Chapter 14, Part 1

By Frank Tursi, Susan E. White and Steve McQuilkin
JOURNAL REPORTERS
© Winston-Salem Journal

Bowman Gray Jr., then the vice president in charge of sales at R.J. Reynolds Tobacco Co., leaned back in his office chair in late 1954 and fingered the novel red-and-white flip-top box that contained the ''new'' Marlboro. The 30-year-old brand had undergone a sex change.{{pr}}

The R.J. Reynolds Tobacco Co. was once the largest cigarette company in the United States with a powerhouse of best-selling brands: Winston, Salem and Camel. But times changed, and as the case against smoking became more pronounced in the 1960s, RJR failed to adapt to the marketplace. Its rivals would eventually rush past it, and RJR's efforts to catch up would have a profound impact on the company and the cigarette industry.

The ''Mild as May'' slogan designed to attract female smokers had been replaced in the advertisements by a squinty-eyed cowpoke with a tattoo on the back of his hand. No red tips to hide lipstick smears for this hairy-chested Marlboro, which came packaged in a hard cardboard box, not that sissy ''soft'' paper stuff. Tiny Philip Morris & Co. had recently introduced the masculine Marlboro in test markets in New York City, where RJR salesmen snapped up a few packs and shipped them to Winston-Salem.

Gray fetched one of the Marlboros out of the box, lit it and took a few drags. ''Gentlemen,'' he said to those in his office, ''Philip Morris will have to be watched closely from here on in.''

No one in the U.S. tobacco industry had paid much attention to Philip Morris before. In a business where size did matter, the English import had never commanded enough market share to win anyone's respect. At the time it reissued Marlboro, Philip Morris was fifth among the six major U.S. tobacco companies. Its sales were plummeting, though, and it seemed forever destined to being a small fish swimming among predators.

So with little to lose, Philip Morris executives bet the company's future on the Big Idea -- the total transformation of an obscure woman's cigarette into a rugged, macho man's smoke. In doing so, the company's chieftains showed that they were willing to throw away the rule book. (Kluger footnote; early history of Philip Morris.)

As midgets scurrying underfoot of giants, the men who ran Philip Morris always had to be quicker and more aggressive than their competitors just to survive. Because they didn't have a long history in the United States, Philip Morris' leaders weren't as shackled to the past as were their counterparts at RJR. }

They were worldly men, who lived in New York City -- not Durham or Winston-Salem. They had offices on Park Avenue and, as the Marlboro's remake would show, were well-versed in the ways of modern marketing and advertising.

All were qualities that would serve Philip Morris well in the new world the tobacco men would find themselves in after the 1964 surgeon general's report. Customers could no longer be taken for granted; they had to be cultivated as carefully as a field of prime golden leaf. Neither could governments be depended on to unflinchingly do the industry's bidding. Of all the American tobacco companies, Philip Morris was the quickest to adapt to the new environment. Its executives moved forcefully to establish its brands in parts of the world where smoking was still unquestioned. They made meaningful acquisitions in an attempt to lessen their reliance on tobacco money. They quickly made the most of the new advertising rules that Congress put in place when it banned cigarette ads from the public airwaves.

But it all started with the Marlboro Man, whose success took even executives at Philip Morris by surprise. Marlboro began a meteoric rise in the mid-1960s that threatened the supremacy of RJR's Winston.

Worried Reynolds executives ordered their scientists to pull Marlboro apart to find out what made it tick. They wanted a cigarette just like Marlboro, which meant they had to find a way to loosen the Marlboro Man's hold on the kids of America.

A Different Kind of Company

A relative latecomer to the American cigarette market, Philip Morris had always been a different sort of company than RJR and the other U.S. cigarette makers. The company traced its roots not to the tobacco fields of the South, but to the streets of London where the company's namesake opened a small tobacco shop in 1847.

Philip Morris built his business selling Cuban cigars and Virginia pipe tobacco to the city's carriage crowd. After the Crimean War in 1856, Morris sold hand-rolled cigarettes to returning veterans, who had acquired a taste for the short smokes favored by their French and Turkish allies.

Morris died in 1873, and management of the shop passed to his widow, Margaret, and brother Leopold, who bought out his sister-in-law in 1880. Business was going so well the following year that Leopold Morris built a manufacturing plant at Poland and Marlborough streets.

Taken with an opera singer with expensive tastes, Leopold spent his company into the hands of creditors in 1894. It emerged from receivership under the control of William Curtis Thomson and his family. The company struggled along until 1902 when King Edward VII declared the shop his main supplier of cigarettes. He had been buying his smokes from the Morris store since his days as the Prince of Wales.

