Philippe Boucher's Rendez-vous with . . . Tara Parker-Pope


Rendez-vous with . . . Tara Parker-Pope


Author of Cigarettes: Anatomy of an Industry from Seed to Smoke (The New Press) New York , NY , USA
Tara.Parker-Pope@wsj.com

By Philippe Boucher

Rendez-vous 94
Thursday, March 22 , 2001

PB : Thank you Tara for accepting our rendez-vous.
May I ask you to introduce yourself?


Tara Parker-Pope : I've worked for the Wall Street Journal for eight years, with most of that time spent covering consumer products, marketing and advertising. I first began writing about tobacco during a stint in our London bureau. There I followed corporate news for what was then BAT PLC and also wrote about changes in European smoking habits and the fascinating and effective advertising strategies of tobacco companies under the more onerous advertising standards of the U.K.

"Cigarettes' was actually conceived by an editor at the New Press who felt that, despite scores of books written on the subject, there really wasn't an accessible, concise primer on the topic, and certainly nothing studying the economics and business strategy of the industry. Personally, I was often frustrated at perceptions of the cigarette business as a dying industry even as I was staring at earnings reports showing these companies were hugely profitable. My interest in tobacco has always been from a marketing perspective, but after I finished the book I began writing a weekly health column for the Wall Street Journal (*).

Q1. I'll start by saying that Cigarettes is mostly a short (168 pages plus the notes) history of the US cigarette manufacturers. This compact format is more digestible and accessible than heavier books but the points I want to discuss concern less the past than your assessment of the situation today and the future. In the preface you write, "little has changed for the industry... the cigarette business remains a highly profitable growth industry" (xi) while in your conclusion you state : "the settlement has taken much of the steam out of the anti-tobacco movement" (p.162). Do you really believe "the worst (as the industry sees it) is probably over"? (p.167)

T P-P : Throughout the history of tobacco, attacks on the industry have come in waves. While new attacks likely lurk in the future, I am convinced the worst is over for the industry, courtesy of the attorneys and anti-tobacco forces who forced the industry's worst secrets out into the open. It is so easy to buy into this idea of the industry on the ropes, battered by litigation and anti-tobacco sentiments. I think the industry benefits from this perception. The reality is that these companies might as well be printing money as they churn out cigarettes. If things are so bad, where did these folks get $8 billion to spend on advertising last year? In the U.S., where tobacco times ought to be the toughest, Philip Morris posted a 28 percent jump in 1999 sales and RJR reported a 33% gain.

The legal wranglings over the past few years certainly come with a cost in terms of higher prices for cigarettes and battered shares on Wall Street. But while higher prices might cause some smokers to trade down to cheaper brands and a few smokers might leave the ranks, most smokers will simply pay the legal bills through higher prices and keep smoking. And don't forget that the industry has a wily ability to capitalize on its troubles. For instance, the initial concerns about smoking and health forty years ago created a huge market for filter cigarettes and spurred the launch of Marlboro, a brand that dramatically boosted the cigarette's appeal among young people.

Q2. You recall that in 1902 Duke and the Imperial Tobacco joined together to from British American Tobacco (p.11) and that in 1911 the trust was dismantled. Don't you think that 100 years later a similar backlash could happen? What about David Kessler's call for a dismantling of the industry? Wishful utopic dreaming from the former FDA Commisionner and now Dean of the Yale School of Medicine?

T P-P : Kessler's argument is intriguing, but I don't think history supports it.

There was a time when people were literally put to death for smoking and it didn't stop people from doing it. It's hard to believe that brown wrappers (cigarettes as porno?) will make a difference. I find the idea that the industry might be forced to play a role more like that of a public utility - providing products to those who need it but not make money or promote it - ironic given the utility situation in California right now. I don't know all the details of his argument but think there are some real First Amendment issues at play as well, and there's also the issue of the booming business tobacco companies do abroad. How will that be stopped? I think it also goes against the grain of the American mindset to interfere to that extent with private enterprise. After all, this is a country that bristles at the idea of giving up its semi-automatic rifles. But let's assume that Kessler somehow does get his wish and the industry is dismantled. Cigarettes will still be produced. Perhaps the current cast of characters won't be involved, but someone will be making cigarettes and someone will be smoking them.

Perhaps the most compelling argument against the dismantling theory is that the government is clearly complicit in the spread of tobacco and the support of tobacco. If the government was truly interested in stomping out smoking, especially among kids, we'd have $20 packs of cigarettes, but we don't, because that would either cause a steep decline in smoking or encourage smuggling or both. And under any of those scenarios the biggest loss would be felt by government tax coffers.

Q3. You say that the tobacco industry has been a paragon on capitalistic ideal (xii).

I wonder how many capitalists would trade their corporation's reputation against the tobacco industry's? Recently an Imperial executive was asked to quit the board of SmithKlineBeecham. Beside their closest allies and the people they pay, who wants to sit along a tobacco industry executive? isn't the industry still very much isolated?


