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.

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Early History

PM opened its London tobacco store in 1847 and by 1854 started making its own cigarettes. A new firm owned by American shareholders acquired the US Philip Morris Company and incorporated it in Virginia under the name Philip Morris & Co. Ltd.

The early acquisitions were small packaging companies whose products were used in cigarette manufacturing. During the early 1960s, the company diversified into consumer products with the purchase of companies such as American Safety Razor, Clark Chewing Gum, Miller Brewing Company and 7-Up. Some of them did not meet PM's expectations and were subsequently divested, often at substantial gains over the original acquisition prices. Under Joseph Cullman, who became the CEO in 1957, PM's growth rate increased.

Hamish Maxwell replaced Cullman as CEO in 1985. Soon after becoming the CEO, Maxwell purchased General Foods Corporation for $5.6 billion in 1985. In 1988, he purchased Kraft Foods and merged the companies into a $23 billion food-processing company, then the second largest in the world. In 1989 and 1990, PM acquired Jacobs Suchard, the second largest European chocolatier and six smaller food companies that complemented the Kraft General Foods product line. Under Maxwell, PM's revenues grew from $16.3 billion in 1985 to $44.8 billion in 1989 making it the 7th largest company in the world. In 1990, tobacco accounted for 40 percent of sales, beer, 8 percent and food, 51 percent.

In March 1991, Michael Miles was appointed Chairman and CEO. Miles who spearheaded the merger of Kraft General Foods had joined the company only two years earlier. In 1993, PM sold Bird's Eye frozen foods and bought RJR Nabisco's North American cold cereal operation, a 20 percent interest in Molson Breweries (No.1 in Canada) and 100 percent of Molson's US breweries. ......

        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