting 

~~ ~ that as een considered most effective user of TV to push sales & 

~,- even w/TV ban pending, "THE MARLBORO THEME LENDS ITSELF VERY WELL TO PRINT 

1 MEDIA," sez Jos III . . .the p T i~s equivalent to NYC blocks . . .the 

~ /ll work areas will be bounded by glassed-in gardens floodlighted at night . . . 

~ PM has - r cam s 

--MARLBORO MAN KNOW HOW TO GIVE A PARTY :4,-27-71s Good as showing the 

esprit & closeness of PM ties w/Richmond/Big blast tossed at Hotel John 

~ Marshall for Richmond biz establishment on eve on annual stockholders mtg, 

offered steaks, lotsa booze, Miller beer, slide presentation & lotsa 

good cheer . . .Jos III as emcee, butt of jokes & in charge of poking fun 

at Richmonders, e .g ., David Reynolds exec vp of Reynolds Metals said by ~ 

Joe to be interested in recycling the (bronze) Lee Monument, or bd chair---3 

man of AH Robins Co who refused to leave a tip, J HARVIE WILKINSON JR,• ~p 

pres o nf~d Va Bankshares, Inc who wanted PM to put all its money in p., 

UVB's Xmas Club savings acct . . .Universal Leaf, conservative eo that neverp, 

advertises, given some tips on how to promote, ..such as pic of Jos III m 

carrying Marlboro sign on his back ~3 

--O'pEXUDED BY PM MANAGEMENT 1#-27-72a Sharply increased sales 

& earnings aga~ in ls ~ r a s annua2 m g~gathers, for 31ST STRAIGHT QTR 

~ BOTH SALFS & NET ABOVE YR-AGO QTR . . .Jos III also thinks "WE H4vF: ENTERED A_ 

PERIOD OF RELATIVE CALM" in running controversy over relation of tob to 

heaT~i . . ." causal rla~ions ip o~~~oTi: ~ous ills is 1NCREASINGLY- 



OPEN TO TIO ,~ HE SAID(RK : HERE'S WHERE THEY LOSE ME)/ 

re Mi ler Beers it's going to take time to turn it around . . .Marlboro now 

at a gallup, is #2 brand in US#~+#*w/unit sales up 20% in ist qtr 

t --C2G . pT•ANT, PACKAGED EDENz Workers can look out on interior garden 

' courts, walk to their bldgs along tree-lined malls, go to employee lounges 

)) overlooking work floor & put on earphones for instructions on hunting, 

fly-fishing or sewing ($9 7 ?) . . .PM HOLDS TOWER DEDr_CAT_rON . 4-26-73z Millhiser 

speaks of continued confidence in cig-- .ndustry & adds "As a matter of 

policy, PM has always given top priority to achieving the highest possible 

~ quality standards for our tob . products . . . ."/PM complex when done to be the 

largest single capital investment in Va's long histroy 

-THE MARLBORO STORY (& STORE), nice column in -9 27 ZZ..T-D by Shelley 

Rolfe//big new promo on Western clothing . . .l0 millionarlboro Countr 

' cookbooks distributed free via r- o ad? .in e a m on Marlboro story 

s ars the late LES'o B, w o manages to speak w/o ever opening his mouth 

very wides filters were considered sissy, "We asked ourselves what's the 

most virile man you can think of -- a cowboy," claims Marlboro Man was 

hatched in a hotel rm in NYC over a weekend, & "on Monday morning I ran up 

& down the hall . . ."/Landry replaces LB on screen & talks of "A MASCULINE 

111 MAN IN H O . .an image so spectacular it became part of the 

American language" RKz here's a guy believing his own press notices) . . . 

the Country Store concept so successful it was hard to find mfrs to supply 

the stuff at proper price & quality, e .g ., 5,000 Stetsons & 3,000 chamois 

shirts 

--PM SEEIfS TO SELL CLARK GUM, 2-1-73z Hoping to save 140 jobs in Richmond 

of Clark people G'YF~-2aR5TMSON FOR THE SALE after buying operation 

& moving it from Pittsburgh to Richmond . . .GW quoted in BW article that PM 

had bought into the candy biz via Clark but concluded it was too small an 

industry & its mkta expertise did not fit well__into thei _commodi 

of the c z . . . Jos s PM now 2 largest cig co publicly held 

& MARLB R NOW 1 BRAND in world . . .capital expenditures at Commerce Rd 

facz ty w reac 20 b' omp1 

--NEW PL z 10-4- article says PM has_z g .g.nthal.f ~ctts 

by now for the 6 million s ft lant, output expe~c~ce~ to reach 3 billion 

a wk by full pro uc n .. o spen_d G}g„ 

~. ities in next yrs c~q~nes_t~Gal~ Y+° ~ x'$7 ;~ mkU ~ ox . ... ?ta _,QpersQa~ ,p~antsj// 

PT:AN*i""CC>NIES'-'L'0~~., WAY, BA$Y' by Shelley Rolfe, 10 1~-77Lz Big chan~e from the 

old ri idl formalized cie factories on Richmond's Tobacco Row on lower 

Ntain 5' , nedL p ~is _you~~ d :_s„largestn cig. factory, turnine out SOO mill ion 

ci~:v . . .first~factory commiss-ionin 20"y'rs`"for Gordon BUNSHAFT, sr 

des3cgm,partner at NY's Skidmore, Owings & Merrill/PM p„ ~in-mess e in 

form of li ht & o enness views ~of gardens via floor-to-ceilin'g"a.ndows, 

exorczsing t e e ess of most fae~ies, ~ing -to i pro e wor environment 

& life quality . . .PM open 'de , he says, they didn't 

impose preconceptions 2nd article dated 10-19-7$z,,,'W',Qy~ s 10 -to, - 

eaeh 94' high . . . if it were an office bldg, design would $~a'~'~°~o~r 

b~a 

e ng o ustere ,a even the product ,u of a totalitarian as 

mentli bt 

mfg facility, it's mos mpressive insidez s Laeiousness, azr nes...s ..,ele an~t 

manle_pareuet floors + mammoth abstract t pes~ries designed TT for the loby 

by Svan Cherma eff 8' x 4' wide woven by tapestrymakers of Aubusson, 

France PLE T COMBS A LONG WAY, BABY, 10-27-74c plush, sound- 110 

insulated 2nd floor 1o es w/its board rm view of the hard mape floors p~ 

woo o be eas er on workers' feet than cement), bright glare- -7 

free lighta.ng, c eery green, blue & ye'llow walls . . .m_ ~n~ 

.- ' or cone ept ~T of cluQtering workers in sub-Ln'ts as a complete prouction unit much less cT 

dust than at o1d Stookton St lant . . .locker rms for all, no piAed-i .n'- ms5,c_ rn 

bot res on to wor er su es ion ,- o~ f to-tal lant cost said W 

devo orker amen s 20cth-St .~ .~ :aefozj*. :,'to~ :. eoome„ware ouse ONCE- co 

PROMINENT TOBACCO ROW FADING FROM INDUSTRY SCENEz there were 60 plant 

in Richmond in '80 now there are . .Larus & Brother, k a House of Edgewor 

, gradua ly closing its mfg & stemmery operations here, in town since 

1877, acquired 5 yrs ago by Rothmans of Canada Ltd . . .3giantplants on 

Cary st closed in recent yrsz Lorillard in '62, ConsoTi3a~ed Cigar lYf''69, 

and L&M in '70 . . .on1y American & PM remain on Tob Row . . .by 1875 there were 

49 cigar or cheroot factories & 36 chewing & smkg tob factories in Richmond, 

& about this time cigs began to be made in great numbers///ART CRITIC FOR 

„ T-D FD C oss itt does 11-3-74 appraisal on new plants Bunshaft built 10 enormous 

mous glassed-in vaults that have been filled w/trees & flowers, nearly all 

) indigenous to Va . . ."~he ~orizontal monumentality of the nlant is countered 

'l by the almost medieval towers of Fr zen r research b1 . .lots of Va art 

for these facilities THE MAGIC IN TOBACCO by Chas Houston 5-22-75z Plant 

can turn out 25% of of US demand for cigs now . . .PM brand now turned out 

only in Stockton St plant . . .3 drs & 27 nurses covering the three shifts . . . 

Y- the ci -maki & acka i modules o for 00 000 

million 

o a of 1 0 modules, totalling $50 



--PM, EEOC SETTLE CIVIL RIGHTS CASE, 4-22-75= PM consents to conform 

its practices to '64 Act, start a program for dissemination of employment 

opportunities, start affirmative action file, accept job applications 

from blacks & women even if job doesn't exist 

--PM STRIKE, CONTRACT & SYMPATHY, 3-5-77s Strike in 14th day/jurisdictional 

& manning issues, PM wants to be able to shift machinists to 

whatever jobs are needed 

--PM GROWTH MESSAGE MAY BE AIMED AT EMPLOYEES, 4-9-77+ Jos III tells 

annual mtg that 23 yrs of steady growth isn't enough & PM still isn't 

#1 in either of its main industries . . .in '76 (bicentennial yr) PM ac- 

/ counted for 25% of US oie biz, 5% of cig biz outside US & 12 of the beer 

b~//also NETt7 L~1G~.~'t~CTORY BEING PLANNED but not in Richmond are good news 

on Merit intro, doubling of production expected the next yr . . .PM had 

largest unit volume inerease in industry as it has had every yr since '66 

'~-.".--PM JARS BEER INDi35TRY._?~ 27-27= Came in unhampered by conventional 

wisdom o~' ie~eerTiz, has revolutionized what was consgryative & highly 

structured industry/beer barons' battle ulted in COST- t at 

has iven nrice o£ six oac P~ow t at oY six pac o eps & leslta 

dramat~ .c reductions in brewery profit marrsIns . . .tne envire an3ustry said 

to De rene-uic, ace . to Anheuser-Busch general beer mgr//beer used to be 

made from rice giving a bit bitter taste not out of fashion as corn has 

been the mainstav, givi~r l ;ght, r taste &~color/POS3'_W_AR_PHENOMs splitting 

up o neiahborhoo s weir corner bars . . . .in '47 two-thirds of beer was 

dr in bars or beer ail & 2 at homet today less than 1/3 drunk in 

bars . . .in '48 A-B started trend to natl beers, establishing brewries in 

Newark A as we as by O when PM bought Miller, it had,4. of 

the mkt & had declined to 3 .94°l in •72-~### ~~#by '74 up to 6 .2%, by 75 it 

was 8 .6%//WHAT MILhER DID WDREADF-ULLY CLEVERs they looked at the mkt 

& found specific segments they.could pick off . . .took over 

mk~t &~r bbed 100% before anyone could react . . .t en ~~ -O2 , which 

li ek the flip- o~ c3g box turned beerbiz on its ear, it se ls in 8-pack 

for same price as 6-pack of 12 oz, which offers 16 oz more -- big success 

but not for obvious likely reason that 7 oz was just enough of a drink to 

quench most thirstst has overwhelming reason given is that smaller bottle- 

sta r& 

Pervescence lon er than bigger bott , allowing 

you to do something else wh le you re en oying eer . . .now every other 

big brewer is following suit, a proliferation of new packaging & mktg 

techniques/keV to Miller successs advertising, p~in cash flow ~,C~L 

into the mkt s are cuest, more cash t an - even, it sez ere, but Schlitz 

& A-B still spent nearly twice as much as Ni11er 

~ --PM WO LD HEADQUARTERSs Belmont Hotel located there from '06 to '31, 

later irlines Terminal Bldg from '39 to '78 when construction began on 

PM HQ, site is midwa b t Times S ,,, . .PM always in NYC, highly valuing 

its service , ' s, ansi , amen ties & people/"Like all fine architecture,° 

PM hq is designed to complement & enhance the surrounding area/ 

GC & other surroundin bld s of natural sto * . facades designed to 

harmon ze w e s s ey ace but su icientlysimilar to blend w/each 

~ other . . .600,000 sq ft spread over 26 floors housing some 2,000 employees/ 

over Park Ave entrance is a decorative bronze medallion positioned to 

enhance the uiet anc of the r key features the 

ublic hall O f ; A CE OF INTERNA COLUMNS, to be 

fi e w greenery, trees, seasonal flowers, four retail shops, places ~ 

to sit & eat, small cafe, branch of Whitney Museum . . .activities of the ~ 

~ museum are free & open to public, PM glad to underwrite as examnle "of 

how private enterorise can a,d.dres~the ~ublic interest to the betterment`z 

oi' society" . . .Architeet Ulrieh Franz n is PTS'a guy, did research bldg in~ 

Richmond Miller Brewin h thePark exec offices & new offices & 

factory additions in Louisville///from CALL NEWSs 1/79 hails announce- 0N 

ment as NY Landmark & PM's future home as embodying "sculptured grace, ~ 

~10 

practical space", to be made of ra lass & ranite . . .now said to house 

some 1,200 PMers on comp et on in spring o 

.featuring bloc_ k-lon g 

~ pe~astr ;an n1a_ w/permanent installation of 20th cent . sculpture in the 

Whitney branch w. additional display & lecture areas a light & airy space/ 

8/79s will weigh 80,000 tons, from rock-bottom to tower top rising 4F,K' 

of which 44' is below st .TRICKY EXCAVATIONs anchored to Manhattan's 

bedrock by 27 load-bearing columns, 6 cols at the north Ar~__ .mu„stbe 

ing, .-t.,~.,,t]1",,,51„0~ .,~,tY}rq,ythq _subwa.ys sp ace & around the track areas, most of 

this excavation will have to tie doneT by"h`9rid -- this had been 

i foreseen in trying to establish schedule . . .11/79s the rock in area housing 

the elevator shafts & sump pits so hard that it had to be blasted, 

unforeseen time delays so double shifts added . . .about 400 people will 

remain at 100 Park//6/82s the move is on under Shep~rd_Pollack . . .the 

.( art collection is ec~~ic modern w acquisi~3ons from many unknown & 

If lesser knowns, many women artists included . . .1/83a ME CAP5ULE inst ,~3 

as JOHNNY COMES QUT OF N RETIREMET ong enoug 0 1 0 cia h t e f w t . e . . sui ap e 



contains PM early adv gems + film on creation of Marlboro Man . . .3/83= 

14,500 lb bronze medallion 14' in diameter, intended to set off the bldg's 

' elegant modern simplicity w/a bronze relief to be in harmony w/19th cent . 

architecture of nearby GCT, it's NYC's first major architectural ornament 

since WWII, design comes from PM's corp seal & classical moti#'sx rampant 

lion & horse placed abreast of a globe, symbolizing PM's world operations, 

globe & disk framed in stylized patterned bands 

--PM DIRECTORS FACE SMOKE SCREEN, by Morton Mintz, Wash Post $-28-82 : 

four PM directors also pd directirs of insurance co .s that view s as 

health hazard so serious they give policyholders a discount if they don't 

smoke . . .PM bd though~, unanimously holds in notice for its annual mt~s 

~E "No conclusive clinieal or medl~cal oroo anv c use-A++d-Pf+'eet relationship 

/1be~ d3sease has been discove22 re r#*-#~r'""'F*(RK calls this stonewa1 

a.7-ng) . .e o3 corpora e responsibility is Geo Comfort, 67, real 

estate management execsfa~rdirector of NY Mutual Life Insurance Co sez 

"The main reason I'm on these bds is the real estate expertise I bring" 

to them . Beyond that, he says, "I'd rather not comment -- for yr readers" 

+ Robt Huntley, pres of Wash & Lee Univ in Lexington VA & dir of Shenandoah 

Life Insurance Cos "I really don't" have a problem being on both bds 

& "I don't think that every corp . that I'm associated with has to agree 

) in every way" & the PM statement on S&H see bove s"I thi 

11 that' t" sa s the o- ac -a- smo er o£ rlbo // 

see also reasoning of J S . D, t en ar exec vp of Cit corp also dir 

of Memorial Sloan-Kettering Cancer Center who made it "very clear" to 

S-K whom they were enlisting (a PM director) . . .to PM he brings "some 

realism from the outside world" & to S-K "some of the realism of the cig 

world" . . .but S-K's top dr Edw J Beattie Jr says PM's S&H position is 

"misleading" despite clinical lack of proofs "Clearly, cig smkg has a 

disastrous influence on US cancer statistics" to say nothing of its 

effects on heart disease . . . adds Dartmouth Med School dean Robt W McCollum 

similarly rejects this statement but H. Robt Marschalk sits on bd of 

Dartmouth med school & PM & is retired vace chairman of Richardson-Vicks, 

Inc . drug co . who says serving on Darmouth & PM bds "doesn't bother me . . . . 

I see no anomaly"//add T. Justin Moore, Jr ., CEO of Va Electric Power 

Co ., who hasn't smoked since WWII but enjoys serving & says PM products 

(cigs, beer, soft drinks) provide many people w/"a few of the joys left 

in life" . . .Re~edvolunteers that his father,~ a smoker, died of~.o ., & 

though he recognizes statistical assn, he views smkg as a matter of 

"personal choice" . . .adds Marschalks "the great, great majority of smokers 

never get lung eancer"#*~###+, 

--LIVING WITH THE LIMITS OF MARLBORO MAGIC, Fortune i8- Zn '83 PM 

passed RJR to become #1 in industry, in '81F widened its ead w/3% gain 

in units & grabbing 35% of US mkt, largest share since AT led & dominated 

industry in '4Os . . .BUT this magic hasn't seemed to transfer to Mi~,?e=& ~p 

7-U Miller sales have s$aS3.ed & profits are down & 7-Up has been hit rn 

y s ong competitive pressures . . .High Life off from 14% of beer mkt in --3 

~'79 to 8% in •84, Miller hasn't earned much e fo its aren • -Fpuichase, 

earnings have us a ou covered the interest on the roughly CN 

$1 billion PM has borrowed for bottling plants & breweries built in '70s/ oN 

7-Up boasting it's caffeine-free & its sugar-free formula uses 100% ~ 

NutraSweet, widely considered safer & tasrier than the other leading ~ 

sugar substitute, saccharin -- but a_ltov=the+- ao far 7-Up has 

$8 .5 million//MAN ON THE SPOT IS CEO MA%WELL, sof~- t-spol-cen & courtly who 

tenaciously iously guards his private life vs . public curiosityt his good manners 

no impediment when he wrestled CEO job from the boisterous & aggressive 

ex-Miller CEO Murphy, but belying his low-key style Hamish celebrated his 

election by buying a Maserati . . .associates call HM brilliant & meticulous 

analyst who doesn't shy away from tough decisionss he's shaved 1 O vositionc 

r taff cor staff) of 86, put the industrial pac aging div on 

the block revs mil xon , written down asset value of brand new 

` '& never used Ohio brewery for $450 million -- BUT SAYS OF THE ?'We .DRT-NK COS 

~~ "I CAN SAY UNEQUIVOCALLY THAT THEY HAVE NEVER BEEN FOR SALE . AND I P~R AIX..;E 

YOU WE wIl',L KEEP M3S,LER & 7-UP FOR THE FORESEEABLE FUTURE" he tells Fortune*~~%~###~s###~~one 

reason e may ang on is "ATL~ ENDURING PARADOX IN 

THE TOB . BIZ" : despite SG's growing disapproval of smkg, "the industry 

has turned into A WILDLY PROFITABLE OLIGOPOLY^#**#*##PM raised prices 11% 

yr before even though technology is reducing production costs//©UT3IDERS 

UNLSKELY TO INVADE RY : initial machinery investment very high, 

to is o of-production costs & has to be stored & cured for more than a 

yr, social stigma attaches to mfrs & may affect public perception of their 

other products as Jim BOWLING CONCEDES "The Procter & Gambles don't dare 

come in . Their shareholders would revolt"*****/source of Marlboro popularity 

partially in perverse reaction to antismkg argumentss "People who 

accept the fact that they are going to smoke even though it's bad for them 

say they want a real cig, a full-flavored one," says an ex-PM sr exec . . . 



PM OFFICIAL LINEz we don't get people to start smkg, only to switch 

brands . . .Merit up to LF .3l US mkt share//M1Z.LER STORY : Murphy fond of 

saying he-3i~ ow a damn ng about the beer biz" but knew enough 

W, to realize Miller slogan "The champagne of bottled beer" was aimed at 

eople who cL3-3 

' 'Tt 

drZ muc eer . . .~ ' 3eve ~ Sops clever mktg campaign that 

ecomes T ' aime at b ue-collar crowd & dubbed "work reward " 

e .g ., you work hard so you deserve a good beer -- ours . . .Mi er began 

outspending everyone on per-barrel sold basis & caught the rest snoozingt 

volume shot u from 5 million b rels in ' i ' lion in '#*##* 

w about @ g3~pw M'oID . ite . ipytr2942 ~d. in..-'-1W & so by famous or 

no -s ex-a e eE sn3.zy__~+to~der~ul,,1,y~ _?'~y commercials implied 

that here was a lower-calorie drink NOT FCR S ~analagous 

*to Marlboro cowbo & filter) . . .BUTz tricks that wor e w ar5. oro d'1dn't 

w beer o ev m sta e z(1) St k w/M'l"s m; p theme lon~ after its 

effectiveness had peaked, barel slterin it fo 1 unlikg„the, .A'!{~,F~7,. ..~?or 

.~ ?or`ve 

cowboy it 

meanw i e Bud £ightsback wlbouncr 

rsioiz, a copy but livelys "For all you do, this Bud's for you" & Lai 

~~ Miller Lr'kised High Life ces" iri?`'80`°ae"=~obiioii>5+ vYas 33m~s~n8c*~ben though 

Bud eventually followed, lot~sòf~i ler quaffers, less loyal than cig 

smkrs, abandoned ship to Bud . . . :khats-.HIGH-h.iFE~.. ~LQC~.,zm~FF~40~ t'Yibet„~,,; 80 

&'84*#***-rzow new ad campaign appealing to chauvinis, made'e Yrmerkcan 

way(RKs but soon turns to Natural Lager, made w/Japanese technology) . . . 

Hamish expresses confidence High Life will be "all right . IF IT N'T . 

SO WHAT? WE'LL HAVE OTHER PRODUCTS" -- which is what happened"~~*~*MLJIRr 

into near-beerNcy/Siar~.~~ & sinRe,consumers want cheaper beer, Miller now 

piri~'~oducirig ~wo eeonomy 5i1~~$s, Meister Brau & Milwaulee's Best////THE 

-UP STORY : in '78 while PM "was still heady w/Miller's apparent achievemen~t 

Edw FraRte1 . : a,k4p,rd driving ex paratrop ,~r , & Murphy disciple 

to take charge-~~"soon felt he fiad'~a bo5zp b~'~YSiiiting siut to newly health- 

.oqnsc~,o,~, r~onsumers that ~U had no caffeine (aNev~x,~had it :- never,x~will") 

BU7.' °turned out `tbuy"e`rs'"d3 .dns `t'much' care &"4'oN those viho dId"C6ke3"'~~'ensi 

~ soon introduced ca£feine free versions . .even worse, Big 2 enga-ged in 

-s are a has ma3.n y ur e second-tier of the industry as 

cola kings fought it _pk~_w ._~.n" t~tg _~efi,:~rt p~ice deals & hvy adv, & so -7 ~ 

mkt share s"IiY~anlc' f'irom 5 6~~ 478 to tiWn"'~aPfeiYfe- ee 

co a, e wa tog~ed 7-,Un t~,o~ 

become 3~ ,~.iar.a33GJ~.- :* C cs~ ning_~n adv sn~a.° `~' or "'~ 

1~~"Ee-a 3ke entry in lemon-lime m'7Tt . . .a tough s3.tuat ory, __ WI-1?'7F- PM 

FRETS WHEN LBO EAK -- the chairman's favorite uest9 .on Wm Campc 

be l, exec vp for domestiic , says . . .meanw i e sees it as his main 

~ job as FIGUR3NG OUT HOW TO _ L7,SE ~~LX ce '83 co, has 

bought bac,k g~.~,~sj, o~ts~andiy : ._sha .r . . .HM cou~`cT""hl~ay orYt ~ 

k'9:ghef' 3ivìdends tp shareholders, d T'ESN 'DO • ,esT 

LIKE THAT PROSPEC T&~ 

diff . ideas than buybacks in minds O~, 

p.~ECT OUR, EARNIIdG$ , 

WE MUS T USE OUR RES OURCFS _ Tp S UC CEED IN , F?"B`[~.~'~$7Y.'SS~E~"~~ ~~~~Y''~t- ~ 

ment those are eer sodas with all eir pro'r~-~u~ as he says "It woul~ 

be ver shortsighted to get out f a business every time there's a down- ~p 

turn"~et2 as_ ?? .~.g9.A~: :.P3l8i.t o .,..?n~.~.~- .,.$~~:,!~A~?,~~QF~rs,,.~2~$?r9. ..,_~-~:~_•#-, a ~ 

powerfu,l xtsuccess of P~Y[-Lyredit Corp ., which 

; e finances~mortgages forreal estate subsidiary Mission Viejo & makes 

~' loans to Miller distributors & 7-Up bottlers, assets up 50% this yr on 

~ doubled profits, see p33, conclusion " on before Marlboro eaks Maxwell 

aims re smoker of biz to t e' IDEBARz 

HN MURPHY, the loser in race w HM, brash & brilliant 55yrold orchestrator 

of Mi.ller's dazzli,ng_~i,,:~,~,e . . . t .. ' , ~~~"t,~e•~~~pes ~a 

, HM ed"~"° "75"' o4l a£ew vo . . . JM was GW s man bu o~ ~i"a'~`"tie_ i~~'osing 

credib9.lity as Mi er s arted to go flat in '8O . . .A STUDY IN oPPOSTmE ~z 

HM is said to be retic buttoned u, carries a little notebook 

- -ro jot down stuff JM as flambo~yant .~fxcgc, , _bit.o£ a~bully . . .after 

driving Miller from #~7'tTewe~'"to"#~2 `he seemec~ ~o le t'tkie ~eer biz go to 

his heads "The Miller 9rou ac uir d he most massive cas 

arro " sai one ex-sr exec as people in NY~hq got 

fe up w antics like JM's wiping his feet on an A-B rug under his desk 

~ every morning, JM's_penchant for press attention, fanc~yy~suites & chauffeure 

car~. rths_normt .~:an>..==~P~ess.mx 

» ., :c~. ~. s .~ ... 

