Philip Morris Companies Inc.
Excerpts from 2001 Annual Report
Philip Morris U.S.A.
■Philip Morris Incorporated (PM USA) continued to pursue successful strategies in 2001 that enabled it to strike a favorable balance between increased market share and sustained income growth. Retail share increased 0.3 points to a record 50.8%, according to data from IRI/Capstone. Underlying operating companies income increased 7.7% to $5.8 billion, driven primarily by higher pricing, improved product mix and productively. Shipment volume declined 2,3% to 207.1 billion units, due primarily to a reduction in wholesalers' inventories in the fourth quarter in advance of a federal excise tax increase in early 200?. Although industry volume as reported by Management Science Associates declined 3.2% for the year, PM USA believes that industry volume remained in line with its historical rate of decline of 1% to 2% when adjusted for reductions in trade inventories.
■ PM USA grew its premium category retail share by 1.0 point to 61.6%. The premium category continued to be resilient. It accounted for 89,3% of all PM USA shipments, up 1.1 points from 2000 and compared favorably with industry shipments of premium products, which increased 0.4 points to 73.9% of total U.S. shipments. PM USA continued to focus on the four brands with the greatest potential for long-term strategic value and growth: Marlboro, Virginia Slims, Parliament and Basic.
■ Retail share for Marlboro rose 1.1 points to a record 38.2%, outpacing all other brands on the market. Marlboro, the number one brand across all states in the country and in every major trade class, continued to grow with focused marketing initiatives for adult smokers.
■ Parliament grew its retail share 0.2 points to 1.2%, driven by the brand's national expansion. Virginia Slims retail share was unchanged at 2.7% in a highly competitive marketplace. Basic, PM USA's leading discount brand, remained essentially fiat with a 5.1% retail share in a changing discount environment.
■ Youth Smoking Prevention continued to be a core business priority. In 2001, PM USA again spent over $100 million and supported initiatives associated with the prevention of youth smoking, while promoting positive youth development. Grants of almost $5 million in 18 states enabled 300,000 middle school students to receive Life Skills Training, a program that has been identified by the Centers for Disease Control and Prevention as being effective in reducing youth smoking.
■ PM USA demonstrated its strong commitment to responsible retailing by helping nearly 70% of its retail accounts adopt a non-self-service retail format PM USA also expanded its Options program, an initiative to help business owners find effective, practical ways to create a more comfortable environment for both non-smokers and smokers in public places.
■ In other areas of corporate responsibility, PM USA continued to work toward developing a conventional cigarette with a significant reduction in potentially harmful smoke constituents. The company continued to make progress through farm-based efforts to reduce potentially harmful smoke constituents in tobacco.
■ PM USA remains optimistic that it can continue to deliver strong business performance in the years ahead, due to its powerful brands, significant scale and committed workforce.