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Emerging markets & free trade in carcinogens

I posted earlier this year on the strong growth in cigarette carcinogen sales despite the financial crisis.  The world’s largest carcinogen producer, Altria, had earnings per share growth of 10% in 2008 and was increasingly moving into the ethyl alcohol market.  Altria also split into two businesses in March 2008 Phillip Morris International (internationally-based) and Altria (US-based).  The internationally based PMI is starting off in markets where it has relatively low market share but where restrictions on smoking are lax. The US based Altria has a substantial market share via its Marlboro product (also now marketed internationally via PMI) but faces increasingly tight restrictions on the distribution of a product that is known to kill.  As I mentioned earlier Altria is increasingly moving into the smokeless tobacco (‘snuff’) market in the US.

Last August PMI launched Marlboro in China which is home to one third of the world’s cigarette smokers.  He has also launched this product in the lucrative Indonesian market where the product is being marketed to youth at sports events and rock concerts. These developments are tracked in an excellent Business Week article.

These developments target an exhaustible resource since emerging markets are themselves increasingly adopting anti-smoking policies. There are now public smoking bans in China.  But smoking is an ingrained part of the culture of many such countries and it will take some time for the anti-smoking message to bite. This is PMI’s window of opportunity.

Of course having a background for 50 years in the US-based tobacco wars will not hurt PMI either. The firm has considerable experience in deceiving the public and running rings around regulators. It has a comparative advantage in deceit.  (In emerging nations I would take these skills seriously and ban PMI products simply for the reason that one could reasonably expect the PMI deceit to be effective!)

It is a pity about the 5.4 million people who will die around the world this year from cigarette-related causes.   But good business strategy and, in times where the global economy is not strong, it is good to see at first-hand the benefits of globalisation.

4 comments to Emerging markets & free trade in carcinogens

  • John Mashey

    Nit: “marketed to mouth at sports events”
    marketed by mouth?

    re: Business Week: it’s nice to hear Camilleri is being socially responsible. It’s hard to believe any cigarette company exec is unaware that they must addcit children, nto adults, since the latter can quit.

    1) I assume you were the hc in disuccsion at johnquiggin, so I won’t repeat that.

    2) But I’d add:
    Teen brain changes increase cigarette addiction from NewScientist in 2003.

    And a direct pointer to that fine RJR product Twista Lime.

    and WHO on youth smoking, which offers a nice quote from a 1981 PMI memo.

    3) For anyone who wants a fine history, Allan M. Brandt’s “The Cigarette Century”.

    4) And there’s a subtle connection with AGW, via ,a href=”http://www.who.int/tobacco/statistics/tobacco_atlas/en/”>WHO on tobacco, i.e., deforesatration. Note that besides cutting trees for space to grow tobacco in some places, wood is sometimes used to cure the tobacco.

    As of that chart, Indonesia was #7 in tobacco production.

  • John Mashey

    Oops, I forgot one tidbit:

    According to Allan Brandt’s book, the architect of tobacco’s PR strategies in the 1950s was John Hill, of powerful PR firm Hill & Knowlton. H&K was a defendant in many tobacco suits, alongside PMI.

    p.166: “He had quit smoking in the early 1940s for health reasons…”

  • hc

    Brandt’s book is excellent and the best I have come across although there is much good material out there. the main point I picked up from Brandt was that the tobacco companies always seemed a jump ahead of the regulators. Labelling laws and even the great settlement turned out to be advantageous for the companies.

    Remember the companies survived untouched after the major health reports of the early 1960s. Until the end of the century they were still denying that smoking was addictive although their internal reports in the 1950s showed that they understood that then.

  • Wonderful post – I was working on a similar article which I will probably still take a shot at, but from a slightly different angle. Thanks for sharing this with your readers…I’m sure I’m not the only one who appreciates it.