--THE GENERAL FOOIIS STORYz se ,_ e OI'~~R?F GoeG Raek to Growings_ Fortune t,_10-83s 

~e~ x prem eosition of 

' any packaged food's & drinks &`-selling skills exceeded perhaps only by P&G, 

tl' GF kex~t [jlCAn~lQintinE Wg .11._St„bring,inggross to bottom line + acquisitions 

turned into duds & new pro~ucts £ell~f~.at: .:'6°iz~£"`)+ova w/nsea_~- Mever 

& Entenmann's purchases . . . for yrs people at White Plains hq were viewed 



/ as well-educated, intelligent, well bred & NOT VERY AGGRESSIV~, ex-execs 

remember it as RELAXING TO WORK AT GF, what ma~ ere was e way thinas 

wer don ther than resul s, till last yr s cut of personne & shuffle 

o -upper eehelons - G Ta COF„~'u.,Fg ;,,,Cyp~„-.~,,,~J.=8 . . . . CEO JAMES L . FERGUSON 

became CEO 9 yrs ealr- er~ at"-47, views his task w/impassive expression & 

narrowed eyes of the poker player, maximizing profits by cutting costs . . . 

9PS.:,mo,r,a,,than,,. 4}A}- ~miry,'_~~& 9 but by '80 the cost-cutting policy 

hadgone stale, foo~ biz expan$s'may~e 1% a yr, GF couldn't look for more 

than 2% annual sales growth w/o major product innovatiins or purchases . . . 

In areas like fish, poultry, natural fruit juices, frozen entrees, cheese, 

yogurt SN & fresh baked s~NY,,,`~,~ goods, the mkt was increasing faster W,F . 

; . 

~' s~NY ~ s . . .whereas coffee consumption, which pealced "on 

per C"a.~'~a"'Uasis in ear~ '60s made up nearly i/3 of GF's sales in '82 & 

22% of net . . .new products like ~un pp e, an ar~£icia5- ~uice, &-~rispy 

Cookin' French Fries, & Lean Strips, bacon substitute, all came & went 

fast . . .BUT N ST IN PLACE : from mar in rotection to volume b , 

mgrs pusY}„g,d to bM~d biz by g o a yr~~om o a yr ~~ urn _on r~e ~t,~~al 

from 13 .2% ~n siscal ~2'::.-£o"u "P"ec "view toward axInn• units ~•vr~°a'& 

eople who aren t oerformin~ Osca- Meyer purq 9, o million put 

deeply into processed meat ~'ii•~"`45tz't""'Y°~iving to be 

proGes~Qd.,~,'~~~ „ :j.t, biz growing at 11% a yr, turkey a bigge~" an 

oFi eI'cezl ~`~e ~{gg~~ ,for . S.a~g amt, of processing labor + good 

purchase of Mntenmann's ~pxiq_,~/~,rper ambert for $,~15 m3~l .lion or 15 .8x 

earnings, n~groivYYSg"a£5% a yr, as'b'gdat„°'Me'yer, & now covers 

more than 1/3 of US . . .its 800 delivery trucks can also be used for other 

GF products like breads, cookies, fresh snacks . . . Oscar Meyer has refri - 

erated truoks that wo w deliver of dair rod well need to 

jazz up cereals, GrapeN-I4uts~,~~.7~, & Aaisin Bran since 1942, 

so Post now has I{a~`s'"'an `~'-ràpe-Nuts, doing well, & now a grand health whopper 

cereal In Honey Nut Crunch Raisin Bran + Fruit & Fibre/JELL-O 

w..w+i.i.~. .»ns . 

0 

.e 

Ainc_e _i_8~Zbut the 3-4 hrs it takes the dessert to set is longer ~an~ 

any consumei'~'•tv^dn'-~"to'Wait, so GF going w easy-to-prepare formula of 

~instant frozen Jell-O Pudding Pops, a hit~COFFEEa frosts i .n Brazil in 

'70s were disastro bean Prices, which rose in o yrs, cu - 

ting In o m gins . . .GF rep acing Robt Young as fuddy-duddy image for Sanka/ 

OVERS~T~ .1~F~EAD~now . t~g~.- of budget c~,3'~t'_ elling & admin . 

cos s i hest ~"~`~i~ ~ i.°ooii'~biz . s~~dsfie$''~.L% in ca -S~ 

ano i~ 276 doome a.n next few months . GOALs grow more by acquisition than 

product innovation/STRONG.-NEW-"+FSGURE~pHZLIP, . .d,:, ._Sk62TH-, . .„#9, named COO 

In '81, a mktg man . . .see n3ce new GF HQ 3.nve 'robTdsigned by Kevin 

'Roche John Dinkaloo Assoca•ates for 50 mi lion##_#*-# e 

exterior & massive e~~,tGl}e arms 

. 4~: 

out "„gle~~W ~~~~ 

TtSoFts""'a' ipia~s" JWAST T3LYTHIS //I g~d 1`R, ~~~~~ 'orbes ~s~~r• 

y~ 5-20-85 as W _ F ' ., . . u 16 s' 'nni _& highest 

ever -- u w y . . .ea,.: . . pQ $ .nt1 . . a$.a 11 __ . ._. : h.a$$ . &. . - . . &a evs 

I but on 2 a to ne . . . . . . . . . .compe- ~ od' n more to bottom 

purehases=. . .LouiseRi ~ng s $16 was milliono os~r ~55 mi~lion as In key sales 

at purchase, now nicely in black on sales of $300 million . . .BUT SLOW as 

I it takes 3 ~: Q to move ZZWAU ~f3 

f, .~-._zsn ..P~xd~,~n .o a~to natl s~r 

.'SLEEPX . MANAOFm~ :T~m 

sez 

'$'~ 

u ton s£ood 

~-"-' 

ana 

'" 

yst. 

~, 

ehronict~ 

"~' A~ w ~ 

. . . 

ally disappoint- on 

ing, a s a son, Lufkin & Jenrette analyst . . .Smith G =~~t ~® 

o~ki sokn+awleciaes ast slowf~otednesa [s batt - i~!1?t^ "lY -~s 

i`~~i sez &L 

rn 

focuses on convert ng sa~ ~.no pro~its decentralized grow h staff Le v 

& reduced HQ personnel . . past~fa~.1 Q 

~~" adv & e peryd~.ture, surrende"ifi~' m7Zt~'Iiarq- . L.n„s ~~ ~' a"e ..~, e -„ by a~ 

E_""°urn $acTc'~F'cU'"s"b'i ~63~Yee" th£eat $e scied"it~^lead'' a £'as~-growiTng ~ 

decaf ~t7 ; , R . .~fiA~rccâsn•s..~ .r 

. SUITOR MAY BE CASH-RICH PM, WSS ~ 

9-2 5 85 Spe a su w s a e M or possibly Unilever NV, Dutch ~ 

arm of the huge Anglo Dutch consumer goods co, or Nestlearlier 

in yr bought C,~rno~~~~ -A , belh-o . .~& 

close at 101'- o£fer ~,as}"~e wourd q, . e . 

w~ì3-ci " tb'~'~fifi "be~'cor assets GF idri h t r" Le 

"s _ o's t 'e .'- on 

.,_ . . ~, . ` . . ., . .~ . : . . .. ~W ' .. 

sez ona on s a~"h~A~ FOR PM, CIG GIANT BUYS 012 FO - 

B2hLSN, Time 10-7-85= GF as very 1ow-ke &, 

. in c ~,G#n, 1 es ever 0 - 

e o' i n na ., pushin~ ii'3~ ~a~ es to bzllion leve] ,, or bi 

~ 

est 

. . : ,., 

era11 lackluster m e t . . .an inabih '~y to ring success down to the 

food industr consohdates : Nestle~~C'arnation and Beatrice ~oods Esaiarkwed// 



Wal1 St thinks PM PAID TOO MUCH, Emanuel Goldman thinks it would have 

done better w .restaurant chain///GF DEAL MAY NOT BE SO SWEET, BW 10-15-85= 

on surface looks like smart move b_ut_ $5 .75 billion nricetag is 'i .SX 

I book value . ~ con a pai ~'3~2X book for N biseo consir ;PrAn a 

¢ette 

.sez Dean Witter Reynolds' analyst David Goldman : "Those 

turkeys . THIS IS DUMB" . . .LOW PROFITABILITY main gripe as coffee pric,~s 

a hurt, its share of GF down from 41% of '81 volume to 28% now//BUT : Hs~sish 

Maxwell no , g,~de our, 

~~$~~~,.,~.~~~,.&4lxrc.e, ~c to spur grow~h * ~'#~'~'~~'~`'(~s candor, 

anyways~~c-~PM afe 

soon acquire other £ood co .s to add to GF larder . . .to 

be worth :7 

it, GF will have to perform better than previous PM aequisitionss 

AmerSa£etyRazor got swamped by Gillette's sunerior technology in '60ss 

d2arIc eame wen~ias~z s~ cuF e eTose ~co as e a series 

of small divisions that weren't doing anything occupy far too much of 

top management's time" . . .MILLER OVERBUILT & OVERREACHED= in '84- 7-Up 

' finally posted net of less than 1% after yrs of operating losses . . .lM 

sez this time he went to great len~ths to avoid mistake, studied food 

biz ~ra yr & approao~d- ze ceal s1owT~.-go~'~,at end b of£eri 

to maXa.tender deal if $120 wasn't acceptable to GF/no PM plans o send 

c~.g execs to Rye Brook to s e ~.ngs up . . .thanks to PM's big cash flow, 

little dilution of stock from purchase . . .Emanuel Goldman : HMax didn't 

want to risk another 7-Up, be little 

rew~"K#######x 

NSERT -VA SLIIYS PARTNERSHIP HAS YET TO GO UP IN SMOKE, USA Today 11-14-86s 

Nearing 15th anniversary of the ti~e t the $1 million championship begins 

following o'!~n a~Rb , 4-yr hiatus . . .sez Rosie Casals, 

winner of the first VS, " . . .women's tennis has come a long way . The 

Slims is s on~-mous w/wnmen's tennis . They have been tremendously impor~ 

, not jusinan-ciaZTy Tiu~'in every other way . . . total prize 

money was $7,500 in first tourney, by '71 there were 20 tournaments, 

23 players & $500,000 in purses . . .BUT sez MARK PERT3CHUK of ANR "It can't 

help but encourage kids & other people to think cig smkg is socially 

acceptable"//CHRIS EVERT LLOYD : "We have gotten bad press because we are 

sponsored by a c g .co -- at s the bad side of it . But I can't say 

anything bad about them . . . . They don't cut corners, and THEY REALLY CARE 

ABOUT THE WOMEN"''f'M"x''E*adds Billie Joan King "The Va Slims people have a 

lot of class, and they're fun to work with . . . . I DON'T SMOKE . I DON'T 

OURAGE O RS TO SMO "##~###~##~#~##(RK : what else does the VS sponsorship 

do if not at? //origin of tourney : King led 8 women players, 

angry at disparity bet men's and women's purses (£ormer got 12X as much) 

+l~ to Gladys Heldman, founder of World Tennis . to as e p in aunching 

our s e raise alf o£ it from Jos 7TI . . .VS had only \~p 

recently been lntro uced, U TSAGJ-2S1T1DEAL WAY OF PROMOTING WOMEN'S Or, 

TENNIS & OF PROMOTING VA SLIMS IN A POSITIVE WAY W/O GETTING INTO THE V 

PROS & CONS OF SMKG" . . .soon a 3yr TV deal w/CBS//after 8 yrs Slims got -rout 

because of diff of opinion "over format & direction," acc . to PM G'N 

press releasess WTA wanted more & larger prizes for big events ON 

--AMID ARTWORSS, REFUGE FOR SMOKERS, NYT LF/6/88s is lobby of PM bldg ~-o 

exempt from new NYC smkg control law? O"A 

--TOB . PRESS KIT IGNITES CONTROVERSY by Morton Mintz, Wash Post 12-20-87 

Guy Smith caught w/gimmick that smkg foes see as Red-baiting . . .in Nov 

~mith sent out press ~.~~0 5~-0 edators & nT4ews~'irectors w/three 

eye-catching itemss a glossy black brochure, on front printed in deep red 

is reproduction of the Order of Lenin, conferred by USSR, & in white 

letters "One world-famous newspaper w/o cig adv" & in the inside pocket 

is copy of Pravda + handsome 4W4-page volume "American Voices : Prize- 

Winning Essays on Freedom of Speech, Censorship & Adv Bans" ; overlaid on 

title of dust jacket are Stars & Stripes + videotape excerpt of conflicting 

views of restrictions on commercial s eeeh, made by Institute for 

''Democratic Communication at BU soonsor Oo OOO no-stfiings. ~'aut 

from PM /squawks by AMA exec vp J~Res"~' *5~ .2t i'E~Re15 . i e ynar -Okla) . . . 

as ed if redbaiting was implied, he says "I think it's a perversion & a 

flat-out effort to discredit us" (as major sponsors of adv ban on cigs . . . 

Synar accuses PM of us"the basaeat . t?rossest ferm of redbai~ina to 

pro ec~ t their multibilhon-dollar ~.nvestment" . . .Rep Whattaker also weighs 

in to protest, "They couldn't care less that their adv attracts thousands 

. of young people, many not even of legal age, to start smkg every yr"// 

'f( SMITH CLAINS SLR?R75E : "All we're saying is that that newsuaner doesn't 

run eze aw . It doesn't in any way imp y$FaT ey re commun3.sts or 

anything else . I'm sure that they're all great Americans . I'm certain 

that they're all card-carrying Americans . . . . The ose is to make the 

pt__that ac~v_bans are_ a, forz2}__q .i,_c.enso~Skzap. -&-e -~tg_ thaE`goesEo " 

~" Prav i.S. ., .c:~1}~ored :da : I a,m~glad I don't have to defenc9 ."a'forY6~'''a~' c ._inensorship" 

~r & caTYs the press kit "merely a device to draw att . to the censorship 

issue" . . .he agrees the press has the right to exclude & include what it 


PDS history 40 SNSERT 

--FORBES JAN 1 '85 COVERAGE OF FOOD PROCESSORS : Under branded foods 

are 35 entries, led by Kellogg . . .RJR2 has 39% of its, gross from food & 

21°J% of profits . . .~gF,3~'$,~,p ,~,~~T~_, . .,p,~,-G~ ~.1,pn_., .1~ 

a on 

eauitv (ROE) of 19 .1 . vs-G'~b7~,RA~'F~t 

#lti ROE--- IT 

ow" rating for pre ic EaTiSi~y . . .GF. FTIY~~x&?~2.p~~ ~Za~gi,n 

y of 3 .7 w t~,cl~os~ to but below industr~median _o44 . w ereas a isco's 

S we~'Eer "t}id"ffiore nrofi'~ta . e ovtfit w/its earnincss 

predictability rated "very high" - 


PM history/4-1 

chooses, but key pt is that it's the editor's right, not the govt's// 

the 55 winning essayists got $81,000 in prizes, none of nearly 4,000 

contestants said they entered for money . . .Smith adnits the essays are 

"extremely one-sided 

--THE PM MAGAZINE, feature by Wash Post Writers Group 7-27-88sMag is 

now third largest in US behind TV Guide's 17 .2 million, Modern Maturity 

w/15 .9 million, P-M has 11 .2//PM took its data base including many who 

had written in to Marlboro Country Store promos for belt buckles & cig 

lighters & bought lists from merchants who sold raffles & didn't know 

what to do w/the lists of losers' names//pushing a recent Roper Poll-run 

survey of its readership claiming trillion-dollar buying power by smkrs, 

, says Guy Smith "The smoker is both a political & eco force who has 1__ arger 

gone unreco ized~_~_~y ophTicians in us r eaders" . . .the mag is t~-e 

besE a~P cou'Tbuy; sTicc-F, brig t, up ea . . .recent issue had exclusive 

interview with Pres Ford which is characterized by comment "The first 

thing you notice about Gerald Ford up close is how much he looks like 

his pictures" + he has "no regrets" about his time in White House###*wow :/ 

Chas Kuralt, a smkr, appears often in the quarterly mag . . .summer issue 

has feature by him featuring people jogging & canoeing & depicts lean, 

healthy-looking people who probably feel about cigs "the way Phyllis 

Sclafly feels about crack" + personality profile of 101yrold woman who 

J"took occasional drink & smoked for many yrs" 

--PM GOES FOR MERIT TASTE TEST, NAMING RIVAIS, WSJ 9-19-88 : Dbl-page 

Merit ads uroclaim Merit rated as hi~ a1's or better than Winston Lights, 

Salem Ligh~&-Tient . . .aces to natl ast~ e tes . .ning this to the Pepsi 

Challenge, a bare-knuckled naming names come-on, aggressive for PM 

--$11 .5 BILLION BID IS MADE FOR KRAFT BY PM/Stunning Merger Offer/ 

k, Takeover, 2nd Largest, Would Create World's Top Maker of Consumer Goods, 

p1 ~ead story inNYT 10-18-88 :-Only the $13 .3 billion purchase of Gulf 

~ 

by evr01 uld ~p il . . .would aul ast Unilever as to co er 

oods co . . . . $90 share nrice is 50 . GREATER VALUE OF KRAFT 

F HMaxwell says he phone Jo ic an yesterday afternoon r5/1 ) 

T who "told me of their wish to remain independent & that they are on the 

record on that " . . .intention is to keep Kraft in Illinois . . .Wal1 St analysts 

s/ say Kraft will have trouble finding a better deal : "'No n com anies 

can__come u w 1 billion ; m no aware o ' sez Kidder Pea o y& Co . 

ys . -o pu up a .o i n s own . . .trading has been hvy in 

stock -for 4 mos/priceis 26X Kraft's EPS, PM insider calls it a r- 

" comne bidld co.s wouecomearEes b 7th ltdstrorpin 

inuxa~ c, ~ 

US . iust behind GEI-ViFS -page letter to Richman sez that while IT was 

necessary for legal reasons to make a tender offer, "I want to emphasize 

our stron desire to ne otiate an amic ble transaction, and I would like 

to mee w you soon o d scuss our offer" by way o anticipation K h~ 

announced 2 wks earlier a much stronger poison-ill plan to make taeover 

more~i~'I'icul~p ionally expensive even Ior abidder as determined 

& well-£inanced as PM" : 

iives d3.rectors ri ht to swa _ 

for stock itself when someone aequ res as llttle as 20% of the stock/ 

HM sez PM is "ver satisfied" w GF urc ase, PM has invested $1 .4 billion 

iin it since buying it for .7 bi aon 3 yrs ago/Wall St M&A firm of 

Wasserstein & Perella is advising PM///PM-KRAFT MERGER MAY LIMIT PRODUCT 

INNOVATION, WSJ leader 10-20-88 : PM as masters of LINE EXTENSION w/Kol- 

~iid ae classic examDle since GF was a en over, avai a e now in reg ., 

extra-sweet, sugar-free, soon available as a frozen novelty, then being 

readied as a ready-to-drink beverage & in testing now are Kool Shots, a 

liquid concentrate version & Kool-Aid Sports Koolers for young jocks . . . 

but these are sli ht variations onl on a familiar theme/PM in Kraft seeking 

new trove o erica s es - nown rands, w ic can be extended : 

Parkay margarine, Miracle Whip topping, Velveeta cheese . Breyer's ice 

cream + powerful springboard into foreign mkts & into food-service biz 

in which K is #2 now/PM CREDOs best, not first#*#"'~etter Imown £or ~IStg 

~ertise than bold innovation . . . Mell PM's URBANE CHAIN-93~P~K 

The pro~lems "Ultzmately, stretching axw a brand to its limit w line extensions 

can erode brand loyalty if mgrs try to make the brand all things to all 

consumers"#*#*~(RKs what made the product distinctive & desirable will be 

removed) + KRAFT LINE w/hv dairy content is not where the Amer diet- 

& health-consciousness has een ie or -the '9os in era of se-called ~ 

1Tlight" foods, K has been slow to ut its cheeses & salad dr ' ~ 

41'y2t . . .PM will have o pump fresh life into K as i d nto GF . . .K's ~ 

, Richman, CEO, asked recently re his co .'s interest in dev . of fat substi-~ 

!!!!' tutes, suggested it was modest, telling analysts he thought such developments 

"interesting, but they must be marketplace proven"**********//K's ~ 

well-regarded pres Michael A . MILES disparages quickie nroduct intros, ~ 

C.T7 



what he calls "the Ready! Fire! Aim! approach" & thinks too much stuff 

going into mkt these days is "goofy"//smaller distributors like Stokely 

USA Inc . fighting David-Goliath fight vs . GF & Kraft for their line of 

single-serve veggies or Ben & Jerry's Homemade, Ine ., premium ice-cream 

of Burlington, fears Breyer & Kraft's Frusen Gladje 

--CONTRASTS IN TOB . STRATEGY P VS . - NYT 10-27-88s The deliber 

HMax vs . the zm a a.ent Ro s Johnson RJ s buyout bid seen by anas 

bold effort to turn the enormous cash-generating capacity of the tob . 

biz into VAST, QUICK PROFITS in $17 billion takeover bid, whereas PM's 

$11 .5 million bid for Kraft is almost the EXACT OPPOSITE STRATEGY, major 

expansion of co . into area prom~.sing a longer, brighter uure than tob . 

seems to (even so, tob .-derived profits would drop to only 64% vs . current 

76% if takeover succeeds) . . .note how since '80 cig unit sales down 

from 619 billion to 558 but nrofit ner M units HAVE TRIPLED from $3 .80 

to ~~_K5 . ."AN AMAZINGLY RESILIENT B NESS," sez Disna Temple at Solomon, 

"H= many products can you b for $1 .20 that is an apeti1e-sun-. 

pressant, a stimu ant or a re axan . d~ ependin(~~on the condit~ions -- & 

is a egal product?" . . .HM thinks people are a wl ays going to have to eat 

(vs . smoke) so food biz is promising . . .whereas $a sez he believes in the 

future of tob, but he is more a dealmaker than a marketer, Wall St expects 

him to sell off most o ood uni~-i e remains at RJR after a 

successful buyout, this might mean more aggressive mktg of Winston & 

Salem, slipping RJR brands -- but no matter how aggressive, Johnsonwatchers 

doubt Ro s would sta the ame for ver lon 

--HAMISH MAXWELL'S BIG HUNGER, B -- : also said to be 

looking at Kraft but PM has lots more ready cash, HMax sez "We hope 

they will see the benefit of making a deal w/somebody who will not break 

the co . up" . . .PM's opening bid 22X K's est . '88 earnings, K price went 

soaring 30pts in 2 days . . .HM wi lin to u for Kraft BECAUSE 

PERFECTLY W/GF PR DUCT L v rv 1a.ttle o erlav an yst c Particelli 

o Booz A1len calls K"one o£ the best b~s o£ the food co s ri--ht nnw . 

