The release of previously secret tobacco industry documents as a result of litigation in the USA provides the opportunity to examine how the industry gained a foothold in the Japanese cigarette market. To the extent that their actions in Japan generalise to other foreign markets, we are able to gain an industry perspective on how US tobacco companies penetrate foreign markets. While the growth of the Japanese cigarette market was a multifactor process, we found that television advertising played a central role in opening the Japanese market in three ways. First, it allowed foreign brands (which collectively represented only 3.9% of the Japanese market in 1986 6 ) to appear more popular than they were and thus appeal to established smokers of Japanese brands. Second, television advertising attracted young people, who were the key to future growth and were more interested in foreign brands. Third, television advertisements allowed Philip Morris to create aspirational smoking role models using actors who were, or resembled, famous Hollywood action heroes. Transnational tobacco companies used sponsorship and promotional events to circumvent television regulations both before television advertising became legal, and after it was restricted. The Japan experience suggests that prohibiting advertising, particularly on television, as included in the Framework Convention for Tobacco Control, 1 is a crucial policy intervention to slow or prevent the transnational tobacco companies from penetrating new markets, and that these policies must include televised sponsorships and promotions to be most effective.

In September 1986, Japan was the first country in Asia to open its market fully to US tobacco companies, resulting in an immediate and dramatic rise in US cigarette imports from 9.9 billion cigarettes in 1986 to 32 billion in 1987. 4– 7 During the next 10 years, Japan became (and remains) the leading destination for US cigarette exports, with a 2002 volume of 78 billion cigarettes (61% of total US cigarette exports) (fig 1). 8 Market liberalisation went hand-in-hand with tobacco marketing deregulation; by 1988 cigarettes rose from 40th to second place in total television advertising. 5, 9 Television advertising was allowed in Japan until April 1998, when the Tobacco Institute of Japan, which represents both foreign and domestic tobacco companies, adopted an amendment to its voluntary rules that eliminated television advertising. 10 During the television advertising period, Japanese domestic cigarette sales fell while imported cigarette sales rose. 6 In addition to brand switching, smoking rates increased among teens and young adults, especially females. 6, 11 In addition, during this time the total Japanese cigarette market grew approximately 15% (fig 2).

The Framework Convention on Tobacco Control, which has been signed by 115 countries and ratified by 16 as of 22 May 2004, includes a comprehensive ban on tobacco advertising, promotion, and sponsorship. 1 Tobacco companies argue that these bans are excessive, 2 and that tobacco advertising does not encourage smoking, but only brand switching among established smokers. 3 However, past experience with market liberalisation in the absence of comprehensive advertising restrictions suggests that advertising plays a pivotal role in opening new markets.

We searched tobacco industry document archives from Philip Morris, Brown and Williamson, RJ Reynolds, Lorillard, and American Tobacco companies using the University of California, San Francisco (UCSF) Legacy Tobacco Documents Library ( www.legacy.library.ucsf.edu ) and three tobacco industry documents internet sites (Phillip Morris, www.pmdocs.com ; RJ Reynolds, www.rjrtdocs.com ; Lorillard, www.lorillarddocs.com ). Initial searches on the Philip Morris site were conducted between September 1999 and August 2000 using the keyword “Japan”. Searches were extended in April 2003 on the Legacy Tobacco Documents Library using the names of key organisations and individuals identified in relevant documents, their office locations, project dates, files, and reference (Bates) numbers using standard methods, 14 yielding a final collection of 788 related to marketing and television advertising strategies in Japan.

We analysed tobacco industry documents from the US tobacco companies with the largest market share in Japan at the time the market was opened in 1986: Philip Morris (Philip Morris Asia, Inc, which included Japan until 1985 when Philip Morris Kabushiki Kaisha, Japan was established as a separate entity 12 ); RJ Reynolds (which sold its international interests, including those in Japan, to Japan Tobacco in May 1999 13 ); and British American Tobacco and its American subsidiary Brown & Williamson.

RESULTS

Opening the Japanese cigarette market

Major milestones in tobacco advertising, policy, and changes in market share in Japan are summarised in fig 3. In 1980, the Japanese market was controlled by a single government owned monopoly, Japan Tobacco and Salt Monopoly (JTS), which owned all cigarettes and controlled all advertising, sales, and distribution channels.15 A 90% foreign cigarette tariff kept imported cigarette prices high,6 and transnational tobacco companies collectively controlled less than 1.5% of the market.16,17 Transnationals could not advertise on television, conduct market research, or form their own distribution networks.15 Violating these rules was not illegal, but if provoked, JTS could retaliate by stopping or reducing imports.15

Figure 3 Key milestones for transnational tobacco companies in Japan.

A Philip Morris Asia strategic plan for 1981 to 1985 stated intentions to “utilize the offices of the [United States] Special Trade Representative [who represents the United States in foreign trade negotiations] to continue to place pressure on the JTS to increase market access”.18 In 1982 the US Trade Representative convinced the Japanese government to lower the tariff on imported cigarettes from 90% to 20%6 and to allow transnational tobacco companies to advertise on television, magazines, and billboards and to conduct marketing research.19 The US government also threatened trade sanctions,11 and in 1985 Japan privatised its monopoly into Japan Tobacco, Inc,6 abolishing the tariff on US tobacco in April 1987.6 A 1985 Philip Morris marketing report stated:

“…due to the success of our market access efforts, many restrictions have been reduced or eliminated in recent years… the Japanese market which was completely closed to foreign brands, is now relatively open with freedom to advertise and distribute our products”.20

Market liberalisation gave transnational tobacco companies relative price equity (before this time a pack of imported cigarettes was approximately 100 yen more expensive than the average domestic brand), and increased the number of retailers selling foreign brands from 15 000 to 260 000.6,20 While all transnational tobacco companies benefited from these changes in price and distribution, Philip Morris was particularly successful. Between 1983 and 1996, Philip Morris cigarette sales increased over 10-fold from 4.3 billion in 1983 to 44.6 billion in 1996.21–26 One unique strategy that may help to explain Philip Morris’s success in Japan was its investment in television advertising.

Appealing to consumers through Television

Transnational tobacco companies faced a dual challenge in opening the Japanese cigarette market: how to convert established smokers, most of whom smoked Japanese cigarettes, and how to attract new smokers to international brands. Television provided an optimal means to reach both.

Established smokers: television made US brands appear popular

Transnational companies faced intense domestic brand loyalty among established Japanese smokers.4 Research reports written for Philip Morris and Brown and Williamson describe strong nationalism, and a desire to fit in as reasons that consumers did not smoke foreign brands.15,27–29 Of the Philip Morris brands, Lark had the least strongly American (unpopular) image:

In the context of 1981–1982, one thing was unequivocally clear with respect to the Japanese tobacco market—Japanese origin evoked a positive image and American origin evoked a negative image. Lark, however…was unique with its image falling somewhere in between.29

American brands also had a reputation of having an overly “strong flavor”, but Lark cigarettes had a charcoal filter and appeared to have milder taste characteristics which made them similar to Japanese cigarettes.29 These facts may explain why Philip Morris’ Marlboro brand, while most popular worldwide, initially performed poorly in Japan with less than 1% market share before 1990,24 and Philip Morris concentrated on Lark instead.

A 1994 Philip Morris marketing presentation explained that television was the key to building recognition for small brands:

TV is the great equalizer...• Smaller companies can compete on equal terms with JT [Japan Tobacco]• Small brands get “Look Big” i.e. PMSL [Philip Morris Slim Lights] can advertise as much as Mild Seven”30

Philip Morris aimed to capture “share of mind,” the extent to which consumers thought that a brand was popular and frequently smoked,31,32 reasoning that increased share of mind would be followed by an increased share of market. RP Roper, vice president of Philip Morris KK,33 wrote in 1988, “We’re investing strategically in higher quality media to make more positive image statements about our brands and create a share of mind greater than our share of market—create a sense of bigness and importance about our brands.”36

With a colour television penetration of 99.2% in Japan,22 television was the most cost efficient advertising form.34 Philip Morris International president William Webb explained in a draft of his 1990 presentation for the board of directors:

“Even though we’re growing rapidly, we continue to view the market as being in a development phase. This year, we’ll spend over $200 million on direct marketing. Japan’s DME [direct marketing expenditure] is nearly twice as much as West Germany’s. This spending is intended to ensure continued growth of our brands and is heavily weighted toward TV.”35

