The History of MarIboro

The Early Years

Back in 1954 the cigarette industry was dominated by non-filter brands such as Camel, Lucky
Strike, Chesterfield and Pall Mall . In fact, the non-filter segment accounted for 90 % of all
cigarettes sold in the U .S . during the early fifties .

Marlboro, on the other hand, was one of those non-filtered cigarettes that made up part of the
other 10% of volume at the time . It was an extremely mild cigarette liberally blended with
Turkish tobaccos and had been in existence since 1924 . Positioned as a women's cigarette, the
Marlboro of old came with a choice of ivory or red "beauty tips", that, among other things,
helped to mask lip-stick traces .

Advertising for the brand claimed that Marlboro was as "Mild as May", and that, smokers
need never feel "oversmoked" with a Marlboro . The brand held less than one quarter of one
percent market share . At the time, there were only six other filter brands available : L&M,
Parliament, Tareyton, Viceroy, Winston and Kent .

Enter the Red Roof a-n_d L.eo Burnett

In 1954, Philip Morris saw an opportunity to enter the filter segment with a new Marlboro
blend . It was stronger, more flavorful and cork-tipped - all appealing to male consumers . The
new Marlboro came wrapped in a revolutionary new package : the now famous flip-top box . It
was bold, masculine and eye catching with its red and white stripe design . The flip-top box
was the first major change in packaging in over 40 years . After test marketing, Philip Morris
new they had a winner, and immediately patented its design .

To reintroduce this cigarette, Philip Morris chose a new advertising agency : the Leo Burnett
Company of Chicago . At the time, Leo Burnett was a considerably small agency, especially
when compared to the larger shops on Madison Avenue in the Big Apple . Philip Morris
executives loathed the Madison Avenue agency-types . They wanted a company with more
grassroots . They had seen work produced by small agency in Chicago called the Leo Burnett
Company, and although Leo was already a legend in the advertising community, it was his this
work and Leo's humble, midwestern charm that attracted Philip Morris .

One of the first contributions Leo made to the Marlboro business was to recommend a change
in the product's packaging to the now infamous "red roof" design known throughout the
world . It was a risk to suggest changes to packaging (removal of stripe, capitalization of
branding) - afterall, PM was only looking for advertising for the brand . But his suggestions
were an instant smash with the folks at Philip Morris . That very same day, Leo met with
Philip Morris executives, who, at his request, had spent the night in Chicago, to unveil our
very first ad for Marlboro, created in less than 24 hours out at Leo's farm .

(cont . )

Source: http://industrydocuments.library.ucsf.edu/tobacco/docs/rhcp0124 . .
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The ad featured a cowboy, chosen because he instantly connoted a recognizable masculine
symbol . The ad seemed to have all the elements of a big idea-going for it - an appeal to the
largest segment of the smoking population - men - with the heroic figure of the cowboy, and
the bold new packaging . Copy introduced the brand as a new entrant from Philip Morris that
"delivers the goods on flavor ." It was an instant success . In fact, Leo and PM executives were
so pleased with this first attempt that it ran, virtually unchanged, as the very first Marlboro ad
from Leo Burnett .

Sales Begin To Take-Off

In less than 30 days, Marlboro became the number one brand in greater New York. It passed
all other brands - a notable achievement considering that Philip Morris, at the time, was the
smallest company in the cigarette business .

Although the very first ad featured a cowboy, the "you get a lot to like" campaign in 1955-56
also featured may different kinds of men : they were strong and masculine, worked at
interesting, action-filled occupations, and wore tattoos that hinted at romantic pasts .

With growing public awareness and acceptance of the Marlboro Men, sales took-off, from a
mere 18 million cigarettes in 1954 - to 6 billion in 1955 - to more than 20 billion in 1957,
when Marlboro sold three times as many cigarettes in a day as in the entire year of 1954 .

Through the late fifties the campaign evolved several more times from "Where's there's a
man, there's Marlboro" in 1957 to the "Settle Back" series, in which our Marlboro Men were
seen relaxing and enjoying their cigarettes . For a time, ads even featured athletes like Paul
Horning of the Green Bay Packers, with PM one of the first sponsors of professional football .

Within just a few years, the creative concept of the Marlboro Man and what he stood for had
been firmly established . He had attracted millions of smokers to the cigarette that "delivers
the goods on flavor" . And because the product lived-up to that promise, Marlboro was well
on its way to becoming the greatest success story in tobacco and marketing history .

