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Marlboro (US)

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Marlboro is far and away the world's best-known and biggest-selling cigarette, with a huge global presence and total sales still well in excess of $20bn. Ownership is split primarily between what are now two entirely separate companies: Philip Morris USA and Philip Morris International. Ironically, as the tobacco industry comes under ever more intense regulatory pressure, Marlboro is still going from strength to strength at least in terms of market share. In its home territory, more than four out of every ten cigarettes smoked is a Marlboro, the brand's highest-ever level of market share. That dominance is mirrored to a lesser extent in just about every other territory the brand is marketed, as other cigarettes see brand share erode in favour of Big Red. The reason? Arguably it remains the legacy of Leo Burnett's Marlboro Man and the abiding power of marketing, even in an industry where advertising itself is now virtually forbidden.

Brand Value

Kantar's Brandz ranking still places Marlboro among the world's ten most valuable brands, worth an estimated $80.3bn in 2015.

Advertising

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Competitors

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Analysis

Marlboro is the world's best-selling tobacco brand by a wide margin, with an extensive global footprint. Ownership is split between two separate companies: Altria's Philip Morris in the United States and Philip Morris International (PMI) - now an entirely independent company - in all other markets. Somehow the brand has retained a uniquely distinct marketing message, even though worldwide tobacco regulation makes that message virtually impossible to convey. As the world #1, Marlboro is also a principal target for litigation over tobacco-related deaths, especially in the US, but increasingly in other markets as well. Other threats including ongoing pricing pressures from discount cigarette brands, and the general decline in popularity of smoking in developed markets. Yet there are numerous new markets to explore, not least China, as well as Indonesia, where PMI has established a significant presence.

The continued growth of Marlboro is quite a feat for a mature brand in a controversial industry which faces a partial if not total advertising ban in virtually every market in which it is sold. The secret perhaps is that as long as smokers keep smoking, Marlboro keeps growing. With the exception of Camel it is virtually impossible to name any other cigarette which has any form of defined brand image. Yet the Marlboro Man marketing concept, combined with the brand's stark red-and-white packaging, has retained its power for almost 50 years. In early 2001, Philip Morris's German subsidiary introduced another twist, a series of cinema commercials featuring the Marlboro cowgirl, to reflect the fact that around half of Marlboro smokers are women. In a sector where brands face serious restrictions on developing a brand image, the tried and tested brand values of Marlboro are apparently hard for smokers to resist. For many years, there was even a successful range of Marlboro Classics apparel produced under license in Italy by Valentino Fashion Group. Marketing restrictions eventually forced the company to adopt a new name of MCS.

In 2014, the Marlboro family held a record 43.8% share of the total US retail cigarette market. Volumes were 108bn cigarettes, down by 3% on the previous year. While Marlboro's share of the declining US market has remained firm, there is increasing evidence that it is losing popularity among younger smokers. For example, share of the US 18-to-25 market had fallen according to Morgan Stanley figures from 57% in 1999 to around 48% in 2009. In addition to Marlboro regular, the portfolio until recently also housed Marlboro Light and Marlboro Ultra Light, as well as Marlboro Menthol and Marlboro Menthol Lights, Marlboro Milds, rolled out in 2000, and Marlboro Blend No 27, introduced in 2003. In 2006, however, a US court ruled that all tobacco companies must cease to use descriptive terms such as Light, Mild or Low Tar which imply a lower health risk. As a result, those tags were dropped and the brands are now differentiated solely by pack colour. In the US, these are red, gold, green and black. The group is no longer allowed to differentiate between regular cigarettes and what used to be called "light" brands, so the four colours are primarily separated by lifestyle approach, with Gold (formerly Marlboro Light) standing for flavour, Green (the old Marlboro Menthol) for nightlife and new launch Black for mystery and adventure. Black is the variant which has enjoyed the greatest success in recent years, appearing to find a new market among younger smokers who regard Red in particular as old-fashioned, and Gold and Green as "uncool". As an added benefit, it is priced around 20% below Red. All marketing is now restricted to direct email and traditional mail, and enhanced with sweepstakes, competitions and similar one-to-one initiatives.

