Philip Morris has its origins in the London tobacco business of the 1840's although its more recent development commenced with its incorporation as an American company in Virginia in 1919. Some sales growth was apparent in the 1920's bat it was not until the 1930's that the Company became a significant force within the American tobacco business. Acquiring the Benson & Hedges Company in 1954, and its important PARLIAMENT brand, it has subsequently developed into the second largest tobacco company both within the United States and the free-world. International tobacco operations commenced in the early 1950's and in 1955 an international division was established which, in that year, had annual sales of four Billion cigarettes mainly in Australia, Venezuela and export markets. In 1968, the purchase of Godfrey Phillips significantly improved the group's representation in the Far East and Australasia, and sales of the Group over the past ten years have grown very considerably, culminating in the acquisition of Liggett Group trade marks outside the USA, in June 1978. Philip Morris has, in recent years, been pursuing an active policy of diversification. Major acquisitions have been the Miller Brewing Company in 1971, which now ranks second among U. S. brewers, and the Seven Up Company in 1978, which ranks third among U. S. soft drinks manufacturers. Other interests include chemicals, paper, tissues and packaging, which are within the Industrial Division and housing and land which are within the Mission Viejo Division of the Company.
Total Sales of Philip Morris
Total cigarette sales of Philip Morris, including manufacture on behalf of other major groups, have grown from 152 Billions in 1969 to 401 Billions in 1979, an average annual growth rate of 10. 2%, and it is apparent from the chart that total sales have grown at a remarkably consistent rate. The group currently holds a 14. 5% share of the free-world market. In 1969 Philip Morris acquired local companies in Holland and Dominican Republic and increased its holding of the Nigerian company to over 50%. In 1970 Macropolo was acquired in India and new License agreements were made in Yugoslavia and Bolivia whereas license manufacture ceased in France. Weltab in Belgium was purchased in 1971. In 1972 a local company was acquired in Panama, replacing a license arrangement, and joint venture local companies were established in Indonesia and Canary Islands. A manufacturing company was formed in W. Germany in 1973 to replace existing license and marketing arrangements and a license agreement was made in Japan. In 1974 a joint venture company was established in Ecuador, and in Mexico the local company was merged with 'Mexicana' resulting in a reduced holding. A contract was arranged for sales of FORTUNA on the Spanish mainland and the manufacture of MARLBORO commenced in the U. K. Godfrey Phillips ceased operations in Malaysia, with the brands passing to licensed manufacture. New license arrangements were made in Singapore, Poland, Colombia and Netherlands Antilles. Local companies were acquired in Costa Rica and Brazil in 1975 and license manufacture recommenced in France. New licenses were arranged in Greece and Bulgaria. In 1976 a company was formed in El Salvador and interests in Ecuador were increased. In 1977 the Indonesian company ceased operations, with the brands being manufactured under license. New license agreements were made in East Germany and USSR. In 1978 Liggett Group brands outside the U. S. were purchased and a license agreement was made in Hungary. Controlling interest in the Indian company was relinquished in 1979, a license arrangement was made in Portugal, and an interest was acquired in Uruguay. In 1980 the local company in Argentina has merged with the Reemtsma subsidiary.
Regional Sales of Philip Morris
North America currently accounts for 47% of Philip Morris total sales, followed by Western Europe with 23%, Latin America with 15% and Asia with 8%. Since the mid-1970's sales in the Middle East have grown at over 21% p. a., whilst annual growth rates in other regions have been 15% in Western Europe, 11% in Africa, 7% in Asia, 6% in North America and 5% in Latin America. Sales in Australasia have declined slightly. In terms of Market share the company has 28% of the North American region, 26% of Australasia, 19% of L. America and 13% of w. Europe. In the rest of the free-world combined (Africa, Asia and M. East) the Group has less than 5%. These Domestic markets account for over 63% of Philip Morris world sales. In the U. S. A. Philip Morris hold second position behind Reynolds and the group is making very determined efforts to become market leader. Philip Morris long standing links with the Monopoly in Italy have enabled them to become the leading foreign company there. MARLBORO'S climb to second position in the West German market has helped Philip Morris overtake Reynolds for fourth place behind Reemtsma, B. A. T. and Brinkmann. Tabacalera Mexicana is the other major manufacturer in Mexico apart from La Moderna, the dominant B. A. T. associate. 'Catana' in Venezuela currently lead B. A. T. 's subsidiary, but this situation appears likely to be reversed in the near future. In the Philippines La Suerte, Philip Morris' licencee, is the second largest manufacturer behind Fortune Tobacco. Top
Brands of Philip Morris
MARLBORO International brand. U. S. type blend. KS, LS and RS filter. Packings 20 H/t 6 s. c. 3 row Main market U. S. A. Sales in 1979: 166 bna. 41. 5% of Group business.
