Philip Morris Executives Address Morgan Stanley Dean Witter Global Consumer Conference

Business Wire, Nov 8, 2000

In a competitive marketplace, Virginia Slims held its share at 2.7 percent and continues to be an important brand for us. Recently, we introduced Virginia Slims Kings into two test markets to generate interest and news for the Virginia Slims franchise.

Parliament, which is currently marketed in about a third of the country, achieved a 1 percent retail market share, up one-tenth from the same period last year. In the Northeast -- its core region -- Parliament has reached a 3.7 percent share, up 0.3 percentage points from the same period last year.

Despite a higher net average retail price than its major competitors, Basic's retail share was up a tenth of a percentage point to 5 percent from the same period last year, outperforming its key competitors on a share-growth basis.

These results, along with our list price increases through the first nine months of the year, have driven our underlying income from operations to $3.85 billion, up 6.4 percent from the same period last year.

To further support our income growth, we are focusing efforts on improving productivity and developing new business opportunities, including capacity consolidation, leaf acquisition, customer service, enterprise redesign, and e-business.

In 1999 we announced the planned closing of our Louisville (Ky.) plant to adjust for production capacity changes. On June 29th of this year, the last cigarette pack rolled off the production line, more than five months ahead of our original deadline. Through this and other actions we have taken over the past three years, we have reduced overall headcount by 24 percent.

We believe that our leaf acquisition initiatives will provide us with an adequate supply of tobacco to make our high-quality blends, while cutting costs. For example, through our Pilot Burley Tobacco Farmer Partnering Program, we've contracted directly with burley tobacco farmers to purchase their tobacco. This new program will allow us to work with farmers to help them lower their costs in producing high-quality tobacco. This pilot program has been very successful, with more than 100 million pounds of leaf already under contract.

Our customer-service efficiency plan is helping us streamline our distribution system and consolidate our use of public warehouses. Since the beginning of 1999, we have cut the number of public warehouses that we use by a third, and we're now evaluating more reductions.

We've developed an enterprise redesign effort, which we call Project Symphony, to update our systems, improve our processes and make it easier to share knowledge within the company. The first phase of the project brought SAP general ledger software and systems improvements to our finance function, along with connectivity to our upgraded SAP-based ordering system. We've designed this system to allow development of Internet-based applications in the future, such as ordering by wholesalers. We successfully completed this phase of the project in October, and it went into full operation without a hitch.