This strategy appeared to be successful. In 1988, when Lark’s market share was only 3.7%,36 many Japanese consumers believed the brand to be popular:

“…in the last [1987] General Consumer Survey the Japanese describe Lark as the leading brand in the world. Reinforcing that perception is precisely what our aggressive marketing support is designed to do—give Lark stature in the market place—make it the Marlboro of Japan if you will.”36 [emphasis added]

Brown and Williamson research also found that by 1987 Philip Morris’s Lark advertising was remembered more frequently than any domestic brand, even though over 90% of respondents smoked domestic brands.37

New smokers: targeting future growth

Philip Morris’ 1981 General Consumer Survey included the brand awareness, starting smoking age, and TV habits of 800 foreign and domestic brand smokers, some as young as 16 years (the legal smoking age in Japan is 20).38,39 They found that smokers starting before the legal age of 20 were less health conscious, quit less often, and smoked more heavily throughout their lives than later starters.40 In addition, industry research suggested that young people were less worried about conformity41 and were more interested in American brands.37,42 The company’s marketing memos reiterated that “entry level smokers” under the age of 25 were an essential target,43–45 and their market research subcontractors recommended creating a new brand for beginning smokers:

“For younger people, in particular those who are beginning to smoke, there is an opportunity for a new PM [Philip Morris] brand whose brand personality is directly relevant to them…this would establish a loyal franchise, and the measure of the task for PM is to evolve their smoking experiences within the PM portfolio, as life-stage values change.”46

Television was seen as a great way to reach young people with image advertisements: the audio-visual medium conferred memorability, and allowed advertisers to link stories with their brands. Research conducted for Philip Morris also indicated that their Lark brand could be marketed towards young smokers as well as established smokers. Research in 1988–89 reported that, despite the social norm of conformity, many smokers of Mild Seven (the popular Japan Tobacco brand) aspired to be aggressive, ambitious, energetic, confident, sociable, worldly, sophisticated, and successful.32 While Japanese cigarettes were marketed as brands for average, ordinary people,32 Lark advertising was designed to appeal to these other aspirations.47,48

New smokers: Hollywood image

To attract the younger generation, Philip Morris took advantage of desires common among young men: heroism, intrigue, danger, and fast cars. Philip Morris market research found the movie spy character James Bond represented an ideal aspirational masculine image that was developmentally tuned to young men49 and exploited one of young adults’ most popular pastimes.29,50,51 James Coburn, Roger Moore, Pierce Brosnan, and Robert Wagner played Bond or Bond-like roles in Lark commercials, mirroring their on-screen personas.34,52,53 Philip Morris also used younger movie stars with international recognition such as Tom Berenger and Charlie Sheen to heighten the appeal of Parliament to young male smokers.54–57 These arrangements entailed more than movie placements—the stars were featured in cigarette advertisements on television and billboards that were similar to their hero movie roles.

New smokers: using televised event sponsorship

Marlboro, which initially did poorly because of its American image, grew in popularity over time as it increasingly appealed to young men (fig 4). In 1984, a research consultant for Philip Morris suggested:

Figure 4 Market share of major foreign brands in Japan 1981–1998. Source: Brown & Williamson.24,25

“Marlboro’s franchise is strongest among young [Japanese] smokers 14–18...The development of a marketing positioning for Marlboro where it can be viewed by the younger generation as the cigarette uniquely positioned to satisfy their specific wants and needs, separate and distinct from those of their parents’ generation, will provide Philip Morris with a long-term development franchise among this sector of the population.”58

Marlboro’s success also increased after a popular Tokyo TV station started broadcasting Marlboro sponsored Formula One (F1) auto races during the late 1980s.59,60 Motor sports were extremely popular among young Japanese men, and F1 was the most prestigious event.60 Philip Morris spent over 700 million Yen per year on F1 racing between 1991 and 1993. By 1992 the estimated public relations value of the association with F1 was 15.5 billion yen in 1992 ($141 million); the racetrack attendance was estimated at 150 000 with an additional 3.3 million viewers on Fuji TV. The masculine image of both the Marlboro cowboy and F1 racing appealed to young men,59 who noticed that the “danger of F-1 racing and the health risk of cigarettes overlap”.59 Between 1992 and 1994 Marlboro market share increased from 1.25% to 2.07%.61 In 1997 Marlboro became Philip Morris’s most popular brand, surpassing Lark, which was increasingly considered, along with the Bond campaign, “as an older brand...for older people”.59 By 1993 four of the 10 most popular brands among young adult starters were Philip Morris brands, Marlboro was the most popular international brand among starters, and one out of every 10 Japanese starters smoked Marlboro.58,62

Thus, television solved two of the central challenges in the Japanese market. It allowed foreign brands to appear popular to established smokers immediately, and created images appealing to new smokers for future growth. Television advertising became the central element of Philip Morris’s marketing strategies in Japan (fig 5).30

Figure 5 Reproduced from Philip Morris marketing report illustrating importance of television.30 OOH, out of home.

Television advertising boosts market share and grows the overall market

After restrictions were removed in 1986, both the quantity and the quality of tobacco TV advertising increased dramatically. By 1991 Japan Tobacco spent approximately $990 million on TV ads and Philip Morris spent approximately $145 million.63 However, a report prepared for the CEO of Lorillard tobacco company,64 noted that Japan Tobacco’s “main strategy is volume and not necessarily quality”.63 A Philip Morris marketer discovered that advertisements that incorporated famous actors and continuing storylines were more memorable,29 and a 1987 Brown and Williamson advertising study also found that consumers remembered actors much more readily than they did the setting of the ad, animals, props, or the ad slogan.37

Cigarette television advertisements were widely viewed, well liked, and quite memorable.65,66 A 1992 study conducted by Infoplan (a marketing research company) for the Tobacco Institute of Japan found that the most commonly mentioned source of cigarette brand awareness was television commercials.67,68 Philip Morris research found even respondents who had trouble pronouncing the English ad slogan “Speak Lark” were able to “playback” the slogan when prompted.29 By 1987, the “Speak Lark” slogan had become so well established, the actors in commercials only had to mouth the words.34,69 Philip Morris’ success with television advertising was also noted by its competitors, Lorillard63 and Brown & Williamson37 tobacco companies. Philip Morris was able to increase its share of the foreign cigarette market in Japan throughout this time (fig 3). In addition, the increase in competition, new distribution channels, and cigarette advertising in Japan was accompanied by a reversal of prior downward trends with an expansion of the total Japanese cigarette market by approximately 15% (fig 2).

Maintaining access to television

As elsewhere in the world,70–73 transnational tobacco companies anticipated advertising bans well in advance of their enactment and pursued several strategies to maintain a presence on television.35 In Japan, tobacco companies became adept at circumventing television advertising restrictions before 1981 when they had been limited by the Japan Tobacco monopoly.20 For example, public relations firms handling sports sponsorships “made sure that TV channels featured these events and some even made prime news topics”.19 Philip Morris used Marlboro sponsored racing since at least 1976, when “the 1976 and 1977 Formula One Grand Prix …turned out to be a 2 hour Marlboro film”,19 and gave away Parliament wristwatches and Lark T shirts during weekly television game shows.19

Tobacco companies revived these strategies as they anticipated the reinstatement of television restrictions. As early as 1985 Philip Morris planned to increase sponsorship of motor racing and other spectacular sports “to have pre-emptive activity to prepare for prohibition of electronic media use”.20 Philip Morris also worked to obtain placement of its logo in the ad campaigns of other non-tobacco companies: “we are very successfully exploiting our involvement with Shell Oil, which features the Marlboro car in all its advertising.”36 Philip Morris also sponsored Japanese skiing and golf tournaments, bar and nightclub promotions, and concert series.74 Brown and Williamson sponsored motorcycle racing events at the Suzuka racetrack in 1987, where the Lucky Strike sponsored riders “virtually monopolized the live T.V. broadcast of the race”.75 Philip Morris also planned to “initiate an aggressive outdoor signing program” when they anticipated a possible end of TV advertising coincident with the World Conference on Smoking or Health in Japan in 1987.76

While working to delay and circumvent marketing restrictions, Philip Morris simultaneously increased TV ad spending dramatically; Dinyar Devitre, president of Philip Morris KK explained in his 1988 presentation to the board of directors: “much of the marketing spend you see here goes into television, where we’ve increased yen spending 60% this year in anticipation of a broadcast ban in 1990.”77 In 1989 vice president of Philip Morris KK, Robert P Roper, reported in addition to their heavy investment in television: “at the same time we are aggressively developing alternate media forms such as outdoor, cinema and event promotions to have pre-emptive positions in each of these area for the day we no longer have TV.”30,78

