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University of Zagreb

Faculty of Economics and Business


Bachelor Degree in Business

THE IMPLEMENTATION OF RESPONSIBLE MARKETING


INITIATIVES WITHIN THE TOBACCO INDUSTRY

Undergraduate thesis

Luka Herceg

Zagreb, June 2015

University of Zagreb
Faculty of Economics and Business
Bachelor Degree in Business

THE IMPLEMENTATION OF RESPONSIBLE MARKETING


INITIATIVES WITHIN THE TOBACCO INDUSTRY

Undergraduate thesis

Student: Luka Herceg, JMBAG: 0067490647


Mentor: dr.sc. Andrea Razum

Zagreb, June 2015

Table of Contents

1. Introduction ........................................................................................................................................ 1
2. Corporate socially responsible behavior in the tobacco industry .................................................... 3
2.1. Shifts from defensive towards offensive actions ......................................................................... 3
2.2. Limitations in the pursuit of more responsible marketing in the tobacco industry .................... 6
2.3. Benefits of socially responsible engagement ............................................................................... 9
2.4. Steps in the implementation of social responsibility ................................................................. 11
3. Tobacco industrys devious path towards socially responsible marketing .................................... 13
3.1. The use of socially responsible practices in favor of image enhancement ................................ 13
3.2. Tobacco companies' internal marketing studies s as a tool for creation of their own marketing
strategies ........................................................................................................................................... 15
3.3. Tobacco farming as the key issue in being more socially responsible ....................................... 17
3.4. The role of the Framework Convention on Tobacco Control (FCTC) in altering the behavior of
tobacco companies............................................................................................................................ 21
4. Socially responsible marketing strategies for tobacco industry ..................................................... 22
4.1. Sustainability as the key driver of innovation in the tobacco industry ...................................... 22
4.2. The importance of effective marketing communications for tobacco companies .................... 24
4.3. Socially responsible product advertising, promotion and packaging......................................... 25
4.4. Product innovation as socially responsible marketing strategy ................................................. 29
5. Case study analysis: 'Philip Morris's attempt to move towards more responsible marketing
initiatives' .............................................................................................................................................. 31
5.1. The development of the 'societal alignment' initiative.............................................................. 31
5.2. The implementation of strategies of 'constructive engagement' and 'management of key
relationships' ..................................................................................................................................... 33
5.3. Philip Morris's implementation of the 'societal alignment' initiative worldwide ...................... 35
5.4. The real impact of the initiative ................................................................................................. 36
5.5. Philip Morris's socially responsible marketing strategies .......................................................... 37
6. Conclusion ......................................................................................................................................... 39
References............................................................................................................................................. 41
Table of figures ..................................................................................................................................... 48

1. Introduction
This thesis examines the possibility of the implementation of responsible marketing initiatives
within tobacco industry. In this thesis, the aim is to investigate whether the firms operating in
one of the controversial industry sectors, tobacco industry, are able to act in socially
responsible ways or not, while continuing to produce and distribute one of the most deadliest
products worldwide- tobacco. This thesis is divided into six major sections: introduction,
corporate socially responsible behaviour in tobacco industry, questionable practices of
tobacco companies, possible socially responsible marketing strategies, case study analysis and
conclusion. Each of these sections is further divided into subsections that more thoroughly
assess sections' topics.
First of all, the thesis devises several possible ways of firms in tobacco industry to act more
socially responsible through their offensive actions, then it will state the limits that firms
encounter alongside possible benefits and it will finish up with the necessary steps those firms
need to undertake in order to be seen as more socially responsible players.
Secondly, the thesis evaluates certain questionable practices performed by tobacco companies
in order to build their corporate image and have control over tobacco regulation. It will
explain all of these practices through evidence acquired from companies' internal documents
that were made available to public after the US Department of Justice brought suit for various
questionable practices in 1999, against industry's leaders. In this section, thesis will also
present the importance of tobacco farming that needs to be taken into account by tobacco
companies if they wish to act more socially responsible. Thesis concludes this section by
showing the importance of the Framework Convention on Tobacco Control as means of
greater regulation within tobacco market.
Thirdly, thesis will point out possible socially responsible marketing strategies that relate to
effective marketing communications, product advertising, promotion and packaging alongside
product innovation. Special emphasis will be put on advertising and promotion, especially
within point-of-purchase environments
Futhermore, case study analysis on Philip Morris' attempt to move towards more responsible
marketing initiatives will be presented. Here thesis takes into account the development of
Philip Morris' societal alignment initiative through which it wanted to present itself as more

socially responsible to the public, due to the fact that its reputation has eroded throughout the
past three decades as a result of many devious practices that it constantly performed.
In the end, thesis concludes by summarizing all the major elements examined with the
personal view of the socially responsible practices within tobacco industry.

2. Corporate socially responsible behavior in the tobacco industry

2.1. Shifts from defensive towards offensive actions


Throughout the past century, some major tobacco companies such as Philip Morris, British
American Tobacco, RJ Reynolds Tobacco, Lorillard Company and others used many
defensive actions in order to fight off litigation, regulation and bad press (Friedman, 2009).
There were various kinds of defensive actions performed at that time by industry's leaders
such as the use of public relations and framing, influencing government and key
organizations, disputing scientific studiesand casting doubt on them, creating conflicts of
interest, etc. (Friedman, 2009). These defensive actions were performed as a result of many
scientific studies made in early 1950s in the US that indicated that nicotine is addictive, and
that smoking is heavily linked to lung cancer. Soon after these studies were published in 1952
as a part of the "Reader's Digest" Medical Journal, 'cigarette sales plummeted for two years,
the first such decline of the century except during the Great Depression,' according to
Brownell and Warner (2009).
Urged by these kinds of studies that linked smoking to health issues, CEOs of major tobacco
companies gathered a year after in order to sign an agreement called "A Frank Stetement to
Cigarette Smokers" whose major aim, as indicated by Brownell and Warner (2009), was to
'accept an interest in people's health as a basic responsibility, paramount to every other
consideration in our business.' In addition, tobacco companies promised to work together with
organizations whose major concer was public's health. Unfortunately, these claims made by
tobacco companies acted as means to defend their profits and manipulate press in their favor.
As the Brownell and Warner (2009) indicate: 'since the "Frank Statement," approximately 16
million Americans have died from smoking, and millions more have suffered from
debilitating diseases ranging from emphysema to heart disease. Had the industry come clean
in 1954- matching deeds with promises- many of these deaths would almost certainly have
been prevented.'
Besides manipulating press at that time, tobacco companies also had great power in
influencing many government officials, lawyers,scientists, lobby groups and executives in
order to acton their behalf and do everything in their power to postpone regulation and alter
public opinion about tobacco companies in general (Brownell and Warner, 2009).

As a result of great amount of press manipulation and mispresentation of data towards public,
tobacco companies were accused of racketeering, fraud and conspiracy from the side of the
US Department of Justice in 1999 (Friedman, 2009).According to the study made by
Friedman (2009), tobacco companies were found guilty in 2006 of the following things:
'falsely denying the adverse effects of cigarettes and their addictive properties; manipulating
nicotine levels in cigarettes and then denying that they were doing it; falsely marketing their
"light" cigarettes as less harmful; intentionally marketing their products to underage smokers
and viewing them as "replacement smokers"; publicly denying what they internally
acknowledged to be true: that secondhand smoke is hazardous to non-smokers; and destroying
documents and suppressing scientific evidence.'
Due to such kinds of defensive actions, tobacco companies lost credibility with public and
understood that they should make a great shift in acting more socially responsible. That is
why they decided to engage in offensive actions in order to create a new kind of image where
people would see how tobacco companies care about the development of local communities,
youth smoking prevention, education, health, etc. There are numerous examples of these
kinds of offensive actions where tobacco companies actively engage to change public's and
regulators' perceptions about the way they do business (WHO, 2003).
An example related to the development of local community may be the project made by
British American Tobacco in Kenya under the name "Kerio Trade Wings Project," that
according to WHO (2003) strives to 'developing tobacco growing activities as an option
towards alleviating poverty in line with the government's poverty alleviation strategy.'
Another example of British American Tobacco (BAT) social engagement, but in the field of
education, is the development of the International Centre for Corporate Social Responsibility
as the part of the University of Nottingham. British American Tobacco poured 3,8 million in
the development of such a facility in 2000, that was the first one bulit in the UK, according to
the WHO (2003) study.
When it comes to youth smoking prevention programmes, there isPhillip Morris's "Think.
Don't Smoke." advertising campaign that was the most criticized by the public and many
researchers. In this campaign, smoking was portrayed as an adult activity that in turn, had
negative effect on smoking prevention (Farrelly et al., 2002).
These ads increased the likelihood of 12-17 year-olds to start or continue smoking, as
indicated by one study published in 2002 as a part of the American Journal of Public Health
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(Farrelly et al., 2002). In this study, comparisons between American Legacy Foundation's
"Truth" campaign and Philip Morris's "Think. Don't Smoke." campaign was made. The study
measured the influence of these two types of US national campaigns on youth attitudes and
beliefs towards smoking. The findings were very interesting as they pointed out that Phillip
Morris used its campaign as a tool to decrease the awareness of youths on damaging health
effects of tobacco alongside increasing the probability of youths' intention to smoke the
following year.
Due to the counterproductive results of the Phillip Morris campaign on youth smoking
prevention, the "American Legacy Foundation" decided to make Phillip Morris pull all the
advertising material pertaining to this campaign (The American Legacy Foundation, 2002).