Prompted by the rising popularity of cigarette smoking in the United States and boosted by the cachet of being tobacconist to the crown, Thomson incorporated Philip Morris & Co. Ltd. in New York in April 1902. The company puttered along unspectacularly, trying to survive on its royal pedigree. Its brands commanded less than a half of one percent of the U.S. market in 1924, when Philip Morris was bought by Tobacco Products Inc. Rueben Morris Ellis was installed as president and directed to turn the company around.

Ellis searched through the company's trademark list and came up with an old brand that had been named for the London street that was the site of the company's first factory. Ellis positioned Marlboro as a premium-priced smoke for women. The ads featured the drawing of a female hand holding a cigarette, which the copy boasted was ''Mild as May.'' Though it sold only a few hundred million units, the brand turned a tidy profit.

It wasn't enough, though, to prevent Tobacco Products from crashing in 1929, a few months before the stock market. Rube Ellis was on hand to buy one of the pieces, Philip Morris & Co., from creditors.

Despite the success of the ''Call for Philip Mor-rees'' ad campaign by the pint-sized bellhop Johnny Roventini, premium-priced Marlboro was merely treading water during the hard times of the Depression. Ellis tried adding an ivory tip to the cigarette's end, but it would get smeared with lipstick and women would complain. So Philip Morris took what seemed like a clever step: It attached a red tip to Marlboros. That wasn't enough either. During World War II, Philip Morris pulled Marlboro off the market.

The brand re-emerged after the war with a filter and, again, that ivory tip. The filter did nothing to dispel the brand's distinctive female, or ''tea room,'' image. Sales were good, but men still steered clear of these sissy filtered smokes. Marlboro, with a market share of less than 1 percent, seemed to have a dim future.

Bill Smith spent much of his early career on the road selling RJR cigarettes. ''I don't remember seeing the woman's cigarette in a dozen stores in my career,'' said Smith, who became president of Reynolds Tobacco. ''The consumers didn't know about Marlboro before. Maybe a few snobs did somewhere.''

A Cowboy to the Rescue

Parker McComas was well aware of Marlboro's obscurity. A banker with a reputation for square dealing and tough mindedness, Oliver Parker McComas had joined Philip Morris in 1946 with the mission of stabilizing a wobbly ship. He cut a bloated corporate staff, beefed up the sales department and hired key executives who would later direct the company's rise. By 1950, sales had rebounded. McComas, president by then, presided over a company that was fourth in the industry and gaining fast on No. 3 Liggett & Myers. As a sign of its growing confidence, Philip Morris moved that spring from its run-down offices on Fifth Avenue in Manhattan to elegant 100 Park Avenue, just a stone's throw from the bustle of Grand Central Station. This, too, was a company on the move.

The smoking and health studies that were published in the early 1950s put the brakes on Philip Morris' momentum, dropping it back to fifth place. Sales flattened in 1951, dropped 6.6 percent the following year and another 3 percent in 1953. Most of the company's customers were college students, educated urbanites, or women, who tended to be light smokers. They were just the type of people to heed the health warnings and switch to supposedly safer filtered brands.

To reverse the trend McComas made two bold moves that would have a lasting effect on Philip Morris and the rest of the industry. He persuaded the company's board to buy little Benson & Hedges, another old English company with roots on Bond Street. Benson & Hedges made a popular filtered brand, Parliament, and McComas figured that Philip Morris could put the company's expertise with filters to good use. More important, the deal brought Joseph F. Cullman Jr. and his son, Joe the Third, as he was known in the business, to the Philip Morris board in early 1954. The Cullmans, the owners of Benson & Hedges, were third- and fourth-generation tobacconists and among the shrewdest and best liked people in the business. They would become the catalysts of Philip Morris' future.

McComas also heeded the advice of George Weissman, who headed the company's marketing department. Philip Morris, Weissman said, had to develop a filtered brand with a strong taste, a virile image and more widespread appeal. Company surveys found that old Marlboro seemed to be a likely candidate for a remake. Philip Morris sold more than 12 million packs a year, and many customers thought its name had a manly ring to it, despite its mild taste and effeminate advertising pitch.

Leo Burnett got the job in 1954 of beefing up the ladies' smoke. A short, dumpy man with cigarette ashes perpetually running down the lapels of his suits, Burnett was already an advertising legend, having given the world the Jolly Green Giant, Allstate's ''good hands,'' and United Airlines' ''friendly skies.''