MARLBORO 100'S International brand. U. S. type blend. Extra length filter. Main packing 20 S. c. 3 Row Main market U. S. A. Sales in 1979: 17. 5 bns. 4% of Group business.
MERIT International brand. U. S. type blend. King & Regular site filter. Rain packing 20 s. c. 3 row Main Market U. S. A. Sales in 1979: 13. 5 bns. 3% of Group business.
MARLBORO LIGHTS International brand. U. S. type blend. King & long siie filter Main packing 20 s. c. 3 Row. Plain market U. S. A. Sales in 1979: 12 bns. 1% of Group business. BENSON and HEDGES 100'S International brand. U. S. type blend. Extra length filter Hain packing 20 s. c. 3 row. Main market U. S. A. Sales in 1979: 12 bns. 3% of Group business.
FORTUNA U. S. type blend. KS, LS and RS filter Main packing 20 s. c. 3 row. Main market Spain Sales in 1979: 9 bns. 2% of Group business.
Summary of Philip Morris
The main geographical, market, and brand features of Philip Morris are outlined above. Other significant aspects of their business are as follows: - Main Countries of Manufacture; U. S. 54% of Group's total manufacture, W. Germany 5. 5%, Holland 4%, Mexico 3. 5%, Switzerland 35%, and Venezuela 3%. These six countries account for nearly three-quarters of the Group's total manufacture. Exports and Licenses: In 1979 72 Billions were exported, 54% from the United States and 44. 5% from Holland, Switzerland and West Germany. License agreements account for 44 Billions, nearly 11% of Group business, with the Philippines, Italy and Spain being the most significant. Duty Free Sales: These are nearly 10 Billions and account for 2. 5% of Group Business. U. S. Type Blends: Including German blends these account for 86% of the Group Total. English Type and Black account for 7. 5% and 4% respectively. Packing: Soft cup pack sales of 233 Billions are 58% of sales. There are hinge lid sales of 142 Billions, representing 35%. Menthol: Sales of 31 Billions account for nearly 8% of Group Sales. The leader in the menthol segment is the BENSON & HEDGES 'House' with sales of 12 Billions followed by VIRGINIA SLIMS and MERIT. Tar Levels: These are reported for 81% of Philip Morris Group Sales and, of this, 38% of sales fall within the 1-16 rag. per cigarette rating. Brands recording less than 10 mg. tar include MERIT in the United States, Western Europe and Venezuela; PARLIAMENT LIGHTS in the United States and MURATTI AMBASSADOR EXTRA MILD in Italy, Switzerland and France. International Brands: These sales, which exclude the U. S. Domestic Market, amount to 122 Billions. The leading 'House' is MARLBORO with 99 Billions, followed by LARK (5. 5 Billions), PHILIP MORRIS (5 Billions) and L & M (4 Billions). The sales performance of Philip Morris over the past decade has been the most impressive of all major international tobacco companies. Although there are indications of a reduction in their annual growth rate it remains significantly above that of their main competitors and will mean an increased share of the free-world market during the next few years. The main strength of the Group is MARLBORO, the free world's leading brand, which in all versions accounts for over half of P. M. 's total sales. This heavy reliance on a single 'House' may, however, prove to be a long-term weakness, For a cigarette brand to be seen as truly international, it must also be seen as part of the international air travel scene. In addition to ensuring its availability aboard the airlines and through the Duty Free shops, advertising at key airports is one of the most effective ways of achieving this credible international image. With the advent of the International Brand management structure at Millbank, a centralised service for the planning, co-ordination and selection of airport advertising sites was established in 1975. This central service provides detailed information on International Airports and other specialist transport media for the benefit of BAT advertisers of international brands. It has sometimes been necessary to prepare a totally separate advertising concept that conforms to the requirements set by some Airport Authorities. House Style, or Corporate Advertising, for BENSON & HEDGES and STATE EXPRESS is present at some major airports where tobacco advertising is either banned or limited to designated sites only. House style concepts for all our International Brands have been created in anticipation of further restrictions. At the present time such advertising can be seen for BENSON & HEDGES in Scandinavia, London (Heathrow) and Hong Kong. Whilst the selection of display sites within International Departure Transit Lounges is the responsibility of the Air Transport Advertising Executive the purchase and style of advertising located on or in Duty Free Shops and at point of sale, remains a B. A. T. U. K. and Export/IDF marketing activity.