Phillip Morris also implemented the so called "societal alignment" initiative through which it
wanted to be seen as more responsible company taking into account peoples' expectations
about what company like Philip Morris should represent.It also wanted to be more open
regarding youth smoking prevention, regulation, product marketing and other potentially
debatable issues (Yang and Malone, 2008). Phillip Morris even introduced a new name for all
of its subsidiaries to be associated with, known as ''Altria," that according to Phillip Morris
pamphlet from 2001 and mentioned in the study of Yang and Malone (2008), represents the
following: 'Altria, derived from altus, meaning high, symbolizes for us a company that is
already great, but reaching ever higher.'
Furthermore, British American Tobacco (BAT) has also tried to move towards more offensive
strategy by enabling crop diversification in Brazil. Throughout the past century, BAT forced
farmers in Brazil to plant only tobacco and use the income from tobacco to purchase the
products from abroad (Machado do Nascimento et al., 2012). By planting exclusively
tobacco, the land would deteriorate heavily in its fertility and would cause the inability of
growing food crops on these lands (Machado do Nascimento et al., 2012). As BAT enabled
for greater crop diversification, more food crops could be seen planted by Brazilian farmers in
recent years, that in turn prevented all the negative consequences that would have occurred if
tobacco had been planted instead.
Despite all of the contributions made by tobacco companies in acting more socially
responsible through their offensive actions, many researchers still believe that these actions
are rather an important marketing tool through which tobacco companies continue to shift
attention from real issues assocciated with tobacco production and consumption, than the real
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intention to sincerely improve on their social responsibility practices. Many scientists have
also agreed that tobacco companies' offensive actions benefit more the company itself due to
the positive public opinion it acquires and as a final result maximize shareholeder's value
(Hatings and Liberman, 2009). Due to this, corporate social responsibility within tobacco
industry is defined by some scientists (e.g. Hastings and Liberman, 2009) as "corporate selfregard."
As we could see, there is still a lot of work left for tobacco companies in order to be seen as
acting more socially responsible. The major impediment to their way of being more socially
responsible is the fact that tobacco is proven to be lethal and addictive, and as such cannot
completely come along with companies' social and marketing initiatives. Tobacco's lethal and
addictive caracter is one of the limits encountered by tobacco companies in pursuing more
responsible marketing initiatives and it will be analyzed more thoroughly in the following
section.

2.2. Limitations in the pursuit of more responsible marketing in the tobacco industry

Tobacco companies find it hard to implement responsible marketing initiatives due to the fact
that its product, tobacco, is lethal to health and addictive in the same time. Furthermore,
tobacco companies lost credibility due to the past behaviour of companies' executives that
used all kinds of previously described defensive actions, to influence key organizations and
fight off regulation. Due to these facts, the public and various organizations such as the WHO
(World Health Organization) have increased their level of expectations from tobacco
companies' implementation of socially responsible practices. These high expectations imply
that the mainstream CSR (corporate social responsibility) that is used in other types of
indutries worldwide, is not feasible when it comes to tobacco industry (Palazzo and Richter,
2005). Tobacco industry has to use a different approach towards CSR, if it wants to act as a
socially responsible player. In the following several paragraphs, we will see what are the
major impediments to acting more socially responsible in this industry and how can tobbaco
companies overcome these limits.
There are four major limits to CSR according to the study made by Palazzo and Richter
(2005). These include: corporate philantropy, stakeholder collaboration, CSR reporting and
self-regulation.
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Corporate philantropy is seen as the basic component of CSR by many scientists (Hastings
and Liberman, 2009; Palazzo and Richter, 2005). It is defined as the sort of action through
which you give to good causes (Hastings and Liberman, 2009). According to Palazzo and
Richter (2005), the philantropic engagement of tobacco companies faces certain boundaries in
terms of contributions made by tobacco companies towards charities and the strategic
implementation of CSR, that cannot be implemented by tobacco companies neither through
core competencies (as it usually is in other industry sectors) nor through reputation building.
As Palazzo and Richter (2005) indicate: 'A first constraint might be called the "dirty money"
problem. The decision to contribute to charities is constrained by the public pressure on those
who take money from tobacco companies. When BAT gave money to the University of
Nottingham for the foundation of a CSR research center, they provoked a furious debate
within and around the University. Similarly, it caused a public outcry when it became known
that BAT offered to sponsor students at the London School of Hygiene and Tropical
Medicine.'
Palazzo and Richter (2005) further analyze the second boundary towards engaging in
corporate philantropy: 'For tobacco companies a strategic approach to corporate giving is
difficult to implement since the specific characteristics of its products do not allow for a focus
on core competencies. The reputational aspect is quite problematic as well, since there might
be even more pressure on the charity organization if the tobacco company decides to launch a
cause-related marketing campaign around their engagement.'
Stakeholder collaborationis also one of the main pillars of CSR (Hastings and Liberman,
2009). In most industries stakeholder collaboration is considered to be of a great benefit to the
company due to its ability to build reputation and create jointly with its stakeholders, greater
amount of value than if it operates alone. However, in the tobacco industry, stakeholder
collaboration has exactly the opposite effect. According to Palazzo and Richter (2005):
'Collaboration with external partners is limited by the reputational risks for those who
cooperate with tobacco companies. This is especially true in the field of scientific research
which is of paramount importance for tobacco companies. Scientific research that is
sponsored by tobacco companies is exposed to conflicts of interest and will unavoidably taste
of manipulation. This can be seen in the fact that some scientific journals do not even publish
research that is funded by the tobacco industry. Being paid by the tobacco industry or
cooperating with it threatens the reputation of the external partner, especially for cooperating
scientific researchers or critical NGOs.'
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Therefore, there is no incentive for NGOs to cooperate with tobacco companies, since this can
only bring them more harm than benefit due to the bad reputation tied to tobacco companies.
On the other hand, if tobacco companies isolate their "socially responsible practices" from
other stakeholders, there is no control from the side of the regulators (such as WHO) over the
tobacco companies' "responsible" actions.
When it comes to the third major limit towards acting more socially responsible, CSR
reporting, then tobacco companies have to adopt a different, more transparent approach. This
has to be done in order for tobacco companies to move away from the mainstream CSR
reporting, as this type of reporting focuses solely on positive effects of socially responsible
engagement, that in many cases leads to window-dressing (Palazzo and Richter, 2005).
Window-dressing has been defined by scientists as the set of marketing practices made by
tobacco companies worldwide whose real aim is to build reputation and continue doing
traditional business alongside moving away from additional regulations (Cai et al., 2011).
The problem with tobacco industry is that no tobacco enterprise can be completely open
towards public due to the addictive and lethal character of the product it produces. Therefore,
CSR reporting within tobacco industry has to be taken to a greater level of transparency in
order for tobacco companies to be seen as acting more socially responsible.
The fourth major limit is self-regulation. Industry self-regulation can be defined as 'a
regulatory process whereby an industry-level (as opposed to governmental or firm-level)
organization sets rules and standards (codes of practice) relating to the conduct of firms in the
industry. This definition implies that industry self-regulation requires firms in the industry to
decide to cooperate with each other'(Gunningham and Rees, 1997). This is particularly the
case in tobacco industry where tobacco companies agree upon the rules and norms within the
industry whose major aim is to protect the industry's profits and continue doing business as
usual while in the same time trying to appear more socially responsible to the public by
implementing various "corporate social responsibility" initiatives. This is of course bad
example of self-regulation, as it strives to protect the industry's production and distribution
oflethal and addictive product, tobacco, without actually attempting to contribute to the
common good.
Now that we have seen how the tobacco industry is different from other industries in terms of
implementing socially responsible behaviour, we will turn to the possible benefits of tobacco
companies by deciding to truly engage in such actions.
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2.3. Benefits of socially responsible engagement

Socially responsible engagement of tobacco companies can bring huge increases in firm value
(Cai et al., 2011) and decreases in firm risk (Jo and Na, 2012). Through empirical research,
both of these studies give the positive sides of implementing responsible marketing initiatives
and prove how companies that operate in controversial industry sectors have enough
incentives to completely engage in such activities.
The study conducted by Cai et al. in 2011 that focuses on increases in firm value, develops
three main hypotheses that are tested on a sample of US firms operating in sinful industries
including alcohol, tobacco, gambling, nuclear, oil, cement and biotech. The three hypotheses
include: the "window-dressing" hypothesis, the "value-enhancement" hypothesis and the
"value-irrelevance" hypothesis. Each of these hypotheses is formed in accordance with the
study that examines moral, immoral and amoral management (Carroll, 1991).
For example, Cai et al. (2011) develop the window-dressing hypothesis under the assumption
that 'CEOs of firms in controversial industry sectors are immoral managers and they use CSR
as a means to enhance their own private benefits of reputation building as social citizens at the
cost of shareholder wealth.' The study further assumes that under this hypothesis, the
investors will find out about these devious actions of managers' and that the firm will be
negatively affected through stock market that in turn creates a negative effect on firm value.
The second major hypothesis developed by the same study (Cai et al., 2011), is known as
value-enhancement hypothesis where managers are seen as moral with intentions to
strategically implement corporate social responsibility, improve the firm's transparency, and
be profitable in the same time, thereby leading to the positive effect on the firm value.
Lastly, the study (Cai et al., 2011) develops the value-irrelevance hypothesis, labelled as such
due to the participation of amoral managers that according to Carroll (1991) represent
peoplethat show lack of ethical concern or are completely unaware of some action being
moral or immoral. Therefore, their participation within the firm will have no effect on firm
value (Cai et al., 2011).
Having in mind all of these three hypotheses, researchers (Cai et al., 2011) conducted
multivariate tests alongside the use of descriptive statistics and bivariate correlation to come
to the conclusion that 'CSR measures and firm value are positively and significantly
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correlated,' meaning that the value-enhancement hypothesis has been supported by regression
results. In the same time, the results supported neither of the other two hypotheses. This in
turn means that 'executives of US firms in controversial industries, in general, behave morally
or strategically and engage in CSR activities to improve their long-term value enhancement
rather than use CSR involvement as their personal private benefits of reputation building at
the cost of shareholders' (Cai et al., 2011).
The other study (Jo and Na, 2012) that focuses on decreases in firm risk as a result of CSR
engagement takes into account similar sample of firms as the one described earlier (Cai et al.,
2011). This study (Jo and Na, 2012) develops two hypotheses, where the first one is labeled as
"risk-reduction" hypothesis, while the other is labeled as "window-dressing" hypothesis.
Under the risk-reduction hypothesis, Jo and Na (2012) assume that CSR engagement of firms
in controversial industries will have negative correlation with the firm risk. They assume this
on the basis of studies made by many authors that indicate how, for example, strategic CSR
can contribute to risk reduction (Porter and Kramer, 2006) or how through CSR, financial
markets become easily accessible and capital constraints tend to be lower leading to a
decrease in firm risk (Cheng et al., 2011). On the other hand, under the window-dressing
hypothesis, Jo and Na (2012) assume positive correlation between CSR engagement and firm
risk. This hypothesis is connected to the before mentioned study of Cai et al. (2011) due to the
fact that window-dressing leads to decrease in firm value, meaning that, in turn, it has to lead
to an increase in firm risk as firm value and firm risk are two interconnected terms that
strongly depend on each other.
The results of their study (Jo and Na, 2012) indicate that 'CSR measures and firm risk are
negatively and significantly correlated,' leading to the interpretation that 'executives of US
firms in controversial industries, in general, are risk averse and engage in CSR activities to
reduce their long-term risk.' In the same time, results show no support for the presence of
window-dressing.
By combining the results from these two studies (Cai et al., 2011; Jo and Na, 2012), we can
see how firms operating in controversial industries can achieve increases in value and
decreases in risk, if they are willing to implement corporate social responsibility initiatives
through which they can, in the same time, make great contributions to the common good.