For several years, the main threat in Marlboro's home market has come from cut-price brands, which offer poorer quality but at significantly lower prices. During the first half of 2002, Marlboro's US share slipped worryingly, with the result that the company fought back with its own price cuts in a lavish $600m promotional burst. This resulted in a steady growth in share until 2008, albeit of a dwindling overall market. An increase in excise tax on cigarettes in 2008/09 led to a slight dip in market share for the latter year. The brand is also a prime target for smuggling and counterfeiting in all of its global markets.

Description restrictions are also in force in international markets where the brand is controlled by PMI. As a result the international architecture for Marlboro has also been overhauled, and there are now three main families of Flavour, Gold and Fresh. Additional sub-brands have also been introduced in specific markets, such as Marlboro Advance in Malaysia, with a recessed filter; Marlboro W-Burst in Japan, which has cooling capsules built into the filter; and clove and menthol enhanced Marlboro Kretek in Mexico. Outside the US too, Marlboro has continued to grow its share in most of its most valuable territories, even in the declining Western European market. The brand claimed an overall international share (excluding the US and duty-free) of 5.7%. Total volumes outside the US were 301.6bn units in 2012, accounting for around a third of Philip Morris International's total unit sales, and more than twice the volumes of the next two brands combined. In 2005, the group regained rights to manufacture and market Marlboro in Japan. (Previously the brand was marketed under license by Japan Tobacco). It is the leading imported brand, but sales are small by comparison with local giant Mild Seven. In the UK, Marlboro is sold under license by Imperial Tobacco, and in China it is produced by China National Tobacco Company under a license agreed in 2005.

New products launched internationally in 2007, included Marlboro Mix 9, a high-nicotine, high-tar cigarette infused with cloves, in Indonesia, as well as various mentholated products in Asia under the Marlboro Ice Mint, Marlboro Fresh Mint and Marlboro Crisp Mint brands. These are expected to roll out to other countries. Selected international markets will see the introduction of another new sub-brand in 2008. Marlboro Intense is designed for countries where a smoking ban prevents smokers from lighting up indoors. Shorter than normal Marlboros, the new product allows users to finish a cigarette in six or seven more intense puffs rather than the usual eight or nine. Other derivatives under consideration include extra-thick Marlboro Wides, and a hand-held electronic device, the Heatbar, which emits less smoke than a normal cigarette.

Brand History: Strangely enough, this quintessential "man's cigarette" was originally introduced as a women's brand. In 1924, the British tobacco merchant Philip Morris had only recently established offices in New York, and was trying to establish a niche for itself in an industry dominated by the country's four main manufacturers: American Tobacco, RJ Reynolds, Ligget & Meyers and Lorillard. Seeing an opportunity to develop a brand exclusively for female smokers not otherwise directly targeted by the existing companies, it launched its first new brand in the US under the advertising slogan "Mild as May", targeting a market of "decent, respectable" women. The cigarette's name was derived from one of its existing British trademarks, named after the military hero the Duke of Marlborough, but adapted for American pronunciation as Marlboro. The cigarette was unusual for the time in that it was filtered, when most cigarettes were not. Later, during the 1930s, the paper on the tip was even changed from white to red in order to hide unsightly lipstick stains. Yet Marlboro never really took off in an environment dominated by the three main brands of Lucky Strike, Chesterfields and Camel, which between them accounted for as much as 80% of all sales by mid-decade.

