"Sensible regulation of tobacco benefits society and consumers everywhere. It also benefits our company's businesses. With regulation comes stability and predictability," said David Davies, VP of Corporate Affairs for Philip Morris Europe.
Davies's comments reflect Philip Morris's concerted efforts to promote a positive image. The company has repeatedly gone on record as saying that it is not in their best interest to market cigarettes to children and have even created a 12-member office charged with finding ways to deter teens from smoking.
Anyone who owns a television set in America has seen Philip Morris's "Working To Make A Difference" series of promotional ads. The multi-million dollar campaign spins the company as a conduit of altruism, not cancer. Company employees ministering to at-risk youth, and affable volunteers delivering food and solace to the indigent and elderly through company-sponsored programs. The spots are accompanied by maudlin music and well-timed smiles from an adolescent in foster care to a lonely shut-in.
Many have claimed that the campaign is egregiously exploitative, using the suffering of others as pawns in a PR war. Others have said the ads reek of hypocrisy; while a company employee mentors one adolescent, another kid is on a nearby street corner, chain smoking Marlboros, oblivious or apathetic to the suffering that cancer causes.
And who can deny the internal company memo brought to light during the USís litigation process, which impudently claimed that "today's teenager is tomorrow's customer." Furthermore, studies have concluded that cigarette advertising has actually increased in youth-oriented magazines since marketing restrictions were levied.
Many think US warnings on cigarette labeling are not as strong as they should be. In Canada, new packaging requires 50% of the pack to be a beauty shot of the hazards of smoking. All of the images are extremely graphic, featuring the effects of such nasties as mouth disease, lung cancer, and infants born to smoking mothers. The packaging is under fire from both anti- and pro-smoking groups but itís hard to imagine that this wonít be effective in reducing Canadaís 45,000 smoking fatalities each year. Late last year, the European Parliament voted to follow suit with a similar plan to place an image on 30% of the packaging and the World Health Organization (WHO) intends to set similar packaging rules for its member states.
Meanwhile, the tobacco companies are taking full advantage of lax advertising in other parts of the world to entice the masses who havenít yet rejected their deadly product. In Romania, a logo for Camel is silhouetted inside traffic lights, materializing when lights turn green. In Hong Kong, smokers use empty packs of cigarettes as free passes into discos. BAT (British American Tobacco Co.) employs scantily clad women to light the free promotional cigarettes given to teenagers in Gambia. And in Spain, a Madonna concert was rebroadcast as the "Salem Madonna" concert. The Federal Trade Commission says the tobacco industry has a $4.9 billion global advertising budget. Adjusted for inflation, that is triple what it was 20 years ago, and itís being put to use in whatever way works, depending on the market.
So how did we get to this state where tobacco companies are actually portraying dueling images as they promote their product internationally? It all started in the US when smokers decided to put an end to the open market for tobacco companies. The landmark 1998 settlement between the major US cigarette manufacturers and 46 states and five territories resulted in an agreement by tobacco companies to pay $246 billion over two decades for the recovery of Medicaid costs for treating ill smokers.
The tab limits future claims that states can make against the tobacco industry. However, that stipulation has done little to stem the hemorrhaging of the top five US cigarette manufacturers, whose collective worth is estimated at US$157 billion domestically. Since the settlement with the states, juries have been awarding multi-million dollar (and in the case of a class-action suit in Florida, multi-billion dollar) settlements in individual suits. The success of these litigants suggests that the tobacco industry has only just begun to incur the judicial wrath of a culture no longer disposed to smoking, or its nefarious consequences.
Tobacco magnates also have the ire of Uncle Sam to consider as the federal government looks to recover billions of federal dollars spent on health-insurance programs for those suffering from smoking-related illnesses.
But fining a company is not going to reduce customers and prohibition has never proved a winning formula for ending addictive behavior. The most effective way to shut down the tobacco transnationals will be through marketing and manipulating their brand image.
Therefore the Master Settlement Agreement also restricted much of the marketing and advertising practices of cigarette companies in the US. "Joe Camel," the cigarette-smoking, sunglass-donning, babe-magnet dromedary that is directly correlated to the prominence of RJ Reynolds's Camel brand, was rendered extinct. Also banned are billboard appearances of Philip Morrisís Marlboro Man, a Leo Burnett premise widely celebrated as one of the most successful cases in marketing history. In accord with the existing bans of cigarette ads on television and radio, the new restrictions forbid most outdoor advertising. The distribution of tobacco brand-name merchandise, the lion's share of which was targeted to younger audiences, was also declared unlawful.