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2.4. Steps in the implementation of social responsibility

As we have already seen, tobacco companies need to undertake different kind of an approach
towards socially responsible engagement in order for their actions not to be seen as the form
of pure reputation building or the form of improving corporate image (Palazzo and Richter,
2005). Tobacco companies have to understand that they form a part of the society and that
their actions directly affect the society, while, on the other hand society's actions (e.g.
regulators' or NGOs actions) also affect tobacco companies in various ways. Therefore, there
is the huge interdependence between tobacco companies and society, and if both of these two
subjects wish to benefit from each other's actions, they need to start thinking about the
strategic implementation of corporate social responsibility and the concept of the creation of
shared value (Porter and Kramer, 2006, 2011).
This concept takes into account the points of intersection between the corporation and the
society as a whole. According to the views of Porter and Kramer (2006, 2011), 'leaders in
both business and civil society have focused too much on the friction between them and not
enough on the points of intersection. The mutual dependence of corporations and society
implies that both business decisions and social policies must follow the principle of shared
value. That is, choices must benefit both sides. If either a business or a society pursues
policies that benefit its interests at the expense of the other, it will find itself on a dangerous
path. A temporary gain to one will undermine the long-term prosperity of both.
Furthermore, Porter and Kramer (2006, 2011) state that the ideal place to start creating shared
value is where the core business activity intersects with social issue. Since we deal here with
tobacco industry, then we can expect to have great amounts of points of intersection between
tobacco companies and the society that in turn exist as a result of shifts in social norms or
some improvements in technologies (Cai et al., 2011).
The concept of shared value introduced by Porter and Kramer (2006, 2011) takes into account
industries that are not considered to be controversial, where the implementation of social
responsibility practices does not create such a great potential for conflicts between
corporations and society, as opposed to the tobacco industry or any other controversial
industry. That is why tobacco companies need to take great care when talking or writing about
their social responsibility practices due to the possible impact these actions may have on the
society.
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There are many things tobacco companies can improve upon and introduce in order to be seen
as greater contributors to the common good. First of all, tobacco companies should stop all
political lobbying activities and avoid cloudy scientific statements. They could even
completely withdraw from issuing scientific statements at all and rather publish those of the
WHO or other reliable sources on their websites and in their CSR reports (Palazzo and
Richter, 2005). Secondly, tobacco companies should allow for the greater cooperation with
local governments and NGOs in terms of the creation of effective tobacco regulations
(Palazzo and Richter, 2005). These regulations should take into account all the issues related
to tobacco companies operations including manufacturing, distribution and marketing of
tobacco products (Warner, 2002). Particular emphasis has been put on eliminating advertising
in point-of-purchase environments where children shop, immediately ceasing targeting to
young adults (18-24 year-olds) and amending the youth smoking prevention programs
(Warner, 2002). Finally, society as a whole should make a step further in order to push
tobacco companies to comply with ethical standards and codes of conduct through the help of
international conventions such as the "Framework Convention on Tobacco Control."
Now that we have seen the possible ways of behaving more socially responsible, we will
proceed to the questionable practices performed by tobacco companies through the last
century. Many of these practices were found in tobacco companies internal documents and
are certainly worth mentioning.

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3. Tobacco industrys devious path towards socially responsible marketing


3.1. The use of socially responsible practices in favor of image enhancement

Tobacco companies' questionable practices first started to appear in the 1950s, especially after
the first study relating smoking to lung cancer was published (Brownell and Warner, 2009).
Following the publication of this study, many tobacco companies' sales declined in the
upcoming years alongside the erosion of their image with the public (Brownell and Warner,
2009). Tobacco companies decided to react to this publication by creating their own "Frank
Statement to Cigarette Smokers" in 1954, in which they wanted to express interest in peoples'
health, their cooperation with key health organizations and their responsibilities towards
public (Warner, 2002). Unfortunately, all of these things were in fact smartly designed in
order to cover unfair practices of tobacco companies and as stated by Brownell and Warner
(2009), they represented 'a master plan and script that directed the beahavior of industry
executives, lobbyists, lawyers, scientists, and government officials friendly to the industry.'
Following the studies that indicated how smoking is related to the lung cancer, in 1960s and
1970s several other scientific studies appeared that reported on the nicotine addiction levels
and the secondhand smoke. Soon after these studies were published, tobacco industry leaders
admitted within their internal documents that nicotine is addictive and that secondhand smoke
is hazardous (Brownell and Warner, 2009). For example, scientists from British American
Tobacco (BAT) reported the following: 'The habitual use of tobacco is related primarily to
psychological and social drives, reinforced and perpetuated by the pharmacological actions of
nicotine on the central nervous system' (Bates and Rowell, 2000). BAT was not the only
tobacco company that internally admitted the addictive nature of nicotine.

Brown and

Williamson, the former American tobacco company and the subsidiary of BAT also
recognized nicotine's addictive nature: 'Nicotine is addictive. We are, then, in the business of
selling nicotine, an addictive drug' (Bates and Rowell, 2000).
When it comes to the issue of secondhand smoke, then independent scientists and tobacco
industry scientists came to the same conclusion: that the secondhand smoke creates health
problems. This statement can be supported with the research of the BAT scientist that was
compared with the earlier research from independent scientists at Cornell University, that in
turn, proved how glycoproteins that cause allergic reactions were found as an integral part of
tobacco smoke (Bates and Rowell, 2000). From the moment when this was established,
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tobacco industry tried to do everything in its power to deny the link between secondhand
smoke and health effects. Due to the fact that this link would act as a threat to tobacco
industry viability, the US Tobacco Institute decided to form the following strategy: 'The
strategic and long-run antidote to the passive smoking issue is, as we see it, developing and
widely publicizing clear-cut, credible, medical evidence that passive smoking is not harmful
to the non-smoker's health' (Bates and Rowell, 2000).
This last quote is particularly important as it gives us the sense of direction of tobacco
companies in the second half of the 20th century. They decided to counter all of the scientific
studies made by independent scientists, instil doubt on them and tried to persuade nonAmerican scientists to write and report for them, as according to Friedman (2009), nonAmerican scientists were viewed more favorably by American journalists.
Following the establishment of scientific evidence relating smoking to lung cancer as well as
secondhand smoke to health problems, tobacco companies started engaging in many socially
responsible practices with the aim of moving the attention away from their core business
activity by investing in some projects that were not directly related to their business activity
(Friedman, 2009). All of these socially responsible actions are in fact offensive actions as
tobacco companies tried to continue building reputation, traditional business and fighting off
regulation through them (WHO, 2003). Examples of such actions could be seen in the
previous section of the thesis, where tobacco industry leaders such as Philip Morris and BAT
contributed to different fields such as local community development programs, education,
even health and others (WHO, 2003). As Friedman (2009) puts it, 'a key reality of corporate
social responsibility, which is reflected in the tobacco industry's internal documents, is that
companies generally only change their positions and practices when public opinion and
subsequent political pressure forces such changes.'
This gives us the opportunity to conclude this section of the thesis by saying that tobacco
companies have not fundamentally changed, due to the fact that they still use socially
responsible actions as those actions that enable them to continue doing business as usual and
reinforcing their image and reputation with the public.

