PHILIP MORRIS MOUNTING TOBACCO OFFENSIVE

By Published on .

Most Popular
With two smokers now at the helm, Philip Morris Cos. is finally rising to publicly defend Marlboro Country and the tobacco industry to the American public and Wall Street.

Under unprecedented attack from a variety of critics, Philip Morris Co.'s new top executives will mount a vigorous response befitting the world's largest cigarette marketer-an effort insiders say former Chairman-CEO Michael A. Miles was not prepared to lead, personally or professionally.

"What we have done in the past six to nine months is a flavor of what you will see in the future," said new President-CEO Geoffrey C. Bible, 56, at a New York news conference with incoming Chairman William Murray, 58, last week. "It is our intention to continue to defend our industry and the rights of our consumers as briskly and as strenuously as we possibly can."

The response kicks off today with page ads in eight markets through the next five days. Ads headlined "How to spot flaws in secondhand smoke stories" reprint a long article from Forbes Media Critic questioning the Environmental Protection Agency's passive smoking report and media coverage of it. The ads from Young & Rubicam, New York, include a line, "in any controversy, facts must matter."

This week's ads won't be the last. After generally allowing its rivals to lead the public response to tobacco critics, Philip Morris-the world's largest tobacco marketer-has decided to mount a full-scale response, though the company declined to reveal spending plans.

From financial analysts to corporate insiders, many welcomed the surprise helm transition-even food analysts who cheered Mr. Miles' appointment in 1991.

Messrs. Murray and Bible were on a whistle-stop tour of Philip Morris operations last week, visiting divisions nationwide to reassure nervous and demoralized employees.

They also spent 2 hours in an analyst meeting.

Analysts suggested the sudden resignation of Mr. Miles, a former Leo Burnett Co., KFC Corp. and Kraft executive, reflected the board's disagreement with his plan to spin off food operations.

But insiders say the shy, aloof Mr. Miles, a non-smoker, never was comfortable defending the industry to the investment community.

They also say he realized that, despite the food business' growth as a percentage of sales, Philip Morris wasn't ready to be run by a food executive.

Analysts who attended the meeting said Philip Morris' new team believes a strong defense will not only aid the company's public perception but also help convince Wall Street of the intrinsic value of the tobacco unit.

Mr. Miles "acted like he was CEO of Quaker or P&G," said Gary Black, an analyst with Sanford C. Bernstein & Co., New York "He was focused on classic brand marketing and he never understood that tobacco is different than cheese. He didn't act as a leader."

Mr. Miles turned down interview requests last week.

Mr. Black said Philip Morris' stock price and morale suffered as Mr. Miles failed to face up to the non-marketing challenges of a tobacco company: the fights to fend off critics and convince investors continued profits are viable.

Most disappointing might be the performance of KGF. It never materialized as the food industry leader envisioned six years ago when Philip Morris bought Kraft and merged it with General Foods.

"KGF is adrift," said Timothy Ramey, food analyst with C.J. Lawrence Inc., New York. "There are just not a lot of product successes to talk about."

Jay Nelson, an analyst at Brown Brothers Harriman & Co., cited Mr. Miles' "style factor."

"Given the intense anti-smoking heat, Philip Morris needed a little more of a cheerleader for the tobacco side," he said.

Mr. Bible, a personable chief executive who puffed a cigarette as he met with reporters, is expected to be more aggressive in his public statements.

Although Philip Morris sued ABC-TV in a $10 billion libel suit, challenged the EPA's stance on the dangers of secondhand smoke and has taken on a California ballot proposal to standardize anti-smoking regulation, R.J. Reynolds Tobacco Co. and Brown & Williamson Tobacco Co. have taken the lead in responding to critics through ads.

Mr. Murray also indicated the company's continuing commitment to cigarette price cuts instituted last year.

As chairman, Mr. Miles approved the cuts; the results, while depressing earnings, reinvigorated Marlboro beyond the company's wildest hopes. Nosediving toward a 20% share before the price cuts, Marlboro now is approaching 28% and growing.

Messrs. Bible and Murray, both natives of Australia, have long experience in the tobacco industry, but also have worked with KGF.

Before his recent elevation to vice chairman-worldwide tobacco, Mr. Bible had been exec VP-worldwide tobacco since April 1993, and was exec VP-international for Philip Morris from 1991 to 1993.

He was president-chief operating officer of Kraft General Foods from 1990 to 1991, and president of PM International (the tobacco unit) from 1987 to 1990.

Mr. Murray had been president-chief operating officer before his recent appointment as vice chairman-worldwide food.

In this article: