"America's Turning 7-Up," the ads say, and they represent a $40 million commitment this year and the start of a long-term drive by Philip Morris Inc. to put its latest acquisition near the top of the soft drink market.
It's been only 13 months since the tobacco and beer giant shelled out $520 million for the 50-year-old company, and much remains to be done. Seven-Up has scarcely 7 percent of the soda market compared with Coca-Cola 36 percent and Pepsi's 17 percent.
But the figures don't scare Philip Morris, an acknowledged master at marketing that is accustomed to facing -- and beating -- long odds.
When the corporation completed its acquisition of the Miller Brewing Co. in 1970, the beer brewer had only 4.5 percent of the U.S. market, placing it at the bottom of the rung among major manufacturers. Its market share hit 19 percent last year, second only to Anheuser-Busch's 26 percent, and Miller has set the pace as the fastest-growing brewing firm in the nation.
"We intend to be a major factor in the soft drink business," Ross Millhiser, vice chairman of Philip Morris, said in a recent interview at his company's futuristic Operations Center here.
So far, Seven-Up sales are "a little higher," Millhiser said. It's a bit early to be looking for any sizable turnaround, and the company isn't expecting major gains anytime soon, he explained.
"We bought the company for strategic, long-term growth," Millhiser said. "We don't need anything now to continue to grow."
The affairs of Philip Morris are important to Richmond because the company is the city's largest employer. More than 10,000 persons work at one of three cigarette factories here, plus six other tobacco-related manufacturing operations. The corporation is based in New York.
Philip Morris moved into the Operations Center five years ago. It cost $300 million to build, encompasses 1.6 million square feet and churns out half a billion cigarettes a day. The center also houses research and development and controller operations for Phillip Morris U.S.A., the conglomerate's domestic tobacco division.
A host of new soft drinks are spilling onto retail shelves this year amid plenty of costly ballyhoo, suggesting that the timing of Philip Morris' entry into the industry was less than propitious. Millhiser doesn't agree, however.
The vice chairman was here for a meeting of First & Merchants Corp., of which he is a director. He lit a Marlboro -- a product of Philip Morris and the top-selling cigarette in the U.S. and the world -- and explained that the acquisition of Seven-Up gives the company a compatible "third leg on our consumer goods stool."
Soda, like cigarettes and beer, is a low-priced consumer good "that provides pleasure," Millhiser said. And Seven-Up was particularly attractive because the company has a worldwide name, making it an ideal cnadidate to plug into the parent company's worldwide marketing network, he added.
Millhiser doesn't deny that Phillip Morris has its work cut out in promoting sales of Seven-Up in an intensely competitive industry. "The soft drink business is much more segmented and so more competitive than beer," he said.
Still, Coca-Cola and Pepsi are the only heavyweights in the industry, and Seven-Up is in the No. 3 position, he said. With market shares of 20 percent in some areas of Canada and 15 percent in some cities on the West Coast, there is no question Seven-Up can do better, Millhiser said.
Philip Morris is banking heavily on its contention that the cola market is tiring and that Seven-Up is especially popular among the younger generation.
Ergo its new ad campaign, which represents more than a doubling of outlays over last year's expenditures and focuses on young, active people enjoying the lemon-lime concoction.
Analysts are waiting to see if Philip Morris can repeat the magic it performed after its takeover of Miller, making of Miller High Life, Lite and Lowenbrau for the U.S. market. "Philip Morris didn't know anything about brewing, but everything about marketing," August Busch III once said in a widely quoted remark.
Action came boldly and quickly after the acquisition.
Philip Morris found that Miller had a lot of old beer on the market and so it recalled hundreds of thousands of cases of field inventory, replacing it with fresh product.
Then the company introduced and heavily promoted the seven-ounce Pony bottle for Miller High Life, which brought in new samplers -- and, ultimately, new customers. Along the way, Philip Morris scrapped its old ad slogan, "The Champagne of Bottle Beer," and replaced it with "Miller Time," banging home the idea that Miller was a good, basic beer.
The haymaker came in March 1975 when Miller introduced Lite, which wasn't the first low-calorie beer but did go on to become the best-seller. By the end of 1978, Lite accounted for nearly 10 percent of all beer consumed.
Philip Morris also has enjoyed a healthy dose of success with its tobacco products, its primary business since 1847.
Its market share in the U.S. last year grew to 27.8 percent, up from less than 10 percent in 1964 and behind only the 33 percent share of market leader R. J. Reynolds Industries Inc. Philip Morris is the second-largest publicly held cigarette producer in the world.
Besides the leadership position of Marlboro, the company has the top-selling 100-millimeter brand in Benson & Hedges, the top low-tar cigarette in Merit and the top women's brand in Virginia Slims.
Perhaps most impressive is that Philip Morris cigarette sales continue to climb faster than the industry as a whole, which isn't growing very much at all.
Last year, sales of Philip Morris U.S.A. grew 5.3 percent in unit terms compared with negligible domestic industry growth of 0.1 percent. The company has enjoyed the largest unit gain in the industry every year since 1966. R. J. Reynolds, meanwhile, hasn't really increased its market share in more than 10 years.
In short, Philip Morris isn't hurting.
It reported its 25 consecutive year of gains in both revenues and earnings in 1978. In the past 10 years, earnings have increased at a compound annual rate of 23.7 percent, while revenues posted a 20.6 percent yearly gain.