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3.2. Tobacco companies' internal marketing studies s as a tool for creation of their own
marketing strategies

Throughout the 20th century tobacco companies' pricing was characterized by price
leadership where the firm that has the greatest market share would decide upon the price per
pack, and others within the industry would have to follow with similar prices (Chaloupka et
al., 2002). This in turn establishes cigarette prices at a greater level than in other competitive
markets that gives cigarette manufacturers greater profits than in other industries
(International Agency for Research on Cancer, 2011). There was no great concern regarding
the tax amounts to be levied on cigarettes in the first half of the 20th century. As soon as
many scientific studies relating smoking to lung cancer started to be published in the 1950s
and 1960s, US States started imposing cigarette excise taxes in an effort to decrease the use of
tobacco products and to curb the negative consequences arising from such use (Chaloupka et
al., 2002).
A study made by Chaloupka et al. (2002) shows us how tobacco companies conducted their
own marketing studies through which they became aware of the importance of price elasticity
for their business, with the special focus on the young adults responsiveness on increases in
cigarette prices through time, as this target group represents their most important customers.
This in turn made them able to alter their pricing and marketing strategies for different types
of consumers they targeted. For example, Myron Johnson of Philip Morris, recognized this
importance through Mallboro brand: 'I think price elasticity, like income elasticity, has a
greater effect on lower income people than on those with higher incomes. As mentioned
above, Marllboro smokers, being younger, tend to have lower incomes. Thus, Marlboro sales
are probably more responsive to price changes than are the sales of brands which appeal to
older segments of the population' (Chaloupka et al., 2002).
Whenever some US State decides to increase the tax on cigarettes, tobacco companies
respond in various ways. Tobacco companies use different price-reducing marketing efforts
such as: 'the distribution of free samples of their products, the distribution of coupons through
print advertising and direct mail, on packaging, and via their web sites; retail value-added
promotions that involve free cigarettes (e.g. buy-one-get-one-free offers); and direct price
discounts implemented through payments to distributors and retailers (e.g. through "buydowns" trade programs)' (International Agency for Research on Cancer, 2011).

15

This type of price-reduction marketing strategy was successfully implemented by Philip


Morris. Due to the great increases in state taxes and presence of inflation in the US in 1980s
and early 1990s, many tobacco companies decided to develop discount brands through which
they wanted to increases sales and attract "young adult" smokers (Chaloupka et al., 2002).
Philip Morris, as the industry leader at that time, 'announced a major shift in business strategy
designed to increase market share and grow long term profitability in a highly price sensitive
market' (Philip Morris internal documents, 1993). Phillip Morris used lots of promotional
efforts, through which it managed to achieve a 40 cent per pack reduction, thereby countering
the tax increase and inflation (Chaloupka et al., 2002). As Chaloupka et al. (2002) indicate:
'One consequence of these price reductions was a sharp rise in youth smoking prevalence. For
Philip Morris, however, this strategy was highly effective. By the end of 1994, its market
share had grown to 46.9%, Marlboro's market share had risen to 30% and the upward trend in
the market share of discount brands had been reversed.'
Philip Morris was not the only company that benefited from promotional efforts. RJ Reynold's
Camel brand also showed an upward trend in consumption among young adults: 'The major
factor contributing to CAMEL's dramatic growth among Mid-West 18-24 year old males
appears to be the increased level of Mid-West promotional support, and in particular,
CAMEL's targeted promotions. These promotions included buy-three-get-three-free ("six
pack") discounts, coupons, the "Camel Cash" programme, and other retail value added
strategies. As described in a subsequent report, it appears that these promotions were critical
to sustaining any increase in Camel's market share' (RJ Reynolds internal documents, 1989).
As we could see, tobacco companies used various kinds of marketing studies to examine the
impact of prices on smoking among various age and sex groups. These studies were used to
create their marketing strategies composed mainly of promotional efforts intended to increase
sales, long term profitability and attract specific target population. In the following section,
we will turn to the importance of tobacco farming in building socially responsible behavior of
tobacco companies.

16

3.3. Tobacco farming as the key issue in being more socially responsible
Tobacco farming is nowadays mainly located in the southern Brazil, where in some areas such
as Santa Cruz do Sul, tobacco companies' taxes represent 70% of municipal budget (Machado
do Nascimento et al., 2012). Therefore, local communities' development is highly dependable
on tobacco production. In this area, production of tobacco is performed by all of the major
tobacco companies such as: British American Tobacco (BAT), Phillip Morris (PM), Japan
Tobacco International (JIT), Universal Leaf and Alliance One (Machado do Nascimento et al.,
2012). Tobacco production is present in southern Brazil from 1917, when tobacco companies
started to develop an integrated production system that is still present today, working in the
following way: 'the producer is linked to a processing company which provides inputs,
technical support and a guarantee to purchase all the contracted volume, but on the other
hand, classifies and determines the quality and characteristics of the required product'
(Machado do Nascimento et al., 2012).
Tobacco farming share in developing and developed countries can be seen in the table below
(Vargas and Campos, 2005):

Figure 1- Tobacco farming share in developing and developed countries

From this table, it can be seen how there is an increasing trend in tobacco cultivation in
developing countries since 1962 and a corresponding decrease in developed countries.
17

The importance of tobacco production for local families, farmers, and whole communities can
clearly be seen through the information presented by the Souza Cruz company (subsidiary of
BAT in Brazil) that reports the following: 'The tobacco grown in the South of Brazil employs
165 000 families and is the main source of income on small producing properties, as it uses
only 15.4% of the total area and accounts for close to 56% of revenues earned from these
properties' (Souza Cruz Management Report, 2012). In addition, the data from AFUBRA
(Associacao dos Fumicultores do Brasil), mentioned in the study of Luis Felipe Machado do
Nacimento et al. (2012) reports the following as well: 'In 2010, the tobacco companies
generated about 30 000 direct jobs and the Brazilian government collected about $5.3 billion
in taxes on tobacco and cigarettes. Taxes on cigarettes account for 78.7% of industry
revenues.' It is also worthwile to mention that Brazil is the 2nd largest producer of tobacco in
the world and its major exporter (AFUBRA data, 2012).
The profile of tobacco farming in the 2000-2002 period with number of families participating
alongside the area covered by tobacco can be seen in the following table (Vargas and
Campos, 2005):

Figure 2- The profile of tobacco farming for the 2000-2002 period

Now that we have seen tobacco farming prevalence in Brazil, we can turn to its significance
for CSR practices used by major tobacco companies. According to the study of Jackson and
Apostolakou (2009), more extensive CSR practices will be undertaken by companies that
operate in business sectors with higher impacts on stakeholders, which in turn leads them to
adopt the institutionalized form of CSR. This can particularly be seen in Brazil, where
18

institutional pressures oblige tobacco companies to engage in CSR practices (Machado do


Nascimento et al., 2012). There have been lots of different opposing views when it comes to
the implementation of CSR practices by tobacco companies. Some authors say that those
companies that admit the harmful effects of the product they sell and distribute, cannot be
considered as socially responsible (Campbell, 2007). Others, like the representative of JTI
claim the following: 'It is not the product that defines the action of the company, but how the
company behaves in response to the impacts it causes and the product itself causes, this
defines the CSR practices' (Machado do Nascimento et al., 2012).
This last statement of the representative of tobacco company sounds great only if tobacco
companies were able to stick to such claims and do everything in their power to mitigate the
harmful and hazardous effects of tobacco farming, or any other activity within their value
chain. Unfortunately, almost all of the evidence does not speak in their favor. There are lots of
examples of environmental health impacts of tobacco farming that have not been taken into
account by tobacco companies so far. For example, agrochemical use in tobacco farming can
have desastrous effects: 'Studies have shown that tobacco absorbs more nitrogen, phosphorus
and potassium than other major food and cash crops, and therefore, tobacco growing
decreases soil fertility more rapidly than other crops...Unlike many food crops, tobacco
production offers no replenishment to the soil or to other parts of the farm ecosystem. The
biomass (stalks or plant residue) left after harvest is of no food value to livestock and poultry'
(Lecours et al., 2011).
Other problems for which tobacco companies have shown little concern, relate to the farmers'
protection while planting tobacco: 'LMIC (Low-to-middle income countries) farmers are
largely unaware of the toxicity of the products as well as the right dosage and safety measures
they should use...In Kenya, 26% of tobacco workers showed pesticide poisoning, while in
Malaysia, a third of 102 tobacco workers presented with 2 or more symptoms of pesticide
exposure' (Lecours et al., 2011).
There are also some other concerns such as deforestation and food insecurity. When it comes
to deforestation then, it is useful to mention the following findings: 'The average amount of
natural vegetation removed per developing country is more than 2000 ha or about 5% of total
national deforestation, while it rises, on average, to around a quarter of all deforestation in the
group of seriously affected producers' (Geist HJ, 1999). Food insecurity is of great concern as
well, due to the fact that tobacco fields have spread through the years at the expense of food
19

crops, that in turn make traditional food crops scarce thereby causing reductions in livestock
production (Lecours et al., 2011).
All of the before mentioned environmental effects of tobacco farming in turn lead to
environmental concerns of greater proportions such as the 'destruction of ground water
resources; sedimentation of rivers, reservoirs and irrigation systems; climate change; and
species extinction due to habitat fragmentation and overexploitation' (Lecours et al., 2011).
These environmental problems can be mitigated to some extent by the implementation of CSR
practices by tobacco companies, especially in the area of tobacco farming which is the most
critical activity within tobacco companies' value chain.
For example, one of the issues that is being taken into account by tobacco companies is the
crop diversification. Crop diversification would mean that tobacco companies would
encourage the plantation of other crops such as food crops for example, as long as these crops
do not directly compete with tobacco (Machado do Nascimento et al., 2012). However,
tobacco companies have not shown compliance with the regulations introduced by
Framework Convention on Tobacco Control (FCTC) so far, regarding crop diversification
(Machado do Nascimento et al., 2012). This disagreement puts tobacco companies and
organizations such as WHO in a tense relationship regarding many issues such as crop
diversification mentioned above or worker's safety measures for example. There are two
articles of FCTC- Article 17 regarding "Provision of support for economically viable
alternative activities" and Article 18 regarding "Protection of the environment and the health
of persons", to which tobacco companies should adhere (FCTC regulations, 2003).
Unfortunately, these regulations are only true on paper and the speed with which they are
implemented in low-to-middle income countries is questionable, as we could see that many
tobacco companies refuse to accept all of the regulations proposed by FCTC (example of noncompliance with crop diversification regulation mentioned before).
According to Machado do Nascimento et al. (2012), government should take a more active
role in low-to-middle income countries in supporting farmers 'by providing technical
assistance, financing and purchasing guarantees for the production of alternative crops to
tobacco.' In this way, farmers would become more protected and tobacco companies would
have to face greater institutional pressures that will eventually lead them to implement these
types of CSR actions.

