corporate propaganda in tobacco

21551189 Alexander Beau Novadnieks Dissertation: Tobacco in Indonesia

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Corporate Propaganda in Tobacco:

A Sustainable Marketing Strategy for the Sales Promotion of Tobacco in

Indonesia?

Under Graduate Dissertation BA (Hons) Chinese Studies and Business


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Abstract

The purpose of this research study was to investigate the nature and future sustainability of

marketing strategies in use within the Indonesian tobacco market; focussing in particular on the

utilization of corporate propaganda as a sales promotion tool by the Philip Morris International

group of companies and its affiliates over a fifteen year period. By using existing research on

the strategic marketing practices in use within this market, I was able to support qualitative

observations made. Moreover, by drawing comparisons to strategic decisions made by a

number of organisations in the tobacco market within the United States of America throughout

the twentieth century, I was able to ascertain a firm understanding of where the Indonesian

tobacco market may be heading, with regards to future regulatory legislature in this sector.

Empirical data on this market shows that regulatory legislature, introduced in recent years in

order to restrict marketing practices in use within the Indonesian tobacco industry have

produced little to no effect. Sales volumes and market value growth have shown consistent

promise across sectors, even against sectors with changing customer demands. The sheer size

of the tobacco industry in relation to the overall Indonesian economy itself appears to hinder

the introduction of regulatory measures to market. Due to the limitations of this research,

actual qualitative data in the form of interviews, regarding the future strategic decisions to be

made by the Philip Morris International group of companies and its affiliates was not completed.

Therefore further research into this field would be recommended in order to gain further

insight into the long-term strategic goals of this organization and the marketplace as a whole.

Despite the limitations in place, current market activities and trends suggest strong similarities

with the twentieth century American tobacco market. From this research I was able to make

accurate observations regarding the long-term sustainability and direction of the strategic

marketing practices of the organisation in question.


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Acknowledgments

I would like to thank my dissertation supervisor Chengbo Wang for his unrivalled level of

support and encouragement throughout this research. I would also like to thank the second

referee, Joan Pearson for her critique and consideration in reviewing this research.


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Table of Contents

Chapter Page Number 1. Introduction 1

2. Literature Review

3

Indonesian Tobacco Market

3

Market Legislation and Barriers 4

Tobacco Lobbying 7

Corporate Propaganda and Tobacco 8

3. Methodology 9

4. Findings & Analysis 12

Indonesian Tobacco Market Condition 12

Market Legislature and Advertising 13

5. Conclusion 16

6. Bibliography 17

7. Appendices 19


1

Introduction

Today Indonesia is the fourth largest market for the sale of tobacco products in the world (see

figure 1.). The market is separated into two key sector preferences; white cigarettes, such as

the globally recognized Marlboro and Camel brands, and ‘Kreteks’, a hand rolled high-tar

cigarette with a blend of tobacco and cloves. The kretek and other hand rolled cigarette sector

of the market currently employs eight hundred thousand workers across Indonesia (Yulisman,

2014). In recent years, changing market trends and an increasingly affluent middle class have

seen sales of the kretek sector fall almost twenty percent between the years 2012-2014 (Philips,

2014). Instead the market has shifted quite dramatically to favour the white cigarette market in

both luxury and economy guise. As Indonesia does not participate in the ‘World Health

Organisation’ framework convention on tobacco control (Tobacco Control Laws, 2014);

regulation or progress in the name of public health and interest has been made difficult by the

sheer size of the market with regards to maintaining taxation revenue and strong employment

figures. Instead this largely unregulated industry has seen increasing sales across all sectors

over a fifteen year period, coupled also with an increased interest from foreign investors. The

most notable of which would be the 2005 acquisition of HM Sampoerna Tbk Pt and its

subsidiaries by the Philip Morris International group for a reported five billion US dollars

(Mapes, 2005).