Little changed over the next 30 years. By 1954, Marlboro's market share was reportedly less than 1%, and Philip Morris, still only the #6 tobacco company in the US, considered ditching the brand altogether. The company gave little-known Chicago agency Leo Burnett one last chance to save the product. Encouraged by the sudden emergence of a distinct men's market in the early 1950s (Playboy magazine had launched the previous year with considerable success), Burnett advised Philip Morris to abandon the brand's previous image altogether, and repackage Marlboro as a rugged man's smoke. The debut campaign featured the "Tattooed Man", a lean outdoorsman whose tattooed wrist - all that was shown of him in the ads - suggested an adventurous, manly lifestyle. The "smooth-drawing" filter was presented as a device which allowed the "man-sized taste of honest tobacco" to "come full through", and much was made of the "modern" flip-top box which "keeps every cigarette firm and fresh until you smoke it". Introduced in New York in 1955, the new Marlboro became the top-selling filtered cigarette almost literally overnight. The brand was rolled out nationally later that year, and sales soared by more than 3,200%, jumping from $160m in 1954 to $5bn within a single year.

By 1957, the year in which the first article appeared linking lung cancer to smoking, sales of Marlboro had topped $20bn. The Tattooed Man had by now been replaced by a cowboy figure, described by Burnett as "the most generally accepted symbol of masculinity in America". In 1964 the agency created a whole alternative Marlboro County for their Marlboro Man to inhabit, depicting their brand mascot in a variety of iconic American landscapes. That year Marlboro overtook Winston as the top US brand. At the same time, Marlboro sponsored pro-football sports events on television, as well as the western series Rawhide. By the 1970s, the brand image of the Marlboro Man was firmly established in the public imagination. In 1972, the year tobacco advertising on television was banned, Marlboro had become the world's #1 cigarette brand, and continued to build its lead over Winston with a series of striking and evocative print ads.

Marlboro's apparently unstoppable growth experienced a serious interruptions over the next decade. When tobacco companies began to face growing restrictions on advertising through traditional channels, Philip Morris led the way in developing new forms of promotional activity, first in sports, sponsoring car racing in the US and then Europe, and subsequently through what would later be called "product placement" in movies. In 1980, the company paid a reputed $42,000 to have its logo featured no less than 22 times in the blockbuster Superman II. Promotional activity was increasingly important in an industry coming under pressure not just from external health concerns but also low-cost competitors. By the 1980s Philip Morris and the other big tobacco companies had developed a habit of increasing prices every two years, confident that consumers would be prepared to pay the higher price to satisfy their need for tobacco. In 1980, Liggett, by then the smallest of the US manufacturers, introduced a range of no-brand "discount" or "generic" cigarettes that substantially undercut the leading brands. Initially there was no market for these brands, but as economic recession began to cut into consumer shopping, and a 1983 excise tax ramped up the price of all brands, the discount cigarettes' share of the market began to grow steadily. More seriously for Big Tobacco, once consumers had developed the taste for low-price cigarettes, they didn't change back when the economy improved. By 1993, discount tobacco accounted for more than 30% of the market, while Marlboro's own share of shipment volume had slipped to just over 21%.

Philip Morris took a huge gamble, launching a massive $200m promotion, but most seriously of all taking the unprecedented step of cutting the price of a pack of Marlboro by up to 20%. The financial markets reacted with mild panic, believing that Philip Morris's price cut signified a triumph for unbranded goods over traditional brands. They marked down PM's share price by more than 20%, as well as that of other branded consumer goods manufacturers. Yet the panic of what became known as "Marlboro Friday" was soon shown to be unwarranted. By the end of the year, Marlboro's share had climbed back to almost 27%, and has continued to grow steadily ever since.

Yet concerns over health risk did continue to gnaw at sales of the main Marlboro brand. During the 1980s and 1990s, a series of spin-off brands were launched in the US, and some of these have been extended to other markets. Faced with increasing restrictions on advertising, the group announced in early 2000 plans to roll out its Marlboro brand into non-tobacco-related sectors. One plan under consideration was to buy a chain of top-class international hotels that would be rebranded under the Marlboro name. Other plans were said to include cable TV or mobile phone services. None of these strategies has yet been put into practice.

Last full revision 12th December 2015

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