KG ConsultantsPhilip Morris CaseFuturist Analysis

April 14, 2006

Glenn Kouri _Katie Lehane_ Kate Saul _Kim Truba_ Greg Williams

History

• Philip Morris– Cigar importer– First tobacco shop opened in London (1847)

• Over the next 50 years….– The becoming of Philip Morris & Co,. Ltd

History

• Joseph F. Cullman and the Marlboro brand– From last to first in the industry

• Profitable Acquisitions – Miller Brewing Company, Kraft General Foods, Kraft

International Foods, and General Foods International

• Global Expansion– Philip Morris International

Competition

• Reynolds• Brown & Williamson• Lorillard

– Camel, Winston, Salem, Doral, Newport, and Kool

So how does Philip Morris differentiate itself from its

competitors?

Tobacco Agreement

• The Master Settlement Agreement (MSA)

-Philip Morris

-state attorney generals in 46 states

-4 states

-other tobacco suppliers

Limitations

• Forbids and restrictions -participation in targeting youth -advertising, marketing, promoting programs and

activities-cartoons-transit vehicles-outdoor advertising

Targeting the Youth

• state attorney generals• responsibility in promoting to “adult-smokers”

-21 years of age with proper ID

-$600 million

Marketing in the media

• use of cartoons• billboards, signs, arcade games• advertising on public transportation• products in television shows and movies• selling of merchandise

Changes in Marketing

• magazine covers• cut advertising by almost 100%• direct mail

- verify age

- information regarding products and merchandise

Subsidiaries: Cigarettes• Leading manufacturer of cigarettes in the U.S.• Owns $70 billion dollars of cigarette industry• Cigarette Companies run by Philip Morris Ind.

– Marlboro– Virginia Slims– Benson & Hedges– Merit– Parliament

Beer Industry

Brands under Miller Brewing Company:• Miller Lite• Miller High Life• Milwaukee’s Best• Lowenbrau• Sharps

Food IndustryFoods sold under Kraft general foods, Kraft

International & General Foods International• Kraft Cheeses• Maxwell house coffee• Louis Rich turkey• Oscar Mayor lunch meats, hot dogs, bacon

Food Industry Cont.More food brands:•Louis Kemp seafood Products•Post cereal•Jell-O•Kool-Aid•Sealtest dairy•Breyers Dairy

Financial ServicesNamed Philip Morris Capital Corporation

•Offers services for major equipment leasing programs for customers and suppliers

To remain successful the CEO decided to set goals for new products such as meeting consumer trends, expanding

geographically and manufacturing globally.

How has the company developed?

Direction of Philip Morris

• Introduction of website in 1999

• Surgeon’s General Warning

Strategic Developments• Company mission and goal• Success measurements

– Align with society– Exceed consumer expectations– Create long term value

• Altria Group became parent company in 2003– philosophy

Legal Issues

• 2003 lawsuit of Philip Morris defrauding “Light” smokers

• 2005 decision due to the Federal Trade Commission

Financials

• 4th Quarter Market Share of 2005 was 50%• Altria’s stock price as of April 10,2006 was 70.04• Quarterly dividend of .80 per common share• 2005 Earnings from continuing operations went

up 15%

What steps should be taken in the future?

Recommendations

• In the past Philip Morris has primarily focused on tobacco industry

• Integrate more business from other markets -Promote other markets

• Restore company’s image and continue cigarette awareness ads

Questions?