20

3.4. The role of the Framework Convention on Tobacco Control (FCTC) in altering the
behavior of tobacco companies
WHO's Framework Convention on Tobacco Control was established in Switzerland in 2003
and it represents 'a binding international legal instrument which establishes broad
commitments and a general system of governance for an issue area' (WHO official web page).
Its major aims relate to price and tax measures to reduce the demand for tobacco, non-price
measures to reduce the demand for tobacco (such as protection from exposure to tobacco
smoke, regulation of the contents of tobacco products, tobacco advertising, promotion and
sponsorsip, etc.) and supply reduction measures (such as illicit trade in tobacco products, sales
to and by minors and provision of support for economically viable alternative activities)
(FCTC, 2003).
To this day, 168 countries signed the agreement which was later on ratified as well (United
Nations Treaty Collections, 2015). One of the countries that did not decide to be a party of the
FCTC is the USA, probably because 'the convention would attack the spread of tobacco in
poor and middle-income countries, the principal targets of the industry's plans for future
expansion. Success in the later endeavor, of course, would affect the financial well-being of
major multinational companies like Altria (parent of Philip Morris)' (Brownell and Warner,
2009). The USA could not also agree to sign the convention due to stringent impositions from
the WHO regarding advertising and promotion, stated in Article 13 of the FCTC: 'Each Party
shall, in accordance with its constitution or constitutional principles, undertake a
comprehensive ban of all tobacco advertising, promotion and sponsorship.'
As we could see in previous sections of this thesis, US tobacco companies have been using
misleading CSR practices that has led them to improved corporate image and reputation
building, as well as to the escape from additional regulation. These kinds of misleading CSR
practices that lead to such things are highly penalized by the FCTC and the WHO in general.
This can be supported by findigs of Hastings and Liberman (2009), who comment on the
guidelines of Article 13 of the FCTC by reporting the following: 'Specifically they conclude
that contributions by tobacco companies to other entities for "socially responsible causes" are
in fact a form of sponsorship; and that the publicizing of "socially responsible" business
practices, such as good employee-employer relations or environmental stewardship, is just
another variation on tobacco promotion. They therefore recommend that both be banned.'

21

4. Socially responsible marketing strategies for tobacco industry


4.1. Sustainability as the key driver of innovation in the tobacco industry
Nowadays, sustainability plays a huge role in fostering innovation. Unfortunately, many
companies are not aware of this fact and simply do not believe that sustainable practices can
lead to lower costs and greater revenues from either better products or new businesses created
(Nidumolu et al., 2009). Instead, companies reside on traditional value chains and profit
making, believing that sustainability is some kind of a tradeoff 'between the largely social
benefits of developing sustainable products or processes and the financial costs of doing so'
(Nidumolu et al., 2009). Tobacco industry is one of many industries that is still far away from
implementing sustainable practices. However, the study made by Nidumolu et al. (2009)
provides great insights for any type of industry sector, whether controversial or noncontroversial, to truly engage in such practices as they can clearly lead to the new path of
innovation.
There are five major stages through which

tobacco companies must pass in order to

successfully implement sustainability and make it a key driver of innovation. These stages
include: 'viewing compliance as opportunity, making value chains sustainable, designing
sustainable products and services, developing new business models and creating next-practice
platforms' (Nidumolu et al., 2009). The first stage is crucial for tobacco companies, as it deals
with adherence to legal standards and voluntary codes (Nidumolu et al., 2009). As Nidumolu
et al. (2009) indicate: 'it's smarter to comply with the most stringent rules, and to do so before
they are enforced. This yields substantial first-mover advantages in terms of fostering
innovation.' As we have seen from previous sections, tobacco companies have had hard time
adhering to regulations imposed by regulators such as the WHO, due to the fact that it
influenced directly their profits and business operations across countries. Perhaps examples of
HP and Cisco, that have adopted 'a single norm at all their manufacturing facilities
worldwide', may help tobacco companies in optimizing thier own supply chain operations and
capitalizing on economies of scale (Nidumolu et al., 2009).
The second major stage is making value chains sustainable, starting with supply chains and
continuing to operations, workplaces and product returns. When it comes to supply chains for
example, then tobacco companies can implement similar things that were done by Cargill and
Unilever: 'responding to people's concerns about the destruction of rain forests and wetlands,
22

multinational corporations such as Cargill and Unilever have invested in technology


development and worked with farmers to develop sustainable practices in the cultivation of
palm oil, soybeans, cacao, and other agricultural commodities. This has resulted in techniques
to improve crop yields and seed production' (Nidumolu et al., 2009). Tobacco companies can
contribute in the same way, simply by accounting for greater crop diversification.
Third stage in the sustainability process pertains to designing sustainable products and
services. In order to 'design sustainable products, companies have to understand consumer
concerns and carefully examine product life cycles...As they move into markets that lie
beyond their traditional expertise, they have to team up with nongovernmental organizations'
(Nidumolu et al., 2009). Tobacco companies can for example, introduce eco-packaging or
more environmentally friendly chemicals in the tobacco production. When deciding to
conquer some other developing market, they would have to carefully assess customers'
concens there and partner with some NGOs to help them find a way towards more sustainable
tobacco products in that particular market.
Fourth stage relates to developing new business models. In order to develop a new business
model, tobacco companies have to find new ways of doing business as well as improving on
their relationship with customers by meeting their needs in a different way (Nidumolu et al.,
2009). Customer needs can be satsified by performing detailed market research to see what
are the emerging trends that would potentially satisfy tobacco companies' future customers
(Kotler and Keller, 2011).
The final stage is the one that deals with the creation of next-practice platforms. There are
various types of next-practice platforms that have emerged lately. One of them is 'smart grid',
which is defined as a platform that 'uses digital technology to manage power generation,
transmission, and distribution from all types of sources along with consumer demand. The
smart grid will lead to lower costs as well as the more efficient use of energy' (Nidumolu et
al., 2009). Tobacco companies can use this type of platform in tobacco farming by optimizing
the energy use of machinery or some tobacco storages in developing markets.
To conclude this section, we can say that tobacco companies have to move towards alternative
ways of doing business if they were to be more sustainable. They should try to implement at
least one of these stages, as it will surely lead to new innovations and more sustainable future.

23

4.2. The importance of effective marketing communications for tobacco companies


As we could see from the previous sections, tobacco companies had many problems when it
comes to the effective communication with the public. Many industry leaders engaged in
activities of manipulating scientific studies, influencing the press and changing the
perceptions of public and regulators regarding second hand smoke in order to protect their
own profits and oppose additional regulation (Friedman, 2009). However, if tobacco
companies want to act as more socially responsible players in terms of their marketing
practices, they will have to take into account proper marketing communication tools. In other
words, they have to 'come clean' with all of the devious practices performed in the past and
they will have to inform the public, among other things, with any new type of either product
innovation or developing market that they plan to conquer.
For example, public relations is one of the communication tools that needs to be carefully
implemented by tobacco companies to achieve greater credibility with the public, that in turn
increases reputation (Watson and Kitchen, 2010). Many CEOs recognize the huge importance
of public relations and reputation building: 'It's the role of public relations to make sure that
the organization is getting credit for the good it does. Great reputations are built on doing this
consistently over a period of time in which a track record of delivering on promises and
engendering trust is evident to everyone. All members of an organization have a contribution
to make to building and sustaining reputation' (Murray and White, 2004). In this sense,
tobacco companies would have to report on all of the good things that they did in the past or
are planning to do in the future. In addition, they have to be prepared to communicate the
mistakes that they did and the bad marketing practices on which they want to improve. After
all, in order for any company to develop a good corporate reputation, "admitting mistakes" is
an integral part and it surely should not be omitted (Watson and Kitchen, 2010).
In building strong corporate reputation, tobacco companies will need help from all of the
internal and external stakeholders, as well as the CEO, who is defined by some authors as the
"chief communicator" whose reputation greatly contributes to company's overall reputation
(Watson and Kitchen, 2010). When deciding to communicate with the public either through
their company reports, or through live conferences, tobacco companies should put greater
emphasis on reporting the good and the bad things in relation to company's core business
operations and refrain from overemphasizing the "social responsibility" activities, as such
activities have been found to have negative correlation with reputation, by some authors
24