The Marlboro Man Finds An Identity & A Home

By 1962, however, the Agency found ourselves asking just who was this Marlboro Man . At
the time he was represented by a mixture of diverse and appealing types, but as such, we
desired a single, simpler expression of masculinity . The solution was found in the American
Cowboy . . .the very first and original Marlboro Man .

In a world that was becoming increasingly complex and frustrating for ordinary folk, the
cowboy represented an antithesis : a man, whose environment was simplistic and relatively
pressure-free and whose lifestyle represented the American ideal .

(cont . )

Source: http://industrydocuments.library.ucsf.edu/tobacco/docs/rhcp0124
And in 1963, Leo felt the need to give this man a home : a greater, vast place : Marlboro
Country . He showed up in New York, in Yankee Stadium and against backdrops of other
great American landmarks . We wanted to say that wherever men smoked for flavor, that was
Marlboro Country .

The final refinement in the evolution of the campaign was to put the cowboy in his own true
world - the American West . This natural world was as rugged and dramatic as he was . And
against this backdrop, he became even more believable and more heroic .

Sales Continue to_Soar . Despite The Absence of Television

Spurred by this powerful and appealing combination of elements, Marlboro sales grew at an
even faster pace during the 1960's . From the introduction of Marlboro Country in 1963, the
average increase for the rest of the decade was more than 10 percent per year .

The strength and staying power of the Marlboro idea was again demonstrated when cigarette
advertising was banned from television in 1971 . Prior to the ban, television had been the
major medium for most cigarettes, including Marlboro . Without TV, some brands suffered .
But the Marlboro Man and Marlboro Country were so firmly established that a smooth
transition from broadcast to print and outdoor was accomplished .

In the place of memorable commercials came a continuing series of powerful portraits,

sweeping vistas and action-filled moments-in-time .

Marl oro . n s Its •in o

"Marlboro Country" had become part of America's mental geography . With this consistent
presentation of a single-minded image, the Marlboro Man had been established with the
American smoker . . .and Philip Morris had built a solid foundation upon which they could
expand and line-extend in order to take advantage of changing consumer tastes and attitudes .

So in 1966, full flavor Marlboro Menthol was launched in a King-sized soft pack using
Marlboro Country photography of a greener, lusher nature to reinforce the menthol benefits of
a cool, fresh, smooth smoke .

In 1967, along came Longhorns 100s (later called Marlboro 100s) . A new, longer length, full
flavored brand with a gold "red roof" design .

As we moved into the early seventies, full flavor demand began to somewhat stabilize due to
consumer's interest in tar and nicotine content . Spurred by consumer demand and local threats
of the implementation of "tar and nicotine" taxes, Marlboro launched its most successful line
extension ever - Marlboro Lights . A low tar companion for the cigarette that stands for
flavor .

(cont .)

Source: http://industrydocuments.library.ucsf.edu/tobacco/docs/rhcp0124
With the introduction of Marlboro Lights, the brand's character'expanded into slightly softer,
more gentle imagery, all the while utilizing the familiar, consi6tent themes of the roof, the
cowboy and the country .

Au boro Becomes
During this time the brand grew significantly and 1975 Marlboro overtook Winston to become
the #1 brand in the U .S . and by 1982 Marlboro Lights had established itself as the #1 selling
low tar cigarette .

Marlboro Racing Hi c Th ir ui
In 1986, Marlboro Racing began, proving that the Marlboro concept could be successfully
extended into other equities consistent with the theme of heroic masculinity . Racing, as well
as other promotions began to add more value to the trademark, and have helped to further
expand the world of Marlboro in consumer's minds . In 1990, Marlboro left Patrick racing to
team-up with Roger Penske to form Marlboro Team Penske . They began competing on the
Indy Car tracks, creating excitement for the brand by becoming one of the most-recognizable
and successful teams in the series .

Line Extensions Continue

Over the years, Marlboro continued to use line extensions to support and address more
changes in consumer's tastes and attitudes, creating "new news" for the brand . . .and fueling it
growth .

In 1988, Marlboro launched yet another, line extension in the Menthol category, but this time
with a Lights product to capitalize on the fast growing low tar segment . New advertising for
the Marlboro Lights Menthol brand was still in brand character and yet was distinctive
enough to separate and break-through the clutter to announce to consumers that there was, yet
again, another new product in the marketplace . The advertising featured dramatic photographs
of horses charging through water in lush green areas of Marlboro Country .

By 1990, Financial World magazine was touting Marlboro as the most valuable brand in the
world .

grands Begin To Emer=

The 1980's and 90's were a time a big change in the U .S . ; a decade of extravagance led to a
decade of economic concern and value consciousness . Private label products, never that
popular among American consumers, became acceptable and even preferred, thus leading to
price promotion from many brand-name products across many categories .

