Altria Group (Philip Morris Cos.)

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Until 2003, the Altria Group was known as Philip Morris Cos. The company traces its roots to a small London tobacconist who opened his first shop in the mid-19th century. In the wake of the Crimean War (1854-56), Mr. Morris noted the prevalence of cigarette use among British soldiers, who had developed in the field a taste for the cigarettes rolled by their Turkish allies. Those English soldiers made cigarettes a vogue in English smoking circles.

In 1870, Mr. Morris opened a fashionable shop in Bond Street that catered to diplomats and members of Parliament. In 1896, Philip Morris Co. (by then under the management of Mr. Morris' widow and brother) even received a warrant of appointment as tobacconist to the Prince of Wales, a devotee of cigarettes.

The Morris family lost control of the company in 1894, but the Philip Morris name was retained and also adopted by an American company. In 1919, after several ownership changes, U.K. tabacconist George Whelan acquired the U.S.-based Philip Morris Co., incorporating it into his Tobacco Products Corp. conglomerate under the rubric Philip Morris & Co. Ltd. The company's cigarettes�including Cambridge (commonly called Philip Morris), Players, Oxford Blues and English Ovals�were presented as premium products.

The luxury smoke

Philip Morris' high-priced brands did not capture much of the American market, however. During the first decade of the 20th century, the "Big Four" in the tobacco industry included American Tobacco Co. (Lucky Strike), R.J. Reynolds Tobacco Co. (Camel), Liggett & Myers (Chesterfield) and P. Lorillard Co. (Old Gold). (Brown & Williamson, which marketed Kool and Raleigh, overtook L&M for the No. 3 position in the 1960s.)

In 1924, Reuben Ellis, a former tobacco salesman, was named president of Philip Morris & Co. The next year, he created Marlboro, a new brand targeted at women and an audacious move for the small tobacco marketer. Women represented between 10% and 15% of the cigarette market in 1925, and organized, vocal critics of women's "cigarette habit" persisted.

National advertising for Marlboro, created by Picard, Bradner & Brown, New York, appeared in tony publications such as Bon Ton and Vogue in 1926. As with its other brands, Philip Morris positioned and priced Marlboro as a luxury product, and early ads showed an obviously female hand holding a cigarette. Copy described Marlboro as "Mild as May," but Marlboro failed to capture the female market.

The people's cigarette

During the Great Depression, Philip Morris found itself in trouble. Marlboro's premium price of 20� per package was too steep for the average consumer; likewise, the eponymous Philip Morris brand�an import from Great Britain made solely of Turkish tobacco�at 25� was priced above the mainstream market.

In January 1933, Mr. Ellis reformulated and renamed Philip Morris cigarettes as Philip Morris English Blend, pricing it at 15� a pack, and signed the Biow Co. to handle the new brand. It was Philip Morris' first entry into the 15� sector, where 90% of the cigarette market lay.

Biow's efforts by 1938 helped propel Philip Morris English Blend to the No. 4 position, behind Lucky Strike, Camel and Chesterfield; Philip Morris was now a real contender in the marketplace, a concern for the top cigarette marketers. At the heart of Biow's campaign was the diminutive bellhop Johnny Roventini singing out "Call for Philip Morris" on the company's weekly radio programs and in other advertising.

Philip Morris�the brand and the company�made tremendous gains in the early 1940s: Sales overall were up 33% by 1941, almost another 25% by 1942 and still another quarter by 1943. Philip Morris' advertising budget also increased dramatically, with a considerable proportion going into radio.

By 1954, Philip Morris was in decline. American Tobacco's Pall Mall edged the Philip Morris brand out of fourth place, and even within the company it was acknowledged that the flagship brand was stale and dreary. Compounding the problem was rising public anxiety about smoking.

Early in the 1950s, scientific studies asserting the dangers of cigarette smoking began to be taken seriously. One, by physicians Ernst Wynder and Evarts Graham of the Sloan Kettering Institute, published in the December 1953 issue of Cancer Research, made the front pages of the nation's newspapers as it suggested a direct link between smoking and cancer.