Upon first glance, it would seem as if the domestic levies, interminable legal bills, and marketing restrictions would completely incapacitate US tobacco corporations. But that has hardly been the case. Commensurate with the heightened anti-smoking sentiment and dramatic decrease in American smokers has been an increase in sales of US tobacco overseas. The Master Settlement Agreement does not restrict marketing efforts of U.S. based companies internationally, and though a bill proposed by US Senator John McCain (R-AZ) did seek to restrict international tobacco marketing, it could not muster enough support to be passed.
Developing countries are particularly ripe for tobacco transnationals. While anti-tobacco sentiment throughout much of the European Union is tantamount to what it is in the States, governments of developing nations tend to provide lax or non-existent marketing restrictions on tobacco. The World Health Organization (WHO) claims that by the year 2030, 7 million of the estimated 10 million annual smoking-related deaths will occur in developing countries.
Even when taking into account the speculative nature of that figure, it still suggests that consumers in developing countries are more prone to the marketing of tobacco, and that their respective governments are less apt to implement the regulations tobacco companies face in more affluent societies. Without universal marketing restrictions, tobacco transnationals are now promoting their products throughout the world more aggressively than ever before.
Which might explain why Philip Morris International, the foreign arm of Philip Morris, is able to generate revenues in non-US markets that rose from US$15.7 billion in 1993 to US$26.3 billion in 1997 -- a 68% increase. As trade barriers have fallen throughout the world, particularly in Asia, tobacco transnationals have been able to tap markets and compete with indigenous tobacco companies. Some estimate that, all told, the world's cigarette market is worth US$260 billion annually.
With China opening up to foreign competition, the international stakes are all the more significant. Nearly half of the male population in China smokes. International watchdog groups fear that the thorough marketing tactics of transnational purveyors will lure more Chinese women -- a demographic that has significantly lower rates of smoking at the moment. Moreover, a recent reduction in tariffs will allow cigarettes to be marketed more cheaply, thereby rendering them more accessible. It is also feared that Chinese producers will in turn infiltrate the markets of developing countries in order to offset revenue losses created by competition from transnationals. As the largest domestic producer of tobacco in the world, China stands to compete significantly outside its borders.
But the US tobacco companies arenít just aggressive in the East. In Germany, which is noted as the largest European smoking market, a rival manufacturer tried to spark a price war with Marlboro. In an effort to protect and even bolster its market share, Philip Morris introduced the brand L&M as a cheaper alternative. Marlboro's premium pricing was thereby protected and competition on the lower-end of the price scale was subdued. Philip Morris now enjoys 41% market share in Germany; in 1980, it could only claim a paltry 10%.
How much longer will this international marketing freedom exist? That's the question transnational perennials are now facing. Prior to a ruling by the European Court of Justice last October, the European Union was poised to implement an across-the-board ban on advertising to be phased in incrementally, coming to full fruition in 2006. But the directive to ban tobacco advertising, which was adopted by a vote among EU governments in 1998, was overturned, as the EU's court found the prohibition to be legally flawed.
The EU is expected to bring forward new legislation, notwithstanding the ban's recent annulment. Immediately after the announcement was made in Brussels, British government officials pledged to move ahead with their own legislation to ban tobacco advertising. France, Finland, and Denmark have already banned various forms of cigarette advertising. But relative to the at-large international market, the proportion of countries with strict marketing restrictions is small. Hence, a growing movement on behalf of the WHO to enact a worldwide treaty that would restrict marketing measures universally.
When the WHO convened at the UN in Geneva last October, public hearings were conducted on the Framework Convention on Tobacco Control (FCTC), the formal name of the proposed global tobacco-restriction treaty. At the core of the FCTC treaty would be uniform, international restrictions on the marketing of tobacco products.
If the FCTC treaty is established, it would have to be ratified and then implemented through national legislative systems. That could take years. Regardless of the timetable, it seems safe to assume that tobacco transnationals will face heightened scrutiny and further marketing restrictions.
The eventual result, it would seem, will be a reduction in tobacco advertising and marketing worldwide. Already tobacco marketing has spun off a cottage industry in the US -- that of anti-tobacco marketing. For independent marketing agencies fretting over lost revenues to advertising restrictions, jumping into the burgeoning anti-tobacco campaign market may be one way to mitigate losses.
The American Legacy Foundation (ALF) has launched a campaign to remind us of the far-reaching suffering caused by cigarettes. Debuting in January of this year, the ads feature harrowing tales of tragedy directly related to cigarette smoking. There are no moving arias in the backdrop, no smiling faces, simply personal accounts of loved ones lost to cancer. Speaking volumes for the financial investment of the public health foundation, ALF aired its ads during this yearís Superbowl at an estimated US$2.3 million per 30 seconds of airtime.