T P-P : Tobacco companies can't hide from the product they make, nor do I believe they are trying to. Indeed, the new strategy is to galvanize smokers into being proud of who they are and to promote smoking as the torch of individualism. If you're saying the capitalist ideal is to make tons of money and never hurt anyone, then I guess tobacco doesn't qualify. But I don't think very many capitalists worry much about hurting others beyond how it affects their business. (Does McDonald's care about obesity? How quickly did Ford react to its Explorer crisis?) Cigarettes are cheap to make, have a huge markup and cater to an endless supply of addicted, brand loyal customers. And if they die or quit, there is an endless supply of new customers hitting their teen years or living abroad. What's not to like?

As for who wants to sit next to a tobacco executive? I'm sure the rejected board member will be welcomed with open arms by the museum or symphony boards of the world. These guys (and I do mean guys) don't get their feelings hurt. The antismoking movement would like to think the industry is isolated, but I don't think so. As I say in the book, the cigarette economy is vast and never ending - advertising executives, retailers, equipment makers, and government officials love tobacco and need tobacco. Maybe the tobacco guys are getting kicked off corporate boards for show, but they're still getting invited to the dinner parties, political fundraisers and art openings.

Q4 . When you mention the antismoking campaigns funded by the settlement money at the state level you say that "there is no evidence that telling kids not to smoke really works" (p.163). The tobacco control community knows it does not: only the industry keeps promoting this just don't do it approach. The messages financed by the settlement money are very different and mostly very anti-industry: have you seen the clip produced in Florida that taunts and shames a tobacco executive and his children? The one in Minnesota where young adults ridicule and insult the industry? The quest by the truth warriors for the Marlboro man or their phone interview with an advertising executive? These tough anti-industry ads seem here to stay and grow (with new states starting similar TV campaigns). How long can an industry stand such vilification on TV while thirty years ago they chose to drop out of TV rather than stand limited counterads? Remember this is only the beginning... the settlement money is supposedly there for the next 24 years...

T P-P : Correct me if I'm wrong, but I've never seen any data to support the idea that any of these efforts --- industry-funded or tobacco-control funded - have any measurable or lasting effect on youth smoking rates. I know some experts argue that vilifying the industry actually makes cigarettes more appealing to teens - the allure of forbidden fruit. And on a personal note, I'm turned off by these body bag etc. ads I've seen of late. It's a little extreme and seems a little PETA-ish to me. (You can love animals and still be appalled by throwing paint at someone.) There's a real live-and-let-live attitude among many people these days, and I'm not sure hounding tobacco executives really ignites support for the anti-tobacco movement. The problem with the counter-ads 30 years ago was that the dangers of smoking hadn't yet permeated the public consciousness. Now they have and I think anti-industry TV ads have limited effectiveness and may actually hurt the anti-tobacco cause.

Q5. My 5th question has a much narrower focus. You state that Newport is the country's most profitable cigarette (p.37). Can you explain why?

T P-P : Tobacco industry analysts believe Newport is the country's most profitable cigarette based on calculations they make using available sales, profit and per-pack data provided by the manufacturer. Why is Newport so successful? Partly it's that Lorillard is a well-run business. And the Newport brand is markedly similar to Marlboro - it is a premium brand that dominates its market. Lorillard leads the menthol market and is less vulnerable to discounting than other brands, thereby making it a strong profit maker. The brand has grown steadily at the expense of rivals and is hugely popular among black and Hispanic urban youths. A recent Wall Street Journal article noted that 74% of Black teen smokers smoke Newport.

The appeal of a brand to the youth market is a key to its profitability and long-term success. As smokers age, they become more price conscious, making them more likely to switch to less profitable discount smokes. But creating brand loyalty early helps a brand hold on to those aging smokers longer, boosting profits.

Q6. Is there anything else you would like to add?

T P-P : I'd like to emphasize that this is not intended to be an anti-tobacco book or a pro-tobacco book. I simply tried to step back from the health issues and the controversy and focus on the fact that this is a remarkably successful business. The book talks about various aspects of that business from growing tobacco to marketing it as well as the role health issues, legal battles and anti-smoking sentiments play in the business of making cigarettes. Big tobacco would like you to believe it's struggling and that advertising restrictions and legal woes have and will cripple it. But the numbers show that's simply not true. Sure there will be bumps in the road, but this is a thriving industry, and with foreign markets, such as China, just beginning to open up, I believe the best times for the cigarette business are still ahead.

PB: Thank you Tara for taking the time to be with us today.

P.S : Tara's column for the sunday edition of the Wall Street Journal can be read at
http://careerjournal.com/columnists/balancedlife/

Rendez-vous is supported by a contract from the Robert Wood Johnson Foundation
This document's URL is: http://www.tobacco.org/News/rendezvous/parkerpope.html

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