Within weeks of the article's appearance, the chief executives of the leading cigarette marketers, including Oliver McComas of Philip Morris, met to discuss the best means of dealing with a potential crisis of public faith. Their response was two-pronged. They set up the Tobacco Industry Research Committee, jointly funded by 14 tobacco marketers and associated groups of growers and warehouse operators, to address health concerns.

At the same time, the tobacco executives agreed to launch a PR offensive that openly questioned the validity of the charges leveled against their products, claiming the evidence was inconclusive and, allegedly, tainted by the researchers' determination to attract publicity and money for their laboratories.

The smoking public, however, was concerned, and per capita cigarette consumption in the early 1950s declined 10%. In response, the industry began to more aggressively market filtered brands, which were touted as safer, milder, smarter smokes, even as it denied any danger associated with its nonfiltered products. In 1954, Philip Morris moved to revive its bottom line by joining the filter wars.

After an 18-month survey, Philip Morris determined that 61% of the (mostly male) 10,000 respondents had tried and abandoned filtered cigarettes, deeming the flavor inferior or the image weak. The study also showed that Marlboro had considerable positive name recognition and that, although it was attached to a "women's cigarette," the Marlboro name had a masculine ring. As a result, Philip Morris decided to effect a sex change on the brand while creating a filter cigarette that delivered all the flavor of unfiltered cigarettes. Chicago-based Leo Burnett Co. handled the Marlboro makeover.

"The Marlboro Man"

Marlboro's tobacco blend was reworked to produce a strong, flavorful smoking experience and packaging�a bold red-and-white graphic design on a unique, crush-proof, flip-top box�was entirely new and distinct from any rival brand's. The slogan "Filter, flavor, flip-top box" summed up the qualities of the "new" Marlboro.

More important in the Marlboro marketing scheme however, was the regendering of the product. Whereas before Marlboro's personality had been elitist and feminine, it was recast as down-to-earth and ruggedly masculine. The image pegged to the new brand was the now-iconic "Marlboro Man"; the tagline was "You get a lot to like."

Philip Morris needed this effort to pay off. The company had purchased Benson & Hedges early in 1954 for $22.4 million, but the investment had yet to pay off. Indeed B&H's Parliament cigarette, the pioneer of the filter market, had lost 10% in sales since the purchase, and Philip Morris slipped to No. 5 in the industry.

Advertising for Marlboro was pervasive in newspapers and on billboards premiums, radio and TV. The rugged Marlboro Man (at first portrayed in a range of roles�gardener, construction worker, pilot and outdoorsman) appealed to both sexes, young and old. And in 1956, Marlboro became the first national sponsor of National Football League telecasts, linking cigarette smoking with sports, vigor and masculinity.

RJR's Winston filter was the runaway best-seller among filters, but by 1957�after just two full years on the market�Marlboro was closing in on runners-up Viceroy and L&M. In 1960, with Marlboro struggling to oust Winston, Burnett launched the highly successful "Marlboro Country" campaign.

But in 1964, Marlboro as well as other cigarettes ran up against a report from the U.S. Surgeon General that specifically linked cigarette smoking with disease-especially lung cancer. In the months following the Surgeon General's report, the Federal Trade Commission moved to restrict cigarette advertising and mandated strong health warnings on packaging.

The industry united behind the front of the Tobacco Institute to lobby Congress to prevent FTC regulation. The mission of the Tobacco Institute, opened in Washington in 1958 with money from "big tobacco," was to represent the interests of the tobacco companies, growers, wholesalers and advertisers and remind lawmakers and the general public of the contributions made by tobacco to America's economic well-being and individual Americans' pleasure and mental health.

The institute persuaded Congress to circumvent the FTC, and in 1965, the Cigarette Labeling & Advertising Act required mild health warnings on packaging but blocked state and local action against the industry, while preventing the FTC and other federal agencies from taking action to regulate tobacco advertising.

Success despite regulation

In 1969, however, the FCC responded with a novel interpretation of the "Fairness Doctrine," mandating that broadcasters provide equal airtime for antismoking forces. (The Fairness Doctrine required broadcasters, as a condition of receiving an FTC license, to provide balanced coverage of controversial issues.)