In anticipation of future TV advertising bans, Philip Morris planned to “fully exploit” their celebrity heroes,79,80 and increased the quality of television advertisements to “develop the strongest, most durable images for our brands while we still have television”.36 In 1994, Philip Morris was spending 10.9 billion yen ($102 million)26 on television advertising, and noted “we will have to spend more money—not less—if ban happens”.30

Protecting “freedom to advertise”

Tobacco companies also pursued policy strategies to avoid regulation, including (1) agreeing to trade other concessions for advertising rights, (2) recruiting and training academics and other experts to argue against restrictions and undermine studies connecting advertising and youth smoking, (3) recruiting support from other industries that profit from advertising to lobby government officials, and (4) creating an industry-wide self regulating body (the Tobacco Institute of Japan) to adopt partial advertising restrictions to head off outside regulation.

Philip Morris and the other transnational tobacco companies placed top priority on protecting their ability to advertise throughout Asia. As Robert Bockman stated in a memo to Philip Morris executives Daniel Tso and G Aelvoet in negotiating advertising limits in Hong Kong (Aelvoet would later work for Philip Morris KK):

“Am extremely concerned about increased time restrictions on TV. This should not be conceded…Perhaps following will give you some bargaining power…PM should continue to push for FTC method [to monitor content of cigarettes]…In point of fact, we do not care about testing methodology. What we are doing is to try to give you a tool for bargaining on the point that is worthwhile negotiating, namely the advertising time restrictions.”81

A 1990 Japan report by Roper stated, “further restrictions on TV advertising …pose the most serious threats to import growth”.53 Philip Morris’s 1992–1994 corporate affairs plan for Japan’s main advertising objective was to “forestall any further reduction in TV advertising and retain access to all other forms of advertising and promotion”.82

In February 1987, Japan Tobacco Inc, Philip Morris KK, Brown and Williamson (Japan) Inc, RJ Reynolds, and Rothmans Marubeni Tobacco Corporation founded the Tobacco Institute of Japan (TIOJ) to represent the industry83; “to ensure that the [tobacco] industry’s interests are protected”.84 Its activities included to “establish and monitor the voluntary code on cigarette advertising”.83 Although these codes gave the appearance of increased self regulation, there was no means to enforce the code outside of the tobacco industry or its representatives.

Philip Morris also planned to “identify and train Japanese academics/experts to be prepared to defend commercial free speech and the benefits of advertising…[and] commission local research on smoking patterns to refute arguments that advertising influences consumption”.82 A 1992 Philip Morris report on Asia also planned to develop relationships with retailers associations who could act on the tobacco industry’s behalf:

“Over the plan period, PMKK and TIOJ must maintain and strengthen their relationships with the Retailers Association of Japan, perhaps the most powerful group in influencing Japanese policy-makers on marketing freedoms as well as on tax issues…the next element in our strategy to defend and maintain marketing freedoms involves organizing and strengthening the resolve of the advertising agencies and public relations agencies associated with tobacco companies, as well as publishers, to defend freedom of commercial speech.”85 [emphasis added]

In 1994 the tobacco industry also strengthened its self enforced tobacco industry advertising codes to forestall legislation: “modification of voluntary codes may enable [us] to avoid the legislation of ad restrictions.”85,86 Using these tactics, the tobacco industry was able to delay the end of TV advertising until 1998, 12 years after Philip Morris executives first anticipated it.87 The 1998 voluntary code adopted by the Tobacco Institute of Japan prohibited tobacco brand advertising on radio, cinema, and the internet. However, the code still allowed advertising in newspapers and magazines, billboards and posters, cigarette sample distribution in pubs, restaurants, and events, sponsorship of events except for those where minors or females form the majority of the audience (an exceptionally lax standard), all promotional activities, and unrestricted use of brand names on non tobacco products.88 After 1998, the overall Japanese cigarette market declined (fig 2). Japan Tobacco reports its market share continued to decline, dropping from 77.7% in 1997 to 73.3% in 2003.13,89