Court order plays havoc with cigarette branding
Marlboro Gold, anyone?
Major cigarette-makers face a daunting marketing challenge in the wake of a federal court ruling last Thursday: changing the name of some of their biggest-selling brands.
Unless overturned on appeal, the court ruling will force companies to abandon the adjectives "light" and "low-tar," powerful marketing tools now used in many cigarette brand names. Altria Group Inc.'s Philip Morris USA will have to rename its Marlboro Lights and Ultra Lights - alternatives include Marlboro Gold and Marlboro Silver, both used in Europe - and Reynolds American Inc.'s R.J. Reynolds Tobacco Co. will have to rename its Camel Lights.
The dilemma for cigarette-makers: How can they reposition their brands without turning off smokers who might suspect that other aspects of their favorite smokes have changed?
"It's a herculean task," said Rita Rodriguez, the chief executive of Enterprise IG US, a branding company owned by WPP Group PLC that works on behalf of marketers such as Hewlett-Packard Co. and American Express Co.
The threat to the well-established brand names is the biggest negative facing the tobacco industry from U.S. District Judge Gladys Kessler's ruling in the Justice Department's civil racketeering lawsuit. Though the judge sided with the federal government, finding that tobacco companies conspired for years to deceive the public about the dangers of smoking, she said she didn't have the authority to impose any major financial penalties.
Instead, the judge ordered the companies to admit they lied about the harmful effects of smoking cigarettes - through what's known as "corrective advertising." She also ordered the companies to warn consumers that tobacco is addictive, and to make many tobacco-industry documents public until 2016. The corrective statements would have to appear on Web sites, in full-page advertisements in major newspapers, on one of the three major television networks, and on cigarette packaging.
From Jan. 1, cigarette-makers would be banned from using such terms as "light," "low tar," "mild" and "natural" and any other adjectives that might result in the public believing that a particular type of cigarette might be less hazardous than other brands.
At stake is the future of the tobacco industry's single most important product. Cigarettes with tar ratings of 15 milligrams or less - those generally marketed as "light" or "low-tar" - constituted 84.9 percent of the 367.6 billion cigarettes sold in 2003, up from 60.5 percent in 1991, according to a Federal Trade Commission cigarette report for 2003, the most recent available. Cigarettes with tar ratings of 3 milligrams or less made up 1 percent of the total in 2003.
Retailers are already worrying about how smokers will receive the renamed cigarettes. The ruling "will have an impact on our light-cigarette sales. There's no doubt about it," said Andrea Baker, the general manager of a group of six Taylor's Mini Mart stores in Cooperstown, N.Y. "When it comes to tobacco sales, it is 99 percent perception and 1 percent product. Some consumers will go on to smoke the same light cigarettes even by a new name such as Marlboro Gold, but a significant number of them will suspect the cigarette has been altered in some way, shape or form."
Adding to the challenge facing the tobacco companies in rebranding light cigarettes are the advertising restrictions they face in the U.S.
A 1998 agreement between major tobacco companies and the states requires cigarette manufacturers to eliminate billboard ads and stadium signs for their brands and to cease advertising on taxis and at bus stops. Philip Morris USA also no longer advertises its cigarettes in magazines. That leaves direct mailings and in-store displays as the main marketing methods available to cigarette companies.
Still, Altria, Reynolds and other cigarette-makers have faced - and survived - similar bans on terms such as "lights" outside the U.S. At least 33 countries recently have specifically banned the "light" and "mild" descriptors for cigarettes. This includes the 25 countries in the European Union, and eight other countries that ratified the World Health Organization's tobacco treaty. (The U.S. isn't participating.)
But the industry had a simple solution to the problem: In most of these countries, Philip Morris International and other cigarette-makers switched to a color-coded system, selling what were Marlboro Lights as Marlboro Gold for the coloring on the packs. Ultra Lights were reborn as Marlboro Silver in many places.
As a result, the bans had little effect on either total cigarette sales or sales of individual brands in the countries where those regulations have gone into effect. Some question whether U.S. experience will be different.
"I see little reason for the outcome to be any different in the U.S. if Judge Kessler's ruling is upheld," said Michael Schaefer, an analyst at the research company, Euromonitor International.
Maura Payne, a spokeswoman for Reynolds in Winston-Salem, said that the ban could affect many of its brands, which include Kool, Winston, Salem and Doral. But though the judge also barred the use of "natural" as an adjective, Payne said, Reynolds plans to continue to sell its Natural American Spirit cigarettes, because they are technically made by Reynolds subsidiary Santa Fe Natural Tobacco Co., which wasn't specifically named in the suit.
