Mitt Romney's Bain Helped Philip Morris Get U.S. High Schoolers Hooked On Cigarettes
10/16/2012 9:28 am EDT
WASHINGTON -- When Mitt Romney served as CEO of Bain & Co., his consulting firm helped tobacco giant Philip Morris develop a groundbreaking sales strategy that researchers say has been linked to an unprecedented spike in youth smoking.
On Friday April 2, 1993, Philip Morris stunned Wall Street and tobacco experts by the slashing price on its flagship Marlboro brand by 40 cents a pack, to $1.80. It was a landmark day for the tobacco industry, one that became known as "Marlboro Friday" to public health experts.
The radical move was deemed by top Philip Morris executives as necessary based in part on more than two years of Bain research. Marlboro sales were slumping amid pressure from an expanding discount cigarette market, and the prospect of higher cigarette taxes had the company concerned about long-term profitability.
Investors initially pummeled Philip Morris for the price cut, chopping more than 20 percent from the company's stock price in a day. But within weeks, a cigarette price war was raging, with R.J. Reynolds slashing the price of Camels to compete with the cheaper Marlboro varieties. A year later, Philip Morris stock had fully recovered, and continued to make steady gains over the coming four years. Marlboro Friday ultimately proved to be the tobacco industry's most successful effort to increase domestic profit in the face of heavier regulations.
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