(Hutton et al., 2001). In addition, putting greater emphasis on such activities got them
accussed of pure reputation building and coporate image improvement, as seen in previous
sections.
Apart from public relations, there are other types of marketing communication tools such as
advertising, sales promotion, events and experiences, direct and interactive marketing, word
of mouth marketing and finally personal selling (Keller, 2009). All of these channels should
be integrated in order to receive 'the desired awareness and image in the minds of consumers'
(Keller, 2009). Many tobacco companies have managed to create brand awareness and
especially 'associations between young adult values and tobacco brands' (Hafez and Ling,
2005). However, those global marketing campaigns of major industry leaders in which they
form a connection between values and lifestyles to brand image, only creates greater
indignation from the side of regulators such as the WHO, since it increases the likelihood of
young adults to start or continue smoking while in the same time identifying themselves with
a particular lifestyle (Hafez and Ling, 2005). This is considered as irresponsible behavior of
tobacco companies, since they counter-argument the regulations that impose restrictions on
sale and promotion of tobacco products to most vulnerable groups, such as young adults
(Hafez and Ling, 2005). Therefore, the issue with "young adult" smoking should be
particularly adressed by tobacco companies in their reports and respective solutions to this
issue should be proposed.
In the following two sections, the thesis will focus on the marketing strategies of the socially
responsible product advertising, promotion, packaging and it will offer product innovation as
possible means to act more socially responsible.
4.3. Socially responsible product advertising, promotion and packaging
Tobacco industry has a long history of different types of tobacco product advertising,
promotion and packaging. Some serious advertising and promotional efforts started at the
beginning of the 20th century when the Camel brand was established, followed by the
appearances of other popular brands such as Lucky Strike, Chesterfield and Old Gold (Slade,
1997). At that time, tobacco companies advertised through mass media, such as television ads
and print media ads alongside billboard advertising (Slade, 1997). Due to heavy restrictions
on all forms of advertising applied by the Framework Convention on Tobaco Control (FCTC),
tobacco companies have found themselves in a relatively limited advertising environment

25

(FCTC, 2003). In other words, they had to search for alternative methods of advertising and
promotion to market their tobacco products.
Despite the fact that many different types of regulations have been introduced in recent years
from different regulatory bodies such as the WHO and the Food and Drug Association (FDA),
tobacco companies still allocate quite big amounts of money to advertising and promotional
purposes. For example, in 2000, 'tobacco companies spent $4.26 billion dollars or 44.5% of
the total expenditures on point-of-sale advertising and promotional allowances, which include
payments to retailers for prime shelf space and in-store displays as well as volume discounts
and promotional price reductions (buydowns)' , in the USA alone (Feighery et al., 2003).
These numbers imply that retail stores are the most favorable place for tobacco companies to
market their products, thereby acting as the primary channel of communication between
customers and tobacco companies (Feighery et al., 2003).
More detailed tobacco marketing expenditures on cigarettes and smokeless tobacco can be
seen in the figure below for the period 2002-2010 (Federal Trade Commission, 2012):

Figure 3- Tobacco marketing expenditures in America, 2002-2010 period

Furthermore, regulators and public health officials show great concern for the presence of
different types of marketing materials in the point-of-purchase environments, to which
children and young adults are most heavily exposed. For example, 'about 90% of all tobacco
marketing materials were located within four feet (1.3m) of checkout counters, the prime

26

location in most stores. In a survey of stores in 42 states conducted in 1999, 92% had some
form of tobacco point-of-purchase marketing materials' (Feighery et al., 2003).
Example of the tobacco promotion in the point-of-purchase environment can be seen below
(Richards, 2014):

Figure 4- Tobacco promotion in the point-of-purchase environment

Some other problems related to responsible marketing practices include the presence of
various types of flavored cigarettes, plain packaging opposition, and advertising and
promotion in Third World countries. When it comes to the presence of flavored cigarettes,
then we can say that these types of cigarettes have been created to target primarily youths,
with different flavors such as berry, lime, coconut, vanilla, mint, coffee and others, that 'mask
the taste of tobacco, thereby making it easier for new smokers, 90% of whom are teenagers or
younger, to take up the habit' (Lewis and Wackowski, 2006). Examples of such flavored
cigarettes include Brown and Williamson's "Kool Smooth Fusions" or RJ Reynolds' "Camel
Exotic Blends", defined as a product line that 'consists of 5 main-stay flavors and additional
"special" or "limited time only" flavors featured in promotion with seasons, holidays, or other
campaigns' (Lewis and Wackowski, 2006).
These flavored cigarettes have a distinctive packaging full of colors and various images to
appeal to younger population and in the same time acting as 'a travelling advertisement of the
brand when carried by a smoker' (Lewis and Wackowski, 2006).

27

This type of interactive packaging that targets young adults, created the need for a new type of
packaging, known as plain, standardized or generic packaging (Cunningham and Kyle, 1995).
Plain packaging is defined as the packaging type that removes 'the attractive, promotional
aspects of tobacco product packages. The only distinguishing feature remaining would be the
brand name, which would appear in a standardised font, size, colour, and location on the
package. Plain packaging would apply to all forms of tobacco products, to carton wrappings,
and to tobacco paraphernalia such as cigarette carrying cases and packages of cigarette papers'
(Cunningham and Kyle, 1995). In this way, tobacco product packaging would be standardized
so that it remains the same from brand to brand (Lewis and Wackowski, 2006).
Examples of plain packaging can be seen below (West, 2015):

Figure 5- Plain packaging

Cunningham and Kyle (1995) point out several major benefits of plain packaging such as:
reduction of tobacco consumption, elimination of package as advertising, reduction of the
impact of tobacco industry promotional efforts, enhancement of public education efforts,
influence on consumer perception of quality and taste, fewer products on the market, costs
government almost nothing to implement, reduction of smuggling. Other important
contributions of plain packaging mentioned in the study include their unappealing nature
(base color, no extraneous writing and messages other than those of health warnings) and the
inability of companies to differentiate their products (due to standardization in materials,
package sizes and opening methods).
The last important marketing responsibility problem to address is the advertising and
promotion in the Third World countries. Many tobacco companies see the opportunity in
28

conquering developing markets due to many factors such as lower levels of literacy in these
societies, less access to information about the possible health effects of smoking, women view
of smoking as a path to freedom and emancipation, people's identification with greater social
status when smoking Marlboro, etc. (Palazzo and Richter, 2005; Cateora et al., 2007). All of
these factors entice tobacco companies to continue their promotional efforts in developing
markets. Furthermore, tobacco companies tend to tailor the levels of tar and nicotine to the
tastes of local population, and in many cases these levels are almost twice as much greater
than in developed economies, leading to greater addiction and health effects (Cateora et al.,
2007). For example, 'a recent study found three major US brands with filters had 17
miligrams of tar in the United States, 22.3 in Kenya, 29.7 in Malaysia, and 31.1 in South
Africa' (Cateora et al., 2007).
In order to implement more responsible marketing strategies with respect to product
advertising, promotion and packaging, tobacco companies have to do several things. First of
all, they need to stop advertising in the point-of-purchase environments thereby contributing
to a decrease in tobacco use (Warner, 2002). Furthermore, they need to stop targeting young
adults and children through their flavored cigarettes alongside removing all of the different
types of flavors except from menthol in cigarettes, which is allowed by the Food and Drug
Administration (Lewis and Wackowski, 2006). Another crucial step is to 'adopt plain
packaging with graphic Canadian-style warning labels occupying half of the front and back of
each pack' (Warner, 2002). In addition, they need to stop targeting developing markets as
means to increase their profits as well as manipulating tar and nicotine levels across markets
(Cateora et al., 2007). Finally, they have to start gradually implementing all the other types of
restrictions that pertain to product advertising, promotion and packaging that form part of the
Master Settlement Agreement (MSA), the Framework Convention on Tobacco Control
(FCTC) and the Food and Drug Association (FDA).
4.4. Product innovation as socially responsible marketing strategy
Many tobacco companies have recently started to engage in product innovation, mainly to
boost 'brand performance, keep existing customers loyal and attract new ones', but also to
reduce harm and unpleasant smell of tobacco smoke (Euromonitor International Marketing
Research, 2011). The great contribution of product innovation to sales can be seen in British
American Tobacco (BAT) report from 2010, mentioned in the study of Gilmore (2011),
stating how 10% of sales came from product innovation, with half being the new types of
29

products and product variants that did not exist a year before. There are many ways in which
tobacco companies differentiate their new, alternative products. For example, some
companies, like BAT or Philip Morris (PM), decided to implement capsule filter technology
whose major goal is to improve 'freshness' of cigarettes (Euromonitor International Marketing
Research, 2011).
Others, however, have focused on reducing the smell of the burning cigarettes: 'JT's D-spec
technology claims to reduce unpleasant tobacco smoke odours but the key design feature is
the blue 'D' icon on the box signifying the use of D-spec technologies. 'D-spec' is Japan
Tobacco International's (JTI) proprietary odour-reducing technology which employs carbon in
the filter as well as a double layer of paper and added flavours in order to reduce odour
emitted from burning cigarettes' (Euromonitor International Marketing Research, 2011).
An innovative alternative to smoking can be seen in smokeless tobacco products whose
market share has rapidly increased in the past few years. Examples of such products include
PM's 'Marlboro snus smokeless tobacco brand' or Lorillard's 'Triumph snus' (Euromonitor
International Marketing Research, 2011). Other alternatives to conventional cigarettes include
nicotine inhalation products, such as the 'Vype', which was introduced by BAT in 2013 with
the aim of reducing harm from tobacco (BAT official website, 2015). Another example of
such an alternative may be JTI's 'Zerostyle Mint' inhalation product that represents 'a
'smokeless cigarette' with a tapered mouthpiece and a removable cap, with replacable tobacco
cartridges' (Euromonitor International Marketing Research, 2011).
An upward trend in smokeless tobacco marketing and sales can be seen on the graph below
for the period 2002-2010 (Federal Trade Commission- Smokeless Tobacco Report, 2012):

Figure 6- Smokeless tobacco marketing and sales, 2002-2010 period

30

5. Case study analysis: 'Philip Morris's attempt to move towards more


responsible marketing initiatives'
5.1. The development of the 'societal alignment' initiative

