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US: Philip Morris sells cigarettes, but can it sell integrity, too?

by Bruce MohlBoston Globe
December 18th, 2005

Philip Morris says it is trying to be a ''responsible" tobacco company, but is that an oxymoron?

The tobacco giant reported an operating profit of $4.4 billion last year selling a product that company officials acknowledge is addictive and causes lung cancer, heart disease, and emphysema. The company controls more than half of the US market and together with Philip Morris International sold more than 948 billion cigarettes last year.

Yet Philip Morris defines responsibility as spending millions of dollars on campaigns to help people quit smoking, to prevent young people from starting, and to develop a less-harmful cigarette. It also supports legislation that would give the Food and Drug Administration regulatory authority over tobacco products.

''We're the market leader. We're trying to bring the market along and return respect to the industry," said David M. Sylvia, director of communications for Philip Morris, in an interview in Boston.

It's a tough sell. This is, after all, an industry not known for being upfront with consumers. Back in 1994, sitting on internal studies showing the dangers of smoking, seven tobacco executives went before Congress and testified that their products were not addictive. They also insisted that studies showing links to lung cancer, heart disease, and other respiratory problems were inconclusive.

Sylvia, in Boston to talk about the company's ethical philosophy, said the bunker mentality that used to pervade Philip Morris has been scrapped in favor of a willingness to deal head-on with the problems the company's product causes.

''A lot of people say that if you want to be responsible, get out of the market, stop selling cigarettes," Sylvia said. ''We think that would be irresponsible. We don't think it would solve a single problem if we stopped selling cigarettes. The void would just be filled by someone else."

In fact, the company is trying to expand its cigarette business, not contract it. Even as cigarette consumption declines slightly, Philip Morris has increased its market share in the United States to just over 50 percent. Its Marlboro brand accounts for 40 percent of all US cigarette sales.

Internationally, Philip Morris is busy building and buying cigarette manufacturing plants around the globe. Cigarette shipments abroad increased 9 percent in the third quarter.

Sylvia also says Philip Morris opposes higher cigarette excise taxes, even though antismoking advocates say the higher taxes tend to curb smoking and raise revenue that can be used to deal with the fallout from smoking. Sylvia said raising cigarette excise taxes unfairly penalizes smokers and leads to smuggling of cigarettes across state borders.

Philip Morris's responsibility campaign is focused in three areas. The company spends about $100 million a year trying to curb youth smoking, both at point of sale and with literature targeted primarily at parents. Philip Morris is also running ads on national television promoting its ''Quit Assist" program.

Even though its own ads say ''there is no safe cigarette," Philip Morris is also spending $300 million to build a research center in Richmond, Va., to develop a safer cigarette.

The company's brochures and handouts were prepared with the help of outside advisers, , several of them at the Harvard Medical School. The brochures are straightforward, pointing out, for example, that more people die from tobacco-related illnesses than from alcohol, car accidents, AIDS, firearms, and illegal drugs combined.

What's unusual about the handouts is their sponsor, a tobacco company, and their look. The brochures feature quotes from real people but use pictures of attractive models. There's no disturbing picture of a diseased lung or a person tethered to an oxygen tank.

Cheryl K. Olson, a public health researcher at the Harvard Medical School who, independent of the school, helped write and design several of the Philip Morris publications, said she encouraged the company to use pictures of the actual people being quoted. But she also said research has shown that scare tactics don't make people change their behavior.

Olson said she and other health researchers were used by Philip Morris because the company realized it had ''less than zero credibility." Despite being skeptical, Olson said she decided to work with Philip Morris because the company kept its hands off her work and had the resources to get the message out.

Asked why Philip Morris was doing it, she said: ''It's very important for them to be seen as a good corporate citizen, to be able to say, 'We've stopped lying.' "

Richard Daynard, associate dean for academic affairs at the Northeastern University Law School and chairman of the Tobacco Products Liability Project, said Philip Morris's responsibility campaign is part of an overall business strategy by its corporate parent, Altria Group Inc.

Daynard said Altria's stock price is discounted because of regulatory risks and ongoing litigation involving its tobacco subsidiary. He said the responsibility campaign allows Philip Morris to acknowledge past mistakes and suggest to adults and potential jurors that it is time to move on.

Late last week, Philip Morris scored a major victory when the Illinois Supreme Court threw out a $10.1 billion judgment against the company. The class-action lawsuit had alleged Phillip Morris fraudulently suggested low-tar cigarettes were less hazardous than other cigarettes.

Daynard also said Philip Morris's efforts to prevent youth smoking may actually have the opposite effect. A famous internal Philip Morris memo dating to the early 1990s suggested that portraying smoking as risky, adult behavior and making it difficult for minors to obtain cigarettes actually enhances their appeal among young people.

''Nothing has changed morally on their part," Daynard said of Philip Morris. ''Circumstances have changed, so their tactics have changed."





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