They are growing like hell & very profi .table" . . .K 'is stron st of US 

od co .s abroad which HM likes a lot, esp . Germany, taly & us ralia 

w GF s s rong presence in Britain, Japan & Korea . . .MUCH SYNERGY POSSIBZ,E= 

PM can gain by jointadvertisinz, event-snonsor5.n~_-distribu inG ~` mktg 

punch to lock up huae chunk o+' moat coveted surPr shelf spye esp 

w ere re r 3.gerated & freshly prepared foods are so1 . . .3n con~ast to K's 

ine, manv. GF products are sl~ o~we~rg- r~owing powdered mixes, rozen veeeies, 

cereT T& coffee . . .GF's firs it 6 g move : :.into re£rigerated came w/Oscar 

Meyer purchase of '81//analysts say PM will overpay for K because decline 

of cig biz is going to accelerate . . . under PM GF has mana ed to 

shed much of its stifli ng bureaucracy but con inuing pro s .in domestic 

co Eree Siz are a rea ag on pro i-Es . . .convinced that GF probs were_ 

} .u~zder~controlt PM beg~an scouting 

hard for ano her~ foo biz a~~os 

ago as seaxch team looked at broad array o cand dates, GF people were 

partial to Kraft . . .HMax made his final decision on Friday 10/14 as 

lawyers & execs worked .thru the weekend to Pet the deal ready for formal 

offer, LETTER DELIVERED MONDAY to Richman w/cordial tone BUT LEFT NO 

DOUBT AS TO PM' S INTENTIONS///SIDEBAR, "MARLBORO MAN, MEET THE MASTER 

OF MAYO"e much about M1KE MILES, who at age 11, when other kids dream 

of becoming a cop or an as r~ onaut, MM knew he wanted to be an adv-man . . . 

jumped in '82 from Heublein after RJR bought it & Ky Fried to run fo~ 

4pera ions at 'Kraft_ he in_ ~Tman a,Tvo Fo>.-.-,,,~. .11 maQterv urna-otnd" 

f the once- lodding food processor, JR focused on dumping weak units 

& acquir ng promising ones w i e overhauled mktg, sales & production ; 

it had been a sleepy, dumb old co . . . .in '8 Kr ft's first er sellin 

the nonfood Dart bi (as in Dar & aft , net rose . on sales 

jump of 2 ., w bet er igs for first 9 mos . of '88 . . .MM's mktt F wizardrv 

draws raves from the industrv "He's crucial to the valte of' Kraft " 

saus B W ldron, who had been his boss at Heublein, now CEO at 

von . . 

r .~yi 9 . iazzed ua K's ads ~~ pu_t new life int chees e & mavo, 

formely sio- to no-growth produc~~ rpe ing Phila crem a cheese as 

a lower-calorie alternative to butter & RECONSTITUTED ITS CREEKY CHEEZ 

WHIZ as a microwavable hot cheese sauce, hiking sales 35%*********key I'O 

~ .-~'- .;__-~ 's,,,,,s~k.ills + massive push of new products by Kraft ~35O ~ 

since ', now`testing whole line of Chillery brand entrees, sa7.a3s & `-I 

desserts + Br ,e er•s reserves . . .MM : NW jour . major who started career -~ 

at Leo Burnett in ' 1, 10 yrs working on acets like P&G . grabbed chance 

to oversee mktg at client K Fried where he became chairman in p 

'77, ~ 

cleaning up a co . that had been a ered & beaten . . . or ah~ol , at 

desk by 6am from his home in Lake Forest but makes it hom~y dinner 

w/wife Pamela, an artist, & their two sons . . .e~a~ed accident in white 

water ra£tine trin on Canada's Chilko River taking j v~i es of adv & 

mktg execs . . .a director of the Ohi Lyric Opera co & Louisville Ballet/ . 

a key part of HMaxwell's job nows to hold MM 

http://legacy.library.ucsf.edu/tid/fmw44c00/pdf 

CN

PM history/42A 

, --NYT CASE STUDY front bus sect Sunday 10-23-88 : Grand Met's $5 .2 billion 

lion bid for Pillsbury crowded out of top news by PM-Kraft deal + 3 days 

later RJR tries to go private*******President of Campbell welcomes the 

merger & says the two are so big already he can't see how it will make 

any di££/i£ they keep the two separate managerially, then nothing will 

have changed "And if they do try to combine them tomorrow, IT WOULD TAKE 

THEM TWO YRS BEFORE THE EXECUTIVES COULD FIND THEIR NEW OFFICES"##*#use// 

wh food industr consolidation is ood for the consumer : lessening of 

compe i on oesn t drive up prices . . .m rs hrow their m3ctgodollars at instore 

promos & price reductions -- & the bigger the co ., the more money it 

has to throw vs . price reductions (i!!)//durinz Reagan admin ., antitruG+ 

lawc hava hsaen sub iected to a_ . SYS TEMATIC . PO7•ICY _. A . . . e way to 

combat Japanese 3.s to build state-of-the-art factories & facilities that 

~ can stand on their own ; mergers like Kraft-PM don't advance any of that// 

~.) PM sees what's coming in Europe in '92 & is girding for it ; foo biz is 

too overcrowded-2~_more restructurineneededp too many co .s do only what 

Wall St wants -- allocate resources bearing in mind only short-term results 

(RK : this is part of the answer to Joel Barth argument that PM overspent 

to buy into food biz & could have used its money more wisely)//the 

~ merged KGF has more clout & should be able to get•shelf space it wants & 

~ needs, ossibl w o a in "SLO LLOWANCES" . co . will have some 

Oo of t e ion foodbiz more produot i .nnovation & aggressive 

mktg to be result of merger --KRAFT REJECTS PM BID, OF_FERS $14- BILLION DIVIDEND PLAN, NYT 10-24--88 : 

top of pi, co5.s 4-5 w pic o£ Richman . . .deal would by_~£~ar the~.ar esty~. 

~ restructuring ihistory . . .he says"'fie°~nea~'L~a~~ '~~i''4x~fit 

CL. ma`-3e osre°a"~~-ractive o fer . . . "if they were o o ff~er a price tI at veflects 

the full v u of Kraft" . . .ACTION FOLLOWED 5z HR SUNDAY MTG ON EMERGENCY 

BASIS at a£t hq I442 expected to offer $20 .3 billion for RJR this same 

morning, Monday) . . .the package explained . . .PM's all-cash b' s worse 

tax consequences for Kraft holders since gain à`1S"tacab~e14 in junk 

bonds as part of estimated $110 a share package would cost Kraft $1 .5 

billion in debt on top of current $1 .1 billion . . .to handSe uge new debt 

j.oaca ic man concedes, ouid "RE UI BY OUR ED'II'L S" 

but they'd have high incentive in stock options Richman says Kra£t's curren, 

situation is "NOT OF OUR MAKING . Rather, it is the 12roduct of current era 

investment volicies &-t'in attitudes that favor short-term i „c ;ai g,-a~ ;fi" 

cat'ion over steady, long-term grow' =nee ~ .ng I1G-j/%PM & KRAFT CLASH OVER 

O~'FE.TtS: NYT 10-25 88 a I-Iamish takes swi~e at the `fi4 u"-~i ili on dividend n_1an, 

raiaing~"~iQ,t}~,, uestions abu~tîts fes.14 ~y" & "real value" . . .Kraft 

s ac at~"I'SI s°""pging rem`ksOcall`s them "TOTALLY CONSISTENT 

+W/PM'S PRESSURE TACTICS TO BUY KRAFT .OI~ .T~ C1,~.?.," adds it will not be 

"~to~cY~ecide which is the better 

offer . . .PM said K's offer might take months to firm up while its was on 

the table now & raised question wheher it would keep it there for very 

long . . .but Goldman of Paine Webber doubts after 18-month study PM is going 

to abandon its quarry . . .Kra£t stocke-ml jumped $32 .50 previous week soared 

~` another $10 yesterday to $100- 

close at $102 . . .Wal1 St arbitragers put a$100- 

103 value tag on Kraft package offer while PPd insiders & allies said it 

was less than ~ . . .MOREOVER.~, PM PLAN WOUS,R, _JOMEP._,SCRAFT ~TOGETHERX Hamish 

~ notes, while Kra£t ~Su~.a re u~e breaku of the co . 7~'Ur$ena.ng its 

e $'f~~i~- -' .~ .,e mor ,ge,g.Lpg.,~~ture /KRAFT SE4.S TERMS FOR PM, 

T'(J'=-8'i `~i~h rie"`gti`tid~=t2 a anytha .ng above $110 a share though PM bid of 

$90 on table . . .but Hamish hold~ .k~.j,~ .,~,]7~2,"~c,'~„& Kra£t shares plunge $3 to close 

}~ at $99 . . .Richmax~"'SEsti3~"~;5èar ~Tamish" letter saying Kraft isn't for sale 

but at $110+ it could be had . . .Wa11 St hears PM is working on a plan to 

1 accommodate this pricetag//ANALYST5 PUT KRAFT PACKAGE UNDER HARD SCRUTINY 

& the~~+_+~nh b.on5~ y~,~g,~hey 'd devalue b 1.~3, making the stock trade at abou- 

I$1~65`~a-share -- THSS -BEl'~G"'~'rt'r77B""CE>l~1-fTED PM PACKAGE w/junk in it, but 

PM people say it's "absolutely untrue" PM is contemplating new offer w/ 

junk in it . . .PM can borrow mone much chea er iv n' s// 

despite Richman posture, many ana ysts doublt PN ma ing serious effort at 

$110 a share ; suspicion is that if PM will do $105 right now, it's a go/ 

sus hat M we11 is la in a waitin --might play it longer 

while Kra£t's stock price retreats urther KRAFT PLAN PARES MARGIN OF ~ 

ERROR, Market Place col . in NYT by Floyd Norris, 10-26-88 : Most leveraged ~ 

as well as largest recapitalization ever, thus fragile & risky . . packa~e ~ 

~bonds of ~t4 w%~~m .~+aown va~ iet beca;7~~" _y a' 

are ~'orced osL„-holders" r.a£h_e,~~°~sQ~c( ~31~ b3""' ese 

"il'f-`~erms of interes°t"i-Teingth not yet given . .& the remiander ~~i,~- o 

age in £orm of THE STOCK or "stub" of what's ~e,~tmay noey 2 Kraft is ~ 

6Ia`lmn th . .':co . says debt level would 

be 7a .i~.7..5,,Q.}1 or 9of 'L'E'l3"~VT 

OULD HAVE A HUWHERE SHAREHOLDERS' EQUITY SHOULD BE, ° as of 

yesterday it had book value o£ ~ust 55 .5 billion of which $900 million was 


PM history/42B 

for good will ; thus its assets are on its books at less than half of the 

debt load . . .THIS NEGATIVE NET WORTH OF I1TORE THAN $6 BILLION extremely 

large . but Wall St thinks only accountants worry about book va7 .ua . which 

is s id to undervalue such tha .n s as brand n . .most past LBOs 

have wound up w equi o a eas /o 0 o a capitalization . . .Smith 

Barney analysts there won't be much cash flow left in the co . & says the 

"stub" would be wo~~~~J, .~..,~.q.~~,l never seen a reca 

this levera~e'~:: :fi0 OFFSET, riormally there would be ~s~ .Ra+,,_,y.~„~1,.~,-o ,7s,~ 

down t e debt do°milcFi'ti~"'this ; if "~s~icks ; 1,10 pay to 

3'^tr "gùns"Ve"I~imited assets sale, it may have to resort to PIK bonds, pay-inkinds, 

a good way of deferring cash flow problems for yrs, albeit at a 

high cost~/overall : LITTLE MARGIN FOR ERROR . . .but likely such a deal will 

be accomplished ":UNLESS- WILLING TO RAISE ITS BID TO SOMETHING AT LEAST 

CLOSE TO THE CLAIMED VALUE OF $110 A SHARE" 

--TALKING DEALS : KRAFT TAKEOVER, SMOOTH & SWIFT, NYT 11-3-88 : Both sides 

started following speedy game_-m] ._ans they saY were thought put well in advance 

. . .unusua a.n atth large co .s usual~y use maneuvers o en o$1 predators, 

but here both 7~~ .~ .f-~,&. ressure forn1r" & satis- 

~3k 3 .- 'F . #~, r . ~^~° '~~ ~cs_ 

factory ag .f°e~Yfi~x'~"~'~~1~xtìn ipton lieard about'PP+I Hare d"n 

wa~"'Ca"TTi",""E-a.ZTed Kraft, his longti~ client, & both Richman & Lipton agree 

offer is too low . . .that eve . NY lawyers & investment bankers descend on 

Kraft corp . HQ in offices on 4th-6th floors given over to them as special 

communications lines strung & computer to link Glenview w/NYC/Kraft advisors 

begin piecing together the plan long discussed -- a recapitalization that 

ould ive sto olders a si i£i.cant dividen . .PM a been iscussa.ng 

a eover actics w assers ein irm since June . . .discussions w outside 

legal counsel re Kraft begin 10/11, process starts in earnest /each side 

gigimed it knew exactlv what the other would do next : "When you m.~' ow e 

r guy is as good as you are, ei~jus £Tin7c about what you would 

do in his place" said one adviser on the deal . . .b,y last Fri before decisive 

weekend, pric-e slipped off to $96 .50 as PM held of_f . . .PM WAS BETTING (1) 

Kraft didn- wan o go ru paln o~ se7 iT ng off parts of itself & (2) no 

other suitor would materialize . . .Kraft also good at playing the game, fiiling 

w/SEC its inte=t?q.~~, ~e~ ~.n asset sales gui~ ty,,.sending a messae 

'C"B"~'f7ti ii°°i`-~wanted-co ., ~ì-Es ante fast before desirable 

product lines were sold off//THE DEAL made while two CEOs were munching 

chocolate chip cookies for 3hrs 



I 

--KRAFT SOLD TO PM FOR $13 .1 BILLION, NYT 10-31-88 : $106 a share is 

,~ final price, agreed to over wee kend, which is $9 .50 higher ian closig 

i ~i' pr~.c'e Fx~i-2E $4O•875 higher than price before offer was made 10/17 . . . 

% g , 

~ e 

~_ _~t^" 

sez Richmane "Our shareholders are receiving full value, & this merger 

is ~HE BEST POSSIBLE OUTCOME for our employees, customers, & the communities 

in w icT we operate"*##*#he remains Kra,F PM vice 

chairman while MMi.les~q '-'~ ~t 

reporting to Richman~at corp level .• .Kraft HQ to remain at Glenview SLL// 

K's directors had refused PM offer & proposed instead to give stockhjol- 

~ ders ~complex P that it valued at $110 a share composed 

~ of $8 1n1g yield bonds known as junk bonds & would 

have kept their shares, which K said would be worth $12 a share, so the 

three=$110 . . .price went up to $102 7/8 last Tues, ending at $102, up 

$10 for the day, & Wall St thoug k}~~'t .3~', W 

;qre, BUT INSTEAD 

OF CONTINUING TO ~"ATTA~D ~~AS'L1~&'REAL VALUE" OF 

IfftAFT OFFER . . . Richmond fought back, saying Kraft will not be pressured" 

& termed HM's remarks "totally consistent w/PM's pressure tactics to buy 

Kraft on the cheap" . ..as HM ~av~ ;y,, 1 .o 

, h~n . -P what kxis nelctt ste would i,~,~, no price inerease" see3n°e$~ 

~n cards 

ll JJ & traders seeme$'d ear~enec7 a arba.tr o 1' that M was 

tr a.n stock down" . .,hints that if Kraft kept resisting, 

PM mlght k loo t elsewhere k' . d . .s d oc Jumpe 11 t two $ o ars 6 o 0 9•5 F on id r ay 

on hope weekend would produce movement . . .Wasserstein, PM's chief fin . 

advisor, phoned Kraft's counterpart, Willard J . Overlock, while chief ' 

lawyer for each firm made contact, PM indicated it was prepared to make 

an offer AT LEAST AS GOOD AS KRAFT'S PROPOSED PACKAGE, no numbers mentioned 

but both sides secure enough for HM to order his private plane to 

wing to O'Hare Airport for motel mtg w/Richman at L~* ton's suite in the 

Westin O'Hare Hotel . . .two d ,~'or 3 hrsq 

and aware that sharp vJ2S`~'ds had be"g5xri to fly ; 4'3L~i re~dssured the ot~er 

that what they had said was necessitated by need to protect his co . & 

ergo they should "start fresh" w/no animosit or re e en . . .talks said 

to be "very relaYd" & the two got a ong very we 1 specif c negotiations 

began around lOpm w~.~,~~~p~3.gg ,.~re & JR saying $106 would be 

more like it & w/each 5O" per sfiare-amounting to $62 million, they inched 

up : $104 .50 but Racluman eld ; HM comes up 91 to 105•50 -- BUT JR HELD OUT 

& by 1am HMax smiled broadly, stuck out his hand & yie7,~7.e4~ 

no changes in ad agencies anticipated since they 

I others . . .Kraft hqd £ ..4 . Q ~plovees m ~ & PM 113 .000•• .HM talking savings 

via elimina$Xon o u ica~~.ve un tions . . .e ectation Richman will be 

around another 4yrs till PM retirement at 65/asked at end if he had,Luy7 

other takeover 1ans H112 aid "No this is enou h£or this "///SIDEBAR, 

"A Muscular onsumer G t" : will musc e e pu o effectzve use . . .some 

I 

obvious & immediate help, e .g., Kraft cheese products can be sent to 

stor as PM's Oscar e ra . erated meats . . .PM to try 

to imbue Kraft w/more aggressive mktg style . . . manue Go dman= real economies 

will emerge once they get to size up each other but pt is there's 

money to do whatever is needed .• .Miles has dpne some restrix,,~., shedding 

nonfood units & adding promi~~3"f1~'`§"5 .i'$~'`d~tE`~"o`'ti e~ frozen 

foods .• .Iv[rLES ASSTrnrtFn T .TKELY TO HOLD HIGHER POST AT PM EVENTUALLY//retailers 

have become ever more power 'u 

Id6iz because mfrs 

on limited store shelv 

, esp when lntroduc new produc_-Fs-+ 

IZED SCANNERSONCRECIMUfi LINES make it much gasier for store mars 

to monitor what's selling & to ;ettison those that don't & supermkts gaiin 

~ 

further s-~rng-Gn thru conso i ation, so the KGF powerhouse may rectifv 

the b c som what###########but smaller competitors could be first to 

feel the pressure /HUGE PM REVS AID KRAFT DEAL : Goldman answers whether 

PM can afford the purchase w/"Do bears sleern in the woods?" . . .PM has 

excess cash f1ow ~^Q ofabout 

~2~]~i~,11on a Vr, twice what Exxon generates, 

meana.ne they can ~av o 

I 

expenditures are set aside/ 4 ba 'ne I 

0\ 

tri • .cost of borrowed capital to be 

on avg somewhat above 9l for 1i£e of the loan which exn~res 

"not a very high interes'*t rate, says anny Gol man B `"E~~Gt7TIVES e ~ 

R_.~a~. ~~' :eW. , ,~s~ . . : ,+~.,~,g~l dep t' became general pN 

counsel a,n "Y76 .~ rs~'1'~Mi9.es y 

vfas ~'`r"'`V}' Ky Fried, then vp ',p 

& gen mgr of RJR's grocery products group ; Wm Murray, Aussie from New 'o 

South Wales, ~~a.d of Svdnev Te_chnica College, did UN relief agency work 

stationed in elrut headed budget division at 2ntlLaborOr in Geneva 

joined PM in '70t Murphy, Columbia la.w school grad in '54J STORYI ON 

~UEiA " dIS4e Kraft had strenuously resisted w/recapitalization it 

valueZc at 11O a share but it contained junk bonds & wasn't greeted warmly 

by either Kraft shareholders or Wall St arbi-bragers -- & 110 OTfIER BSLDER 



{ MATERIALIZED, leaving Kraft little choice but to accept sweetened PM 

offer//BUT : some anal sts believe PM is paying dearl . ."IT'S'SIMPL 

~ FAR TOO MUCH sez Davi Go1 man es oc o ana ys hard to 

us ify anything over $100 as true value, but diversification move should 

certainly help perf . by GF, but Goldman maint th BETTER CO .S 

TO BE HAD AT LOWER PRICES, citing ara ee Corp, Gerber Products &@ua er 

Oats . . .o er va .ew : urchase will somewhat slow PM earnings growth a yr 

or two but by '90 it will really energize the profit pic//Iv TO DE~ : 

little overlap bet two foo 'ts + they share the distributi .on networ 

for many products + unlike GF . MZft has broad-based streneth abroa$ 

& w/competition expected to inerease w end of trade barrierG in SC by 

'92, essential for PM to have more muscle in that mktplace + Maxwell 

candidly concedes Tood will improve PM's ren w/investors, concerned about 

lawsuits & the future or ` cig Fiz T_g .etting WSDELY ~PFC D MANAGERENT, 

Miles in~,articular//BACKGROUND : SHO~~D 73'1`"`TAX2I`1TIER 

MOV~CAIT~'E"'I~'~ ~"JY~AMISH HAD SAT TOGETHER AT A TRADE ASSN MTG IN DC ONLY 

FEW DAYS EARLIER & hadn't iven an hint of hiis lans'tt'**'M"""*'M''Kraft 

had ex~lored a11 op ti41a~ ~,tment o,w~~#.~ ~M . even 

consic~3.er"`~e~.""YCTfiADKSCVU`yPBi AS "A MERCHANT O$°"'YSh"AVff' in attempt to capitalize 

on ant s g sen imen . . .the Kra£ reca i i tion San caused a lot of 

concern because of its hu e , irectors & opera ions peop e worried, 

s e of ma~or pieces o aft loomed, but Richman said there was ~,Q,,,,~ga~Ge 

but to undergo maior chanpes 

if Kraftwas to remain indep~n ~ 

, d, 

qnt,. . .w 

,~,a ~'b"1To~d W~as'"tiigYi stakes n"offer ame &`-~hough'"TSM°~iad~"'t~'rom start indicated 

it was o-oen to da.scusslon of erms'it didn't budge because it feJ+ *+c 

other suitor_ was emerging & because re~a on sc eme asn't 

e w investors . .. OW : delav of a-S=5-" ti3h1ion 

unk bo 

issue y Federated Dept Stores, acquired earlier in yr by Campeaorp 

3ghly leveraged transaction . . .PM felt it was in driver's seat but 

toyed w/other strategies, EVEN OFFERING FOR RJR'S FOOD OPERATIONS//Kra£t 

directors met Sunday at Wachtel Lit ton's NYC offices & as HamE'faxwell~ 

le t- s-- ar vearoun pm to sa .gn the agreement, co advisers & 

~e ecutives gathered round & gave him round of applause*#*'"~ 

11 h 88 A t' Al OPPOS ITION TO MZRGER see A dvocacy Ins titute - c ion er 

t , 

! 

~ combining nation s#1 and 22 a~dve~rti ~Y• PM ov~~,-~ok,,P&G as world's 

.SE 

__ liers 

~ ' largest adver i£ ser -in ,' 7 w . .,] ,~~illion ou`~ayjthe proUieril~:" Lf ~8Y Ri onal 

aYit3`t~u'sÈ`concerns =-'concentratiolz"'o~"~Y'ea .t "~co . & pol . powerful in a 

handful of corp . mgrs + history of tob . co .s` usi their clout "to 

subvert blic education & ublic heal .ini ~.atzves o con ro the 

a v promo of s . .PM can now in~ure e th of employees of Kraft 

& of consumers "BY THREATEN2NG TO WITHHOLD POPUyAR BRAND NAME RIERCHAN- 

D7BE FROM RETAILERS who conduct consumer ed programs that include S&H 

1 ed ., who prohibit smkg on retail premises, who choose not to sell cigs 

~ q.,r WHO REFUSE TO ACCEPT PT-OF-PURCHASE cie adv & promo + presenting 

-~hr~eat, e,~ress or 3 .mplied . o£ massjvo ~ec~ nf ady rQys_ to an .v 'r'y natwOro1L 

or B'Gat1on o?` publ'e_.at l o__ "that (;_H_OO S_OO.SES TO REPORT __GL:__-_? YV-ELY ON 

SPrKG'S HAZARDS, that supports smkg control legislation, or that . . .reports 

on the lobbying & other practices of PM" . . .noting, too, how this echoes 

Sarokin holding that jury could find existence of "a tobacco industry 

conspiracy, vast in its scope, devious in its purpose & DEVASTATING IN 

2TS RESULTS"///NYT editorial Smoke .Io :.ta a Ma -M rger," 11-i$-88 : 

~ There was a time in pre-antiregulation DC when such a merger would 

have sparked great opposition but not now, but non-consumer considerations 

here are important because the more PM "enlarges its economic base, 

~he more }, .t v~ ;li enlarge its already substantial power to influen~e 

puI3cg ohcv on smke . . .~'Ie zen'~ baum askig ~~condition 3.ts approval 

on I-vi pledge use its muscle to curtail the public debate on tob . 

use & NYT hails this as worthy goal : PM "to pledge such restraint voluntarily" 

. . . pondering whether PM via merged co "would wield its increased 

~ power as a lobbyist, employer, purchaser of supplies & advertiser to 

protect the mkt for cigs"#*####citing RJR's petulant behasior fir3 ng 

co rci 1 ou PM tr o~ i'nflence internal ~ 

olicies of its s ; those w o se i jars, ce ophane ~ 

I 

Ior ea insurance . . wi it use new Kraft adv bucks to discourage 

mags & press from printing material critical of tobacco?/PM could short-~ 

cir+Tuit the controversy by pledging to keep hands off internal smkg po1-CD 

icies of its food divisions & to keep tob politics out of its adv deci- C=) 

sions . "If Kraft is really worth $11 billion, surely it is worth such 

a demonstration of good will" . . .//PM ANSWERS, letter to NYT signed Geo 

Knox, staff vp-public affairs : citing corr . bet . HMax & Richman on these 

issues, no o£ trvin_~_, to a .1ter s~kg -oo~ icies Kraft has adopted 

but PriT reserves the riga~t to express its view on smkg pola .cies adopted by 

orgs or businesses, esp . when more extreme than law or convention demand ; 

its media buying decisions made solely on basis of mktg objectives & 

are "unaffected by the editorial oolicies & Tpractices of any medium or 


PM history 44 INSERT 

' --FORBES JAN 1'88 ON BRANDED FOOD D'IAKERS : 74?AFT RATED #13 in profitability 

fitability out of 26 co .s w/PM & RJR Nabisco well out ahead of it . . .& 

` its sales growth was last, doubtless because o ar spin-o so volume 

down, but effects of this spin-off also show in EPS er • Xraft 

#2 in industry at 21 .5% for past ?F_yrs & 23 .8 for past 12 mos, w its 

earnings stability rated a'verv "~ 



publication as they may concern policies or social issues 

the opti.mal move "for all concerned"//But that's the £irst round of reaction 

. . .the ~nd a~kc wti,a . is h,- ohn on a& Co . can't do now at RJR_ 

$h~ the '1 the bu out by wa o~ econom &- 

. . . ." 