(cont . )

Source: http://industrydocuments.library.ucsf.edu/tobacco/docs/rhcp0124
Ma_rlboro Launcbes Largest Value-Added Progr rn - Adv .n "ir T am
Although Marlboro still had the lion's share of the cigarette market (62 % of PM's cigarette
volume), it began to experience heightened competition from the discount segment in the late
80's . In an effort to combat these aggressive pricing tactics, PM responded to these pressures
by adjusting the value equation and leading a renewed investment in retail visibility and
"mega" consumer promotions . With that, a value-added continuity program called the
Marlboro Adventure Team (MAT) was launched .

MAT's primary objective was to reduce outswitching by rewarding loyal Marlboro smokers
with high-quality MAT ' gear' in exchange for package UPC's, or MAT ' miles' as they are
known to consumers . Marlboro smokers also entered a sweepstakes to win a once-in-a-
lifetime, action and recreation trip through Marlboro Country .

MAT was hugely successful, yet despite its efforts, market conditions in early 1993 dictated
the need for an even more aggressive measure to regain valuable category share points (valued
at approximately $500MM per point) .

Marlboro Friday - PM Slashes Price

In January, 1993, Marlboro volume continued to erode to a 22 .0 share (off by 4 points) . PM
was forced to take action . On the marketing front, the MAT was well on its way to becoming
the largest and most successful consumer promotion ever launched . However, MAT was
evidently not enough for consumers to justify the 93 % price gap between Marlboro's premium
price and the lowest-priced discount brands . Smokers continued to leave the franchise and
trade-down to discounts, leaving PM no other options than to reduce the price gap between
Marlboro and discounts to a more reasonable and acceptable consumer threshold of between a
40 % and 45 % price differential .

On April 2, 1993, in what has become known as "Marlboro Friday", PM announced price cuts
of almost $ .40 per pack on the entire Marlboro line . Other premium brand manufacturers
followed Marlboro's lead and reaction on Wall Street was swift and widespread as PM and
other tobacco manufacturers' stock nose-dived . The effects of the Marlboro price reduction
were more widespread that anyone had anticipated . In fact, the effects were so severe that
several other non-tobacco related packaged goods' manufacturers' stock prices also began to
fall . The future of premium brand products, the media predicted, was sure to be dying .

Onward and Upward and Another Milestone

Fortunately, the price cuts were effective . Consumers quickly returned to Marlboro, given
that it was easier for them to justify the more modest price gap . Marlboro was able to recover
lost premium brand share, resume share growth (thereby maintaining Marlboro's equity and
scale) and achieve steady and long-term profit growth . In fact, as March ' 95, Marlboro is
currently at its highest share in the history of the brand at 30 .7 pts . In addition, discount share
has declined (including PM's discount brands), allowing PM to enjoy stable growth on its
more profitable premium brands .

(cont . )

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 . 4 .
Marlboro Launches CoLntry Store & Others '
The success of the MAT program and overwhelming positive consumer response led to yet
another continuity program : The Marlboro Country Store, which again gave consumers the
opportunity to own a piece of Marlboro Country by collecting miles . Currently in its second
phase, the success of this program has proven to maintain consumer loyalty and has virtually
ensured the continuation of similar programs for years to come .

Together, these tremendously successful promotions, along with others such as the Marlboro
Van and "Best of the West" sweepstakes, have helped to expand the image of Marlboro and of
Marlboro Country, creating a world that's bigger than it was before, while remaining true to
the core values that firmly established the brand . . . freedom, independence and masculinity .

Yet More Line Extensions

True to its commitment to satisfy consumers changing tastes, Marlboro continues to explore
new areas to expand its business . To that end, PM developed Marlboro Mediums in 1991,
offering low tar conscious consumers (who desired a more masculine image that Lights) a
choice between Marlboro and Marlboro Lights . Ads for Mediums focused on using cowboy
gear and props as a backdrop for a new, arresting and masculine red roof designed package .
Finally, Marlboro also offers Marlboro Ultra Lights on a limited basis in three markets .
Because of Ultra Lights possible lack-of-fit within the more masculine portfolio of Marlboro
products, the brand will most likely not roll-out nationally .

Marlboro Dominates
To give you an idea of just how dominant Marlboro is, and the magnitude of its leadership,
Marlboro is two and a half times larger that its nearest competitor - Winston . It is the most
valuable brand in the world .

