During the Cold War, when science still had a certain mysterious allure, Liggett used it to sell Chesterfields: "Science discovered it now you can too...No unpleasant aftertaste". The Chesterfield ad shows a man looking down into a microscope while smoking. Smoke wafts up over his face and the microscope. That was then. Now, a half a century later Congress passed a law that gives the FDA regulatory authority over how tobacco is advertised. Landmark legislation, they call it.
"Executing With Quality"
"Joe Camel has been sentenced and put away forever", say the headlines, quoting Senator Richard J. Durbin (D-ILL). The House and Senate supported H.R. 1256 last week. The bill gives the FDA some regulatory authority over cigarettes, including advertising restrictions and limits on cigarette additives and flavorings. Naturally, some of the bill's targets are disgruntled, but surprisingly, not all of them. RJ Reynolds, maker of Camel cigarettes and the infamous "Joe Camel", calls the bill the "Marlboro Monopoly Act", while Phillip Morris, owner of Marlboro cigarettes supports the FDA regulation -- perhaps because Phillip Morris helped produce it. RJ Reynolds is not the only one to complain. "Pro-business" advocates say the bill legislates a tobacco monopoly that's bad for business.
Are cigarettes done? Or has Joe Camel just lost to the Marlboro Man?
Years ago, Altria recognized the need to step-up public relations as the tobacco lawsuits and public pressure increased. Initially, they just tried to stop regulation, but a different tactic finally worked.
- In a October 1, 1998 memo, Phillip Morris proposed that tobacco was like "guns, alcohol and gambling" -- products where the government '"largely leaves it to consumers to discern the riskiness of the products by themselves"', citing perhaps its true feelings about regulation.
- But the company also saw the looming probability of an FDA role in regulating nicotine and began aggressively inserting itself in legislative efforts. In 1996 Phillip Morris and United States Tobacco proposed legislation but were met with resistance from the White House, on grounds that their offer was weaker than what the president wanted. While proposing legislation, of course, the tobacco giants simultaneously worked through the courts to minimize FDA involvement.
- In 1998, the Phillip Morris again made a bid for legislation and John McCain took on the effort. The resulting bill grew as members of each party piled on amendment after amendment until Phillip Morris wanted nothing to do with the result. So they spent "tens of millions of dollars to kill the legislation".
- In 2001, a year after winning a Supreme Court decision ruling that the FDA doesn't have the authority to regulate tobacco, Phillip Morris took up the effort again, shopping the bill around Congress looking for supporters among representatives with other things on their minds.
- In 2004, in a much noted strange pairing of allies, Altria, the newly branded parent company of Phillip Morris and the Campaign for Tobacco Free Kids relieved the parties of their opposition and paved the way for co-authoring the current bill..
Altria controls more than 50% of the total tobacco market in the US, that's half of all the cigarettes, cigars, and smokeless tobacco products sold. According to the company's 2008 annual report, that's "sixty million adult consumers participating in the total tobacco space in the United States", actually 60.4, up from 60 in 2007.
Those "participants" account for $80 billion dollars in retail sales in 2008, up from $79 billion in 2007. $80 billion dollars a year is turf worth fighting for, even at a time when tobacco use is shifting from cigarettes to smokeless tobacco, and from the US to foreign countries. Certainly Altria doesn't need US shareholders complaining about third world exploitation like they did with sneaker factories in the 1990's.
"Gee Dad, You Always Get The Best of Everything, Even Marlboro"
That's what a small boy says to his father in a Phillip Morris billboard ad in 1951", and it wasn't even Father's Day. RJ Reynolds used the authority of doctors: ""More doctors smoke Camels than any other cigarette." And as we mentioned before, 1951 Liggett's Chesterfield brand used science.
Now it's different, they say. In passing the bill, members of the Senate and Congress aim to prevent dishonest advertising and prevent kids from taking up smoking. The legislation has been in the works for decades, but has finally been passed as tobacco's clout is ebbing in the US -- the political climate is right, as they say.
But it's not clear what effects the legislation will have. For instance in an effort to curb misbranding and counterfeit products, the bill says that a product will be labeled "misbranded", if it fails to contain for instance, "adequate warnings against use by children" -- in instances where the FDA requires one. But wouldn't an "adequate warning" that was "adequate" mean that the children wouldn't buy cigarettes at all?
"Altria" for Altruistic
Altria says in its annual report: "Kids should not use any tobacco products". It's difficult to tell when Altria means what it says, and when its rhetoric is purely public relations. At its shareholder meeting Altria noted that it strives to implement four core strategies with
"five core values guiding our behavior. These values are integrity, trust and respect; passion to succeed; executing with quality; driving creativity into everything we do; and sharing with others."
Compliance is "top-of-the-mind" to all employees and leaders and "one important tool that does that is the Altria Code of Conduct". In addition Altria has "built a Library of Principles and Policies that supports our compliance efforts."
Is it far fetched speculation to think that perhaps Altria, with an eye to evolving public pressure, a burgeoning international market, and increasing profit from tobacco products that aren't cigarettes, supports the bill because it makes the company look good while solidifying it's market. Although the cigarette industry volume has declined about 4% per year, much of the decline has been offset by growth of approximately 7% in smokeless tobacco and 4% in cigar volumes." The bill could make it more difficult for new entrants to compete with Altria's companies.
In addition to its tobacco products, Altria has alcohol interests in Miller and St. Michel Winery. While diversifying to more societally acceptable drugs, however, the company can rest assured that its tobacco business will flourish. In addition to restricting market entry of new products, the new bill also gives the FDA authority to regulate counterfeit products, which has moved some investors to list Altria's stock as a "Buy Now".
As for regulation, crafty companies have proven themselves not only good at controlling their congressional representatives but adept at outwitting the FDA. Regulation enacted is only as good as enforcement. The FDA regulation could be the beginning of more regulation and an end to the deadly scourge -- new scrutiny is now being called for in the marketing of menthol cigarettes. Or it could mean more work for the FDA pursuing counterfeit tobacco -- for health, but as well for the cigarette industry.
In the meantime, there's always more suspense. The new rule may well be challenged as opponents say that a rule like keeping advertising outside of 1000 square feet of schools limits free speech.
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