Philip Morris investing millions in a new image
You may think you know all about Philip Morris Cos.
You know, of course, they make cigarettes.
You probably know that the companies' top executives, for decades, stared at a mountain of evidence about the dangers of smoking and said, as recently as two years ago, that they "just didn't know" if tobacco caused disease.
And you might guess that the company has one of the worst reputations in American business. It does. Harris Interactive asked 10,830 individuals about corporations' reputations and Philip Morris was in the bottom three, along with Exxon and Kmart Corp. One of the respondents summed the company's reputation up neatly, writing "Philip Morris = Devils."
If those 10,830 people could visit Philip Morris headquarters in New York, the results might be different.
First, there's the Whitney Museum exhibit of an Indian artist. Then, there's the large propped-up poster announcing "Thurgood Marshall Scholars." Later, as you ride the escalator, you can't miss the poster touting the efforts of Philip Morris employees to end hunger.
Those same employees will tell you eagerly that the company's advertisements combating domestic violence left one organization's hotline so overwhelmed with calls, it needed to expand. They say Philip Morris wrote the check for the $400,000 call center.
Philip Morris knows what people think of it. About 400,000 people die from smoking- related illnesses every year, and that's all the public seems to know about the company. Philip Morris, which owns Kraft Foods and made a deal to buy Parsippany-based Nabisco this week, is in the middle of a massive campaign to change those perceptions.
''It's become all about image," said Thomas Russo, a partner at Gardner Russo & Gardner, a Pennsylvania investment firm that owns Philip Morris stock. "The impact in shifts in public perception have left an indelible mark on Philip Morris (and) on the whole industry."
That exclamation mark came in November 1998, when Philip Morris and three other tobacco companies agreed to a $206 billion settlement with 46 states. Then, in April, a jury awarded two Florida smokers $12.7 million in compensatory damages in a class-action suit. There are about 300,000 other potential members of that class, and other anti-tobacco litigation keeps popping up.
When the tobacco industry is in trouble, Philip Morris is in trouble. It has 50 percent of the U.S. cigarette market.
That's where you come in.
Philip Morris, which also owns Kraft Foods and Miller Brewing Co., wants you to care if its business survives. It wants you to care about its Oreo cookies and its boxes of Kraft macaroni and cheese.
Because Wall Street hasn't cared in a long time. Philip Morris' current market capitalization is much less than 1 percent of the Standard & Poor's 500. In the mid 1980s, it hovered around 4 percent, according to Russo.
The company's stock, presently trading around $27 a share, has been shredded by the tobacco litigation and by investors who insist on smoke-free portfolios. Without the taint, analysts said shares could be trading as high as $70.
''You can look at the valuation many different ways," Russo said. "If you put a fair-market value on Kraft Food, Kraft International and Miller Beer, you might end up creating the tobacco company for free."
Philip Morris has tried many things to swing public opinion. In 1991, it spent $60 million to sponsor a traveling exhibition on the Bill of Rights. "That was so transparent," said Steve Bryant, chief creative officer of Publicis Dialog, one of the nation's largest public relations firms. "That was their smokers' rights strategy. That just failed. No one would argue that someone has the right to smoke in a bubble, just not around me."
Now, the company highlights its charitable work. It has a speakers' bureau that sends powerful executives to talk to PTA groups. It spends $100 million a year on youth-smoking prevention. It gives away $60 million a year and spends another $100 million in advertising to tell you about its good deeds.
James Spector, the company's vice president for corporate affairs policy, said the company does indeed spend $100 million to publicize the $60 million it gives. The numbers are right, he said, but "I would say that characterization of it is definitely wrong." He went on to talk about the domestic violence awareness campaign.
''With their charitable donations, they're trying to divert attention away from the harm that they're doing," said Matt Myers, president of Campaign for Tobacco-Free Kids. "In essence, they're trying to buy forgiveness for the harm their product causes and they're ongoing wrongful behaviors."
The turnaround in public opinion will be slow, if it happens at all, experts said, even though the company last year took its biggest step to date in coming clean.
''With their admission that tobacco's not good for you, they have stopped telling the big lie, which is probably one of the biggest lies in history," Bryant said.
''And that's a good thing," he said. "Companies should tell the truth. It's a fundamental principal of public relations. Even if you don't believe in morality, telling lies means you will eventually be found out. But, having told such a big lie for such a long time to so many important people, including the Congress, they have big-time PR karma to pay. And they've begun to."
The company would not talk about past campaigns it has undertaken. "This is about going forward," Spector said. "The past is the past. There are certain things we could have done differently, handled better. Now we're looking forward."
The company's pitch is that its good deeds are nothing new. It has a 20-year history of giving to food banks and other groups that fight hunger. The other piece of the pitch, emphasized by Philip Morris managers, is that its employees asked it to take a more aggressive public relations stance.
''They had to deal with the questions all the time: 'How can you work for a tobacco company?' " Spector said. "But the company is so much more than a tobacco company. We're hoping it will, in a way, make the employees feel better about working for the company."
In addition to the PTA meetings, its new speakers' bureau has sent employees to hospital associations and a publishers' group.
''We were amazed at the positive response we got," said Peggy Roberts, Philip Morris' director of corporate communications. "Even the people who differed from us on a lot of issues were really amazed that we were willing to get out there and not just make presentations, but answer questions."
What those hostile audience members learned, as Roberts put it, was that "we're people just like you. We're husbands and wives, sisters and brothers, parents and children. We have the same issues about getting through every day that everyone else has."
The company has produced a hefty, glossy brochure entitled "Working to Make a Difference. The People of Philip Morris." The photos on the cover are of two dancers, a windmill and Nicolas Cabral, who works in wheat shredder operations for Post Cereal. The captions read, "Supporting the arts. One of the largest buyers of American farm products. Nicolas Cabral, employee of 25 years, die-hard Cubs fan."
Inside the brochure are pictures of a semi-pro softball player, a junior achievement volunteer, a Tae Kwon Do blue belt and an avid gardener, all employees.
Organizations that receive gifts from Philip Morris have an even easier time pointing out the human side of the company.
''They enable 25,000 meals for people with HIV/AIDS to be served in a year," said Ronald Johnson, the executive director of the Gay Men's Health Crisis Center.
The organization has no problem taking money from Philip Morris, one of its largest corporate donors, Johnson said. The donations fit the Gay Men's Health Crisis corporate policy, which is that the organization doesn't endorse the products of its donors, that a gift can't be predicated on any marketing program the donor is doing and that gifts can't compromise the organization's ability to advocate for people with HIV/AIDS, he said.
''The gift from Philip Morris is completely in line with that policy," he said. "Within that policy, they have been a very generous corporate donor to us."
Yet, for all the genuine good work it is doing, for all the work it has done to spread its message, there's no escaping that the company's primary product (even after the Nabisco purchase, tobacco will still account for the majority of the company's revenues) seems out of step with the times. Dated.
That showed when the Nabisco deal was announced Monday.
At the packed press conference, Chief Executive Geoffrey Bible made his presentation as four key executives sat to his right on the dais, looking down at the hordes of reporters and analysts, ready to answer questions.
Louis Camilleri, the chief financial officer, smoked a cigarette as Bible ran through the particulars.
Think about when you last saw a person smoking in a professional environment. Indoors in New York City.
It was probably a long time ago. After all, when the City Council banned smoking in most public places in 1994, it made an exception for only one office building: The corporate headquarters of Philip Morris.