One factor that has remained a constant within this market is the type of marketing and sales

promotion practices utilised across the board. Heavily targeted marketing strategies, usually

portraying a lifestyle of success, emancipation, and freedom though the use of an advertised

lifestyle choice are used to drive sales growth. In 2013 the female smokers market of Indonesia

grew six percent (Euromonitor International, 2014). As a result this market has developed a

marketing trend of offering ‘slimmer’ cigarettes with female models on marketing materials

and even packaging in an attempt to win favour with the growing customer base (Euromonitor

International, 2014). Furthermore heavily targeted advertising to young men and youth in

general is common in the industry; often portraying a carefree, cool, and successful way of life

once associated with their brands. This is due to tobacco companies need to attract a young


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brand following, who will then become addicted to their products, and remain loyal to the

brand because of the positive association they have with a tobacco brands image

(tobaccofrecenter, 2008).

The following research section of this study will take the form of non-empirical research

utilising the breadth of literature and existing market data available. Subsequently I will

ascertain whether the increasing demand for change in the form of public health focussed

legislature, will directly affect the use of corporate propaganda as a sustainable sales growth

practice for the sale of tobacco in Indonesia; or whether the tobacco industry’s foothold in the

legislation process is restricting progress in the name of public health. Furthermore I will

compare and solidify findings with market trends of the US tobacco market during the 20th

century due to the high level of similarity that exists between both markets sales promotion

techniques and market trends.


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Literature Review

This section of the research study will aim to explore existing research and literature available

on the topics of the Indonesian and US tobacco trade industries, corporate propaganda, and

regulatory legislation within the market. Due to the wide breadth of materials available

regarding corporate propaganda and its relationship with the tobacco industry, this review

section will focus primarily on topics concerning the actions of the Philip Morris International

group and its subsidiaries.

Indonesian Tobacco Market

The Indonesian tobacco market is now the fourth largest market for the sale of tobacco

products globally behind China, Russia, and the USA (see figure 1.) and is expected to become

the world’s third largest tobacco consumer by as early as 2016. Smoking prevalence amongst

the adult male population is the global highest at an estimated 70% (Trefis, 2014). The increase

in social acceptability regarding the adult female smoking population has in part, pushed

growth amongst this sector also.

Previously a relatively unregulated market makes this region an attractive prospect for large

international tobacco companies, such as Philip Morris International. In the year 2005 Philip

Morris completed a USD$ 5.2Bn 97% acquisition of the Indonesian tobacco giant Hanjaya

Mandala Sampoerna Tbk PT and its subsidiaries (tobaccojournal, 2005).

Following this acquisition a change in market trends became apparent. A decrease in food and

fuel subsidies given to households contributed to a falling average disposable income amongst

middle and lower income households. In addition traditional nicotine replacement therapy

alternatives are both a relatively misunderstood, and expensive option within the Indonesian

marketplace (Trefis, 2014); meaning the young smokers market was unlikely to lose market

share with the apparent decrease in disposable income. This lead to the market demand


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shifting from more traditional hand rolled kreteks towards a cheaper alternative such as the

machine rolled ‘lighter’ high-tar white cigarette.

After the separation of Philip Morris from the Altria conglomerate in 2008, figure 4 shows us

how the pressured Philip Morris International group of companies introduced several new

sustained value creators to the marketplace.

Building on the success of their market leading brand ‘A Mild’, and capitalizing on the

vulnerability of the marketplaces’ consumers Philip Morris International introduced the brands

‘Vegas Mild’, ‘Trend Mild’, and primarily for the female market ‘Avolution’. These three brands

were focussed and marketed primarily to the young smokers market due to their lifestyle

attributes associated with the brands. This provided a boost for the profitable core of the

organisation, creating a wider brand reach to fit to the tastes of a varied demographic audience.

Furthermore the introduction of 3 fairly homogenous products under sculpted brand images

allowed Philip Morris to further cement their foothold on the premium ‘lighter’ high-tar

segment by providing alternatives to their already market segment leading brand, A mild. Thus

driving away competition and establishing an 11% market share increase in the process (see

figures 3, 4).

In the traditional kretek side of the Indonesian tobacco market ‘premiumisation’ of brands has

established itself as the latest trend. Adopting black packaging and a premium price point over

the machine rolled sector was first introduced by Philip Morris brand ‘Dji Sam Soe Magnum’

(Euromonitor International, 2014), and has since become the market standard for premium

brands such as ‘Djarum Black’, and ‘Gudang Garam Signature’.

Market Legislation

Currently Indonesia is the only member state of the World Health Organisation that has not yet

ratified the Framework Convention on Tobacco Control, the nation does however classify

cigarettes as an addictive substance (tobaccofreecenter, 2014).


