From Philip Morris to Altria

Abstract

Philip Morris (PM) is the largest cigarette manufacturing company in the world, controlling half the market share in the US. Over the years, it has faced various challenges: anti-smoking campaigns, legal battles and price wars. The company has responded to these challenges by expanding overseas operations and diversifying into the food business through the acquisition of Kraft and General Foods. In 2003, PM changed the group name from Philip Morris to Altria. Simultaneously, Louis Camilleri became the new chairman. The case closes with the question as to what strategy Camilleri should follow to take Altria to further heights.

The new name reflected the company's evolution into a substantially larger, more diverse enterprise than we were originally.

Geoffrey C. Bible, outgoing chairman and chief executive

Adopting a new name for our parent company is a natural next step in the evolution of this enterprise, and I consider it a privilege to guide our family of companies through this journey.

Louis Camilleri, Chairman & CEO

Effective January 27, 2003, Philip Morris (PM), the world's largest and most profitable tobacco seller, had changed its corporate name to The Altria Group, Inc. Altria became the name of the parent company of leading FMCG companies, Kraft Foods, Philip Morris USA, Philip Morris International and Philip Morris Capital Corporation.

The management believed that the new name would help the company to insulate its non-tobacco divisions from the social, legal and competitive pressures that tobacco business faced. Louis Camilleri, the new chairman, reflected on the possibilities ahead for the company as it embarked on a plan to improve its corporate image.

PM was the world's largest manufacturer of packaged consumer goods. In 2002, PM recorded a sales turnover of $80,408 million, net earnings of $11,102 million and employed 166,000 people. PM generated more than half of its sales and profits from tobacco. (See Exhibit II, III)

PM USA, which conducted business under the trade name Philip Morris USA, was engaged in the manufacture and sale of cigarettes. PMI was a holding company whose subsidiaries and affiliates and their licensees were engaged primarily in the manufacture and sale of tobacco products (mainly cigarettes) internationally. PM had grown over the years on the strength of its remarkable array of powerful premium brands. The world famous brands of the tobacco division included Marlboro, Benson & Hedges, Virginia Slims and L&M.

Despite its strong financial and market performance, the company struggled to maintain a satisfactory corporate image. In the 1990s, it faced challenges on a number of fronts: law suits, anti-smoking campaigns, and controls and competition and price wars. PM and other tobacco companies began to face hostile reactions from the public as well as the government. Anti smoking groups began to campaign for imposition of restrictions on tobacco manufacturing, advertising and sales.

In January 2003, PM officially changed its name to Altria Group, Inc., stating that the change was to clarify the relationships between the parent corporation and the operating companies; to hide the "taint" of tobacco and to revamp its corporate image.

 

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        Case Code   BSTA077
   Case Length    18 Pages
              Period    2003
 Organization     Philip Morris
        Pub Date     2004
Teaching Note    Not Available
     Countries    USA
      Industry    Tobacco

Issues

Philip Morris; Altria; Cigarettes; Tobacco; Smoking; Environmental Protection Agency; Marlboro; Fast moving consumer goods; Kraft Foods; Louis Camilleri; Millers Brewing Company; Food and Drug Administration; PM International; Smokers; Strategy