--ARE PM & RJR PUTTING STOCKHOLDERS FIRST?, BW 11-7-88z Within a 

week, the two co .s chose diametricall o osed cou of ctio . . .at 

first Wall St went w/RJ° a s oc rooped 5 7/ reflecting view that 

the acquisition didn't represent shareholder enhancement, whereas RJR 

stock rocketed 21 3/8 to 774, then another 7g when KKR got into it . . . 

RJR's said to be "the re£erred a roach" by a former chief economist 

for t e SMC sr„t s ri~ht to ~out the monev immediately_into shareholders' 

ands -- WHEREAS PM SHAREHOLDERS WILL HAVE TO WAIT A PAYOF 

since big acquisitions, to judge by history, aren't likely to generate 

efficiencies & innovation, notes Harvard's economist ROBT REICHz "It 

will just create a layer of bureaucracy & further concentrate the food 

processing industry" . . .Hard for RJR shareholders to be upset w/deal tha_t 

makes them 60°% richer overni~h_t vs . PM's strategy raises question if i .t's 

?~szv b-ne-e,+G -F,~r„r, a~ -1 „ be snread among shareholders 

urithin cur . .in short, RJohnson hasn't exp n~ h~ 

wan s to take co . -crivate "though it's hard to believe personal profit 

isn T a i'6 g part of the answer"//both co s(1) COULD MAKE BIGGER ~ 

PAYMENTS TO SHARFHO'r•DF.RS since core biz is declining & doesn't require 

muc additional capital investment . . .each sez it's naving out enouah at 

1t69 of EPS, yet those are ower ro ortion t bein aid b BiTM '`~, 

AT&T Me,-c>r w~M-~-#-~#*### 2 BOTH COULD HAVE BOUGHT BACK , more 

aggressively than they've one o a et Reich says under capitalis 

system, "if you make a lot of money, yr shareholders should share in 

that directly, rather than indirectly thru a takeover or an LBO"*****but 

then you've killed the goose that laid the golden egg, sez RK//this step 

viewed as unfashionable in the Age of the Megadeal -- or "PERHAPS IT'S 

BECAUSE PAYING OUT HIGHER DIVIDENDS OR BUYING BACK STOCK WON'T ECE 

~ STATUS OF MANAGEMENT . With a big takeover behind him, ~Iaxwell wzll 

presi e over a larger co . w/more clout and -- most likely -- more pay . 

And Johnson will get his payout more directly -- in cold cash -- & probably 

more quickly"///WHO WINS IN THE HUGEST DEALS? Fortune 11-21-88 on 

same subjectz Kraft d said it would s end $14 billion to ' 's 

billion a eove M A~R .rrz t,ad faced IDENTICAL PROBLEM : they 

couldn't get public to bid up the price of their stock to the levels 

normally accorded companies as lushly profitable as theirs*******the 

buy-back programs didn't have much effect in this regard//exces H 

011 here defined as monev left over- _aft-er taxes . capital spen 

idends & interes ts 

tob . co .s 

hat can reinves muc 

~ 

-! he soT _o 

f some usinesses a R ~ to a~o~od co . .~ & 

w/Zitigation problems i- n- tob . on wane & "smokeless" cig ready for mkt, 

RJR in better shape on cash flow than in a long while . . .LBO DEFINEDz : 

to bu a co, w/borrowed funds often using the co .'s assets as collateral ; 

a oes o in e w i e-ora.neina usu ~oai y se ix 

off nieces of the one,-a t, on, ,,' THE OPE ATIN - AC . l .~ _-_ _=0R"G FROM 

MAKING THE EXISTING MANAGEMENT INTO OWNER-MGRS," & pressure to generate 

cash flow means the ~iz mus e made o operate more ef£icientlv, & 

it usually is, albeit w ayof£s & other orms of cos~tta.ng, the owners 

hope eventually to make big profits, sometimes by selling the biz back 

to the public . . . BUTz during the transitional period of paying off the 

buyout, the concrete of equity has been replaced by the paperboard of 

debt, & "A HOUSE MAY NOT LAST THRU THE NEXT STORM"#*~###//ONE SURE 

LOSER : THE FED GOV as tax i wa. droo to z ro for both co-T"'ich 

paid a£t 20 milion in '87 . .,ALSO, LBO HURTS CAPITAL INVFS T- 

~ P~NT since mone is needed to meet debt so e flciency of US 

in us y nega ive y a f ec ed "FOR HAREHOLDERS ONE THING IS CLEAR : You 

would have been better off to own RJR than Philip Morris," & if you had 

u 

invested the same amt in both shares 10 yrs ago, Johnson's move has 

suddenly made yr stake in RJR worth nearly 4-0% more than yr piece of 

PM + in RJR bu out shareholders WILL CASH OUT & then can make their 

own decis ons about abeut diversifvinF t eir ris s w ereas HARE- 

H DERS WILL TILL HAVE HAMISH Pd1AYGTELL DOING IT FOR THEM" (RK : exactly -- 

& they probably can't find any better investment 

T 

e becom ~ n c1 s 

ey 

in their bas ic b ss !IANY SECURITY ~ 

AN G ' RAT N "It's the wearing of~e ~ 

purple" -- as in i erial -- sez V1m Frankenho 0 om ine Capital ~ 

Management, inves~~irm, "It's strictly A DEFENSIVE MOVE & NOT TO -P 

THE BENEFIT OF THE SHAREHOLDERS . Kraft has good quality earnings, BUT ~ 

SO DO TREASURY BILIS" .L .even at the original offering price, PM will p 

earn only about 8% on its money BEFORE INTEREST & TAXES, so not wise 

investment//RJR HAD TV~LC) BIG PROffi n Johnson came 'nz it had diversi .£~c 

in o consumer ro uc s but w o a coherent strate~v . so Ross_s answers 



--PM, MOVING SWIFThY, UNVESL .S PLAN TO MELD KRAFT & GF, WSJ 7,- 2 ~1-89 . 

c uisition rice now uo t billion . . .now creating by 3/1 the 

Kraft Genera Foods Group, a $20 billior h, to c 'st of p s - 

arate o eratin units/all thi`9`~j+ `M3.ehael 2i.1es, WHO IN RECE UTAS 

RUMORBD TO BE A ADING CANDIDATE FOR CEO POST AT RJR NABISCO/PM said 

to have dr ed its feet w/GF "& doesn't want to make the same mis e 

-Lzvice . . 

. uc cr sov r bet Kraf o 1e in these new assignments,not just s icking w what ey ow or did -- some surprise in this . . . 

David Goldman speculates (of Fahnestock & Co .) is "testing the mktg mettle 

of various people"//the :onsensus : PM wanted synergies from the meld & 

Kraft management, so not surprising that in the reorganization & combination, 

"Kraft is coming out on top" 

--PM & ROTIiMANS SET U_ .K . C2G PACT WSJ 4-21-89? PM has 24 .9% voting 

stake in'Ro zm~Et- ans, tFiis broadens the a .e, rlnging total to 14% mkt share/ 

viewed as much needed step to survive in increasingly difficult Brit . mkt 

dominated by AB's Gallaher Ltd w/1-1-1% of mkt & Britain's Imperial Group 

PLC w/38%•••PM's two brands are imported Marlboro & British-made Raffles ; 

Rothmans brands are R King size, Dunhill & Peter Stuyvesant 

--PM BEGINS TESTING 'NICOTINE-FREE' CIG, WSJ 5-31-89s PM has quietly 

begun preliminary -testing o£ a vzrtualiy nacotine-free cig that it says 

will have all the taste & flavor of a standard cig . . .PM claims this innovation 

is not being done bv filter or naper technoloav but h .y GF techno- 

~ ogy -- by "use the co . s Gen -- Foods for USA subs the iary " decaffein- 

ation of coffee/nic is removed beforehand so cig has standard filter// 

said to be othin lake remier, RJR's ill-fated "smokeless" -- " h~is ~~ 

a real cig w no devices or funn business -- which burns, tastes & sme s 

like a cig . . HAVE .o n . Test-mktg under two names - 

Free & Next 3rom Merit e .£ , . t~~ 

w'~ .12 4ws. P 

a reT~"a7~seen '"ag ~ a~'~ to, the he]. ,~c y~/MERST SS BES - 

'C,IS ~".img for ar oro "PM is 

betting a its r wi h e the same a ea1 as deca£f in te 

off e or s ar-free soda" RON DAVISOF ~s ew cx shouldn t be considered 

sa e a a " s nce "if it contains tob at t ~~it will sti 

r'o Oduce the thousands of chemicals that are in the tar includin t 

that are known to cau r "//Observers think PM wise o . go on the 

offensive & 2 to ine-extend w~Merit as less risky w ~ for the i.X, 

~tro, 

~ . . 

xp a n ~he , pròdif8't•s ,, easier to focus " on "havi4~` e - ` ' "' ti~ ` w`n 

consumer confidence in a whole new brand##a'u'*#***a,*###'x'##*'u'bv stressir 

thQ TL7.C- M moy S ., Y8 . ._ .c S o SG Koo~p/miÌC~ 1'oe-c-cei• 

approac~anJR"s~effort ~~o~acremier as free-standing brand// 

while skeptical of reception, observers feel new brand may win over some 

"who want -t,o ~fg,g~T~a~,tbe-Xar~~ ~~.ng ~ather than being in 

t'Fìe°-t'Yirbes°"o`~ ~~ an addic ;ibri ""+`may7.ure mo';i'e rietv~mis~ers & discourage some 

existing smkrs from kicking the habit#*##***so good mktg conceptx'z~DENIC 

NEXT G~~ETTI~N~ _-p,~'~IEDTBY PM JUST LIKE D~WSS Adv column by Alix Freedman 

8-~~'8~ : PM bettin~"""tHSa"'NE7C'G'Yw"i'Y°f`~do for ciES what Sanlca did for cof- 

T__, 

ill car~-v ;~ e , yrp, ~d.,n;IIe.-~'1t~ „ ',benlogo . . .brands ads 

., vroclaim Introducin~ de-nicotined to`'~i .~~w7rich flavor" & adds that the 

removal or n2c is ••natura.i .•• . . .tie .1ng -teszed in Totee.o, umana & nar-crorcy/ 

Al Ries chairman of Trout & Ries notes the simple analogy, linking cup of 

coffee w/having a smoke . . .MOREOVER, THE CAFFEINE COMPAR3HON EN 

TO IMPLY IT HA5 A SAFER CSG W/O ACTU ASSERTING IT trving to repeat 

itsintro of Merit in the '70s . . .also._trving to_keeA the message sh 

& sweet_ & thus avoid RJR's mist 

the clever contraptiori""tiià'.t' DEh2VEREDNI06TINE--SLTT-NO TAR (RKs Premier 

then was just opposite of Next in what it took out)//some industry critics 

feel the word "denicotined° should draw FTC censure . . .,N,~t ~,3~,~.s,. ..,Same nias 

Carlton but si i£ieantl~ ., ~hi~lae .r: 1ci,Ve,7s of tar//some cjr.ies zon the 'ad~dpy 

s~ress on :~"e Z3'X~ice as subTiminT rebuttal to the addiction 

issue . . .some ads state the brand "offers a choice they have never klad 

before" & "The Next choice is yours" but a competitor exec says if you're 

smoker & are offeredice, a cho' 

you may choose to quit altogether . . .PM is 

in dis & . 6 .'n ne. b d do b 

in d + ~" P -F--'...i79~,cfsr : *~*#*big 

5 1 d 

bucks under promo sez a Cam r e Light smkr : Carltons & Now are like %1O 

sucking air while "These Nexts have a flavor & that's what a smkr wants" aN 

($K : what about the nic hit?)///ADVOCACY-INSTITUTE ACTION ALERT 8-21-89 : `l 

`~ . s-tern producing .iA~i ~ne jn lsales,co.s "new' products ' to imp ly -P 

safer smkg . , .wh distinwi shes .,,1Ye,4t,,is_. ' harxher,Wtar ievels of 4-10mg, ~ 

`loser to resu.lar b_ . FYI carez~Jy y avoids call att . to ' azads o'i"- v 

nic . '6u~ ~ e~ Next as a .* new "choice" for smokers . . .stressin th C0 

"natural rocess" of nic r & trying to link smkg nic-free w coffee/w 

cou e a p .r . success unless smkg control advocates get to work ; PM 

spokesman Andrew White sez product is attempt "to respond to customers' 


I 


preference for A BROAD RANGE OF OPTIONS" . . .Spokane to get test mkt, too// 

RJR strikes back w/"What's Next? Another cig w/more tar than Now"///see 

~ RJR's CHELSEA : its an wer to offensive smel of tob is PERFUMED CIG ; 

t e paper Is treated w air freshener . . .pitched to women & claiminK to 

. .''_ 

be 

ir - '• to smell • d (implying others don't) . . .subtly a-cyrac-cs wa~ic~c-en 

w"scratch 'n sniff" patches in ads///EXCELc made w/specially treated 

I paper, but its real pitch-isYto REDUCE V=52BILITY OF_SIDESTREAM SMOKE, 

but no evidence It does anything more an re uce the obviousness of the 

I nons . . .BY REDUC G T ITY O S S SMO nons m have 1 s of a 

i warnin e o to the hazardous pollutio good quote 

111 from Pertsehuk re PM's"WINK STRATEGY" whereby "They won't concede that 

__ cigs are azardous but at the same time they reassure consumers w/a wink 

& a nod that their new noncig cig isn't the one that everyone is worried 

about" (see 6-15-89 WSJ) 

--PM AS ADMIRED BY INDIJSTRY ANALYSTS FOR SERVICES PROVIDED,'8/893 its 

investor relations people get high marks for offering informed analysis 

of unfolding developments at Cipollone . . ."PM was on top of things & didn't 

play cute" . . .also for speed w/which it explained its big acquisition of 

Kraft . . .their people are experienced, know the co . & the industry well/ 

~ UNUSUAL CONTINUITY . . .as for S&H, analysts say it's really not an issue, . . . 

"That's not part of the conversation" since co .'s position is so well 

known there are few questions 

--KRAFT TURNING TO RIVAL FOR FAT SUBSTITUTE, WSJ 8-2-89= KGF so eager 

to make fat-free foods it's turning to rival for replacement even though 

it's developing substitute of its own . . .placed an order for Simplesse, 

NutraSweet product not yet approved for human consumption . . .could be help 

in regaining ground lost in mayonnaise war w CPC Intl's Hellman's brand, 

Hellman's has 53 .3% of mavo mk v•s: Kraft's 23P 

--PM SPLITS STOCK, RA E6 Dl DEN'r7~ D, WSJ $-31-89 : Split is 4 for 1 

w/22% dividend rise . . .some analysts thought it might go up as much as 35%/ 

Wall St analyst says PM doesn't have to do more than it's doing for its 

holders, esv since STOCK PR E DOUBLED IN PAST vR,,,231 million shares 

outstanding . .SPLIT IS SSXTH SINCE '66, most recent a 2-fop-1 in 'Sb . . . 

QUI ALENT OF 192 SHARES' T~SDAY '-***#*~counting 

the 

ITS WEAKENED RIVAL . RJ?, WSJ 9-21-89 : "30 like .... .a,_s,ha k 

M 

now oing everything it can to explol~E s ae»~e°e~d 

stand ng & consolidate its hold on leadershIp of industry, 

tTV tyoa..._that put its competitox .jn_,.a-bind" + EXP .tCn: 0 

ITS SALE OR4Ein effor~ -to'°mu'scYe"32Jft""oU"E'~i""'C"iYSicedt'"'s-pots in many 

~-t supermkts where it's been long dominant . . .Î can assure you that we plan 

~ to take advantage of any opportunities that the changed situationd at 

(RJR) may br ng, sez vlce c ha rman M urray/James Joh nst 

on no t un er- 

estimated, viewed at RJR as true cig marketer & builder of brands -- 

BUT RJR DEMOGRAPHIS WEAKER THAN PM, made up of older, blue-collar types 

who are less affluent . . .Winston losing steam, partly via many adc campaign 

shifts . . ."I think everv br and wi.l1 have to be repositioned," says 

one unnamed RJR marketer . . .JOHN T N~IC,NSs~R's new 

macho discount brand aimed at young male smkrs, has been stealing some 

biz from Marlboro -f- "A SUGGESTIVE AD CAMPAIGN HAS GIVEN CAMEL NEW SIGNS 

OF LIFE^ . . .plans to reinvigorate other older brands plus new & innovative 

products : "We will spend whatever it takes" (BUT RK NOTES : money is 

not the pt, brains are, as Premier showed)//in 12 mos ended in March, 

PM g-.a~neClg,K ~ue ,~,x ,e on basis of Cam 

tir- 

'd~g & A1p ne'brands, R~'R ~los-~ two l,pts of the segme'n'£~~"$1V~`ln•~'ròc~uces 

2~°X`~,`low nic brand, & Ultra Light Marlboro, showing PM tr,Ying to woo 

smokers concerned about their health . . .RJR trying, too, w/Excel & Chelsea 

& failed Premier . . .~'M L-~._ATCO g~,gRn R~Zg . 3;N Q~ 

, . ¢R~'A' ~ &,y MFtYBE + 

DAMAGING PR ~flDI},~,,,,,, ice a r- rzc ~sesare almost"`~m~•',S'sib 

to resls~even i wan ed to s nce alers ll r is 

all bran s for retailers & pocket the di£f . . . . In May RJR raised prices 

jus un er , s z y lower than expected, but sev wks later, PM chose 

to push the increase to 6%s RJR matched the rise on its high-priced 

brands, but only ~rudgir~ly . . ."You clearly saw our strategvwas to go more 

moaeszlY on nrlcing- sez JonnsZon, ac.aYng ZnaT ever-nl rlces co 

hurt the bele 

.a~uered industruy -- Ry could also P customers are more Yikegv to swltoh_from RJR brands to cheaper ones than 

Marlboro customers are to g .vve up on theirs . . .is PM playing more hardball 

-- namely, while it may lose some business because of higher prices, 

it stands to make more money & gain more mkt share than RJR in the end . . . 

PM- .-ii.D ._900 SALE5P.E9P?.E__.SINCE SEPT F~}sl}, .,@ ffor~ .,t~z.~d~J.,odg e~~ RJl~ 

Yrom rac c o~~y~~r~~ i a-E cF~ved yrs ago when l~E -~-ed•'3ridust"ryt NTi~t5~31è'~' 

~2'Gr"~•~'a most weekly now where they used to come every couple of months 

http://legacy.library.ucsf.edu/tid/fmw44c00/pdf 

96746704


--CLASSIC PM & INDUSTRY ARGUMENTS IN NYT LETTER 9- . 23- : From John 

A . Kochevar, v~-cor~ af£airs PM 9-5-89, headl9 .ned " o~n 'ELiken Smk to 

D ru t, rut, Addiction" . . .in answer to NYT editorial "Raise ig rices, Save 

Lives" . . .starts by (1) minimizing the health peril, "§j tkg tob . .does no l 

impair a nerson~ abilitv to reason or function" adding ci- smTcrs do not 

~tttf 

roo conven~.ence store or '6ea the£- ir families in a mooa-aitier ao 

more than 40 mi ion e nave quit, 90 w o cessation programs ; the 

same can't be said of heroin, crack & cocaine dealers ; (2) US cig industrv 

"does not mkt to children & "In fact, it has attempted to discourage youth 

from sm g by prov~.ding the $arental guidebooks "Helping Youth Decide' & 

'Helping Youth Say No' .(3) the 60 million adult US smkrs pay $10 billion 

/1 

a yr in excise taxes, the most regressive form of taxation and efforts 

to increase consumer taxes disproportionately hit the poor" (RK= & what 

effect on these same poor do the industry's twice yearly price rises, sheer 

profiteering & unrelated to rising costs, have?) . . .hi~her excise taxes 

"would unfairl enalize these 60 ' lion adult smkr 

--T VA SUPERSLIMS LAUNCHz A To ay 9-- M Lights low-smoke 

Superslims" saying new bran ts o less smoke from its lit than 

other 100mm cigs . . .no a ets like P ' u ord narv ow--tar c~6 

wra~ped 87 in - two lavers o vo ous & non-norous paDP.r_ . o ninaCAPRI launched 

~n in ultrathin category, B&Wdidn't want company & has filed patentinfringement 

suit vs, PM for Superslims//the new brand is 17mm in cir 

~erenea vs 24r~m= -eor most brands, has 6mg of tar & .n c ., avaz able 

in reg . & menthol### 

I 

. . .available USwide joining Slims Lights, Slims 120s, 

Slims Ultra Lights & now Superslims/ ds sa "Fat S " and 

"Introducin the First Low SmokP niF for__omen press kit plugs the VS 

tourney, e or amihip Series encompasses more than 60 tournaments 

around world w/$17 million in prize money//less spectacular but 

effective promo is Va Slims Book o Da s intro ' 2 witt - 

` pointm n alrndar .hrnrr,niin women s ro r+ -In hi .orv 

' --HOW PM DIVERSIFIED RIGHT, FQ,+-tuna Disappointment has dogged 

its efforts to grow beyond tob . but by buying Kraft -- & President Michael 

Miles -- it na i .ve found a new money mach~ne//pic on first page of iIM 

~iescrihed as prazma ic, ruthless . Tocused . luckv" . . .PM finally beginning 

to conquer its addiction to tob . & seems to have picked a winner . . .& if 

ever a co . needed to diversify, it's 'M, which depended on a single brand, 

M2rl t,nrn _~enr 60% of' ' ts rof'its last vr . . ."We wanted to be own as a 

consumer-vroducts co," sez genteel Scotsman Maxwell//Wall St keeps a distance, 

knowing that cig profits can't last forever & while esteeming its 

stock trade it at a discount out of concern over tob ; cig consumption is 

declining in US (RKz but growing elsewhere) & litigation remains a threat/ 

early success of KGF "provides a.essons on making a merger work & creating 

a fast-growing biz in a slow-growing industry/not just glittering array 

of famous brand names u~ t RIGOROUS -C TTIN BACK-TO-BASICS M techniques 

that are hallmark o I-a~-1BOs . . .in particular Pgen~l on ^-r.hA 

TOUGH-MINDED . SLEEIff.Y_.GROOMED MILES ._5_.O, who succeeded Richman, 61, as 

KGF chief last month" . . .A BELIEVER IN CAREFUL ANALYSIS & FAST ACTION, a 

"_business iunkie" who shows up for work at 6am . . ."the very model of the 

n w br a of mar that has climbed out of the rubble of inergers & restructurings 

across corp . America . IF HE LIVES UP TO HIS PROMISE, says Maxwell, 

63, Miles could climb to the top of PM itself" adding "THE ASCENT WON'T 

BE EASY" since PM has talented mgrs on cig side including R . WM . MURRAY, 

$3 . . ."BV all reaorts . the coldbloQded Miles fits right in at PM, "whose 

CORP . CULTURE A NEW E~ MEE SUMS UP AS "SCREW IT ; get it aene"//offie rs 

at GF dee 1 resented the PM takeover~, cooperated only reluctantly w their 

new masters & ON TWO bh'~GF^'S--'i'I3f~ 35 OFFICERS HAIL FROM GF//Miles, a 

NONSMKR, COMPARES RISBS OF CIGS TO OSE OF CHOLESTE ' to th 

consumer o a e s or to smok , regardless of how those products 

are marketed, adding "S EE ND G ORALLY WRONG W/THE BUSINESS"*#~##use// 

Mi1es usuall communicates in cris sober tones, saying "I believe in 

ma ing sure you ve done the obvious ings right before you do the less 

obvious things that are more risky" . . .at Burnett agency after college he 

worked on P&G accts like Secret deodorant ; other client Heublein hired 

him 10 rs later as co -mkt ::•.Sci=MM mad:e~his name sa vaga.ng Ky r e 

w ic in sudden y seeme o turn bad & reported big losses, tumbling ~O 

co profits . . .MM to the rescue : sold demoralized employees on a comeback On 

program, fixi.ng almost everything from the menu to training of cooks, he ~ 

did hands-on direction, introduced buttermilk biscuits, did special train--P 

ing for chicken-cooking . . .Ba+4 as a demanding but inspirational boss, con- ~ 

V 

vinced people they had manageable pro'T'. ere were definable-ttfaiFsgs 

.~lJriti111 - u1V .LUUGa.C~ -VU.L LLV .YllY~_yE.`1 L(1CUUlH1f1 C . l1GS-U _IU111CLL 

~res in '82//HIS MANDATE NOWs JOLT A BYELION A YR ."Mflfl- ON O 


I 

i 


ANIZATION INTO RAPID FORWARD MOTION" . . .same as many sleepy old co . are 

asked to do after LBOs -- a fiery demand for improved productivity// 

HAMISHs resembles Charles Laughton in appearance &"sneaks in a quiet 

oxce tha_ au a n . . . expects KGF to come zn-w/"a 

phenomenal 27% increase in '89 operating earnings" . . .most of the $400 

m_illion gain wi11 come from executive vurges & other onetime gains, but 

eritl-e- w~S2' e other no-brainer economies T'ike JOINT PURCHASING . . .one 

key" lots of-zmall economies that add up, from size of the lid on the 

mayo jars o ac~- curacy of wighing ma~i-nes for food portions, latter 

should save $3•5 million in '89 . . .how best to meld distribution systems 

or best w to d arl 1 000 worldwide sal peo le . . .MM so enthusiastic 

a out possible synergies, ho es o sustain 1 annual rofi 

g~ro~wth . . .BUT= cost-cutting not enoug , vo ume grow essen a .a a"That's 

w-7iat"gets the managerial juices going," says Hamish//BI- qAr .T•ia2F'e in 

era when consum turnin to li ht,healthy, natural products, Kra~'t 

line is heavilv weiahted w fattv . c oles~erol-ric roc sse 

foo w plenty of artiriclal ingre en s-- ORTFOLIO, even products 

improved to meet mkt needs, e .g ., ready-to-eat tapioca Jelho 

pudding, lower-salt Oscar Meyer bacon, microwave jalapeno. Chhez Whiz . . . 