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In 2012 President Susilo Bambang Yudhoyono pushed forward the much anticipated ‘Peraturan

Pemerintah (PP) No 109 Year 2012’ piece of legislation to introduce some much needed

regulation to the marketing practices of the industry. This legislation was officially announced in

January 2013 with an 18 month transitional period for its introduction. It states that a

mandatory graphic warning covering 40% of the front and rear facia of cigarette packs must be

in place, with a further side panel warning stating the large quantities of harmful ingredients

and known carcinogens present within the product (Hedley, 2013). Despite the promise of

regulation in the marketplace little confidence has been stirred amongst anti-tobacco lobbyist

groups and consumers, Tulus Abadi of the Indonesian Consumers Foundation (YLKI) stated:

“We knew that the slow pace in the drafting of the new regulation meant that the

industry was persistent in negotiating details of the regulation,” (Saragih, 2013).

The lack of confidence in the Indonesian government to provide public health focussed

legislation with regards to regulating the marketing practices of tobacco companies is well

founded. PP No 109 was first introduced to the government’s attention in the year 2009 but

was not even drafted and introduced until three years later (Saragih, 2013). The Tobacco

industry employs an estimated six million people across the nation ranging from farming, to

manufacturing, and finally sales. It is also the governments third largest source of tax revenue

following oil and timber trades, Muhaimin Moefti, chairman of one of the main tobacco lobby

groups in Indonesia stated that the government recouped an estimated USD$ 8.2Bn in excise

during the year 2012 (Bland, 2013). It is this reliance on the tobacco industry as a whole which

acts as a barrier to legislation in a nation that loses over two hundred thousand people a year

due to tobacco related illness (Karmini, 2014).

Furthering this understanding of the tobacco industry’s foothold over the introduction of

regulatory measures is vital in understanding the future sustainability of the marketing

practices currently in use. (Karmini, 2014) reported for the Daily Mail newspaper the day before

the end of an 18 month transitional period in which tobacco companies were meant to adopt

the new packaging regulations, stating that the legislation introduced had produced little to no

effect, with widespread disobedience of Indonesian law:


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“Despite having a year and a half to prepare warning photos that are to cover 40 percent of

cigarette packs, most tobacco companies failed to meet Tuesday's deadline. Only 409 of the

more than 3,300 brands owned by 672 companies nationwide had registered the photos they

plan to use on their products as of Monday, according to the Food and Drug Monitoring Agency.

They were given a choice of five images last June." (Karmini, 2014).

More recently due to regulatory pressures on the promotion of cigarettes ‘light’ or ‘mild’

characteristics other brands outside of the premium sector have started colour coding products

to promote the products image, menthol cigarettes tend to adopt a green packaging and other

mild brands such as A Mild, Trend Mild, and Vegas mild adopted a blend of pastel colours with

red streaks for elegance and brand synergy with the market leading A Mild. This bares a

shockingly similar resemblance to the industry movements of the US tobacco markets just a

few years previous to these changes.

In order to circumvent FDA regulations on the uses of the words ‘light’ and ‘mild’ Philip Morris

USA began introducing a colour coded scheme to their packaging, in particular the supposedly

mild variants of their brands. ‘Marlboro Light’ became ‘Marlboro Gold’ whereas ‘Marlboro Mild’

was renamed ‘Marlboro Blue’ (Dwyer, 2013). It was proven in a study conducted by the Harvard

School of Public Health that tobacco companies had successfully created a colour coded system

that not only translated the mild credentials of their brands as the ‘lighter option’:

“In the public opinion survey, more than 90% of the smoker respondents said that, one

year after the FDA ban, they found it either “somewhat easy” (10%) or “very easy” (82%) to

identify their usual brand of cigarettes—in other words, they still thought of certain brands as

“light” even though the packages did not use the “light” descriptors. (Dwyer, 2013)

From this study we can ascertain two things; first that the use of coloured packaging by

Indonesian cigarette brands in order to portray either a certain lifestyle or product

characteristic will indeed achieve its desired effect with the consumer. Secondly that the

tobacco industry is more than prepared and practiced in the art of circumventing public health

legislature against their products.


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Tobacco Lobbying

In a nation so reliant on the tobacco trade for economic stability, it is no surprise that the

tobacco lobbyists in Indonesia hold a great deal of power over the introduction of new public

health legislation. It has been said that in an attempt to curb the effects of future legislation,

big tobacco firms are employing a system of ‘recruit now’ through targeted marketing towards

the young adult sectors (Rosser, 2013). The nation’s tobacco lobby consists mostly of the large

producers such as Philip Morris International, British American Tobacco, Gudang Garam, as well

as tobacco farmers groups. Between them a great deal of political and economic resources are

at their disposal making opposing prospective legislature relatively easy.

Inside Indonesia, a widely respected online news source within Indonesia reported how it is

widely believed that cigarette companies were even able to hold influence over President

Yudhoyono when appointing a new heath minister:

“It is widely believed that major cigarette companies persuaded President Yudhoyono

against appointing Nila Djuwita Anfasa Moeloek, the wife of a well-known anti-smoking

campaigner, as Health Minister in 2009.” (Rosser, 2013)

Having this type of political clout available to big tobacco represents the level of near future

sustainability with regards to marketing practices in place. Furthermore it is representative of

the abuse of power being enforced by tobacco lobbying within Indonesia.

Despite the evident current abuse of power by pro-tobacco groups within Indonesia it is said

that regulation will indeed begin to be enforced in the coming years. This is due to the ever

escalating health crisis that tobacco poses to the Indonesian public (Bland, 2013). With 45% of

the population aged 20 and under it will become increasingly important for regulatory

measures to be enforced against the wishes of the tobacco industry. Especially with the

targeted marketing campaigns of recent years towards the nation’s youth.


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Corporate Propaganda and Tobacco

The Oxford English Dictionary classifies propaganda as: “Information, especially of

a biased or misleading nature, used to promote a political cause or point of view” (OED, 2015).

Corporate propaganda is essentially the use of biased or often misleading information in order

to best benefit the company in control of such information. Tobacco companies have been

known to utilise this release of information through various mediums such as targeted

marketing, third party advocates, and corporate social responsibility programs.

Part of Philip Morris International’s most recent marketing efforts in Indonesia included their A

Mild ‘Go Ahead’ branding campaign. Figures 5 and 6 are actual images used in the advertising

campaign and appeared on billboards, bus stops and buildings nationwide during the year 2013.

Corporate propaganda when used by tobacco firms often attempts to convey certain lifestyle

attributes that they wish to be associated with their brands. As we can see from figures 5 and 6

Philip Morris intends to promote images of things such as success, promiscuity, and fun. This

immature choice of attributes clearly targets a youthful, predominantly male audience. ABC

news reported on the escalating youth smoking epidemic amongst Indonesian youth stating:

“PMI has claimed that it does not intentionally market to Indonesian youth, but in the

years following PMI's entry into the Indonesian market, government statistics show youth

smoking rates there have nearly doubled.” (Harris, 2012).

Figure 5 features a young attractive male in what looks to be a nightclub or evening scene

surrounded by 3 young women, all desperate for his attention. His expression could be

described as smug and the young women’s expressions could be described as ‘lusting’. Thus

promoting the lifestyle attribute of promiscuity when associated with the Philip Morris brand A

Mild. It is no surprise that sex and sexual promiscuity sells in tobacco propaganda. Figure 7 is a

‘Don Diegos Cigars’ advert from the year 2001 in which a woman suggestively holds the cigar to

her lips, a brand which is not aimed towards women suggesting that she herself cannot resist

the temptation that Don Diegos provides. This is another key example of tobacco advertising


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and the tobacco market of Indonesia following the recipe which until recently, worked so

successfully in the tobacco market of the United States of America.

The ‘Go Ahead’ campaign was a direct reaction from Philip Morris International as a result of

the restrictions imposed relating to the use of the words ‘light’ and ‘mild’. Instead of promoting

the lighter aspect of the product they chose to instead focus on the attractive new customer

base that had become so loyal to their brands. In 2011 Sampoerna, now owned by Phillip

Morris International put up a billboard advertisement which was translated to saying “Dying is

better than leaving a friend. Sampoerna is a cool friend” (tobaccounfiltered, 2011). Suggesting

that Sampoerna cigarettes are a friend worth dying for is one of the more outrageous examples

of corporate propaganda used in the advertising campaigns of Philip Morris International.

