Philip Morris USA's Cigarette Brand Advertising Drops for Fifth Consecutive Year

Business Wire, Oct 22, 2004

RICHMOND, Va. -- Company also Reports Increase in Price and Product Promotions at Retail for 2002 Federal Trade Commission Report

Philip Morris USA's spending on cigarette brand advertising reported to the Federal Trade Commission (FTC) decreased for the fifth consecutive year as the Company continued to reduce magazine, newspaper and retail point-of-sale advertising in 2002. Spending on cigarette brand advertising decreased by 12 percent from 2001, accounting for 6 percent of the Company's total reported expenditures in 2002.

"Since 1998, Philip Morris USA's spending on cigarette brand advertising has decreased significantly as a result of voluntary reductions in magazine, newspaper and retail advertising and the elimination of certain brand advertising under the tobacco settlement agreement," said Peggy Roberts, senior director of Communications.

Philip Morris USA reported the following reductions in spending from 2001 to 2002:

--Magazine advertising decreased by 72 percent.

--Newspaper advertising decreased by 31 percent.

--Retail point-of-sale advertising decreased by 26 percent.

Philip Morris USA's total reported spending increased by 7 percent overall, primarily due to an increase in the cost and frequency of price and product promotions offered to adult smokers in response to increased competition. In the last several years the retail cost of cigarettes has increased substantially. Consequently, the cost of offering these price promotions has also increased.

"The overwhelming majority of expenditures reported to the FTC represents price and product promotions to adult smokers," said Roberts. "Even after factoring the value that was passed on to adult smokers as a result of these price promotions, the price difference between premium and the lowest-price cigarette brands is significant."

For more information about the Company's products and positions on tobacco-related issues, please visit the Philip Morris USA web site at www.philipmorrisusa.com.