Encountered by many lawsuits, pressures from regulators such as the WHO and NGOs, Philip
Morris decided to implement a new type of initiative known as 'societal alignment' through
which it wanted to 'rebuild credibility with its customers, potential regulators and society at
large' (Friedman, 2009). Philip Morris started developing this initiative in the late 1990s, soon
after around 8 million internal industry documents were made available to public as a result of
litigation against the tobacco industry leaders (Yang and Malone, 2008). Philip Morris
became aware of the fact that it has been misleading the general public and their own
employees for more than a half of the century, and that a great shift is needed when it comes
to the socially responsible behavior (Friedman, 2009).
That is why, Geoffrey Bible, the CEO of Philip Morris at that time, founded a "Strategic
Issues Task Force" in May 1999, in order to come up with the general outline of the 'societal
alignment' initiative, that would be presented on the official company's web page later on
(Hirschhorn, 2004). "Strategic Issues Task Force" developed nine major goals, with most of
them dealing with stakeholder management (Hirschhorn, 2004). One of the most important
goals in developing the initiative, was "Goal 2" that states the following: 'Protect the rights of
adults who choose to smoke while continuing to work to reduce health risks associated with
smoking...reducing the health risks is one of the most important initiatives in the company'
(PM internal documents, 2001). Alongside these nine major goals, task force introduced the
new mission statement of Philip Morris: 'Our goal is to be the most responsible, effective, and
respected developer, manufacturer, and marketer of consumer products, especially products
intended for adults. Our core business is manufacturing and marketing the best quality
tobacco products available to adults who choose to use them' (PM internal documents, 2001).
Societal alignment initiative was considered to be a long-term strategy by the task force team,
and achieving it would require 2 things (Yang and Malone, 2008). First of all, some kind of a
research should be conducted in order to see what people think responsible business is and
what are their expectations when it comes to the implementation of such initiative from the
side of Philip Morris (Yang and Malone, 2008). The following thing that was required relates

31

to 'taking action to align our practices and programs with society's expectations' (PM internal
documents- Parrish speech, 2000).
In order to implement these goals presented by the task force team, Philip Morris founded a
"Corporate Responsibility Team" in 2001 with people coming from different departments and
divisions, such as: human resources, corporate responsibility, compliance, marketing
information, etc. (Hirschhorn, 2004). One of the strategies that was present within the "game
plan" was the intention to admit the hazardous effects of smoking on human health, by listing
the diseases that can be caused by smoking as well as ingredients present in all of the Philip
Morris's brands (Hirschhorn, 2004). This strategy has put Philip Morris one step closer to
truly implemeting corporate social responsibility as a part of its practices.
Another interesting strategy applied by Philip Morris as a part of the societal alignment
initiative, was the creation of the new name with which all of its companies can be identified,
Altria. Altria is derived from latin word "altus" meaning "high" and according to the pamphlet
from 2001, Philip Morris describes Altria as an entity that 'represents our continuing
commitment to being socially responsible and to aligning our thoughts and actions with the
common good of the communities we serve.' In addition, James Spector, head of the corporate
identity changes strategies and practice, confirmed the importance of Altria by saying the
following: 'While on the face of it, it is just a name change, we also have the opportunity to
highlight many of the initiatives that were already in place under PM Cos. Inc. but were
unable to breakthrough because of the name confusion. We can begin to focus attention away
from tobacco, and on to compliance, responsibility, philanthropy, environment, etc., all of the
things we want Altria to be identified with...' (PM internal documents-memo, 2001).
It is also worthwhile to mention that the societal alignment initiative was financed by the
"Societal Alignment Fund", founded in 1999 (Yang and Malone, 2008). This fund supported
all kinds of Philip Morris societal alignment projects, with one of them being the "Miller
Electronic Age Verification Program" whose major purpose was 'testing electronic age
verification machines to prevent illegal sales to minors of alcohol and tobacco' (Yang and
Malone, 2008).
In the following section we will see what other strategies were crucial in implementing the
societal alignment initiative and how it was implemented globally, as well as the final impact
of the initiative alongside some comments from NGOs and other regulators.

32

5.2. The implementation of strategies of 'constructive engagement' and 'management of key


relationships'

Philip Morris decided to implement the societal alignment initiative through 'constructive
engagement' and 'management of key relationships' strategies. Constructive engagement
strategy relies on the proactive engagement in dialogue with critics, political and social
leaders, society and others in order to see which issues affect Philip Morris's products and
operations, and how can these issues be solved to enable Philip Morris clear path towards
long-term success (PM internal documents- PM meeting, 1999). On the other hand,
'management of key relationships' strategy relies on keeping key stakeholders up-to-date with
all the information relating to company's operations as well as 'providing them with the ideas
and resources to represent our mutual interests proudly and confidently in their everyday life,
and in the public opinion and public policy arenas' (PM internal documents- PM meeting,
1999). Apart from these two major strategies on which social initiative was based, other
important principles stated by the Philip Morris, include: business involvement (intimate
knowledge of the business), outreach & openness, employee dialogue, professional
development and long-term thinking and planning (PM internal documents- PM meeting,
1999).
These two major strategies were implemented through research and public opinion data that
gave Philip Morris strong insights about the areas in its business that need improvement
(Yang and Malone, 2008). For example, Philip Morris conducted the "Responsible
Manufacturer Focus Group Study" with focus groups located in Chicago, Illinois, Fort Lee,
New Jersey and Boston where people indicated the things that, according to them, would
make tobacco company 'responsible' (Yang and Malone, 2008). Philip Morris, when
explaining the methodology behind this focus group study indicated the following: 'Each
group included 10 respondents...Respondents were screened to include a representative mix of
adults, tilted slightly upward on education and income. They were not designed to be "opinion
leader" or elite groups...Four groups were among non-smokers and two were mixed with
smokers and non-smokers. The groups were two hours in length' (PM internal documentsFocus Group Study, 1998).
The key findings of the study were to 'come clean' with the public in terms of the health
impacts of tobacco alongside addictivness of the products, to implement agressive anti-youth
smoking measures, to launch public education campaigns about the "dangers of smoking", to
33

make amends for past behavior, to develop new, alternative products, and finally, present
corporate values as indicators of responsibility (PM internal documents- Focus Group Study,
1998). For example, when it comes to anti-yoth smoking measures, respondents indicated that
they would like to see programs such as those that 'restrict sales/access by minors; no
advertising directed at minors; efforts to make sure retailers are enforcing laws; an anti-youth
smoking education campaign/public relations effort' (PM internal documents- Focus Group
Study, 1998). Furthermore, by new, alternative products, respondents meant some 'healthier'
or 'less harmful' products, such as: 'smokeless cigarettes, nicotine-free cigarettes and nontobacco cigarettes' (PM internal documents- Focus Group Study, 1998). Finally, within
corporate values indicating responsibility, respondents took into account 'charitable
contributions, community development, environmental policies, corporate culture' (PM
internal documents- Focus Group Study, 1998).
Philip Morris responded to public's requirements, although not to all of them, in several
different ways. For example, in 2000, it started airing various commercials through which it
publicized MSA (Master Settlement Agreement), that earlier introduced restrictions on youth
marketing and brand name sponsorship to which Philip Morris agreed (Yang and Malone,
2008). In this way Philip Morris sent strong messages to the public that it is able to act
socially responsible to some extent. Another example, that relates to fulfillment of public's
expectations of what responsible company should look like, can be seen in Philip Morris's
decision to update its website to 'agree with the overwhelming medical and scientific
consensus that smoking is addictive and causes serious diseases, including lung cancer, in
smokers' (PM internal documents- PM USA and PM International websites, 2000).
Lastly, Philip Morris responded by engaging in community development activities, such as
the one in Denver, Colorado, where it contributed to the community by providing grants to
some civic organizations and shelters, or by offering 'sponsorship and speakers for a Chamber
of Commerce breakfast, Hispanic Chamber of Commerce reception, and a luncheon for
Colorado AgInsights, an agriculture education organization' (Yang and Malone, 2008). The
whole event was covered by many media representatives so that people can see Philip
Morris's contributions to various communities in this region of the USA (Yang and Malone,
2008).
In the following sections we will see the implementation of this initative worldwide and the
level of impact it had on various organizations and public opinion in general.

34

5.3. Philip Morris's implementation of the 'societal alignment' initiative worldwide


The worldwide implementation of the societal alignment initiative started with the creation of
GCAC (Global Corporate Affairs Council) by Steven Parrish, the senior vice-president
corporate affairs (Hirschhorn, 2004). The GCAC consisted of '16 senior corporate affairs
executives from Europe, Asia, Mexico, North America and 4 senior executives from the
tobacco, food and alcohol companies. The group was to develop an overarching plan to
coordinate activities in each geographical area' (Yang and Malone, 2008). The major goals
within the global societal alignment initiative included: societal alignment, internal alignment,
functional coordination and professional development (PM internal documents- PM meeting,
1999).
Societal alignment goal focused on the implementation of various programs on 'market by
market' basis, where each market would be assessed and then the company would evaluate its
position within this particular market and see whether it responds well to public's expectations
or not (PM internal documents- PM meeting, 1999). Internal alignment goal relates to making
sure that all of the emoloyees and management are well informed and nurture the corporate
culture of social interaction (PM internal documents- PM meeting, 1999). Furthermore,
functional coordination relied on the allocation of financial and human resources across
various geographical areas around the world alongside proper coordination (PM internal
documents- PM meeting, 1999). Finally, professional development relied on developing
programs to support employees' professional development and their 'organizational capability'
(PM internal docuemnts- PM meeting, 1999).
The first such global societal alignment project was held in CEMA (Central Europe, the
Middle East and Africa) market regions, and it was named CEMA 2000 (Yang and Malone,
2008). It collected 'public opinion data in Central and Eastern Europe on issues including the
social acceptability of smoking, characteristics of a responsible manufacturer, attitudes
towards smoking and the image of Philip Morris and its local affiliate' (Yang and Malone,
2008).
CEMA 2000 was conducted in two research phases, it included seven countries as a part of
the market analysis (the Czech Republic, Hungary, Israel, Poland, Romania, Switzerland and
Turkey), yielding the following results: 'Over two-thirds of respondents in all countries
supported government control of tar and nicotine levels in cigarettes, larger health warnings, a
minimum age to purchase tobacco and increasing taxes to pay for health care costs. Wider
35

variation among countries existed in support for public smoking bans, level of concern over
health risks and second-hand smoke and the social acceptability of smoking' (Yang and
Malone, 2008).
5.4. The real impact of the initiative