Aside from the typical advertising campaigns, big tobacco firms have also been known to

sponsor and host music events, sports competitions, and even offer higher education

scholarships (Boseley, 2014). This is another form of corporate propaganda and although it was

recently banned by Indonesian government (Euromonitor International, 2014), it has in some

cases been ignored by companies not willing to accept the new legislation.

Methodology

This chapter of the study will focus on the methods used and the reasoning behind them. It will

also discuss the limitations to the research conducted and any issues that were encountered

during the research section of the study.

Taking ethics into consideration, the organisation being researched, Philip Morris International

was researched using techniques of a minimal level of risk. This means using journals, articles,

books, databases, and historical materials all within the public domain from which to collect the

research data. In order to obtain a wide enough view from which to perform an accurate

analysis, an increased level of literature review and data analysis was required. Due to the large

size of the organisation in question and the notoriety of the industry in which it operates the

quantity of data available far exceeded the amount required for this research. It is then


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important to ensure that all sources of information and data used for the purpose of this

research are of a reliable and ethically sound nature.

To be able to ascertain whether the marketing practices of Philip Morris International and its

subsidiaries are indeed a sustainable marketing model from which to operate; existing market

analysis was reviewed, this was then cross analysed in comparison to the United States tobacco

industry of the 20th century to which this industry bares a strong resemblance. This period of

literature review was to be carried out for a month, with a further week following that month

for market data analysis. In order to support the analysis of the information reviewed

qualitative data was obtained from the Passport Global Market Information Database. This

reliable source of market data, with many variables from which to analyse from allowed me to

create a well-supported argument regarding the sustainability of marketing practices in use by

the Philip Morris International group of companies and its competitors. The data obtained

across a wide time-series also allowed me to view and understand the real effects of the

introduction of regulatory legislation with regards to market sales and growth figures.

This dissertation will take the form of empirical research using Philip Morris International as the

case study. The purpose of the study being to ascertain whether the use of corporate

propaganda as a marketing model in light of growing pressure for public health based

legislation is indeed a sustainable long-term marketing strategy.

The analysis portion of this research will focus on the findings gathered during the literature

and data review period. I have a strong understanding of the organisation and industry in

question; therefore had a strong notion of what to expect in terms of results when conducting

my research. In order to avoid bias or subjectivity I maintained an analytical process to the

literature review, leaving any opinions personal or of others out of my findings and literature

review.

In addition, in order to maintain a subjective and analytical standpoint in my research I chose to

analyse raw, publically available data rather than the information obtained through interviews

of employees to the organisation. This meant that the data reviewed and the argument

constructed could remain purely analytical and free of any bias.


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Limitations to the chosen research were:

Unfamiliarity of the cultural ties the tobacco industry held within Indonesia. This lead to

a slow-down in the literature review process, as I sought to gain a full understanding of

the culture in which the market operates.

Finding suitable sources of market data, Passport GMID, Forbes, tobaccojournal

international, and the Wall Street Journal were decided upon as reliable sources from

which to conduct my research.

Finding journals and market analysis free from bias or personal opinion.

Corporate propaganda is an extremely wide topic on which to base the research study.

Focus had to be prioritised on the targeted marketing towards growing sectors of the

market.

Although the potential for bias in an interview process is a potential risk. Conducting a

small data collection interview could have proved useful in the support of arguments

and analysis. Language barriers deterred me from furthering my pursuit of interview

candidates as I believed the data obtained and market information analysed was already

of a high level of use and reliability.

The required length of the research study meant having to focus my analysis and

literature review to the better known aspects of the market and marketing practices.

For the purpose of further research I would recommend the interviewing of both

employees to Philip Morris International and members of anti-tobacco lobbying groups

from within Indonesia. Furthermore I would recommend further research into the

marketing of tobacco products to youths and whether this will push forward the

introduction of public health based legislature in the future.


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Findings

Indonesian Tobacco Market Condition

When researching the state and operating conditions of the Indonesian tobacco market I paid

close attention to the Euromonitor International industry analysis through the Passport GMID

portal as well as the Forbes Trefis market and organisation analysis papers as these would be

reliable sources of information regarding the state of the market and organisation in question.