Tobacco companies were nervous and so were broadcasters, which began to contemplate a plan to gradually phase out all kinds of tobacco advertising. To avoid further regulation, the tobacco marketers agreed to withdraw voluntarily from radio and TV advertising by January 1971, and the industry shifted its multimillion-dollar advertising spending away from the broadcast media (which had accounted for 80% of the industry's ad spending in 1970) to print media and outdoor advertising.

From the 1960s to the 1980s, in the face of charges that cigarettes were deadly, Philip Morris nonetheless managed to win over both new and old smokers. In the process, the company won the reputation of being one of the smartest-run and most sophisticated marketers in the U.S.

In 1967, Philip Morris again turned to the female market with the introduction of Virginia Slims. Virginia Slims and other "feminine" cigarettes, while never more than niche brands, boasted creative, influential advertising. For Virginia Slims, Burnett crafted a humorous campaign with a congratulatory tagline�"You've come a long way, baby"�that capitalized on the women's movement and emphasized liberation and independence.

Philip Morris then turned to the growing low-tar, low-nicotine cigarette segment represented by contenders such as RJR's Vantage and Lorillard's True. The Merit brand debuted at the end of 1975, with an unprecedented $40 million ad budget for the brand's first year. By 1977, Merit had captured 2.4% of the domestic market; in 1979, the brand accounted for one out of every five cigarettes sold by Philip Morris.

In its Merit campaign, Burnett portrayed Philip Morris as the vendor of a sensible, healthful product. More commonly, however, the company positioned its products as part of a youthful, "cool" and vibrant lifestyle.

Sports sponsorships, first undertaken in the 1950s, continued to keep Philip Morris on TV even after the tobacco industry's self-imposed ban on broadcast advertising was put in place in 1971. Philip Morris underwrote NASCAR racing in the U.S., Lemans racing in Europe and, best known of all, the Virginia Slims Tennis Tournament�all of which elevated public awareness of the company throughout the 1980s.

Erosion of public image

By the end of the 1980s, Philip Morris led the cigarette market, having finally pulled ahead of RJR on the strength of its Marlboro brand. In the 1990s, however, Philip Morris, like the rest of the tobacco industry, watched its public image erode before a wave of litigation, investigation and regulation.

In the 1990s, loopholes that had permitted tobacco companies to get their names on-screen were closed. The Virginia Slims Tournament was one of the first casualties when the Women's Tennis Association dissolved its relationship with Philip Morris. By 1995, the Justice Department was involved in negotiations with Philip Morris to remove signs from football stadiums, baseball parks and basketball and hockey arenas.

In 1998, the settlement reached between the tobacco industry and states' attorneys general further limited the means by which Philip Morris could market its products. Marlboro caps, jackets, towels and duffel bags that had been available as premiums-and allegedly appealed to youthful smokers-were discontinued. Moreover, the settlement mandated that Philip Morris, along with its competitors, contribute to a fund to be used for antismoking education and advertising.

The company began to diversify its holdings in the late 1960s and, over the years, acquired Miller Brewing (1969), Seven-Up (1978, sold in 1986) and Kraft Foods (1988). In 1999, Philip Morris purchased the Chesterfield, L&M and Lark cigarette brands from the Liggett Group (formerly Liggett & Myers).

In the late 1990s, still seeking to enhance its public image, Philip Morris once again turned to Burnett and toward the end of 1999 launched a $100 million multimedia corporate campaign promoting Philip Morris as a concerned corporate citizen. It also changed its name in January 2003 to the Altria Group.

In 2003, the company was No. 18 on Advertising Age's ranking of leading U.S. advertisers with ad spending of $1.3 billion, up 8.7% from 2002 spending.

In mid-2004, the company put both its corporate responsibility and youth-smoking prevention accounts up for review. Most of the tobacco company's traditional ad spending now goes into corporate responsibility. According to the FTC, Philip Morris has paid more than $18.5 billion to states as part of the master settlement with the states� attorneys general; contributed more than $780 million to American Legacy Foundation, which runs the hard-hitting "Truth" anti-tobacco company campaigns; and has spent more than $500 million on youth-smoking prevention.

Evidence of the spending shift can be seen in the biggest-selling cigarette in the U.S., Marlboro. The company spent $32 million in measured media on Marlboro in 2001, according to TNS Media Intelligence/CMR. That dropped to less than $2 million in 2002 and virtually nothing in 2003.

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