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Goodwill Hunting

Philip Morris' charitable giving and health-conscious marketing were part of secret plan to lock in market share and woo the FDA.



The sun will have risen this Thursday, when hundreds of Altria Group shareholders, including many fiercely loyal retirees, gather at the Greater Richmond Convention Center for the annual meeting of the tobacco giant and its subsidiary, Philip Morris USA.

Most attendees may not know it, but the event will mark the success of a once-secret, 11-year-long corporate initiative by Philip Morris called Project Sunrise. It was hatched in 1995 as a road map to remake Philip Morris' tarnished reputation as a cynical purveyor of deadly products and a courtroom pit bull defending a rash of health-related, class-action lawsuits.

 Emerging in its place, according to the intricately planned scheme, would be a “responsible” corporate player that maintains its customer base and shores up its political influence while still turning lucrative profits, concludes a report co-written last year by tobacco health expert Staunton A. Glantz with access to internal Philip Morris documents.

“They basically remade the company's entire political and public-relations strategy,” Glantz says. “It's a very, very important move.” Glantz, a professor of medicine who heads the tobacco center at the University of California at San Francisco, says he and fellow researchers came across the strategy because his school is a depository for thousands of tobacco-company documents that the cigarette makers were required to file in a 1997 lawsuit settlement.

Another report by researchers at Glantz's school notes that Project Sunrise was also intended to “ensure the social acceptability of smoking and of the company” by playing to moderates in the anti-smoking movement while “marginalizing” more strident opponents. “Not many people among the public and the government know about this,” Glantz says.

The objectives of Project Sunrise were multifaceted. A key part was to have Philip Morris shun other tobacco companies and lobby for tobacco regulation by the U.S. Food and Drug Administration, albeit on the company's terms. The law calling for FDA regulation, approved last year, Glantz says, was “written by Philip Morris in 1994.”

As part of the deal for oversight, Philip Morris won such compromises as the FDA's promising to never completely ban cigarettes or the use of nicotine, the drug that makes smokers crave tobacco smoke. The tobacco industry won the right to choose three slots on a committee to set science standards for rules, Glantz says. Another motive for FDA regulation was that it locked in the leading market share of Marlboro, the famous brand that's Philip Morris USA's best-selling product, dominating 42.7 percent of the national cigarette market.

Other strategic moves related to Project Sunrise include splitting Philip Morris USA away from Philip Morris International, which has moved to Switzerland to avoid American lawsuits while hawking higher-nicotine products. As part of the move to pitch itself as socially conscious, Philip Morris USA spiffed up its Web site with blunt warnings that the products it sells are deadly.

David Sutton, an Altria spokesman, says that Project Sunrise was designed to rethink the company's role in politics and in the public eye. Philip Morris began pushing for FDA regulations a few years later, Sutton says, in the late 1990s, shortly after the master settlement agreement in 1998, wherein the major tobacco companies agreed to pay $206 billion to 46 states in the face of sweeping class-action lawsuits. He said that Philip Morris “was part of the conversation” when the law to have FDA regulation was written.

  Despite such contradictions, the Richmond area has been the big beneficiary of Project Sunrise and the new Philip Morris. Shunning New York City and its laws against office smoking, Altria Group moved its headquarters into the glass and steel former Reynolds Metals building in Henrico County. Three other area operations employ between 4,500 and 5,000 people. Philip Morris USA has built a $350 million research and development facility in the Virginia Biotechnology Research Park on Leigh Street. Another $230 million has gone into advanced manufacturing at its production facilities alongside Interstate 95 south of downtown.

“That's an investment of more than half a billion dollars locally,” says Sarah Dunnigan of the Greater Richmond Partnership.

There are obvious ironies with Project Sunrise. While instructing the public about the dangers of its products — cigarettes kill about 400,000 Americans each year — Philip Morris has added new production lines to speed up manufacturing, churning out billions of cigarettes each year in Richmond. The new efficiencies have made Richmond even more important to Philip Morris, which shuttered production facilities in Kentucky and North Carolina. It's also started marketing a bolder tasting brand of Marlboro menthol cigarettes while complying with new FDA rules to get rid of the “Light” labels on lower-tar cigarettes.

On the flip side, Altria, which earned $16.8 billion last year and has enviable net profit margins of 19 percent, has become a major and essential financial supporter of local and state arts, culture, education and sports projects.

Last year, the company gave $6.8 million nationally for education purposes, including to Richmond, Henrico County, Chesterfield County and Virginia Commonwealth University. Some $3 million went to arts and culture groups across the country — locally to the Richmond Symphony, the Richmond Ballet and the expansion of the Virginia Museum of Fine Arts. Altria is helping bankroll the museum's traveling exhibits of Matisse, Picasso and Art in Paris. Millions more went to food banks and environmental groups. While Altria donates across the country, a good portion of the money stays in Richmond.

Such largesse comes after charitable giving in Richmond took a beating. Corporate givers Circuit City, Quimonda and LandAmerica all went out of business during the recession. Another philanthropy source, Wachovia Securities, moved to St. Louis before being swallowed up by San Francisco's Wells Fargo Bank.

“Philip Morris USA and its parent Altria have a huge influence and provide much in time and energy in community affairs,” says Rob Bradham, the senior vice president of business development and governmental affairs at the Greater Richmond Chamber of Commerce.

Project Sunrise is a fait accompli. Richmond may have lost its status as a tobacco town decades ago, but in the wake of recession and a devastated corporate landscape, Philip Morris is seen by many as a saving grace. The company's charity, however, is really corporate strategy. Eventually, Richmonders may have to come to terms with their increasing dependence on a checkbook that by Philip Morris' own admission is based on the deaths of hundreds of thousands of people.

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