Philip Morris USA

Philip Morris USA advertising & marketing assignments

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Philip Morris USA is America's dominant tobacco company, and the biggest business within what is now investment umbrella Altria, previously the diversified congflomerate Philip Morris Companies. PM USA experienced severe erosion of its sales in the early 2000s following a flood of discounted "no name" cigarette brands from rival manufacturers, but it had recovered most of that lost ground by the end of the decade, and since then PM USA's market share has remained stable at around 49% or 50%, even as the market itself has been steadily shrinking. Lead brand Marlboro still alone accounts for at least four out of every ten cigarettes sold in the US, more than the next ten largest brands combined. PM USA's other brands include premium Parliament and Virginia Slims, and discount L&M. Total volumes were 101.4bn cigarettes in 2020, including 88.9bn for Marlboro. The group is also involved in developing a range of "heat-not-burn" tobacco products. It is partnered within Altria by a collection of smaller smoking-related business, including John Middleton, makers of Black & Mild cigars (1.8bn units sold in 2020); US Smokeless Tobacco, which markets snuff and Scandinavian-style oral nicotine pouches or snus under the Copenhagen and Skoal brands as well as new launch On!; and Nu Mark, makers of the MarkTen and Green Smoke vaping brands. In 2019, the company began introducing the IQOS heated tobacco system developed by Philip Morris International in the US in a partnership with its former sister company. (Parent group Altria has a separate 35% investment in another vaping business, Juul Labs). In 2007, the group acquired premium cigar manufacture Nat Sherman. Jon Moore is CEO of Philip Morris USA, with Shannon Leistra as CEO of US Smokeless Tobacco. Tobacco-related products accounted for 97% of Altria's revenues in 2020: $17.9bn after excise from smokeable products (an increase of more than $1bn on the year before as a result of higher pricing) and $2.4bn from smokeless. Philip Morris was originally a London tobacconist who started to make his own cigarettes in 1854. After his death the business continued to prosper, and went public, establishing a first presence in the US in 1902. It was acquired by an American syndicate in 1919 and did well during the Great Depression, though it remained a marginal force at best compared to leading manufacturers RJ Reynolds and American Tobacco. The big change came with the staggering success of Marlboro during the 1950s. Almost entirely as a result of the success of that brand, Philip Morris rose from being the #6 cigarette company in the US to the #1 worldwide by the early 1970s.

Capsule checked 31st March 2021

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Adbrands Daily Update 25th Sep 2019: Talks between Altria and Philip Morris International to re-unite the two companies' tobacco businesses ended without agreement. According to reports, PMI withdrew from negotiations as a result of the sharp backlash in the US against vaping products in general, and especially the Juul business in which Altria has a large minority stake. PMI investors had already expressed unhappiness over getting dragged back into the highly litigious US market. Those fears were confirmed by the scale of the crackdown on vaping products over recent weeks following several deaths and hundreds of hospitalisations that have been linked to e-cigarettes. Several US cities or states have now banned flavoured e-cigs, while Massachusetts today announced a temporary ban on all vaping devices. The two companies will continue to work together on the US roll-out of PMI's IQOS system - which uses a different form of technology from other vaping devices.

Adbrands Daily Update 29th Aug 2019: Philip Morris International confirmed it is in advanced talks with former parent Altria to reunite the two separate Philip Morris tobacco businesses. These were split in 2008 to insulate the company's international operations against potential litigation in the US. A decade later, though, the risks of litigation have reduced and both companies are separately struggling to deal with the continuing decline in traditional tobacco consumption, while also aggressively marketing their own smoke-free "reduced risk" alternatives. PMI markets the iQOS heated tobacco system in international markets. Altria/Philip Morris USA owns the MarkTen vaping brand, acquired a large holding in high-profile e-cig brand Juul last year, and also recently gained FDA approval to begin marketing PMI's IQOS in the US under license. Any re-merger is likely to be an all-stock affair, with shareholders in PMI - the larger of the two by market value - gaining around 59% of the combined business. In all other respects, though, this would be presented as a merger of equals. Even so, neither company's investors welcomed the announcement of a possible merger, prompting a sharp sell-off of both sets of shares.

 Adbrands Weekly Update 17th Jul 2014: US tobacco companies Reynolds American and Lorillard agreed terms for a merger to create a stronger rival to local leader Altria, whose Marlboro brand still dominates the sector with more than 40% market share. Other brands contribute to Altria's total share in 2013 of just under 46%. Currently, #2 player Reynolds is some way behind at 24.7%, from products such as Pall Mall and Camel, but its share has been in slow decline for several years. Third-ranked Lorillard, on the other hand, has been growing because of the popularity of its menthol brand Newport, now the second best-selling cigarette after Marlboro. In 2013, its market share rose to 13.6%. Under the deal unveiled this week, Reynolds would acquire Lorillard for around $27.4bn in cash and stock. In order to ease regulatory concerns over the reduction of competition in what is already a highly controversial sector, Reynolds and Lorillard are also offering to divest several brands. Much smaller Imperial Tobacco, maker of discount brand USA Gold, has been lined up to acquire Reynolds' Winston, Salem and Kool brands, as well as Lorillard's Maverick and top-selling Blu e-cigarette brand, for around $7.1bn. That would reduce Reynolds/Lorillard's combined share to a little over 35% and lift Imperial to over 9%. At the same time, British American Tobacco, the largest shareholder in Reynolds, is investing $4.7bn in order to maintain its 42% holding in the merged group. The extraordinarily complex deal will require the approval of three sets of shareholders and is also likely to entail a long regulatory investigation.

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