O . IS RESPONDINa w/mRFNDV L7NE EXTENSIONS . reduced fat nastries from 

Y4te+~+~++_*+•+'~ cholesterol-free MiracTe-Whiv, microwavab e every ing . . . 

ex~sions make more sense than new products= GF spent $100 million 

a yr on new product development & got almost no new profits for the 

estimable effort ; says MM "The odds of getting a successful major product 

out of test mkt are 100 to 1"#~#u'~+#/ OFFEE WOESs Responsible for nearly 

1/3 of GF volume, coffee went fr.om-:$15O_~m_ lllo !prafi'ttan:r685i 

. . .GF "lost interest in the cof£ee bus+ness," Ham .to'$5O miln in red in '88 ;.ss+ rha•^~ea 

& even stopped adver~ing Maxwel7 t-'2ouse ogether for some months as 

mkt share dropped off further . . .HM butts in & major efforts launched to 

revitalize, now offers Rich French Roast variety & advertising heavily/ 

NIM 2S INTENSE . wants tc be there before subordinates make important deczsions 

. . .will pare units he can't grow, like Ronzoni seen as regional 

product in NE/KEY LINE : Where promotabl flif£s don't e ist h hooes 

to create th e q ."I DON'T FEEL BAD ABOUT SELLING PEOE .7_E PRODUCTS THEY_ 

DON'T NEE75"~##~#he's candid, anyway, e .g anad3.an n variety of Kraft 

peanut butter sold in jar shaped like bear's head, which consumers dig 

even if they paid premium of few cents ; ditto hvped sales of briaht 

orange Cheez Whiz by hyping it as microwavable sauce//CIG LOYALTY : pri 

ises-have outstrinnedi.nflation costs h.L4p/ a vr in aas~ ecarT~i e . _ .PM 

has YFTNVFSTF`T 

A Mi?SH AS IT CAN IN TO B ~ n, which 

has bought it mos t efficient ci 

lants h a would be the uer£ec t 

'nI machi A 

KILLI 

I 

OMER '~'*'u' ~######~#~##must use 

fl Y PLANATION OF ITS AC QUIS ITIONS ~ : 

Bv eavilv leveraging its acoui ns PM buys a lot of earninas 

re 13~~~s'~ on~v 

will 

uce earn ngs before intere~ta~;es o`~"5 

whic roug y equa'~s ~Fie" arnzual interes~~ to btyy Kraft -- but ~ob must pay 0n 

what it borrowed 

. cash _£low will al ow ~capid ~ down of the . 

d_ebt, .t~as-reducin 

0 & boostin rofit 3•••result . P 

buy 

s -non-tob the earnin s investors pre er w o dama ine; i own fi.n . 

resu -1 vEN s IN itTis -in ime may persuade Wa l St 

to e M tra at higher premium/"The is that beauty of this PM game can 

p~~y la it a ~ain ~& ~a. a~.n because the food industr is enormo //one Ice-y risk : t~'i t~p3e cTif3nica y un eres ima e comp ex ties that food 

industry mgrs face////SIDEBAR "It's Fun to Fight a Fettered Foe" on 

RJR's problems : Most of~'M's gains have come at RJR's expense & the 

more it sells, t e more it pumps ac into adv to sus a~~ .n its lead . . . 

OFRGmnER'G OuAT .T .Fn*r_Fi battling to stay even in tob . while trying to~~~.,~ .~o 

generate still more cash flow to make the LBO work . . . JRTob amon .,,y~.y 

profitabi A nt' ri~ dsvs, managing operating profit margin of 2 io vs . 36% ~ 

or~PM & an avg of 31% for the 6-co . industry//KISR within days of its p~ 

takeover IiILLED PREMIER, then sliced off 1/6th of RJR tob payroll + ~ 

ending the trade loa~lcin ame " mis ided incentive ro that le 4p 

lers o mor RJR ci s than they cou d se l, resulting in o~ 

costly returns" . . .Gertsner bad y needs to het more juice out of RJR's ~ 

high-priced brands (RIKa but isn't) cD 

--PM TO LAUNCH 1Z~LArF rF AnS _ WS .r ~ a_L-80 : This is how BILL OF RIGHTS rn 

CAbPAIGN IS TERMED, a patriotic celebration of bicentennial doesn't 

mention cigs or smkg, but antismkg critics attacking it already for trying 

to wrap itself in the document to bolster its beleaguered image . . .a $60 



million 2 c ai b O1 i & Mather . . .Smith of PM concedes it'R 

Elarg~y for imaae-b a i en a. icatxon of tie co .Tsee mailer tubes 

that carry documents & other lit . inquirers get) z'&tq~st~e,op~ e f., ~h,àven't 

~~,e_who we j„e,,,(RK= dubious premise) . If they thi_nlc w~`' 

thrr~"'SYi`ti'o of the Bil1 of Ri~hts _ it follo ' think of 

ur nrod~s' . . .s,ays gr~~~ ?q~ gend~„ o ..h~?5w e1, ~~S3~aix~al 

~+ strate r teet t n - o i $s rin b ki e & 

¢~ wooin_g -ae s as ~rto o eetor of czvil rights##~~###thus portraying itself 

- rt e BofR commercial fates ur vice of MLKi~jr„~ . . ."This Is clever, subliminal 

adv . that really says, 4Smkre--~Pis~'"~ ~e~°~"its . too,' says Al Ries, 

chairman of Trout & Ries of Greenwich, adding °This Is ~designed to et 

the wag ons__in a circle & defend the smk~ franchise/others n~ :e ow popular 

patra.otism is & if you can do that & boos yr b~.z at the same time, that's 

~i "brilliant." sez Rich Winger of Boston Consulting Group . . .Laurence Tribe 

of Harv1S sees little risk of ads defying TV ban on cig adv : "All tY~gy 

~ are truin to .do is bo row of the le itimacy of the Bill of~R Ehts 

itself" U .S . ARC IVES ASSAILED ON DEAL , N T 11-10- z Deal sparks 

debate over-Fiow ~~ar agency can go to supplement its budget . . .Natl Archives 

accepted $600,000 from PM to use its name in advertisements celebrating 

BofR bicentennial + TO & promised 

to locate such itq~,,,,a~.,.,xVcordings of_ voice,s of past Pres3 .de n~s"t"6'r 

tFie -a3'~/says'~r'S~ney Wo1fe, head~-ef'"the'~~Pub11c Citizez'i'~2eseaY'Ch G"roup 

founded by Nader : the ~M adv "SMEARS THE BILL OF R7~w'rr W/THE BLO©~~F 

AME ICANS KILLED ASi ~E~II OF ~ ZAother P c gs"//PM's 

Guy Smith responds : e are celebrating the BofR" & (2) "It is also 

way for us to give the co . an identity . WE HOPE PEOPLE WILL THINK BETTER 

OF THE COMPANY" . T~ie~~ ~sl~ vj,g.ay~~ & readers to JOIP,td & THE NATL 

~ ARCHIVES IN CELEBRATSNG the 200th anniver~`"ar~ rchii~e"sb3~~'er 

sn "raisirigiinds '' "tb suppor't"~rograms of the -Archives 

s 

"We think it is ver a2ronriate to stretch the -r.~,r*+a~•ers' do11 ~^s h~s 

~. w ~'!-uncTrers an ing is that we were deah.na w~PM the corp ., NOT A SMKG 

CO ' . . .sez Jack of Ries Trout, campaign Is ~sery 

wasa~rin~ ha . PFnnT,F Hay A R . T TO MnxF . They have been saying 

a~ cTirectly, but this is an indirect, tonier way of saying it . AND IF 

THEY CAN BUY THE BILL OF RIGHTS FOR $60o .000 . that's a deal" . . .Laurence 

Tri e heTi- re sez e rc ives action is offensive & violates two clauses of 

Constitution, Art 1, Sect 9 & Art 11 sect 1 which he said make it clear 

the govt isn't for sale : "S~ THINGS SHOULD NOT BE FOx SAT° noting 

if PM were rented the fron~ steps o the hite House, "citi.zens would be 

rightly outra~;ed . It Is just a short step from the White House to the 

Natl Archives///PM ADS ANGER CONGRESSMAN, NYT undatedz Thos Luken, D-Ohio 

& chairman of House Subcommittee on Transportation & Hazarcous Materials, 

says the campai~n by PM was specifically undertaken to he d off '~»' th-'~° 

res~rict ons on adv oT ~b roduc~-in Sena e TedKennedy has just proposed 

bill to give gov=c coniro- over tob products & undertake antismkg 

adv campaign via grants to states, schools & businesses & to establish 

Center for Tob Products 0 $18$ million, thus giving DS govt control over 

ingredients of cigs 3'or first time & packs would be required to carry 

~ info re additives . . .last month PM o ed Philip Morris brand bv chan~ing 

its name to "PM" it announced~~ NYT EDI3~S'TnT• "THE BSLL OF RIGHTS, 

FOR~tENT," 11-19-89z opens w/quote from the ad on TV & "For a free copy 

,~,~ of this historic document, call . . ." & then says "The U s has owei,d 

t~'I itself to et taken b the roducers of M lboro ci s, Kool-Aid, Mi .ller 

",li- Beer e ' in a 0 mzllion yr adv campaign based on outlay of mere 

1% of that for ability to rent BofR -- "Jt's-a_s_habby transaction at an .y 

~~ rp ice"x*#~#~--the contract w/Archives stipu~lates t a~ e ci~ . o wan so 

'- communicate its belief its belief it's "one of America's most diverse ~_ 

i • .oorps" which is fine "But ,rh on earth should a federal a hel it 

~~do that?" . . .there's no de .. ha e assn . .,. 42 Archives "lends th ~ 

. co. ri est ~ . . .pooh-poohing c ives e ense''-"-~ ~ 

~ s re ch taxpa'y"d ' o arsz "Who will tell the people at the Archives what ~ 

they should know better than anyone? The Amer . herita e Is ricele "// ~ 

THE BILL OF RIGHT'a NEEI?S A PLUG by Rona1 Goldfar , D lawyer, NYT op-ed p 

' 2-26-90z Says everything on TV gets paid for by commercial interests & ~ 

~"Why not let the Bill of Rights get its plugs wherever it can find them?" 

~ j since a Hearst survey found that J9% of Americans didn't know what-the . 

BofR 3.s*~###*noting an underarm deodaran co . has use pic of t~~tue of 

3.,iT~er$y . . ."tNhy do emotions run so strongly vs . the tob . industry, puri~eyors 

of a public-irealttr-scouT'ge'; ~'or attempting to clean up its public image 

.,:aPPS~} 

/ to- sm° . . TH1'S"~LAS NOTHING TO DO l . Tr~-AJF`.m~ nor will it evar" . . 

'CrY'tt'C`s°"6"all~it attem~t to nurchase innocence bv a~sn, quotng Mike Pert ., 

leadinginati~ r y crit~ .ce "It should be treated like the Medellin drug 

mafia, not the Founding Fathers, adds w/seeming admiration tlow nerfe~.t_1y 

the Bill of Riahts camnaian dovetails w/maior asects of PM's-- v'~tical 

0 i 


I 

' 1 

I 


w/BofR? . . .concluding "The Bill of Rights needs all the att & respect it 

can get . What's wrong w/reminding the public to revere this precious 

document?" (RK answer : PM could do it w/o Archives selling them the franchise 

as quasi-official sponsors, thus dignifying their co . & products) 

--PM SELLS OUT I75 INTEREST IN ROTHMANS, NYT 11-10-89 : Price for_~ 

29% interest is millio , a huge profit & ended specula~ionit m~ .ght 

buy out Ro ans . . .would be before-tax profit of $4$0 million, having 

naid $350 million in '81 . . .stock price rose over the yrs in anticipation 

of PM buyout . . 1'~s~it has managed t9 ,.~ r1lt its o . enterprise 

, i...-~. , ~'~S-d.~3ay~ 

~~.'?sWw ~ 

& does,n,~t_ed 'xo-~Fiintxz'°'fi}+`fE~bYi't'("IZ'K . ° this 'Ft`~'~r 'iio sense~") 

--PM GEAR~73G ~`'~r5`SELL DE~,T7X'L*'"'CIGS BY MIAL, WSJ 11-22-89z Home delivery 

of its Cartier Vendome brand, will provide valuable lists of dedicated 

smokers . . .PM rolled out the pearl-tipped smokes in LA in Oct, had been 

sold only in Europe before, packed in oval boxes w/House of Cartier logo, 

cost twice reg . cigs, distributing the brand thru upscale hotels, restaurants 

& tob shops 

--CIG FIRMS ROLL OUT BUDGET BRANDS w/chart on Rise of Low-Price Smokes, 

WSJ 12-1-89 : AB is Montclair d o1 r' , half of 

reg., a no-fri ls landscape, not Mar oro Country . . .Liggett's PYRAMID 

as one of mo suc intros in . .next wk PM brings out its 

super ow-priice Bristol BRANDED ~ENERr_CS led bv Doral & Cambridee . the 

only part of the biz w rising sales . . .the sub-gener i s will sell Q 70-900 

vs . $1 .10-1 .30 on branded generics &$1 .5$ on regs//cheaper tobaccos ~elower 

adv-nromo costs a11ow the cheapies to be profitable . . . z even 

former regs are taking the discoun rou e, e .g ., B&irl relaunches Vicerov 

as ed aeneric doublin~ its mkt share Prom ~ KS IN 

L THIS brandbecause a.~frthe ~enerzcs~iQn`t attract new smkrs or hoid on~2 

would-be ouitters not only wi11 units £all~~ so wi7. nro antismkg 

foes attack9.ng tiT e deve3opmen~s s rewdly designed to eep two crucial 

constituencies -- teenagers & poor people"/ P ramidz pack looks good, so 

does price & it has taste ; Ligg . says '73% of its customers have defectedd 

from other brands . . .others like Chas b7ul~~To ai'b~ ve no~cT-P~i~~ 

success & .followed suit (IV7ontclair et al .)//ANOTHER PER=L : heightened 

resentment among smkrs of high rices of reg . brands ; Marlboro p~ro_£it 

mart~in said to be 4X Pyramid's~claim here that it's vi'rtua7 .~ yLimpossible 

to drag the generics up the price ladder since price is their raison d'etre 

(RK disagrees)/budget cigs can make only sparing use of coupons & adv . . . 

IF BARGAIN BRANDS PROLIFERATE, THEY'LL HAVE TO SPEND MONEY FOR IMAGE TO 

DIFFERENTIATE & that'll defeat the whole plan, e .g ., PM about to advertise 

Bristol via print & billboard . . .see how PM is SEGMENTING THE MKTPLACE 

from Cartier-Vendome for super-rich down to Bristol ~o e noor TM## 

~I~141S`-TR7-Sobt7 .'; "'~ SNE SELL, J 12-19-89 : Liggett's Eve 

gained 8 .4% this yr despite 6 .6% industry drop/DAVID DANGOOR COUNTERS 

to those complaining about niche & segmented mktgz "I find it reprehensible 

at best & sexist a+ worst to assume that adult women are not capable 

of making the5ir own decisions about whether or not to smoke" . . .VSlims is 

leader w/3% mkt share . . .MARKETERS NOW TINKERING W/SIZE TASTE, SMELL & S,S2QH 

of oi s . . .Capri, most success£ul recen~ launch, up to . s are -- it's 

o sinnier ~ er s ims & 3 o than regs, is promvts PM to launch 

SunPrciims . . .the LOW-SMOKE BRANDS aimed more at women who# mkters say, 

worry more anen about their so` cial image & annoying those around 

them" . . .Chelsea a sweet-smeller & Lorillard doing a lemonflavored brand + 

Newport Stripes 1008 in white packages w/pastel stripes . . .about 90% of a11 

smkrs be~in habit b~y a~e 21, acc to~vt statistics 

--B&H TO SHED UI3P IMAGE, WSJ 2-2-90 : Radical switch . . .mktg people 

say it's very risky to cheapen a brand image, impossible to reverse it/ ~ 

acot is staying w/Wells Rich 

--THE MOST ADMIRED U .S . CORPS . . Fortune i-29-90 : PM ranks~#2 close ~ 

behind Merck . . .Merek gets top grades for roduct i on, b~.g into 0N 

R&D, attracting top scientific talent, bra ns translated into money// ~ 

"Value as an Investment" on Hamish= At first it may seem odd that PB4, o 

whose main product has been damned by the SG, should rank so high, but cp 

has risen from #7 to #2 in 2yrs 1ar el b ivi.n shareholder 

wh t s o - 

mpoken Rr~harm2++g' .~o u° ~-8$Y33~'i`~'°- fli3c'e' ,"avannu iincr 

in EPS vs . SBM•s 7% & ho~ Ford sô . . .of course, i s easier to sell cigs 

than most oer thIngsz customers don't resist price risas__ .rnt 30% 

TICP,,,~g,_~}},~„~yt G last yrwtb~„,c~~,4 st-cutting . . .'Pi~'s~OTAL~7 ~'~ 

LY'IESTORS AVER~C^T'2''~"~"'~mOPS AMONG THE 90K CO S IN FOR- 

TUNE USETPM management not 

t ei usual gaggle of MBAs, many lack college degrees : ?By & large, they 

have to try a little harder," says HI~Y//Rubbermaidz quality of products 

is key . . .3M gets high grades for inventiveness//PlVl rated highest for 

cN&ITY OF ~yT= . .Coke's f9inances impeccable~ sPending its excess 

on 3oreign o tl~.n9 plants . . .J&J gettsng credlt 3or corp . citizenship 

RJR fell Prom ~17 to 267 


I 

I 

r 


-OPPONENTS AIM ANOTHER SLAM AT VA SLIMS TENNIS NAME, WSJ 3-1-90= 

I Critics aim at GWU, back as host of Wash leg of the tourney . . .recent 

Cong- . efforts to restrict cig adv has put new heat on/PM spokesman 

sez "We have absolutely no intention of changing the name of our 

' tournament . . .GWU's ex-prexy Lloyd Elliott kicked Slims tourney off campus 

in mid-'80s 

--TIMES CHANGE BUT THE MARLBORO MAN RIDES ON, NYT 9-8-90 : People buy 

318 billion Marlboros last yr, t4aan thev do bo es_of Coke or cans o~ 

l'~amnbell Soim (dubious compaxison ; it should be packs as the basis of 

comparison) . .its $9 .4 billion in retail sales would make brand 4-5th on 

Fortune 500 list if it were a£ree-standing co .//success attributed to 

(1) consistent adv ., (2) shrewd variations in product & package designs 

& (3) no-discount pricing policy . . .has attracted smkrs fro ide r 

f ethnic & demo ra hic rou s . . .PLs4 never cri eized for targeting speciTic~groups 

angoor : ar oro•s full-bodied tob . flavor has been the 

key . . .but mktg experts go farther : plarl . has done best iob o£ manaaing 

brand identit of any brand, sez John Lister of Lister Butler In¢, NY 

consu tants Marl . accounts for 2/3 of PM cig sales but won't break down 

who smokes it . . .PM overall has about 39% of all male smkrs & 40 .5% of 

all female smkrs, 44 .2% of all Hispanics//how does M . sta 0 ? 

the remark ble consistenc of the adv cited f r t . . .Dangoor sez "For me, 

ways, the cowboy contains the expression of flavor . I could not think 

of anything more convincing than the cowboy to endorse that Marl . is 

the best-tasting cig . You could imagine that the cowboy likes coffee 

stron and his hors owerul~as . . . Even for women, it isn't the 

ma e appea -- it's the f avor endorsement" . . .13 variations of the 

brand, starting w/Marlboro Lights in '72 . . .LOW-TAR (11m . of t 

less) now acct for almost 40% of Marl . sales#*#'~ co ors : Red promises 

flavor ap~" pea7s to men ; go1d, a£ashion signal, appeals to women as do 

longer cigs ; green signals cool & fresh & appeals more pop . among blacks 

, than whites . . .flip-top boxes popular in cities where people wear suits 

& want pack well hidden & no spillage of tob 

--KRAFT LOOKING FOR GROWTH FROM FAT-FREE FO S . BW 3-26-4os One big 

fear is that slimmer versions will cannibalize their old standby lines/ 

followin PM f u1a trying to peddle FZAVOR W/O THE FAT (as in 

Pfeiit & lower n3.c . cigs . lr-ead-~'rno~at-cao : Entenmann's 

sweets, salad dressings, c eese s ices, L.ight n' Lively yogurt, 

Sealtest ice cream among them . . .dozens more on the way . . .trying to do 

all this w/o new substances that require FDA scrutiny/but overall sal?z 

vol at K didn't budge last vr, one reason is declining sales of full-fat 

ice cream where K has Breyer's & Sealtest . . .reg . salad dressings also 

off slightly . . .see chart w/numbers o 'es in new K f - e~ 

variations : Yogurt down from 110 to 100, Italian dress ng from 50 to 6, ~ 

j 

singles cheese 90 to 45, oatmeal cookies 120 to 80, Sealtest vanilla v 

ice cream 140 to 100, Light n' Lively yogurt 150 to 50 . . .adv stressing ~ 

how good these low-fat products taste & are good for yr health . . .Enten- ~ 

mann's adding new sales dollars, K has figured out how to outu£at by 

Ìprocessing skim milk & egg whitesp in £at-free Sealtest, K has imitated 0v 

the " mouth eel" of butterf cream by mixing cellulose gel, a .,p 

dietary fiber, w akim milk & proprietary ingredients 

--GIANT ARTISTIC GIBE AT JESSE HELMS, NYT 4-20-90 : "Helmsboro yountry" 

giant sculpture pack w/portrait of Senator replacing PMInc in center// 

on side of box is '80 uote b GWeissm :"Let's be clear about one 

thing . OUR FUNDAMENTAL INTERE T IN THE ARTS IS SELF-INTEREST . There 

are immediate & pragmatic benefits to be derived as business entities"// 

GW now elaborates : his real thrust, he sez, "I have said that it is in 

the self-interest of_busine~es to support the arts because it makes 

or a better community in which they operate: The arts improve the quality 

of life for everybody"//artist Haacke, 53, says PM wants it both ways : a 

lover of culture AND a prime funder of Jesse, the homophobic Senator . . . 

PM Corp . Contributions '88 list has $20,000 to Jesse Helms Cit5aeâh5± 

(f Center, Wingate NC . . .telephones Charlotte News server, which investigates 

& finds in 4-11-89 article that PM e~ift was t20O .n00, not $20,000/ 

GW explains PM also supports the Bill of Rights, which "gives everyone 

the right to speak even though we don't always agree w/what they say . I 

don't think the two are connected"??? 

' --PM DISTRIBUTING PAPER BY YALE DOCTORAL CANDIDATE, WSJ p1 item 5-9-90 : 

' it finds little significant risk of l .c . from ETS/being sent to ~00 

1 scientists, hoping to defuse EE,4~,report exgected'"`ff~xf~'"t1"i"a""y'"'f'TsT""~èars will 

urgc' bail`-ori--°s'm3cg-a°t`vrorkpiaces . : ..v.,..=


to ban smkg in offices & public places" (RK : note the "antismker" rather 

~ than "antismkg")/of 23 published studies on ETS, 18 "found no scientifically 

. significant risk to non-smokers" & remaining were of non-US populations 

- where cultural & lifestyle differences affected the results . . . largest & 

most comprehensive study on workplace risk of ETS by Dr Luis Varela at 

Yale concluded "We did not find an effect due to exposure to passive smkg 

in the workplace" 

--MARLBORO JUST SAYS NO ON LOGO, WSJ 7-9-90= Logos on toy cars, billboard 

signs on video racing games, & across tots' T-shirts, it looks like 

PM wants kids to smoke . . .co . now plans crackdown on unauthorized use of 

its logo . . .sez MPertschuk "If PM really wanted to stop (the kids' products), 

it could ha_v~ done so ,yrs a_go + Alan Blum scores w/"ARE THEY GOING TO GO 

AFT~H- A STADIUM & a7r~ie other places where ey pay good money to 

expose t eir ogos to kids?"##*#####*see cf . to recent Winston Cup newsletter 

w/Kids' Korner offering sweatshirt w/WC on it as contest prize 

--THF~SUCHARD DEAL : Fin Times 6-22- 0, Suchard denies takeover claims, 

calls it "nothing but rumour" . . .PM in NYC would not comment . . .S,c _ h s 

Ibeen in _ ... news . .. ... . ... 'n 

- 

_recent 

. : 

yrs for . a.g%ressivelye_expanding ..r . . its choc . em 

. 