To support my findings I then obtained empirical market data from the Passport global market

information database, an incredibly reliable source of data.

Figures 1 and 2 show us that the introduction of market legislation in 2012 had little to no

effect on the markets health as a whole, as well as the markets projected growth figures for the

coming years. The industry analysis then supported this market data:

“New regulations pressing the tobacco industry are not stopping growth. 2013’s

positive growth shows that price increases and bans from the new ruling have had a soft impact

on consumption” (Euromonitor International, 2014).

Although Philip Morris International is the overall market leader in terms of retail volume share

(see figure 2), the market in which they operate is extremely competitive with a great deal of

hyperactivity in brands both big and small. Don Hedley reported for the tobaccojournal

international journal database on the activity and product development that is so prevalent in

the Indonesian marketplace:

“A key feature of the Indonesian market is the hyper active energy exhibited by the

tobacco industry in terms of marketing and product development. The eponymous Gudang

Garam brand leads the market followed by Sampoerna A Mild, Djarum, Marlboro and

Nojorono’s Clas Mild. The strength of the A Mild brand is particularly striking.

The A Mild brand holds particular weight in this argument as it was a game-changing brand for

the Indonesian tobacco market. It created the machine rolled mild kretek cigarette market and

in turn created the new drive towards the youthful profitable core of the market. Although

average incomes have been on the rise in Indonesia for a while, I found that the average


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disposable income of the younger markets had declined, due in part to a reduction in

government subsidies. In addition due to traditional nicotine therapy options being a costly

choice in Indonesia the marketplace demand shifted towards this cheaper, cheaper to

manufacture and ‘healthier’, ‘lighter’ high-tar cigarette.

From this point we can see that Philip Morris International have used a marketing strategy in

line with the positioning school of management, introducing homogenous product alternatives

to the marketplace under entirely different brand guises. This allowed them to further establish

a foothold over this market segment and deter the initial introduction of competition to the

marketplace. It was only after A Mild and its other brand variants had been established as

sustained value creators for the Philip Morris International group that competitors introduced

their own versions to the marketplace.

Market Legislature and Advertising

Due to the fact that Indonesia is currently the only World Health Organisation member state

yet to ratify the Framework Convention on Tobacco Control the industry operates under fairly

lax and poorly enforced legislature.

When the 18 month transitional period had ended following the introduction of ‘Peraturan

Pemerintah (PP) No 109 Year 2012’ not even a quarter of brands had followed the legislations

guidelines and implemented the 40% packaging facia warnings that were said to be enforced.

The Daily Mail online published an article surrounding the disobedience of the industry, this

article also highlighted the government’s reluctance to properly sanction firms who did not

obey the new laws:

“Health Minister Nafsiah Mboi said companies that missed the deadline will be issued

warnings, and those that fail to comply could eventually be fined up to $42,000 and face five

years in prison.” (Karmini, 2014).


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To date there have been no fines or jail terms handed out with some companies still claiming

that they need to finish selling the stockpiles of products which were manufactured prior to the

legislations introduction.

The passing of legislation in 2012 was in many ways a step forward for public health in

Indonesia. Public smoking restrictions were put in place, the promotion of tobacco sales

through music and sports events was banned, the promotion of cigarettes as ‘lighter’ or

‘healthier’ was restricted, and packaging warnings aimed at providing solid public health

information to consumers were to be enforced. However due to the large degree of wealth and

resources at the tobacco industry’s disposal, tobacco lobbying groups were actually able to

influence the legislature, delay its introduction and circumvent the restrictions imposed

through alternative packaging methods.

Much like the tobacco industry of the United States just a few years prior to the introduction of

this legislation, Indonesian tobacco brands began adopting a colour coded theme of packaging

in order to work around the restrictions imposed on promoting a cigarettes ‘light’ or ‘mild’

characteristics. In the USA Marlboro light became Marlboro Gold, A Mild in Indonesia kept the

same brand name however the packaging changed from a white and red packaging to a more

peaceful pastel green and red, with just the ‘A’ of the brands name visible. (Dwyer, 2013)

reported for the Harvard school of medicine that the use of colour coded packaging worked just

as well as using the words light or mild and smokers had little difficulty in identifying their

preferred brand of choice after a period of time. Furthermore retailers were actually supplied

with notice sheets from tobacco companies outlining the changes in names and how to

properly guide consumers to their preferred brand:

“This study demonstrates the continued attempts of the industry to avoid reasonable

regulation of tobacco products. Scrutiny is needed by the FDA and courts to ensure that

tobacco manufacturers comply with the law and that their products no longer convey false

impressions of reduced risk” (Dwyer, 2013).