Philip Morris measured the degree to which the initiative was successful through public
opinion research (Yang and Malone, 2008). For example, when it comes to the US public
opinion, then '68% wished there were some way to eliminate cigarettes and 75% wished there
were some way to eliminate "my" exposure to cigarettes' All in all, '62% felt that all cigarette
advertising should be banned, and 59% felt that the right and responsible thing for cigarette
companies to do would be to phase out of the cigarette business' (Yang and Malone, 2008).
All of these results indicate a great need for change and are pointed towards Philip Morris to
take its position as "socially responsible company" more seriously. Despite all of these
insights given by the general public, Philip Morris 'continued to selectively align with only
those public expectations that met its business objectives, seeking legitimacy through an
appearance of responsibility' (Yang and Malone, 2008).
Furthermore, the societal alignment initiative was not favorably viewed by Philip Morris
employees. Only 3% of the corporate affairs personnel believed that their collleagues outside
of corporate affairs division understood very well the need of strategies of societal alignment
and constructive engagement, compared to 51% who believed their colleagues did not (PM
internal documents- survey results, 2000).Several major internal obstacles were identified that
unabled the full implementation of the initative. These include: 'a lack of dialogue both with
the external world and internally within the company; various gaps between messages and
actions; a culture within the company of denial and cynicism; a lack of strong functional
linkages, sometimes with the business and certainly within the global corporate affairs
function; lack of process for integrating Corporate Affairs' Operating Principles with the
business' plans and operations (i.e. poor internal alignment)' (PM internal documents- Arden
13 meeting outcome, 2000).
In addition, some NGO representatives heavily criticized Philip Morris's societal alignment
initative and especially its name change to Altria, characterising Philip Morris as 'banking on
the short memory span of consumers and hoping that yet another PR campaign will win back
a US public that has adamantly rejected its deadly business practices' ( WHO, 2003).
36

5.5. Philip Morris's socially responsible marketing strategies


Philip Morris develops its brands through lots of marketing strategies that it successfully
transferred from developed countries to developing countries, such as Sri Lanka, China,
Hungary, Myanmar and Indonesia (Hafez and Ling, 2005). Philip Morris uses so called
'standardized' 'approach to promotions, using the same basic advertisements and promotional
strategies across markets' (Hafez and Ling, 2005). In order to implement more responsible
marketing strategies across markets, Philip Morris outlined several responsible practices it
uses:
a) 'We do not market to children or use images that are aimed at or have particular appeal
to minors'
b) 'We put health warnings on all our marketing materials and packaging'
c) 'All our marketing respects global standards of decency as well as local cultures,
traditions and practices'
d) 'We do not use cartoons, youth-oriented celebrities or models under age 25 in our
advertising'
e) 'We do not advertise on the front or back cover of any print publications for general
circulation'
f) 'We do not engage in product placement in movies or television- in fact, we routinely
decline all such requests'
g) 'We do not place names or logos of our cigarettes brands on any promotional items
that are likely to be used by minors' (PM official website- advertising and marketing,
2015).
On the other hand, when it comes to product innovation at Philip Morris, then we can say that
PM invested $650 milion in product innovation in the last 3 years, with current expenditures
amounting to $200 million a year (Fisher, 2014). One of the most praised tobacco product
innovation at PM, is 'an electronic device that looks like an old-fashioned cigarette holder,
which heats tobacco to just below the burning point to release the nicotine and flavor of
tobacco with fewer harmful combustion by-products like benzene and tar' (Fisher, 2014).
According to many public health officials, these e-cigarettes represent less harmful alternative
to smoking that will surely save thousands of lives, but they may also attract new nicotine
addicts due to the fact that e-cigarettes 'make smoking less scary to those who don't smoke'
(Fisher, 2014).
37

Apart from launching e-cigarettes and various other innovations such as 'Marlboro Touch',
'Marlboro Advance' and 'Marlboro W-Burst', PM actively participates in developing other
tobacco products (OTP), such as smokeless tobacco products (PM official website-brands,
2015). For example, 'since 2009, Philip Morris International and Swedish Match AB have
operated a joint venture company that has commercialized smokeless tobacco products,
outside of Scandinavia and the United States. Through this joint venture company, PMI sells
smokeless tobacco products, including Swedish snus' (PM official website- brands, 2015).
In order to monitor the development of product innovation, Philip Morris established the
"Product Innovation and Regulatory Affairs Comittee" whose major purpose is 'to monitor
and review the development of new product strategies, key legislative, regulatory and public
policy issues and trends affecting the Company and progress on societal alignment issues'
(PM official website-charter, 2015). In addition, Philip Morris 'is using scores of outside
researchers to study how consumers use the products and whether they will attract new
smokers. This is critical, because the public health impact of reduced-risk products is a
numbers game: If they are 80% safer and used by the 20% of US adults who smoke, that's a
public health win. If they create a bunch of new nicotine addicts, not so much' (Fisher, 2014).

38

6. Conclusion
To conclude, I would like to summarize all the important concepts covered in this thesis
alongside presenting my personal view on tobacco industry. First of all, we could see how the
tobacco industry's path towards implementing responsible marketing initiatives started.
Tobacco companies fiercely rejected any type of scientific study that found a link between
smoking and lung cancer and was conducted by independent scientists. Tobacco companies
decided to present their own scientific studies and instil doubt on any other type of study that
was not aligning with the goals of the industry and that would pose a threat on industry's
profits. In addition, many different lawyers were hired, as well as scientists and government
officials, whose major duties were to act on behalf of tobacco companies in order to supress
any kind of information that would prove detrimental to the existence of tobacco industry.
These types of actions were characterized as 'defensive' actions. Over time, however, tobacco
companies understood that they have to 'come clean' with the public regarding the hazardous
effects of smoking on people's health, so they started pursuing so called 'offensive' actions.
Through these offensive actions, tobacco companies wanted to improve their already eroded
corporate images as well as build reputation, while in the same time acting socially
responsible. Unfortunately, many of these offensive actions were not truly socially
responsible, due to the fact that they acted only as means to cover bad practices from the past
and enable doing 'business as usual'.
Tobacco industry, as well as any other type of controversial industry, is completely different
than other industries when it comes to the implementation of responsible marketing initiatives
or CSR practices in general. Tobacco companies have to take special care when dealing with
their own CSR reports or when engaging in corporate philantropy activities, as these types of
reports and activities often send messages of 'reputation building', 'image enhacement', or
'profit making'. That is why tobacco companies' philantropy activities should be focused on
contributions to specific areas that form part of their business.
In my opinion, they should give greater attention to the fight against contraband cigarettes,
show greater concern for effects of tobacco farming on the environment and the farmer's
position as well, start gradually implementing parts of the FCTC (Framework Convention on
Tobacco Control), abolish any type of youth smoking advertising, contribute to scientific
studies of the WHO and other health organizations, as well as forming partnerships with
certain NGOs. By doing these things, tobacco companies will become more socially
39

responsible players, at least to some extent. When doing a case study, I decided to focus on
Philip Morris, as it was the only company within tobacco industry that developed such an
initiative with global character and great influence on company's members. I see the societal
alignment initiative as an attempt to implement socially responsible behavior that could not
turn out to be successful due to the fact that Philip Morris has not changed its corporate
culture by sufficient degree, thereby enabling cynicism and denial about the new initiative,
within the company. Philip Morris employees just did not feel that this initiative can be
implemented, meaning that the corporate affairs division was not convincing enough in terms
of the values that relate to social responsibility. This was, in my opinion, division's greatest
failure, that eventually led to disastrous results of the initiative and, in turn, provoked greater
dissapointment and criticism from the regulators, public health officials, scientists and the
general public.
Therefore, I argue once again, that tobacco companies have to think carefully before
implementing any kind of 'socially responsible' activity or initiative, as these initiatives can
often lead to lower credibility and further corporate image erosion, if not taken seriously.
Philip Morris, as well as other tobacco companies, invests great amounts of its resources in
the product innovation in order to offer customers different type of experience by using
various kinds of flavours and inhalation systems. Through product innovation, tobacco
companies try to reduce harm associated with smoking and in the same time deny that they
use product innovation to acquire new customers. I personally believe that product innovation
acts as means to gain market share and expand customer base through different types of
substances that change the taste of cigarettes, making it appealing for those who are prone to
new experiences, to try out one or more of such 'innovative' brands.
Finally, I would like to say that despite the fact that tobacco is the product of lethal and
addictive character, there is still enough room for tobacco companies to form certain social
responsibility strategies that can help tobacco companies move closer towards acting as
socially responsible players that take care of all of its stakeholders and future generations.

40

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Table of figures

Figure 1- Tobacco farming share in developing and developed countries ........................................... 17


Figure 2- The profile of tobacco farming for the 2000-2002 period ..................................................... 18
Figure 3- Tobacco marketing expenditures in America, 2002-2010 period.......................................... 26
Figure 4- Tobacco promotion in the point-of-purchase environment .................................................. 27
Figure 5- Plain packaging....................................................................................................................... 28
Figure 6- Smokeless tobacco marketing and sales, 2002-2010 period ................................................. 30

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