Philip Morris: Between a Rock and a Hard Place

by Peter Galuszka

It’s been a very long goodbye. Faced with billions of dollars in health-related lawsuits and huge public relations problems in 2008, cigarette giant Philip Morris split itself in two very different companies.

It reminds me of the scene in Stanley Kubrick’s brilliantly sarcastic war move, “Full Metal Jacket.” A colonel stops Private Joker and demands to know why he has born-to-kill and peace symbols on his helmet at the same time. “What does it MEAN?” growls the Colonel. “I dunno, Sir,” replies Private Joker, “I guess it’s the Jungian thing, you know, the duality of man.”

Duality of cigarette making is more like it. Back in 2008, Philip Morris split itself into a Swiss-based international firm while Richmond got Philip Morris USA and its holding company, The Altria Group. The latter is still a potent force with 3,750 local workers and a big honey pot of largess.

Philip Morris International boosted sales by creating such nicotine laden smokes as “Marlboro Wides” and Marlboro Max 9,” which sold in Third World countries that didn’t have the bucks or the court systems to challenge cancer causing products.

Back here, Altria had broadened into other products like wine and still made cigarettes while pretending it really didn’t want to.

It closed Marlboro plants in Kentucky and North Carolina and centralized cigarette making in Richmond. Henrico County also got the Altria headquarters, which slipped down from Manhattan like a hound with its tail between its legs after all but getting booted out of New York City. If you checked out their Website at the time, it pretty much urged you not to buy its products. Go figure.

Well, 10 years later, it seems it is time to pay the piper. Both firms have seen cigarette sales slide, Altria expects domestic sales drops off from 4% to 6% through 2023. Philip Morris International, despite its ability to sell more addictive products with fewer constraints, is also seeing sales declines.

So, they are thinking about an all-stock merger. Some analysts like Bonne Herzog of Wells Fargo Securities, who likens the world market to a “global arms race,” thinks a merger is a good idea because it gives companies time to think through the “what’s next” after tobacco, at least the smoking kind. Altria has come up with new, smokeless snuff and put down #12.8 billion for Juul, which controls two third of the e-cigarette market. In a hint of what may come, it also put down $1.8 billion for 45 percent of Cronos, a Canadian cannabis product maker. There are other products in the pipeline, too.

This marriage isn’t apparently made in heaven since stock shares of both Altria and Philip Morris International tumbled when news of the possible merger came out, other analysts note. There’s no question the firms must continue to move away from cancer-causing smoking tobacco but how to do it is problematic. One former source at Altria told me that the firm had been very reluctant to get into e-cigarettes and vaping because they were unsure of the health effects, regulation and liability. At the time, e-cigarettes were funky-looking contraptions made out of cheap materials in China with no real oversight. Stores were made to resemble ’60s head shops. They were much safer than smoke real cigarettes, we were told.

Those concerns are hitting home now that a strange lung illness has been striking vaping, notably Juul, users so much so that there are various government probes. On some occasions, e-cigarette devices have blown up, either killing their users or blowing out their teeth and jaws.

Branching into marijuana has been a pipe dream since the 1960s but the word is that top executive at Philip Morris International aren’t turned on to the idea.

So, where does that leave us? Not in a very good space, it seems. Tobacco has been a dominant crop in Virginia since 1619 but it has slowly gone away. Being still a very conservative place, Richmond has hung on to the golden leaf just as long as it could. Altria still remains a major lobbying force. Its name is on plenty of entertainment venues. For how much longer? Who knows?

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13 responses to “Philip Morris: Between a Rock and a Hard Place

  1. As as girl of 16 who sat in front of the mirror perfecting the picture of the ‘sophisticated woman’, and became a pack and 1/2 a day smoker for the next forty years, your article was very interesting. The thing that it really brings home for me is that this fabled ‘market’ might be very good at expanding the economy with new products, but it is absolutely awful at taking down established industries.

    First, we could use a bit more of the European ‘precautionary principal’ to sort out what could cause health and environmental harm before the corporations making new products become entrenched and all powerful. And second, where is our new Teddie Roosevelt? Corporate power’s bottom line is making our decisions and they evidently have the political power, through money, to ignore any toxic effects on our health and our environment and even the future of the earth.