~ 

. 

-Be'Nn"s"Gòt2~"ti"6r" &'EJ ~rae7i'in U5~'"'tiizt's4'f~ered""$,j~"'"miS2ion 

~~losstjuon Brach due to bad sales strategy (?)//PM PRESS RELEASE 6-22-90 

ANNOUNCES AGREEMENT : "This combination will permit us to more effectively 

compete throughout Europe w/excellent brands & broad distribution & mfg 

~«r ca abilities" . . .Net cost to P191 es~imated at bi~ion ~lnanced bv internal 

PM monies & Swiss ZaTs . . . ot schild b s o rc eSwitz 

& are 

PM fin advisers~'uch . consolidated income for `89 of ` 19 mi~i~__ ."cr~ 

sales of $4 .7 billion ONLY o or so!) . . ea s te roas ed coffee mkt in 

France, Germany, Aus ria & Canada ; 3.n choc . it leads in Germ nv . Fr nce, 

Bel ~.um & Austr ; overall 3rd in sales of cor°fee-c oc, worldw~.de . . .in 

~q pic"TeI-up Cote d'Or of Belgium, Du Lac of Italy, in '88 Pavlides of 

Greece, all big in choc . . .HAS 16,02i employees in 20 countries//Fin Times 

6-23-90 story : PM says Such. ga.ves arge enou~h ,~gnce 

~comp ete vs . NeVtle & Unilever Klaus c"hair of ~ùc'hsei~_ 

Co~'"ima;o~1'"ding co ~tiru""which he controls 51 of u- . vo inhts 

though it ah s invested heavilZ ~ in acquis~.tions &~,mo~s,~}~~,~}on„~, Such,„,~„e ;,d 

it needed m6re capi~a7 '~o' maintain $~ie ~aceJsid'ebar in PT same dàys 

Sale 

as ` ta rue`Swigsìmpen°e"~~ahSliESc,_~out it; it~s. py saR,.,W~a»c ~ear why 

Jacobs is selliii--jus~£ 2 yrs after trying Y'` Buro~ean dominance ~by"'R'o'w't .ree 

) bld" unersie lkavi pn~ $79DnYlon xii- ' coneeviz ~USftionar reucn~ b &diit 

~p 

~, -~o $5013 llion in osses 3yrs later . . .NOT E,~FN, .,,,., AR WHAT THE REAL PRICE O~ 

minop3rie`t~• share iTo~ cT~ers are ge t'~ ing 

tainly b low ~egoirig ra~e (I~K'z°Y18t"hotv °3°°c$]ezxY~Ee z$ -- more like 20X)/ 1~ 

for PM deal is correspondingly cheap & go . can ick u 11% of Euro ean O~ 

choc . mkt in one shot///NYT article same day : f eve wor 's ~ 

1ar est cof£ee ~~-'""" ~ i '~ s 

g „~.e~, er . . .Klaus J . Jacobs thought of himse~`~"'as a~"a`v"'Y'd""vs . --' ~ 

~o2ia~Sis . . .Wall St loves ~ zEl e~eal, says one ira os o~n aalyst (Rebecca 

Bar ield), because it "sn't a meza-acguisition that dilutes PM 

shares & puts it deep into debt~' . . . getting for "very _attr.~,e-4ivg ,R.c,e" 

seznce ~Ir'Dean Witter: P1vI-s g ~d_ing Ye&s"_tYzan a c'F'o71ar ~r each 

doll~eg,f,, ,~ $yrj,ssrevenue#~'~'*''EFOOD CO SZ"ES~ PR 

.ujs~e £actorie"s"are ~~,~c~a 

smaller & distribution less ~~,i~],~Xkt e, because of trade 

k~FMy}.~s : ""ttnoe'yaU caii'run a ~rucTc'fioYti"Frarioe ~o Italy, ~a~"r';0.c3Y"~SCEC ;"' 

adds Ade'~ìnan, anticipating biig improvement in profit margins/deal fits PM 

s tratep~~r of building global brands via technology & m ktg across `rlgn 

I 

I 

h be in Eurooe"## Phila cream c eese so in coun r es, Tang powdered 

ange drink in 70 countra.es/deal excludes EJ Brach, leading confectioner, 

US co big in jelly beans . . .Jacobs to retain this & sev other pieces of Such ./ 

$uch . '89 revsz $1 .9 billion in co£fee, 1 .9 in chocolate .521 in cocoa 

trading- c . j88-in sugar con~ec~ionar~,es ], IRE, 

FinT 6-25-90 : curious retrenchment for Swiss co that 2 yrs earlier was ready 

to put up more than 2 billion 1, for Rowntree last April & ready to move into 

Far East in big way . . .weekend consensus developed : M ulled o£f " rkablc 

couv bv -oersuading Mr Jacobs to sel . . . ." ., .BUT: the de as aroused some 

mortification in Switz . . . . to i ' X earnin s& YLgjd 

ungene i ous//profiles on 2 CEOs in FT 6-23-90s ttll 4- com ex e aracter 

combatve & POSSESSED BY DRIVE TO BUII,D co, that could compete w gian s : 

he closed factories & cut personnel RUTHLESSLY -- YET VISITORS often charmed 

& he was capable of visionary utterances when trying to spell out his philosophy 

. . .CHAMPION HORSEMAN member of laG Swiss Olvmnie +,~m, runs his 

own stables & goes riding every day, leading figure in Swiss boy scouting 

movement . . .grandnep hew of founder._ of. J~.pobs„cof#;e~ j~ z4,~,~,Iamburg~.n 1895, 

he took over in establiahed"'tiold~ng` C'o 

in =82 shook up Swiss chocolatiers by buying the Suchard & Tobler names 

& since has spent $1 .5 billion in other acqu3.sit9.ons, including ng snatching 


I 

I 


~ Cote d'Or~rom_under Nestle's nose/HAMISH MAXWELL : a "man of modest style 

/J & grand ambitions,''-he is ~ovial, but ha,-d as n'lQ" . .his father a 

tob . leaf dealer in Li.verpool . . .b° RVED IN RAF & studied history at Cambridge, 

went to work selling tours for Thos . Cook, that brought him to 

US where he met his wife & via his father's connections landed job w/PM 

in '54 . . .i-n '81 was a main factor in the Rothmans deal just as RJR was 

about to look it up . . .a self-confessed "hands-on" mgr, has a habit of 

bypassing sr executives to get reports straight from middle-rankers . . . 

is said EVER TO LOSE HIS APLOMB is tireles erfectionist, or as one 

colleague put it, he has a "igh level of constructive dissatisfaction' .'// 

MARLBORO MAN TAKES HIS COFFEE STRONG, FT 6-25-90 : PM likes the deal because 

it (1) increases its stake in food biz, (2) virtually doubles size 

of foodbiz in Europe, (3) greatly improves geographic spread of the KGF 

coffee interests &(4at a stroke makes it a subc~y 

co~e~je,3~g~y sector .'.~~p"engTèarrìfings gr6w~'o~%-"yr'.~y~'rom KGF . . . 

-£~ie move puts`'YSIl+I'"i2r`Ynuch better position to compete in EC before the '92 

rules go into effec~JR is now 3 in paekaged foods in USTi~hobblec 

'by LBO debts . . .PM could buy still other co .s like Campbell Soup, Quaker 

Oats, PepsiCo (though this last could run as high as $18 billion), & the 

smaller co s are a better risk//ECONOMIST 6-30-90 : speculates that next 

~ on PM shopping list might be pADBURY SCHWEPPES, PM moving fast for fear 

J rivals will get most at the gluttonous feast to begin in '92 . . .good match 

by product & geography for Suchard to grab Cadbury . . .PM was really after 

Such .'s coffee biz & may shy from Cadbury's soda biz (soft-drink)//PM 

HOPES TO GAIN IN EUROPE FROM SUCHARD BID, WSJ 6-25-90 . PM to acguire 

80% o for $3 .8 bill'o would vault PM from #5 to . n F:uronean 

food biz . . .PM planning to move 3.n irection o - , but 

this could be a big gamble in mkt w/320 million WEuropeans w/their 9 

languages & distinctive tastes & cultures/cuisines . . .Miles : no intention 

. to imprt Suchard candv to US, deal doesn't involve any "noticeable expansion 

o PsT~iness in the US" . . .Emanuel Goldman : "THIS IS AS:O mT- 

TTON xrFAVFN, It's agood £it and there's virtuallv no~S' dilution"/ 

has squelched rumors of much larger PM acquisition that might clip future 

earnings . . .PM had needed more scale in Europe/true, PM & Nestle have 

established strong 9.ntl brands w/Marlboro & Nescafe, still fear is that 

regional tastes are not easily changed///REUTERS 6-22-90, interview w/ 

I MILES : Euro . foodbiz has been growing about 3 .5% yrly or nearly 3X US 

!I mkt &'92 will probably prolong this, making attractive mktplace well 

into 21st cent . . .i4t~~~e,.~ tion *s; to o~erate Such very mq.~"We will 

look parjacularly~r'syiiei~gie`"s`'ìii '& dev . spending 

& mktg"///MANY SUCHARD MINORITY HOLDERS STEAMED OVER PM OFFER, WSJ 7-16- 

90 : 90: Jacobs ee s .~oremium over o er s are o lders is a pointed 

exampie of ri'~s-in invsesting in foreign rucs, esp . as a minority shareholder'tt'*'*'note 

crit . from CEO of Globe Finlay Inc, NY-based money management 

firm (intl money) : here's a US co . buying a Swiss co . w/US shareholders 

who appear to be being discriminated against" . . .'n US & Briit tak , 

al1 shareholders must generally be offered the same price u not the 

case a.n m'--n Eq urs coun ier~' ; s in~wi z .~ ,~JGermany,NetS-erlands & Sweden 

minority holders can get a raw deal . . . compared to any other food co ., 

price paid for minority shares is undervalued . . .in most other big food 

a9quisitions, avg price has been 19X EPS but in Such . case it's about ~1O 

142X EPS while .~Tacobs_ got e ._ 31 .7X . . .laclc of fairness suggested/PM ~ 

ARGUES : the purchase of oh.ma rom Jacobs & tender offer to minority 1,3 

holders are two ar te transactions & even though not required, PM is -P 

o PRE s w ereas aco s, a er uying ~ 

avg price, but critics say that was Jacobs's choice to do this & is in `' 

fact separate transaction . . .some cooler heads like RCB Trust Co of °' 

Stamford CT says PM was m re1 look' o f ` - 

''er6 . . .in fact, oreigners like US holders are getting oppty to sell 

at a profit/PM will not alter its bid to minority holders (RK : no need 

to)//JACOBS GETS $2 .26 billion on deal, FT 7-11-90c minoroty holders 

getting premium of 26 .7% over avg daily closing price for the JS shares 

over the 6 mos before 5/25 when the price was inflated by takeover rumors// 

PM press release 9-19-90 : PM controls 99 .6% of JS voting rights 

--PM TAPS WM C ApBEL TO SUCCEED HOUMINER AS PM-US CHIEF, WSJ 9-12-90 : 

The surprise move signals unhappiness w Ehud s management techniques & 

style ; Campbell, 46, is sr vp-corp planning/Ehud said to have made hisW 

. 

e at PM bv mastermindin~ divestiture o£ 7-~'p a~cquisi~ions of GF & 

ft . . .a leading dis~ibutor notes that £or first time in recent memory 

PM-USA will fall short of its unit volume projections & Campbell seen as 

"more in tune? w/the everOchanging dynamics of the biz/top management 

, also said to be unhanoy w/Ehud's decision to rush PM into exoansion of 



effort in discount sector, helping fuel the growth of the discount sector 

w/Bristol & Basic/ALSO= Ehud had NO BACKGROUND IN TOB BIZ yet began to 

engender dislike among cig distributors by rigid approach to dec's' - 

m~aki~n~ in credit & pricing . . .one key annoyance was Zecis on o allocate 

eig sS-iipments longin a3vance of the industry's twice-a-yr price increases/ 

also managed to alienate co . employees, see one particularly unpopular 

gesture by eliminating Secretary's Day perk of sending a dozen roses to 

each secy*********(RK recalls McQuigg story of how Ehud objected to paying 

for babysitters at biz conf where families were invited)/Campbell elevation 

said to portend no major shift in strategy ; Campbell said to have 

I played key role in Suchard deal + HELPING LAUNCH PM INTO LUCRATIVE ASIAN 

TOB . EXPORT BIZ while he was exec vp=mktg at PM-USA '83-'88//NYT version 

, same day : Ehud had been head of USA unit only 20 mos ; Campbell, then 44, 

succeeded Ehud, then 4•8, as vp-corp planning . . .Ehud an Israeli citizen who 

came to PM in '66///PM-USA OUSTS MORE EXECS, WSJ 10-26-90s Top management 

unhappiness w/performance signalled by removal of among others VINCENT 

J. BUCC LATO, sr vp-sales . . . further retrenchments as well as reallocations 

of A's c g budget expected to spur sales at retail level . . .first time 

PM unable to buck the trend of 2-3% loss in units sales yr1y . . .Vince B 

moved to sr vp-mktg & sales of PM's intl tob biz (exports?) ; Jim Morgan, 

sr vp-planning at USA becomes vp of mktg planning at corp hq, & USA's 

eneral counsel Frederic Newman ts s cked///TOBACCO'S SLTAFb .,!$RIP E_ V_EN_ 

P : Even Marlboro sales~:£bj o 4 

sales units, egan to s'o' efi'last yr & shipments were OFF 1 .5% for first 

9 mos . of '90 . . .off-pri .ce nromo for 

what's going on is ~massive e ec i~'°on ~discount brands by OLDER ?S 

& fueled in no sma11 parF>t y P19I i self +Marl . losing some of _t.'~S, 

among young smkrs who p~o~ &_ . ., ;noxe . aFe tq ~~,}1~•~o~-i-t~~x"`th'~$Y4 ' 

c~a° .ds brand, 

'S11fi'!P:`STTGNIA' TIiA'T' DE'0"FiS~'~iT~D RJR''S WINS'TtON which had beexi""~Y ~EiI~ "mid-' 70s/ 

Campbell vigorously dissents in arguinC~' PM's domestic cig niz has topped 

~ 9IA 

AN'L~ti~Y wnen plciiing a brand . . .for 

. 

0 L: 

ow 36 . 

hile ~'ull-b~„ce ul b`r,anc~„ wi!7.,~i„c~ 2 I-of o s a bixthe 

discount 

' mkt -- BUT : ~.nPV,-F.aAt '~`*,r 

'~-~,P hA+-ro,- ~ à do_s in discountmore it encourapes 

Icustomers to trade down threa eni rofi~ins~11T$AL' IP 

IdARLBORO . . . M LITTLE CHOIC After much foot-dragging, the 

co . is spending lavishly o create consumer lpyalty for such brands as 

Bris to1, Buck & Cambridge,,cyhich cost about half as much_as standard,brands' 

Bucks is seen as=-brand"that S)ioot~'''r3giit"à't"'t3ig`"'bs~fS :~'NTai~3:'bo~b;~11~Ii~~Y°~[TNDEF 

FIRE FROM MAGNA & DAKOTA, RJR entries ; RJR holds some 31 .3% of discount 

sector/CAMPBELL CONCEDES 

..,.... TIiQ .... . THE DREl~M ERA of one-hi~;h-;~rice 

: ,~ .M 

fits-all .... is 

~;¢' gone & w~2Trie~~6 Y°""Pb''Ej'.Yr°n &~' "a`1tz~"'E"make a"FsycFìo1og~.bhis 

wasa dream bus'nes istorically, but it has become like every other consumer 

us ess in Amer ca . PRICE COMPETITION IS A REALIT(//TOUGHER COMP- 

ETITION FROM RJR UNDER JOHNSTON : Camel has been rejuvenated2 heavilv advertised 

& discounted in "Smooth Charac~^ on e-in-c e ai 

wh~.ch has caught on w oun r s rs w o PECIALLY AMUSED BY THE 

LATANTLY PHALLIC SYMBOLISM OF UBI@ - . in past 

. o .' o K: not huge gain) . . . thus, 

PiIARLBORO IS T~j,"__NC ~ mTrs `BI_TTFN s up AT BOTH ENDSs discount brands going after older 

'tameY~s` & e'~ad~ ~:-~t~c~3n'~~~r oig.e~/Campbell denies there's evidence 

of youth defection to Camel or any other brand . . .BUTs industry tongues 

wagged when for 2nd yr in row Marlboro offered Xmas deal of buy-3-get-2packs 

free ;anct~• :~unusual for any other brand but is for Mar1 ./B&H now 

discounted sales offers its uApi.e ~i1m ~,'~e s~een as outdated in era w Pn moSt 

smkrs are downscal.e_. . .new a campaign ha~l ere vlr."IFT~F, too,in trouble ~ 

as effectiveness of its adv campaign has waned 

--FAST R~USSIAN~S~, BY PM, NYT "Talking Deals" 9-27-90 : CULMINATION OF ~ 

-~~26yr effor , cod eventually win PM 20% of Russian mlkt . . .there are now ~ 

'` estimated O m_illion Russian smkrs who last yr bought 418 billion units ; ~ 

~ more would be smokec~i•~: ''th~'"g'oV'1;" moribgoly •could•grrsd#iee ae[*{e~ :op- ~ 

ln~zit'o3 S-oafie~""m"kt was hobbled bv "break'd6wri'ni"R-s~~i 

shortages of tob . & other raw materials + WIDESPREAD HOARDING as well as !V 

BALYJY2NG_,OF ,LYES . .._ MKTG TECHNIQUES like adv & product discounting/P&I intl vp 

Andreas Gemtiler~~~ sees Y0=1'O% 5f' mkt'pdssibl'e"°(i)£- :~Ye'do' ousr jobs 

we11'' . . .earh .er in S~t PM announced plans to sell 20 billion cigs to the 

Russian republic byy end-of' `91, also ~ similar"'saTe`s°"b~"t '92 & '95 & is in 

riego-tiati.ons w/other republics ; RJR will sell 17~.2 ~bill'on_ ci~s to Russian 

republic//Russians expected to relax some o~`-Ic g re~ strictions so it can by 

yr's end use cardboard pv of-sales d_ispla_,y., & o-~xademarlits . .,;7,]1ke . Ma,rlboro . . . 

'estimate by-fiob"'-Me`PCli'ants Cissri ~riat'typica~ Russiari smkr `1`t7~ of his 

income on cigs, many X more than Amer ORIGINS OF PM INVOLVEMENT : in '74 

V Tts was as e y govt how to improve quality & revs of its cigs, PM in '75 

hel ed th uc co t Apollo-Soxuz space flight cig . . . 

co or eve opmen in '87 when shortages hit & PM of£ered to sell 



in '87-'89 crisis . . .Russians wanted longest possible credit terms, e .g ., 

more than one yr to pay, at which PM at first balked but finally agreed 

to liberal credit terms IF THE PRICE WAS RIGHT ; Russians vroduced list 

of barter items that could readils be sold for dollas, which Gembler 

wou~dn't iden i presumably are oil, gold &amonds among others// 

Russian republics don't have foreign trade bank to handle trading of 

intl commodities as the central govt does . . .a little less than half the 

price would be in countertrade items, but Russians insisted price be kept 

secret 

--PM ILL OF RIGHTS TOUR GINS, Adv Institute Action Alert 1_O ~1-90 : 

Tour be w a s origina copy of the BofR & visited Vt, Tt &-NY-/ 

-, a hi- ech dis~1.~,.it arrives in q.~.. #~x},2kaccompanied b~ 2E 

~k=iQlariii~s as Yionor gu~~r¢~ =~ ~teridees invited to givd `~0=asti 'YSac 

aT'i''v'f'3eòTap""' e""pòY'" f "iitG"r` e tuse//divers' t or s . r"n o r be- 

.' s eaks PM's careful advance p annin & generous con ' . .a ho~-, 

comml ee org a~x`L~ : .7.g ,,,a,_~,~,~ nc u .inr grou s such as DAR VFS~7""~0 

SL'outs; IZiS ~'C'-"'" , the bar local assn; . '~ ,~wanisf' et~ ~"' - tfid5i~°"` a1 :g roups'"`T~a con- 

.~' ~'~`~~ ~è"" 

doned PM's sponsorship of the event//=2 . EGI3EGIQTj1~_ZS $ S t, co-sponsors 

of the tour in NH ; the Bo4 Scout Handbook ex*+~~n,} v1-conemns use of tnb . 

& ought to be invoked to~'d.iscourage scouts from participatin PM has also 

sought participation of area schools, offering free transportation of 

. kids to the exhibit . . .majority~ oY the exhibit-g oers .a4~: ;,~ia .ke}ron . . .there 

have been protests of_PNf's~pons-r5f"PN1'Tias co 

rovidin - e rs co some dIsTance 1-romZF'ie 

us seems' -o eno_ir~.'re "e°xriression of nrotest ; by appearing to encourage 

t~-~a" c~'i e~'£ ring viewpts, PM presents itself as protector of the First A d . 

~` & thus often de£~le~.ts. r o,e~s _~_, _$ in w en ACT pro esters appeared 

to oppose'~`vI' s'~sup~ort òf esse Jelms, homophobe, Gu Smith is there to 

say "This is what it's all about . They're certa5.n y entitled to their 

opinion . It's a minority opinion"//S.n RI the health community held press 

ul~ conf day before exhibit opened in front of state's own copy . . .the timing 

separated health protesters from others/PRFSS 

....~ 

COVERAGE 

w . .. . . ., .~ ., .TENDS 

. . . . 

RATHER FAVORAB,LE~TOWARD THE,T.O~JF~ . . .in NY, thoug'h., £oli'con£ro~ a3.vocates 

r aged -" " a candlelit•'yi'gi1/news ~I~Y s t 

` conf . on.._the eve . precedin to~'s oroen- 

~ fc~'"~~( ing . . .good press coverage y encou raging peo~?le o-~ see'~ibit BUT 

to bear in mind the motives of the sponsors//IVYState ALungAssn spokesman 

says "This is a way for them (PM) to turn the negative publicity away from 

c ig deaths towards mom & apple pie "//,"PM .isp. t,ryin~ ~o .~i~~dial~r~e~~ 

by purchasing art & exhibiting the Bof`R` ::~". '~ "Bu~ sIiou~d peop~e $rc`b'tt a 

memorable show for this reason? We say no . Go, but hold yr nose"//SUG- 

( GESTED COUNTERMEASURES : Schedule event before PM opening & keep it away 

'i from their speakers' corner -- & keep yr message separate from other 

protesters vr/diff . agenda . . .use The Death March data, tally of tob .related 

death that will occur nationally as tour progresses . . .see PM 

Bill of Wrongs (below) + NICOTINA Wash DOC has 15' re lica of Statue 

of Libertv hold_1'Dg_cig as her,~orch connecte ~~ :y,.,_~.,r_ ~,~,._~o a.,~;;A~ 

cigs in her ri"`g-`13t arm ; sTie °s~ana~'s"ori"pedesta~` o£ PM cigs ; bu.t'~s & ash- 

"tLY'ayW & has digital counter in bottom tracking no . of tob .-caused deaths 

to date as tour advances . . . approach schools & urge them to bring children 

BUT also to teach them tactics behind PM sponsorship . . .estimated qo .,,,,gf.a 

d rp 5ta~_to~ ._.as :, .52?_,,,~.~,//~M BILL oF WaoU 

intolerance, ow tPie S uelched "Death in the est, hRSYn :~S3C :~?~;a 

.,' .,s Kil, er,_a, ,vre PFIf - _ iin" shi,rt~ z qpoofing the , i ler 7,3.te, . .~. 

We re "'1'àvin 

g 

rn 

o`$r4'tiried to'Snii~''f~.e~-~~reg "IZbizganis from ap- y 

pearing for ACS, etc. -t~ 

--VA SLIMS UNDER FIRE, Daily News, 11-14-90 Women's Med Assn of NYC ~ 

- angered by VS's sponsorship of tennis championships in this wee _-Z 

(NY's women physicians "find it unconscionable for a cig co to sponsor a' 

lsporting event" sez Pres Barbara Bartlik, charging that sponsorship is C ." 