In fact, if we look at the top ten packings, all of the non-menthol Marlboro packing's : Reds
(full flavored), Golds and Lights, King Size and 100s, all individually rank within the top ten .
It simply doesn't matter how you slice-up the industry, Marlboro is the #1 brand . . .

- Among Full Flavor smokers

- Among Lights smokers
- Among Box smokers
- Among Soft pack smokers

As you night expect, Marlboro has the largest share of male smokers . What you may not
expect . nor understand completely at this time, is that it also has the lion's share of female
smokers . It just goes to show how universally appealing the brand image is .

Additionally, not only does the brand appeal across the sexes, it also transcends age . N
Marlboro is the brand of choice among today's young, legal age adult smokers - the future of 0
.~
the franchise . ~

(cont . )

Source: http://industrydocuments.library.ucsf.edu/tobacco/docs/rhcp0124
Z'he Future Of The Brand -
The marketing and advertising of Marlboro cigarettes is a constant challenge . Consumers
have come to expect "new news" from the brand, and Philip Morris and Leo Burnett keep
right on delivering .

Marlboro's ongoing evolution and expansion of a single idea has resulted in the most
successful, enduring and recognizable campaign in the history of advertising . It has kept the
brand alive, vital, and aspirational, while remaining compelling and relevant thorough the
years .

Alex, the obvious question you may be asking yourself is, "what's left to possible do"? To
that end, we have to be mindful of the legacy that been passed on to us . We continue to
explore and expand our boundaries and as a recent PM executive put it "never get stuck in the
hoof prints" . Anything goes in terms of exploring and seeking our new ideas - so long as they
are in brand character and fit a strategic purpose - and there is always a new level to which we
can rise . If you doubt that, there are some very exciting and innovative new concepts
currently in development, all of which I'll share with you once your on-board .

In Closin,g So this is its story . It's a text book case of how a good product, a good package, a good
advertising campaign, a good read on tnarket trends and an aggressive commitment to
excellence and innovation on the part of Philip Morris and Leo Burnett can build a brand from
less that a quarter of one percent market share to the best selling consumer packaged good in
the world .

But more than that, the Marlboro Man has become a symbol of the American Ideal . . .a man
that other men would like to be like - a kind of man that women would like to be with . He is
the quintessential "man's man" and similarly, Marlboro Country is not just a geographical
location, it's a state of mind .

Marlboro is more than just another cigarette brand - it has become part of the American
culture . It has a personality all its own and smoker's see the brand as their friend - a badge
they're proud to wear and lay down on the bar.

As a leading national magazine was quoted to say, "Smoking Marlboro is kind of a psychic
down payment on achieving the American Dream" .

Source: http://industrydocuments.library.ucsf.edu/tobacco/docs/rhcp0124
U3/14/95 15 :08 %T -++-+ PY 8TS FLOOR 0003

MAVJ .BtsR'a PACRING HISTQRIt

1955 Marlboro introduced nationally in flip-top box with cork-

tipped Rselectrate" filter .

1958 Marlboro introduced in soft pack .

1958 Marlboro re-engineered to improve filtration .

1962 "Marlboro Country" ad slogan is introduced in selscted

iaarkets .

1963 "Marlboro Country" advertising campaign makes its national

debut .

1965 Cigarette Labelling and Advertising Act requires Surgeon

General's Warning on cigarette packaging .

1966 Marlboro menthol cigarettes introduced in soft pack .

1967 Marlboro 100's launched nationally in Gold soft pack .

1967 Marlboro 100's introduced in the flip-top box .

1970 Marlboro 100's Red pack test marketed in Seattle and

Spokane .

1970 Ventilation was added to the Marlboro 100's product .

1970 Cigarette companies voluntarily agree to display "tar and

nicotine" data in all advertising .

1971 (Jan . 2) Cigarette TV and radio ban goes into effect .

1972 FTC requires clear and conspicuous disclosure of the

Surgeon General's Warning in all advertising .

1972 Marlboro Lights introduced in soft pack .

1972 Marlboro ends the year as the world's best-selling

cigarette .

1972 Marlboro 100's Red soft pack test m .arkatQd in Oklahoma .

1973 The CAB orders commercial airlines to separate smokers and

non-smokers .

1975 Marlboro becomes number 1 in U .S . in addition to best

seller in the world .

1975 Marlboro Menthol Lights test marketed in Green Bay and

Grand Rapids .

/ch : cpz.mpacr .cmo

Source: http://industrydocuments.library.ucsf.edu/tobacco/docs/rhcp0124