This introduction of restrictions on the mild characteristics of the lighter high tar segment also

provided a gateway from which to move in a new marketing direction in keeping with the


15

positioning school of strategic management. A Mild stopped portraying a lighter cigarette and

instead launched its ‘Go Ahead’ advertising Campaign (see figures 5 & 6). This new advertising

direction targeted directly at the profitable core of the organisation with remarkable success.

Figure 2 shows us that within 2 years of the ‘Go Ahead’ campaign starting Philip Morris

International had gained an extra 4.4% market retail share. This shows a level of adaptability

and sustainability to the marketing practices of the organisation in question as they were able

to turn what would at first appear to be a hindrance to marketing into an opportunity to drive

new sales.

In the analysis of my findings I also found that the Indonesian government’s and economies

reliance on the tobacco trade is almost certainly acting as a barrier to regulatory measures

being enforced. The tobacco industry in Indonesia employs around eight million people across

the nation whether it be directly or indirectly, with over one million of these employees

working in the tobacco farming industry (Euromonitor International, 2014). Regulatory

measures have often been met by protest from the farming industry (Hedley, 2013). It would

also appear that the government, although concerned about public health, places greater

concern over the potential damage or loss of revenue from excise taxation.


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Conclusion

The empirical findings of this research do suggest that Philip Morris International and its

subsidiaries operate a sustainable marketing model within the Indonesian tobacco market.

Some of the practices of the industry, although unethical are not illegal, with many of the

findings and market analysis providing evidence of the sustainability of the marketing practices

in place. Corporate propaganda played a large role in all forms of media for the tobacco trade in

the United States of America during the 20th century, and they now play a large roll within the

Indonesian Market. The size of the industry and Philip Morris International as the market leader

in both brand and volume shares suggest that even with the introduction of regulatory

legislature, the marketing strategy in place is both effective, and adaptive. The ethics however

of their targeted youth advertising is questionable, and would be recommended for future

areas of research.

The organisations ability to introduce sustained value creators to a growing segment that they

themselves created during a period of transitional legislature shows us how the Philip Morris

International group of companies has taken inspiration from its actions in the US market

previously, and enforced a revised strategy in a market facing fewer restrictions and a slower

rate of change. This study has outlined the importance in adapting to market changes, both in

regulation and demand as the Philip Morris International group successfully circumvented

restrictions to their market activities.

The Indonesian government is sure to become ever increasingly worried about the state of

public health within their nation. With an increasingly youthful population on the rise, and this

youthful population being exposed to the type of lifestyle advertising that is all too common of

the tobacco industry, future legislation is bound to provide further restrictions on marketing

practices being used towards the young population. Despite this, legislation will only prove

detrimental to the sustainability of Philip Morris International’s marketing strategy if they are

not allowed to take part in the negotiation of legislature. This is unlikely to be the case anytime

in the near future so to conclude, the marketing model and utilisation of corporate propaganda

for the sales promotion of tobacco in Indonesia is indeed a sustainable model.


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Appendices

1.

Euromonitor. (2015). Tobacco sales and market share data 2015. Retrieved Apri l 28t h

, f rom Euromonitor

Passport Database.

2.

Euromonitor. (2015). Tobacco sales and market share data 2015. Retrieved Apri l 28t h

, f rom Euromonitor

Passport Database.


20

3.

Euromonitor. (2015). Phi lip Morris International Retail Volume growth 2015. Retrieved April 28t h

, from


4.

Euromonitor. (2015). Phi lip Morris International Brand Growth 2015. Retrieved April 28

t h, from



21

5.

Source: Image taken from Behance creative archive 2013. Caption Translates to: ‘ Wishy Washy’

6.

Source: Image taken from Behance creative archive 2013. Caption translates to: ‘Out of Control’


22

7.

Source: Stanford School of Medic ine Research into the effects of tobacco advertising . Brand: Don Diegos

cigars, 2001.

corporate propaganda in tobacco

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