"to deceive young girls about the unhealthy consequences of smkg" . . . 

group will picket MSG two nights . . .drs' theme is "You've Coughed Up Enough 

Phlegm, Baby" . . .PM's Sheila Banks, dir of media affairs : "What sponsorship 

Idoes is promote tennis, good tennis . If people don't smoke, THEY'RE NOT 

GOING TO START BECAUSE TI-ZEY WATCHED TENNIS"#^-***#*RK : this is dubious ; 

the event sends a message linking VS & sport as not incompatible 

--SPONSORED MACS ARE COSTLY PITCHES, WSJ 11-26-90 : RJR killingits 

' slick rock music ma Salem SoundWav after mailing it £ree for 19 mos 

i to young adu t s s in hila, Cleve & 3 other cities . . .not worth the cost/ 

lll KGF has tested mags on children, young couples & hvy users of recipes// 

PliY Mag grew from initial 150,000 copies to 10 million, now getting adv from 

Time-Life books & P9.erre Cardin luggage . . .Sa1em, brand favored by middleaged 

suburban women, not right one for rock mag 

, --PPVI TO ENLARGE PLANT, NYT 2-1-91 : $'Lb00 million ticketed for expand- 

1 inE by_„~0% caDacitv of its NC plant . . .an experimental production line 

!!! t at spits 0 ut 101,2 cigs per min, zn CABARRUS COUNTY ca 20 miles north 



~ of Charlotte, already does 85 billion a yr/to be paid for out of cash 

flow & existing lines of credit .• .most of output to~meet sur.~inZd 

from abroad, esv •TaY+aY+• irr„-Pn ~ Hona~ Kon . . .enlarging plant by 3 to 

nearly 2 .5 mi~~on sq ft 

y~ --PM DROPS FROM 2ND TO #79 ON FORTUNE LIST OF MOST ADMIRED CORPS ., 

Fortune 2-11-91 : Bst SurpriSe in SurveY of 8 .000 sr execs, outside 

directors & fin . analysts is nose ive by PM . . .its new judges in the food 

biz didn't think much of its best known product -- cigs . "The director 

of one food co . put it bluntly : 'Anyone in the tob, business must be 

severel do ded "" & another exec wro~~wngraded companies w/ 

po itica action committees, PRODUCTS THAT KILL, & those insensitive to 

'green' issues" . . .P1Y!'s scores for product quality & community & environmental 

responsibility fell accordingly, accounting for most of its dro~ on 

the list . . .S ectacular rofi s don't i re utat /' 

Anheuser-Busc roppe from 9 to ;22 . . .Pepsi & Coke ~ see p 74 for 

PM as >~i5 in food biz . 

--GIANT MILLER LITE ACOT LEAVES BSB FOR BURNETT, NYT 3-14-91 

--FAIR WARNING ON CIGS?/NYT editorial 3-28-91s Re SCOTUS taking Cipol- 

1one .• .if court sticks to its recent logic, the mfrs will lose . . ."Increasing 

hospitable to states' rights arguments, justices recpgnize power 

of Cong . to pre=empt yet demand explicit language showing Cong . intended 

/to do so//BUTs "Very likely, juries would be reluctant to reward any 

_/ plainti£fs"after having been warned, et some '!Yni h-m k e 

~ that the industry has ne~t l i2~gd or dro~n P~ ~+i~t . ; tc nwo-warn ;na~c RKz 

/f not their warnings at all) lseductive adv & oromo" - a useful brake 

on these efforts 

--TOB . CONCERNS HOPEFUL ON DE-NICOTINED CIGS, WSJ 3-28-91 : B&H ads are 

proclaiming a "breakthrough" re nic . being removed the way caffeine "is 

naturally removed from coffee beans" but same flavor still in there as 

in reg smoke . . .PM testing Next in Tamna P s well aa -ax-H in A'z//Health 

Gr3~ics say these are s_ubstantial health claims, clearly designing ads to 

encourage pu ~.c to bel eve new brands are-Zess addictive . . . should be 

classified as drugs & brought under FDA scrutiny, AHA's Ballin said his 

assn intends to petition FDA to do so . . . SIS ISN' ING TH 

CLAINP AT ALL, simply searching for a new niches some sm rs may prefer 

denic cigs "just as some consumers prefer decaffeinated coffee" & a s FD 

houldn't be in v d se ci s are ost hi h1 

ro uo countr notes w Popper of Br,Yant Co ege "Nic doesn't 

have to do w flavor or image . It has to do w/physiolical alteration . 

l9h . vu'_re talkin~ about nic . . vo . are ;_n_ Qnet m_akinA a h .alth__claim"// 

NYT 4---91:Z oa~ ion partners say they're trying to stop natl ro out 

of Next & B&H De-Nic because misleadin to smkrs . . .PM denies any message 

except that "these are low-nic . cigs w~a smooth taste" 

A MORRLSs WSJ prelim~~,, , Hamish groomed no 

clear successor so rumor mi ls have been g'C~"~~ ing, half a dozen names in 

the air, but leaders are MMILES, 51, a no-i~,o~,tiS- g.~1 workaholic, & WM MURRAY, 

~~ 55, the low-key detail man . . .PM IS `~~OSSR nS . L.Murr v+--o es nts 

status guo, Miles the BigShif . . .the diff ~ifl' . is A more than one of perception, 

Ylal sells a ower price t7Tan, ror example, Coke, in terms of premium to 

mkt avg for its earnings//en,an~did strengths diffe -- MILES 

A NONSMOKER who may take over co~~t~iae widely admire 

~~ . .,a, .G~-s . .. ~. mk . e t .a mgr who loves to ponder the thick monthly opera- 

,ting rep .w ort's from his"divisions & return them w/many comments & questions 

in the margins . . .he dQesn't have a great reservoir of small t lk - ' 

too in for that, but o n Cox w o was ex-vp of franc is ng at~'y ~'~' 

ried uring~%W`t'b"Vival drive of '70s says "But if I'm in a fight for my 

life, I' d like to have him around . .•Mil," ~ admitte.d .t}~,e ~ 

KfC priced~, g~terrible &„ ~ ~p~ es r~~y~F'~#~e#t~trFY"~~iim~ng- ~o merger e 

~~ use-'Ic ""same caai~or, '1~1Yb7513$IG ~IVSG-RSTO ÀDMIT TO PROBS . in such areas as Max- ~ 

well ouse co ee & Post cereals . . .a nut on "synergy," saving Kraft $150 

. million via it now, e .g., savin too via econo 1' v 

nir c _ , h' .. sa ed _ ' ,a,o . a. -- 7 IK ~ ~ - e~ -in- - e-woo tob''man" ~ 

kRK says no s cj.ates ca m the ultimate corp exec the man i 

,.a t e r flannel suit, °' his personal s yp s.omewhat more self-c.opR9,,y~}s ~ 

~ & TEN Eth~ es s . . .a smoker like most top Sal i~~x'~o bP more ~ 

s .~ ~''"TzoiBe ~w ni~ty=gritty of tob b ; z 11- "brainstorming ~rand st V" - 

noting P'M`s gran oppty outside US now, esp . in acific Ri PM SAYS 

MAXWELL WILL RETIRE, NYT 3-27-91 : Miles &Mt~r~~~ ~,~x,~~.r~1~,,1 ..~3 million+/ 

M : reticent a cI'ia3°'Ee"è$" ac'~ o ~- wUN 'background . . . 

oinedPM as fin . mgr in Swit NEW CHIEF.PMa_ T1XT .._.3~2891 & 

leads the biz sect : Mi es unanimous choice e~""` -a~em er a regular 

1 r mtg ~ N_ o o `~$-~iA rn'~"awa~y"'irom ~ going to 

get this job . 

concedes that ou~ders mi~ view his e~:eo"'E3.ò~f"às~~~~from tob . by 

PPn : ^THAT WouLD BE A TOTALLY WRONG PERCEPTION . If there has ever been a 



co . that looked like it didn't need fixing, PM is it" . . .adding " USED 

0 SMOKE_,_ & FOR -SOMR RF.ASON THAT I CAN'_T_ E -N RF:MFM ER NOW 

~ more . IT'S Tt .4T nNF (1F THO4F 9'HTNf_R^ (RKt a n w level o£ di in n o uGnes 

. . "THE CIG . BUSINESS IS GREAT, profitable & growing, so it 

looks like the future to me . I just wish we could produce similar economics 

in the food business"//Geoffrey Bible new exec vp-intl//Miles" 

lean !'nt~nse_w ren .. ~,ari,aae•rve . . .Mi~„les•Jeg,ro"tiah 

ase o~,,,,-is~~er orma~'~, ftilly ~'ntegra ing e -wo food divs ., 

squeezin~ ou~ 00 mi . ~ion in ao$~t .,savings ( :) & revival of strong prorf~a'Ui~'itya~~~~~`/WS 

;J°'"ar-t~'c'le same d'a'te : ~urray named chief operating 

officer ~' ."HIS ASCENS ION UNDEILC ," ~ DEST{~~OVE 

I~Y'O~ID T~TOB:' TEEPED HERITAGE, WHICH HAS DAMAGED BOTH ITS WORTH ON 

WALL ST & ITS IMAGE ON MAIN ST"###aF#########I3~M~ys~a_y s j~~~p.~~~~~ 

& interviewed some 60 peoole at pM companywide befo e ma~ing hi .srecommendation 

-- RLBORO PLANS 'MEDIUMS' TO STEb4 DECLINE, NYT, NYT K-~ : New 

variety 12~r red (their 

ads say 17) & 11 in the Light RY~ : wFiy bo ~er~) . .als"d"~•:S•~ nic vs . 1 mg . 

•for re s& O .~ £or Li ht Li hts & Men ho1 tended to attra t, .,wo h 

~! & Red had t c~_ti~ vs w gt ~ %' ~ ~ e co . as vett 

to 

--UNEASY PARTNBRS : ARTS & PM. NYT undated (but probably mid-'90)s 

This yr (' ome 1 million to the arts in US, has given 

out "hundreds of millions" RK : ? over past 30 yrs w emphasis on the 

innovative . . ."w/o PM the whole landscape of dance in the US would be 

substantially diff, and enormously dimini•shed° . . .BUT IT'S ALSO BEEN "A 

MAJOR BACKER OF SEN JESSE HELMS," aw rded - r 20 x .#'•,.tp,, . 

'.~i_~Ci.-~i~g~~,~hh.,J n~nter in-Monroe C~:".' esse -"""'-in' Ori c 

JJJ////N~1En3owmen ri T~SsY'+s _ "a clear case of corp . Amer ca playing both 

ends against the middle," says spokesman for the Dallas Gay Alliance -- 

& it's clearly so, BUT "What is more difficult to discern is whether its 

diverging policies arise out of self-protection or genuine commitment" . . . 

he co . chooses to ate the two s su ort for the 

~n co t whi e su or of He1sm on of se -v ote 'on__ 

says GEO L ..uHIVOX, PM vp-pu J•ia.,.affatrs "SEN HEL HAS BEEN VERY SUPPOR- 

TIVE OF OUR BUSINESS INTERESTS," PM has many facil5 .ties & employees in 

his state + suppliers & growers : "It would be illadv sPd for a co . like 

ours, which lives In a political arena, TO TURN OUR BACKS ON HIId" . . .and 

relativel s in Jesse ets small ot t £rom PM . .,its PMPAC has giver 

Jesse only 1,50 a yr since its creat on in "J~ or 1 000 ' . 

the Helms center also said not to support Senator's po1 tical agenda . . . 

STEPHANIE FRENCH, vp-corp contributions & Knox say PM has taken a lot~ 

heat from the conserva~e &f~n.damentalist riaht for gran s t~vant 

gar e artists . . . made strong pitch before Senate hearings In support of 

NEA program//actor Ron Silver : much hypocrisy involved in accepting grants 

from co . like PM that keeps a creep like Jesse afloat . . . ut n in the 

arts wo e .g ., HARVEY LICHTENSTEIN, pres Bk yn Acad . 

o usic, whose Next Wave Festival gets major PM funding : "I don't like 

thefact that PM supports Helms, but they have a perfect right to do so for 

their own business reasons, & I don't think there's a conflict bet the 

two things" (RK : but NO MENTION MADE OF CIGS & HEALTH MENACE) + CHAS V . 

RAYMOND, exec dir of the JOFFREY BALLETc a naive comment, nothing PM has 

done re support of Helms "would ever lead me to believe that there was 

any requirement that the troupe support Jesse Helms or anybody else"*#*#/ 

PM went for Pop & Op show back in '65//PM office walls decorated w/serious 

artwork, paintings & sculpture . . .PM GIVES NOT ONLY MONEY BUT FOLLOW-Up 

ADV ., PROMO PUBLICITY 

------------ ~O 

ADDENDUM (out of chronological order) . . .. ~ -Z 

--GIANINI'S SMOKES, BW undated but '42 : Axton-Fisher launching Fleet- -P 

wood nationwide as 150 "cleaner, finer smoke" & a king, as A-F is taken CN 

over by son of APGianini, pres of Bank of Amer now, putting in a man of ~ 

their choice to establish family in the tob biz . . .Fleetwood follows PM ~ 

in using glycol & not glycerine as humectant . . .$1 million kickoff & timelyul 

invasion of the cig field during wartime . . . 

--CALL FOR PHILI}' MORRIS, Newsweek 5-8-50 :,FTC clambinE down on ci ff 

ac3v ., noting in April "T~re is no reliableT is in fact ~or adv cla~mc 

that one brand is SuDerlor to anot ', re S&H, amt of nic ., throat irritaTion. 

. .BU Pir tRough tob biz still dominated by Big 3,`.BM has now won 

10% mkt share & clear #4- spot while 50 other brands have come & failed . . . 

HOW McKITTERICK remembered chemist friend's suggestion about the hygro- 



scopic agent & PM launched w/slogan "THE ONE CIG PROVED DEFINITELY LESS 

IRRITATING . . . ." (RK : the great irony since afterward PM plays the health 

angle least of all)/FTC first made charge vs . PIvI on this 8 vrs ago but 

IPM has staved them off eznce . . . yon has been hammering at this main 

'(( theme endlessly & builds the brand's postwar strength on slogan "No 

cig . hangover"*'x~/L on a LONDON- ORN PIPE SMIIfl? whose salesman's creed 

is "Don't ask anyone to o you a favor until you have first done him 

a service" . 

--A SPECIAL REPORT ON PARLIAL~NZ'a CR 1/58 : "There is one new & dramatic 

development in the cigarette Parliament's new hi-fi filter 

which acc . to CU's tests is largely responsible for "AN IMPRESSIVE RE- 

DUCTION IN THE T & N CONTENT of the smoke of this brand . . .its avg yield 

was 13 mg & 1 .8, which represent drops of 25% & 40% from current_lavals/ 

Marlboro in last test was 15 & 2 .3, inston 18 & 2 .7, Tareyton 17 & 2 .0, 

LS regular 20 & 2 .0, Chesterfield king 21 & 3 .4, Camel 16 & 2 .6 . . .then 

also see article in 3/58 "Those Parliament ads" & how PM apparently offended 

the haughty CU & its b ? .n on yuotin such findings 

CLE, Newsweek 6-9-57 ~ : PM~icking off new adv campaign 

for the arlboro Man at Toots Shor's, stag affair w/hearty grub to match : 

choice of bear or buffalo steak, dbl bourbons, "fl9iptop" salad of rough-cut 

greens, hard rolls & strong coffee, drawing quip : "It tastes good, like 

a buffalo should"~*~since PM launched Marlboro Man w/seamy-faced cowboy 

2 yrs ago, much of cig adv has turned to the virility theme featuring 

j'hard- ranite- aw billbds . . .even genteel 

C esterfield using the gruffest professions (loggers, ranch hands, merchant 

mariners, dam bldrs) . . .Tareyton going for white-haired man of 

distinction mode . . .why all the hairy chest-thumping? see Ernest n .Gt Dih r, 

head of Institute for Motivational Research, who says the act oP smkg 

ik~ renresents "power" &"the_coneuest of ^M~e^ to men . "eaualitv° to women/ 

hli +or~ o .~ +n +l.ir.Tr nf -Fil+cro o v . .c - - 

--PUFFING UP CANADIAN CIGS, BW '58_ : Yr earlier a big newcomer, Rothmans 

1 of PM, Canada ;. crasiscene . . .consum tion un 89°L in Canada over_past 

~ 10 vrs vs . 17 .5% in US . . .latest recog ~.~ionno the burgeoning Can . mkt 

is recent announcement that PM was buvin~ out most of stock of B&H (Canada) 

Ltd` PM m k~s ;t -ola ;n- t s~oine~ after Can mkt in earngat . tn :+ 

Can`t sP1l i~v h~a hranAc n4ar hnrn 2. PIYi c' r .n-Fhcr l:anaAian firm hnlria 

ri~ hts, even as Rothmans can't sell Pall Mall,awhich belongs to Imps, 

~ which holds half the mkt w/some 20 brands, star brand is Player's Mild, 

#1 in Can . . . . in runner-up is Macdonald Tobacco of Montreal . . .Player's 

sticks to strong Canadian themes in its adv . . .Macdonald pushes image 

P 

1of Highland Lass on its Export brand, th$ work~ngman's~brand/~/~C~tg~ ans 

'preferr milder blends, smoke almost no burle , referri C 

'J/ a instea~ ~ri ~ontras~"~o fieav>1 roces e,,,,. ~an~ fravo ecj~ US ci s'~~~ 

mos"!


his office figured out something was up . . .other Senate offices getting 

1them by the hundreds a day in computer-orchestrated drive/PM's Steven 

IwWeiss confirms the effort . . .Metzenbaum's of£ice got 7,000 . . .pM ~ius+ 

helvina~ their an~ered customer~communicate w/their e" a Pd of4'icials/ 

those people asked to lend their names have contacted PM in the past to 

ask how to protest, SW says PM has heard from "literally millions of 

smkrs"//but PM did the bulk of the asking, often of people who had written 

away for free cigs in the past 

--NEW ADS BY PM STRESS POWER OF SLVIKRS, pi NYT 6-2~-88+ PM to spend up 

' to $5 million to claim eco . power, launched it w/ad in 19 dailies & will 

use 12 natl mags as well over next 6 mos . . .Guy Smith holds news conf . to 

kick it off, noting 85% o£ smkrs are re istg_ ered voters so "Let the pol- 

I iticians take note . S'o-u re no ~us~~lking special-interest group . 

` ,ing vote"'u"M'#'K"tt'ads are meant to react to the public policy 

environment around US)'kep'Mike Synar, key sponsor of cig adv ban, says 

the PM ad is misrepresentation of smkg's impact on economy/Smith says 

ads are meant as "an attempt to raise the level of awareness but certainly 

not to scare anybody," pt is to tell policymakg,'rs, .._'Don't ignore smp~ 

--PM'S ACQUISITION OF"T4?A`F~',Ad`vo '2ris~^ìnemo 11-4- '8$':""~ven before'getting 

Kraft, PM had OVERTAKEN P&G to become ~ advertiser in world, spending 

about $1 .6 billion in '87 . . .Kraft purchase adds another $400 million 

or so to ad budget//"The addition of K adv accts will provide PM w/ 

additional leverage which could be wielded over publications, advertisers 

& others dependent upon its sponsorship"//see also NYT edit SMOKE CLOUI]9 

A MEGA-PdERGER (also in regular file probably) 11-1$-88 : Metzenbaum is 

asking FTC to condition approval of merger on PM commitment not to use 

its eco . clout to inhibit public debate on tob . use ; better yet (?) would 

, be for PM to pledge voluntarily its restraint in the matter . . .the troubling 

ling matter in the merger is whether the merged co . "would wield its 

increased power as a lobbyist, employer, purchaser of supplies & advertiser 

to protect the mkt for what a naive questiont )/ 

PM could pledge to keep hands-off the internal smkg policies of its food 

subsidiaries & to keep tob . politics out of its adv decisions : "If Kraft 

is really worth $11 billion, surely it is worth such a demonstration of 

good will" 

--TOB . CO .S INFLAME THE FIGHT, NYT letters to ed . 8-4-88s Letter is 

from HEAIb OF THE BIG 3 VOLUNTARIES, saying "PM is trying to pit the 

"minority of Amers who smoke vs . the majority who do not by claimintJ th^t 

smkrs are an orr_,anized eco . £org,e to be reckoned with . If such a force 

exists, it is not the power of smkrs but the inordinate power of tob . ~ 

money" . . .Those concerned about the S&H issue "do not perceive smkrs as ~ 

the enemy ; the real dispute is w/tob . co .s . . .new ads contain serious ~ 

~ distortion since smkg is really a drain on our natl resources also, many .p, 

' smkrs fully support leg is_la~tion desi ed to ro nonsmkrs "P1~4 is far pN 

less concerned a5ou~ti e 1'0 'i s customers than it is about man- __3 

ipulating those customers to enhance sales" ~ 

--PM HUFFING & PUFFING AS ANTISMKRS TRY TO CLEAR AIR, Knight-Ridder V 

bureaus 6-28-Fxo"47}g, .&R . 9,.q},}T}ty commissions, nation's #1 cigmaker 

has hird'3-"ew obbyists to op~ose cig 'Eax inbreaEaes-~"'ari~is[ili'~"d"rdinances 

~tfi3s °`runs ju`s"E a_bout°"wt eri °t7ie GbTI7itIOI N"17~Mb is written so tie this to 

it#~u#~#~*~~#r#~hIT3E) + publishing its own mag . & the Great Amer . Smkrs 

Manual telling smkrs "It is time to fight bac~" . . .e .g ., 'hti.n b 

Pittsbur~h w/massive_ ad cam~oaign to blunt new cit.y smkg or in ce + nat 

campaign or re'c~rs .zs .•cesegra~ns••`.'Co i ence egis .i. ators& cos execs who 

adopt policies vs . smkg//for yrs PM has so ht pol . influence & pubL .c 

good will bv contributingmiTl, 

ticians O .mC ions, 

ne e . and minoritv & _ asts, sportina, vents wome~s^-*-#*#and its latest 

$5 mill3on ad campaign on eco . c ou 'TO ay, 21 mi ion Amer smkrs will 

go out to eat . That's a mkt you can sink yr teeth intol")/the 56-page 

sliok-paper GASmkr's Manual pushes such favorite industry arguments as 

"Advertising does not induce non-smkrs to start smkg" & IT ENCOURAGES SMKRS 

TO SEE THENSELVES AS AN OPPRe'~SED MINORITY . "THE VSCTIM OF RIlVi- 

INATION EVERy T~aY" because smkg is ~.nereasing~ e1rleted '~o"~ìxed 

areas 'in o``c'';' restaurants, public bldgs . . .PM mag now claims 13 million 

circ . +"Smoker," a monthly to keep its people updated on political dev . 

state by state//see also its "GraM~ T, .~gs" program which co . spokesman 

denied knowledge of but others in indus'~ry cited : enlist a lobbyist in 

state or district of key members of Cong ., esp:. Sem Fin Comm & House Ways- 

Means/also hires to fight regional battles, e .g ., Pa Task Forr on P edvet 

Liaspokesman for Lawyers for Consumer- -~""~igh~s in ~arrisburg, which 

is opposed, sez PM HELPED CREATE A NEW NETWORK OF LOBBYISTS THERE & PRO- 

VIDED "SERIOUSSUICE' behind the bi11 + fighting Pittsburgh law of yr ago 

requiring non-sm g~sects in m9 .ny restaurants, big ads pushing "The New Sign 



l of the Times," red-green circle above wds "Smkrs & Non-Smkrs Welcome"/ 

but head of Pa's Assn for Nonsmkrs' Rights says PM is "trying to confuse 

people . . .and encourage smkg in these public places . . . . (I)t's really a 

p .r . campaign to cover over the issue of the hazards of side-stream smoke" 

-- EUTER FETE SPONSORED BY PIV1, Acceptance Raises Ethical Questions, 

WashPos -- : u go~ .ng US Trade Rep & incoming Secy of Ag CLAYTON K . 

YEUTTER was guest of honor during Inaugural week costing thousands of 

dollars & sponsored by PM, the food, brewing & tob . conglomerate//"Executive 

branch ethics rules say 211 official_ca_nnot accept anythin of valu 

~rom a.nvon •ho '+ sts could be a£fected bv t e o i ia ?s actions . 