The only way to defeat Marlboro's effete image, Burnett decided, was to go bold. Forget about appealing only to women. Get a bright red color on the pack. Make the package stronger. As for the ads, use steel-eyed male smokers who ooze rugged individualism, the macho image, with sleeves rolled up to bare their tattoos, hard by the smoke curling from that Marlboro between their fingers.

Supported by the new red, white, and black-lettered flip-top box that was carefully tested through consumer surveys, Burnett eventually put a cowboy in a Marlboro TV commercial and gave the world ''Marlboro Country.''

By 1957, the brand was Philip Morris' biggest seller and the eighth most popular brand in the United States. Three years later, Burnett added the theme song from the hit movie The Magnificent Seven to the ad campaign.

RJR's Smith knew a good sales pitch when he saw one. ''When they first came out, it had the guy with the tattoo on his hand and it didn't do much. But then they went with the cowboy,'' Smith remembered. ''It was about the same time that outdoors became the thing to do on vacation, if you will. And on weekends. And camping with the young people. That's when the outdoor life really started. And they already had that theme with the cowboy. And they managed the marketing very well on it. I give them credit.''

Riding Marlboros, Philip Morris rose more than six points in market share from 1965 to 1970, while RJR fell a point. By the late '60s, RJR officials realized that their position as industry leader was vulnerable. No longer were they being lauded in the business press for their marketing acumen. Philip Morris was now getting the favorable reviews that had once been showered on Reynolds.

Business journals, for instance, noted Philip Morris' foresight in 1971 when cigarette ads were banned from the airwaves. Burnett was ready. He had Marlboro ads plastered in every major sports stadium in America and on every billboard where two interstate highways intersected.

Even competitors like Larry Wassong couldn't help but be envious. ''And here's Marlboro coming off TV with just the most powerful image,'' said Wassong, a former vice president of the William Esty advertising agency who worked on RJR's account during the 1970s. ''Somebody looks at that billboard and they saw Yul Brynner riding into town.''

Winston, still America's best-selling cigarette, was stuck with a tired old jingle, an inconsistent advertising campaign that lacked a forceful visual image and management's aversion to billboards even if RJR had something worth putting on them.

Jerry Long, who would wage war with Philip Morris in dozens of foreign lands during his early years with Reynolds, said that the domestic fight was fought on the billboards and newspaper and magazine pages of America.

RJR's tobacco chieftains as the time -- primarily Bill Hobbs and Bill Smith -- lacked the marketing skill to compete with the savvy Madison Avenue warriors at Philip Morris, Long said.

''Hobbs could not see any need for any improvement. Like Smitty, he didn't see any need for billboards, he couldn't see any need for newspapers. He couldn't understand there was a need for putting the money into advertising,'' Long explained. ''Mr. Hobbs smoked Winstons and he knew we had the best product. He knew. You didn't know. I didn't know. One million customers out there didn't know. But he knew. I know that he knew because he told me he knew.''

It was a frustrating time for people like Yancey Ford, an RJR sales manager out in the hinterlands trying to peddle Winstons with the onrushing cowboy breathing down his neck.

Reynolds tried reworking the jingle and the Winston pack, then switched to various campaigns showing rugged-looking working people. ''It was like every two years, here comes another one,'' Ford said. ''I guess I looked at it as trying to out-Marlboro Marlboro.''

Meanwhile, the cowboy galloped on. Sales of Marlboro increased from 59 billion in 1971 to 68 billion the following year, when Philip Morris clawed to second place among the U.S. tobacco companies. Winston's sales increased only 3 billion during the same period. To compound matters, Salem lost its position as the top menthol to Kool in 1972. Unless the cowboy was corralled, the same fate seemed to await Winston.

A New Breed

The man behind the cowboy at the time was quickly becoming the most successful tobacco merchant since Buck Duke in the heyday of his American Tobacco Co. Joseph Frederick Cullman III was only 45 when he was elected president after the death of McComas in 1957, but he had been in the business all his life. He had worked as a $15-dollar-a-week clerk in a New York tobacco shop, had learned about leaf and manufacturing from the masters at the Upmann cigar factory in Cuba, had peddled cigars as a salesman in New York and had helped his father run Benson & Hedges.

Something else separated Joe the Third and his father from the other executives in the tobacco business, explained David E.R. Dangoor, a Philip Morris vice president who worked for Cullman all his life.