  2. As irritated as I get at that utility I like to pester, it doesn’t kill people for profit. It provides a vital service that is the basis of our economy, and a reputation for customer service protects it from the charges of profiteering. These guys? No social or economic value whatsoever. If we were serious about 1) health care costs and 2) improving the economic condition of poor folks, we’d tax or regulate them out of business ASAP. We are not really serious about 1 or 2…..

    Sorry, No TR on the horizon, and BS is a poor substitute.

  3. re: ” … European ‘precautionary principal’ to sort out what could cause health and environmental harm before the corporations making new products become entrenched and all powerful. ”

    Folks might recall how the Cigarette companies claimed they were not harmful, had commercials with Doctors recommending them and then launch a campaign against science and scientists – which later was used in court to extract the billion dollar settlement against them.

    So we KNEW that cigarettes were bad and yet , just like with the Climate and RGGI now – there is a campaign to convince folks that it’s a hoax….

    We’ve followed the same process with a LOT of toxic chemical and coal – i.e. l “clean coal” and all that rot.

    so we know……. but those who profit from those substances are always quite good at PR and attacking the science that implicates them as harmful.

    Today we’re like cigarette smokers who are in denial that it could be harmful to them – much less give them cancer…..

  4. Well the newer vaping technologies (JUUL etc) are probably taking away market from regular cigarettes. I have not heard about any lung injuries from vaping, but the marketing to teens is an issue.

    • But it is saying bad hygiene and/or smoking homemade bootleg marijuana products. There was a very recent 1-hr documentary on CNBC (which is where I first heard about JUUL). Other than nicotine-addition, the experts were suggesting vaping is a “safe” and less costly way to smoke (for health insurance). Anytime you are putting a non-sterile item in your body, you have all kinds of microbial risks.

  5. Thanks, Steve. I’ll have to figure out how to link

  6. My guess is that you are smoking a raw joint you are getting a lot more bad stuff and from s filter cigarette

    • In April 2018, my wife and I walked through Haight-Ashbury and into Golden Gate Park on the first 420 day since California legalized pot. There was so much “smoke” in the air that it seemed half the marijuana crop in the state was burning. It did irritate my nose and eyes some, even though I’m pretty libertarian on Pot. During the same trip, I saw numerous posters urging voters to ban outdoor vaping. Go figure!

  7. We’re mingling and mangling here. Yes, Altria is disgusting. Yes, they bought off the Imperial Clown Show in Richmond and Virginia has the second lowest per pack cigarette tax in the country. Yes, the Imperial Clown Show in Richmond has even legislated limits on how much additional tax counties like Fairfax can add to a pack of cigarettes. Yes, taxpayers are subsidizing Altria with Medicaid costs for smoking related injuries. Yes, the farmers who grew the cancer causing poison were paid out the tobacco indemnification fund money – even if they no longer reside in Virginia. Reward the producers rather than the victims. What’s new? This is Virginia.

    However, we then get to vaping. Are we talking about vaping tobacco extract or marijuana extract? Selling tobacco extract, as far as I know, is legal everywhere. Selling marijuana extract is legal in 10 states. So, how do people in places like Virginia (where marijuana is completely illegal) get marijuana extract for vaping? It’s either made legally and transported illegally from a marijuana state or made illegally. How many times have we seen the illegal manufacture of illicit drugs end up poisoning the users? Fentanyl anybody? God only knows what is in illegally manufactured marijuana extract. Anybody purchasing bootleg marijuana extract and vaping it is rolling dice with their health. If you must illegally use marijuana (and I don’t suggest you do) buy the plant and light it up!

  8. OMG, filling your lungs with any substance beyond those in Mother Nature’s user specs can’t be benign. Whatever is going on with these patients, it can’t just be those using marijuana or other illicit drugs along with the nicotine juice.

  9. Memories…
    back in 1974 my first intern offer as a junior in Chem Engr at Penn State was Philips Morris in Richmond. Might have taken that intern job, but I got some other offers at the last minute. There had been a recession but it was just ending.

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