Acc . to the exec . order on ethical conduct, any official should avoid 

any situation that might create the appearance he has lost complete independence 

or impartiality or is giving special treatment" . . .Yeutter, 

whose confirmation hearing was scheduled that day, did not check with 

his de t .`s ethics officer to see if OK to acce t P&I's ho 'talit . 

an ai e says e considere suc approva unnecessary in light of his 

imminent departure from the office" & when invitation was first offered 

as reception, Y . was planning to return to private life so the fete was 

"viewed here as a thank you for his efforts on behalf of the tob . industry 

at large while he was US Trade Rep" . . .he had worked to push Japan, SKorea 

& other countries to stop discriminating vs . import of US tob products 

& as USDA Secy he'll oversee an agency whose policies directly affect 

PM's biz interests//GEO . IIIVOX for PP:I : ' . . .we thought it would be nice 

& anoronri~te to celebrate the seleo+ion o-e FMTNFN'i*T QUALIFSED I1AN 

for to Pricult does this in any way address 

he ethics issuey deputy dir of Office of Govt Ethics said "I've got 

problems w/that" when told of the situation w/o names & when told, said 

Y . should have sought opinion from his Rgency ethics officer//Y . & his 

wife attended one of sev inaugural dinners & sat at RJR Nabisco table 

--HIGH STAKES FOR LOW NICOTINE, WSJ 6-15-8g : On1y 4 mos . after RJR 

yanks Premier, PM begins test-mktg Next, a very low';mic cig w/taste of 

a standard cig//antismk leaders fear it could 1u " ' 

it's a sa£e Produc a so a per£ect "starter° for Voungsters/ ~ delieate 

MKTG D Z,~ FOR Pai : how to m tcow-nic, hi-taste cig w o proclaiming 

for the in us ry what is unspeakablee that reg . cigs are unsafe & addictive? 

thus, may hurt tob . co .s in liability suits . . .RJR tried to answer 

concerns about ETS w/Premier BUT STILL CAME UNDER HVY FIRE . . .PM trying 

to avoid RJR's agony : its Next is a real cia while Premier was a clever 

contraption that critics charged amounted to a DRUG DELIVERY SYSTEM (but 

see 5Vm Dunn's remarks about just what a cig is) & while RJR went for 

hoopla, PM 's movin silently ; even so, antismkg people vow a rough reception 

for it : its tar content & other additive ingredients to achieve 

flavor are potentially major dangers/PM testing diff . versions w/tar in 

8-lim ran , acc . to AmHealthFounda ion . . .also a 5mg . version in area 

w-erit U tralight, already on mkt . . .suspicion that Next adv will suggest 

itself to young smkrs on ground of less addictive/a big mktg prob, 

though, for PM is how to tout it w/o heightening its liability exposure/ 

Mad Ave points to eca leina~ed-bSi ee a s as a pY2 .~C84Zsff6 ; -s'CS'•essing 

positive, quality-of-life approach/PERTSCHUK : PM is engaging in "a wink 

strategy, not conceding that cigs are hazardous while reassuring consumers 

w/a wink & a nod that its new brand "isn't the one everyone is worried 

about" . . .£riendly mktg expert says PM must make "compelling case" by 

confessing the perils of nic . . .but : does its very existence taint all 

other higher-nic products? (RK : see whole debate over palladium cig) 

--THE QUIET AFRIKANER BEHIND CARTIER, portrait of JOHANN RUPERT, 

' Forbes ~k-2-00 : mal1a imnosing 39yrold Johann runs Richemont, which stars 

#5 tob . co in world, Rot mans n~;?& such r=xury brand goods as Cartier, 

Piaget, Dunhill w/sales ca . $4 billion a yr . . .Rupert family has 10% of 

shares but said to control half the voting stock . . .Richemont formed in 

'88 as spinoff of overseas assets of Ruperts' core biz in SAfrica, the 

Rembrandt Group, founded by Anton R, now 73, some !4O yrs ago/ANTONs prominent 

among generation of Afri ener b zmen who broke the English-speaking 

community's dominance of the SAfrican economy//RICHEMONT RECENTLY OIrGHT 

PM'S 24% ROTHMANS STAKE, held since '81, so Ruper s now directly cBontrol 

RothmanG ~A CRITIC OF ApARTHFTi] since his days as student at 

Stellenbosch Univ, did NYC stints at Chase Manhattan & Lazard Freres, ~ 

then ran his own merchant bank in SAfrica, joined family firm in '85// ~ 

ROTHMANS : a group of disparate natl operations that JR keeps hands off ~ 

spewing forth great cash flow//among his top execs is Alain Perrin, 47 ~ 

(see Dangoor interview for his work, I think) . . .Cartier produced over 

ON 

500,000 watches last yr . . .Dunhill acquires Chloe, Paris fashion house v 

--PHILIP MORRIS IS STILL HUNGRY . Forbes 4-2-90 : GF deal engineered ~ 

. just 1 mos after HIS4 took command/& while RJR's Ross Johnson in fall ep 



I 

of '88 was launching his disastrous effort to take his co . private . HM 

paid $13 billion £or Kraft & now became 51% food co .//other targets now 

being contemplated, of which Pepsico is biggest & least affordable but 

a wonderful fit . . .HM says he has no time frame but is ready to react 

since big co .s don't come along as often as small ones . . .BEYs PM'S GRSAT 

CASH FLOW . pouring in at $10 MILLION A 

in erest ,~. `-~~.,u~~~2~,~7,7.q1.}_?y._~~•~t.qs t EVEN AFTER'"~APITAL EXPENDITURES 

~~THY DIVIDEND, PM HAD $i• .3 BILLION IN EXCESS CASH FLOW LAST YR= 

clear ex lanation of "FREE CAS TO 

, I , PRICE RISES THAT SP.IARTLY OUTPACE INFLATION ; concedes Vic Ch ir n 

Murravs "WF'V . nON I BECATi3R WE THOIIGHT WF' :'OTn•D GET A Av W'rmu TT . 

~ =AVE . THAT'S WH T YO 'RE IN S SS O O"#*-~~**-## see RK interview 

w Murray Bring & question on crocodile tears re excise tax hikes vs . PM's 

own aggressive pricing to which he says latter is willingness to let the 

mktplace decide vs . former is mandatory govt edict)//PM using some of its 

extra cash to buy in $1 .5 billion, or ca . 5% o£ outstanding common// 

H e,'r-rST-T MAXWELL : his affable, rumpled appearance a bit misleading ; he is 

Rrd as nails . . .HIS_ ACQUISITIVE_INSTINn~ : what's available to you for 

eS are rarely as attrac a.v£~e as the ones you pick yrself : "It's unfortunate 

that those involve, as we say euphemistically, 'unsolicited of£ers " 

(but no regrets) . . .•n cases of GF t he went after LARGEST CO .S P 

OULD under him PM has earned its rep as one o the 

• best-run co .s in US/ see ANALYS .LS OF l~SETS USE at_tL99 as per Joel Barth 

analysis at RAE : case an Fie made tFat "Uo . managements would serve their 

shareholders better if they treated the cig business as A DWINDLING ASSET, 

paying out all the cash flow in dividends rather than launching expensive 

takeovers, "I~UT THIS LSN'T THE WAY THE WORLD WORKS . THERE ARE TOO MANY 

JOB..S INVOLVED, TOO MANY PERKS the weight o£ too much tradi~ion "& 

urchi HM i' com to oreside over 

liqui~3aTion----- WrVT_RK : omitted : the yen for power, beyon mere perks)/ 

says 5on this pt : "If we can go on delivering superior returns to our 

stockholders w/an acquisition program, then they really don't have too 

much to complain about"***Storr points out just how superior the return 

as beens 100 shares bought in '66 for $8 000 now worth $75O OOO ; since 

~~~,~ '! TOTAL RET iRN HAS A .RAGF.D 977 __ NFARLY 4WICE THE S&P 5~~ 

S_TILI_.F RFR AC_QUI_S_ITION : had muc in n common wit PMiu~turally based 

product, recession-resistant, well known '~rand 

(low cost also, heavily 

dependent on adv) . . .Niurphy plainly loved his work there, brought in innovative 

adv//GENERAL FOODS I'ION : it drifted as PM took heat from 

G-JallSt for not takin forceful ro1 o . a once . . . e ~xecs 

wa c_~e_i c ose . - r yrs before taking ac ion . . .FIN!"~teTt` U`~F` w"~'s~i't a 

comp- -le~e"~ooc~~o. w eno'ugPt"'g~ren'"`g'eA'"~if""gY°dlHtYi=13Y•omising areas of the mkt, 

e .g ., its ~ost cereals as a weak #3 behind K iloai~' & GenMills, it didn't 

offer buyers enough appea ing pro uc ine . . .KRAFT GOT IT A LOT MORE 

that GF didn't have, esp . cheeses, Breyers & other ice creams, Parkay + 

ENORMOUS CLOUT W/SUPERNIK73=10°0 of' •a-1,1v US__brsnded packa~e•d~fpods*'~-**-~'MILES 

1lic~a~eFl•"opera~ions, ES TO WORK : cut 2 .500 from payroll, conso moved-Tg 

o Glenview . . .one-time savings goose up opera-Ung earnings ' o even 

thou-T revs went up only 21- . . . future PRODUCTIVITY IMPROVEMEN26 AIMED A 

I 

SUSTAINING 15L_E_ARNINGS GROWTH annually ; hopeful signs Maxwell ouT•se line 

has begun to regain sh~ =~ebig falloff///FUTURE ACQUL52TIONS : PM 

I not likely to stray far from food since, as HM says,'"we would not get 

the same degree of synergies & efficiencies . So we more or less have to 

think in terms of food . .,PEPSICO : stron~ & well-managed & no conflicti 

-oroduc s . domin t preseneack ca major a$ rac ion, esp . 

Fr-!to-Lay -- an area where 'M is now erF e. . .BUT : PM can grow w/_o-megamergers 

es p . in INTL FOOD where HM concedes ' e c u '& it can•t 

be done w one big gu p, i s a matter,of picking up attractive bits & 

pieces, e .g., '8 $100 mill• ou ', Italian 

pasta-& cold-cuts co ., a neat fit PIELL M .O . : his big est £ear is 

rOL.'PTjAOF :NrtY,, .says Miles : "ONE OF HAMISH P/IA OTIONS CON T CTIVE 

DISSATISFACTION" adding how at officers' Xmas party he said h~e ai never 

seen PM produce a great yr -- "Now that's a fairly high level of constructive 

dissatisfaction :" . .e e rout•n consults w middle m s to obta• 

accurate inte~l~ene -~ôm tt,e f,-r,,,t lines SIDEB , e ing t e guilt ~ 

ou of the product" & noting how Lite was the equivalent o£ the filtered V 

cig . . .natural extension of this into KGF w/getting out fat-free versions ~ 

of its dairy & meat lines, also baked goodsui,*~*'"'Kraft baked goods now 

using egg whites & non-fatmilk, eliminating fat ~ 

--RICH & HUNGRY FOR GROWTH, Fin . Times does a leader look at Miles on ~ 

eve of his chairmanship & "options for the enormously-profitable PM," %p 

8-27-91s Miles is NONSNTY,G CF.O . . .much speculation re Heinz, shares of which 

rechy jumped on rumor of bidder in the wings/US tob mkt still enormously 

p-rofitable even in its decline . . .Pin's OPERATING ytARGIN FOR DOMES TIC TOB . 



~OPERATTONS WAS CA 1-i'(>'7 IN '90//scope & geographic spread of future PM 

acquisitions now seen as very fluid, but best bet is more in way of the 

Jacobs-Suchard deal 

--PM TRIES TO BREW INTEP .EST IN LIGHTER RECIPE, WSJ 4'-1L1--91 : Miller 

is trying LITE ULTRA in tests aimed at younger crowds & more fast-paced 

ssenes in Burnett commercials . . . Coors Light & Bud Light stealing Lite's 

mkt share but posting much bigger gains -- 12 .4 and 9•4% respectively 

vs . Lite's 1% in '90 growth//not at all lighter beers can sustain taste 

& command mkt, see failure of A-B's L .A ., brand (Low Alcohol) 

--add MARLBORO MIEnTTrn2 INTRO, WSJ story 5-3-91 e Risky effort to get 

Marlboro F4an ra.d~.ng ts.l1 in The saddle again, biggest brand is at di£ficult 

juncture & PM needs to get it volume any way it can• . .some feel this 

is a fuzzy hybrid/Marlboro d clined_2 . o fro ' ' ~ .here intent 

TO STE~ ;_~L Sh=S MYI YE _ .b .same pac `'ezcent for added white 

ord " .`:big d"eTiate ainoxSg mYztg `rand-name speciZis s,~fear that P,Sedium 

conjures un notion of but others see it as BLAND, ABSTRACT & 

INNOCUOUS, "thereby suggesting you can get fuller flavor occasionally 

w/o substantial health risk . . .this also a way TO MEET AMBITIOUS UNIT 

VOLUME TARGET3 PM's management sets/June the perfect time to get it into 

distribution channel//PM also readying Commander as new budget entry// 

Advo Institute ACTION ALERT 7-1-91 re MARL . PSEDIUPrI & CANIEL 99s : Mediums 

' more clearly resemble the full-strength version than Marl Lights, package 

' closer & cork-tip instead of white . . .~4~ million ad.-.pr.pmo. .~}~,ro/Camel 99s : 

effort to improve co .'s 28% share of s, h e slogan i.s "long 

on smooth" & its emphasis on length aims at stressing slimness as is 

common for brands targeting women . . .evi.dence says this may just b 

r_eoackaged DAKOTA, the brand introduced in April ~Jd~go s ugged ; young 

female m'Tt is ~~ie only growing sector of US cig mkt 

--PM 7S3 HOT ~N FASTERN GERP~tEiNY, Preserving Local Smokes' Bad Old Features 

purb"- sales, WSJ 2-12-92 : Pang dir of PT+7's German subsidiary explains 

overwhelmin sucp~sS ,by_, PIvl, i?'b _eastern . .:G;~rElaany, 'We hammered into 

the peop?e°ttiaa"~the.V a good prct here hat ; r,' need to be 

chan~ed" . . .so PM bougFi a crum ing factory in Dresden, while competitors 

Ks were revamping EGerman brands to make them taste more like milder Amer . 

blends, &~_SEPT TURNING :DUT S TRONG-TASTSNG~-i2GH-TAR CIGS w/few changes 

~ g includin py packaging the sTaying frum in place ~'- -- a ris y move but it 

worked ; `ts h r h-tastin o brand F-6 is #1 w/45% of the re ional 

onsumers in EGermany still accus ome o s ron ~ - avored . 

;~.~, " and they're not going to give it up overnigè °'"lairìs` Iia.~iS'~'1uri, 

using the industry's code wds for high T/Ns PM rints he 

warnin~s~on t~he nacka~es somethinv that hadn't anvea_re 

+~- nmm,n,iG,n/ 

l 

EGerman-bran3s seh for about 15'.~~ less than Western brands & _ consumers 

realized flirting w/latter was costin ~- 1oca1 iobs . . .~ Q , ~E .~G RllJ4 ~r ,Y 

ARE CAUGH~ IN_Ar,TZP~„W1} .R~;L as rest of industrial world moves ~ w*a'r~~Tower 

`Fj'TYs wi-E)i f'lavorin~"added/THE DRESDEN FACTORY dates back in part to 1900 

& has stained- lass windows & iron s .'¢air.,,X+ai1ln .: PM HAS , + N 

(11G IJIKY""d'8' h- acce erata .on was cost-effect` time 

& money no needing to be expended for new mac inery & other costly 

changes in mfg, but roduction S over ' O/ 

M will have to lo s in keeping with EC rules requiring it by beginning 

of 93 u will be done radual .y//any doubts PM had about its 

strategy were wiped away b_ ~R~EE~Y ""{C,`R~, which bought Cabinet, 

EGermany's top-selling brT~utoo name onl"y, switched production to 

WGerman site & the blend to conform to Western standards ; SALES PLU141P+lETED 

as co . appears to have badly misjudged EGerman tastes . . .so PD'f exploits 

the debacle to push its brand harder w/ slogan "F-6 : THg,,,T.(,&RE I~~ 

, --E .C . PARLIAI~YENT APPROVES TOB . ADV BAN, WSJ 2-12t9~ : OKS~Y~~~"a.d 

f ban including sports sponsorships by 150-123 vote to carry further the 

TV ad ban that went into effect in '91/industry lobbyists denounce it 

as a major assault on free speech (the Confederation of European Community 

Cig Mfrs is trade group) . .,but not oug bindin on rulemakin Council f Min- 

'sters t i s ecision can , e amended by ~ the 

par iamentary body ~ 

--PM REVAMPING S75 FOOD UNIT, PdYT 11-28-91s road restructuri of v 

food o~oer tionS n„o„n~Pa RTTm NO nFmn'rrS-g i .. =n, wl result in mil- ~ 

lion after-tax charge vs . 4th qtr earnings + ;;1 billion charge on re- p~ 

quired accrual for postretirement benefits of employees . . .KGF says it ~ 

will discontinue some busineas lines & consolidate its mfg nlan s& dis- N 

triT~ution centers . . .analysts cite weakening food mkt . . .Goldman, Sachs p 

analyst commends KGF for taking bull by the horns (to cut costs if you 

can't raise prices) . . .a1so announcing,~2 billion STOCK REPURCHASE PROGRAM ; 

the KGF moves to improve efficiency & yie1T$`'f$ mill ion savings over 

next 5yrs . . ."AN EXTRAORDINAR2LY COMPETITIVE MKTPLACE RIGHT NOW" sez co . 

spokesman ; Pru e a.a analysta "I£ you can't raise yr prices, you have got 

to lower yr costs" *#**#//[9SJ 11-29-91r move represents intensifying con- 



' cern by #1 food co . over slowed growth . . .co . refused to disclose details 

of the restructuring . . .but known that sales offices for its various fo~ 

lnes will be mer ed + 2nd cut of 8% on i s~' cTieese hne tFis yr 

INTRODUC L~IERIT ULT'r~'?'~ 8-~2z NYT story shows ignorance, 

making big deal out of Sowered nic . rating, stating other brands stress 

lowered tar . . .the reg . is 1mg . of tar & 0 .1 of nic . . .Ultima 100s have twice 

to, Now & CarJ„~gx3, . . . Dangoorz PM"Ii~','S""8èeri -e" 

menting w/NEXT DE-NIC brand"tlia~"fiad"~14/1OOth of mg . of nic for discount 

mkt, PM chooses instead, to go a_fter full-~~icermkt, hope to get smkrs who 

havenwit'&'h"e"3' ~ae`way down""`b>?c"afise theyhaven't found anything 

smokable," says DD . . .new brand has somethin c Â DU L CONC C 

",,.das' :.to.:e s.," aW.,,easier brand appears to e aime a~ men 

since ~. s adv s stressing avor + using "cork" or dark ti in said 

RWt be nreferrad h•Z-P.+i i-"elavor smkrs, usually males -2 - 2z,~]D_ .ntar.Ir 

ce.dep Mx;r lost smkrs to . .:O~.r,~tg~i8y",NQW„oy~~x;t~},~„oyrs . . .NOw cig offers 

hal~ $fie u5tima ie~~"i" 5 tar ~ .oj nic/tt';.is move a ears to mean P 

bac e ff its mu - 'd." dating back to 

' 9 unveiling of Next brand w"De-Nic" beneath the logo, positioned much 

like decaf coffee -- but it f o r,der.-d in t st mktg, had much hi,~her 

levels of tar (RKz also didn't have major brand identification)//ADVO INST 

ACTION ALERT 1-30-92e Seeing it as Tescue. 1V~,„, :._,,RAd . . .a 

$30 million adv-promo campaign set-for"mid'-Feb, ads to have HIGH T 

' LOOK w/computer-like dots as ty~pe£ace, .h_?~dl~,e.,d,...,, t~` t}9 ~,.~LQ~- at 

ftF e lowes£ s of Tvel tar & n i . &~'Surpassing "~Savor 

see add in ~, metallic sky-blue w/-Plow"3'i'n~s-ar^cSLffid "t1Ye~eometr c devloe, 

text "THB ULfig~-Z .,T~,FRD?Y[A~A& hard-to-read text block says 

~"Disco'v~er"6;"3~iew way to smo~e'""at the lowest 1evels of tar & ii . New 

Merit Ultima . On_~~y~ Bu w a smoo , easy draw & a super light 

tas_te you' ll lik'e'~ 

--I{GF PLANS TO CUT PRICES TO GROCERS, NYT 2-21-92 ; Says it plans to 

cut rices it char rocers & reduce s endin o promo campai to 

ring consis en v lower vrc G to consumers . . . move fo owa +mii r 0ne 

1a :ta by P&G, which cut prices to grocers on Oo of its products & 

has SLASHED SPENDING ON COUPONS & PROMO ALLOWANCES paid grocers, including 

on Folger's coffee & Ivory dishwashing soap . . .both KFG and P&G acting 

out of rustration at ht+Pe 1 v 1 0 promo a ents in recent s . . .acc . 

to Nielsen g Research ood co .s s end nearl 0°0 of their total advpromo 

bu ets o~t~rad~e~ 2ron~os, & there s growing feeling that such 

spend'ing is an In fe~ etive wa to b'ld br d lo alt for a product/PM 

& KGF call t is move "an experiment" . . .KGF adds rea heft to P&G move// 

among fees collected by grocers are SLOTTING ALLOWANCES for stockin~ a 

roduct separate fees ar aid to e~it dis la ed PROMIN NTi~ + t' s 

r"'equen y se pro uc s at reduced prices y for sev wee s, a7"~ ing chains 

& wholesalers to buy up sev months' supply at lower prices & then sell 

for higher margin & profits, leading to wild swings in supermkt prices ; 

EMPHAS7S ON DEALS HUR45 BRAND LOYALTY 

--MARLBORO MEDIUM very fancy fold-out out in special 125th anniversary 

issue of Vogue, headlined "Where a man's as tough as the chaps he wears"/ 

in Vogue, though 

' --MARYLAND CIG TAX GAMBITz State raises cig tax by 20¢ a pack In 

' 

spring of '92 and PM 1 g use the o ell 

re ' b dv 2417 ari. on1 " "& showing ts non- 

Marlboro full-priced brana coupon o£fering 2 off any carton of these 

brands & asking yr regular favorite brand & yr sex . . .Gov of MD quoted on 

air as saying "They have to do what they have to do & we have to do what 

we think is right" or wds to that effect 

--NBC NIGHTLY NEWS SPOTLIGHRS PM TIE TO GAMBITING E73 CO ., 6-16-z 

I Lead item on network opens w/news re EPA draft on E2S due to hold ~ 

to earlier position & segues to whistle-blower lately fired by Healthy ~ 

Bldwho gets paid to travel around & talk about in oQSi~p"$~'- 'J 

SuLLtion as rep . of his co . but in fact taking pains never to concede that '~ 

smkg is a key culprit . . .°NBC News has learned," says corr . Robt Hager, ~ 

"that Healthy B1 s has stron~ ties to Philip Morris, & to the cig lobby 

in Was~g onT urs ou thn 10 yrs ~rinspecfing : 3~ealthy Bldgs ~ 

has NEVER advised a bldg owner to ban smkg" . . .source is Jeffrey Seckier, 

who says the co .'s president, GRAY ROBERR6© oke o en1 abo ' 

ink w tob & is quoted as having said to Seckler that co . nvolvement 

w the industry "is pretty extensive" & added "Matter of fact, my personal 

net worth has been significantly increased over the past sev yrs as a 

result of our involvement w/the tob . industry" . . .Robertson says Seckler 

is disgruntled because he was fired but admits that "t b does rovide 

MAJOR FUNDING for the co .," saying it "mig account" for up to 7 of 

our consulting fees" & the fig . $500,000 is mentioned, but denies that 



is reason his Co . has never recommended a smkg ban ; he sas s most of his 

' clients want to accommodate smkr~/Seckler shown being tutore on how 

1 o field c arges vs . ETS on talk shows . . .oiting & showing thank-you 

letters from TI and PM for testifying on a bill or explaining E75 to 

French journalists//story of PM wanting to call the shots, as In case 

of PMI's Ryebrook neighbor, Pepsico HQ, which asked Healthy Bldgs to 

survey the structure & despite the report, instituted a smkg ban in the 

bldg anyway, which cause PM to "hit the roof" . .PM statement says~,_t 

will cont' o . °b c u of its res c- ased unbiased 

A pa ro c o i oor a u . .TI adds "We asked them if they d be 

wi ng to share their views on~indoor air quality & where E2'6 fits . 

And we pay them" 

OUBLE IN MARLBORO COUNTRY, says WSJ's Alix Freedman 6-23-98s For 

-"first ime ar oro rand is asfering all sorts of come-ons to hold mkt 

~ share, such as buy-one-carton-get-another-free, barbecue lighters & 

Marlboro Racing watehes . . .in Aug it will launch F2VE-PACK CARTONS, an 

industry first, to appease smkrs who don't like pu ing down $20 a pop 

for a carton at today's high prices/all this a sharp departure for PM 

& indicates how rocky the rd has become for "the once arrogant cig sellers 

I at PM USA" . . .the brand is losing its momentum though still holds .25 . 

be mkt for mos ended-in March,-but ar oro avg s Zpmen s wer off 

3f n e qtr ; PM argues that ace . to Nielsen Data, which measures actual 

sales & not just shipments 9 Marlboro's share is up a tad . . .Freedman 

writes, w/o support : "Even as entry level smkrs opt in droves for Camel . 

Marlboro's older smkrs are defecting to discounters now a h e 27,8°, 

'_ O'c of the mkt"//Bill Campbell says not to worry whale conce dfQ that the 

exp osion in the discount sector h3,~nu+ greater foeus on the pt sf 

sa1 . . . In a toug~r env3.ronment competitive3yr"'You have t3Ue"~or for 

° M war in the store, but that doesn't mean you have to sacrifice" bldg 

yr brand . . .Marlboro adv budget~,t„o,, .bp l~s,~ 

million, bu't`tItat was ndul`yigh u "h for the MarlboroMedium launch ~Dangoor 

speaks of the changing~envirp~-uge3,zt

PM History/2 - Legacy Tobacco Documents Library

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?