Big Tobacco in Motorsport: An International Business & Marketing Lesson
Big Tobacco in Motorsport: An International Business & Marketing Lecture
Tobacco companies like Phillip Morris International Co. (PMI), holding subsidiaries like Marlboro, found Motorsport as an unrestricted, wild-west to leverage and cement their brands into the brains of millions.
In 1997 alone, PMI spent $350million on global marketing, with $100million of that allocated to Scuderia Ferrari Formula 1 Team.
That is crazy.
The Golden Age of Tobacco: A Real-Life Money Printer… only for a few
You see, the tobacco industry stands apart from many others.
Each passing decade sees regulations tighten, creating formidable hurdles for new firms attempting to break into the market. Consequently, established players like PMI easily capitalise on this restricted competition, harnessing the industry’s excess demand to consolidate their market share.
From the supply side component, why would you even join the market?
Also taxes, can’t forget.
Tax play a pivotal role when looking at the demand component. Let’s break it down with a quick example…
Tax Calculation Example:
Let’s take a pack of 20 Marlboro’s with a retail price of £12.50 as an example to illustrate the tax breakdown:
Specific Duty: £262.90 per 1000 cigarettes : (£262.90/1,000)×20= £5.26
Ad Valorem Duty: 16.5% of the retail price : ( 0.165×£12.50)= £2.06
VAT: 20% of the subtotal : 0.20×£12.50= £2.50
Total Tax: £5.26+£2.06+£2.50=£9.82£5.26+£2.06+£2.50= £9.82
- The total tax on a £12.50 pack of Marlboro is £9.82.
- Percentage of retail price: 78.56%
So what does this all mean?
Well, let’s look at the consumer.
Likely a recurrent customer to addictive tobacco products, makes DEMAND INELASTIC! (customers are quite unresponsive to price changes, aka will still buy if prices go up).
Implications?
“ GREATER THE TAX BURDEN CAN BE SHIFTED TO THE CONSUMER “
Higher prices, as a tax part, DO NOT significantly deter consumption due to the addictive nature of nicotine, allowing already established firms like PMI to use costly regulatory compliance as a competitive advantage to dominate the market.
In 1996, PMI reported a net revenue of $51.5 billion, with operating income reaching $9.3 billion. 15–20% of that goes into marketing. To put that into perspective, Apple spends 8%, and Coca Cola 11%.
Why Formula 1? A Strategic Choice
While F1 may not be the most popular sport globally, it offers unique advantages.
Some quick pointers:
- Global Viewership: Races are broadcast to over 180 countries, with an estimated 1.9 billion cumulative viewers in a season. 2021 Monaco Grand Prix attracted 100 million global viewers
- Target Demographic: F1 fans are predominantly male (70%), with a high proportion aged between 18–34 years old (45%). Further, 30% of F1 viewers have a household income exceeding $100,000.
- Prime Real Estate: Brands like Ferrari, and Mercedes have long standing prestige and attract a certain audience to plaster their logo. Mercedes AMG Petronas F1 Team total sponsorship deals are valued at over $200 million.
“Formula 1’s association with cutting-edge technology and its commitment to innovation resonate with brands seeking to align themselves with progress and sophistication in consumers’ minds.” — John Smith, CEO of Motorsport Network
Marketing Lessons from Marlboro’s Innovative Tactics in F1
The Challenge: Advertising Bans
By the early 2000s, tobacco advertising faced increasing restrictions worldwide.
In 2006, a European Union directive banned tobacco sponsorship in F1.
PMI had to find a way to maintain Marlboro’s association with Ferrari without explicitly displaying the logo. The solution was both subtle and ingenious:
Subliminal Marketing: The Barcode Design
Lesson: Subtle visual cues can invoke brand recognition.
- Historical Context: The barcode design on Ferrari cars was introduced as a direct replacement for the Marlboro logo, leveraging the brand’s established presence in F1.
- Subliminal Effect: Although the barcode did not form the Marlboro logo at speed, it was effective due to its color scheme and placement, which subliminally reminded viewers of the Marlboro branding.
- Motion Effect: During races, the fast-moving cars made the barcode appear as a blur, which closely mimicked the Marlboro logo, ensuring that the brand was subtly but effectively present on the track.
Leveraging Historical Brand Presence
Lesson: Utilise the historical presence and established brand identity to maintain a form of consumer connection.
- Brand Legacy: Marlboro had been a prominent sponsor in F1 for many years, creating a strong association with the sport.
- Consumer Response: The success of the barcode design relied on the audience’s long-term familiarity with the Marlboro brand. Even subtle cues like colour and design placement on a Ferrari were enough to invoke brand recall.
Adaptability and Quick Response
Lesson: Be ready to adapt and respond quickly to regulatory scrutiny.
- Incident Example: Around 2010, European regulators scrutinized the barcode design, suspecting its connection to Marlboro. Ferrari promptly removed the design to avoid potential legal issues.
- Quick Adaptation: This swift response highlights the importance of being adaptable and prepared to change marketing strategies when faced with regulatory challenges.
Guerrilla Marketing in F1: What the hell is a Mission Winnow???
This campaign, launched by PMI in 2018, serves as a compelling case study in logo placement and neuromarketing, like with the barcode, but also guerrilla marketing, and curiosity to drive engagement:
The Motives Behind Mission Winnow
By this time, in the late 2010s, any form of tobacco advertising in its slightest was completely outlawed. No Barcode!
How can PMI continue to market their brand?
Mission Winnow, a “charity” we still do not understand entirely, was conceived as part of PMI’s broader effort to reposition itself as a forward-thinking company committed to innovation and a “smoke-free” future.
The primary motive behind Mission Winnow was twofold.
- First, PMI aimed to shift public perception by emphasising their investment in science and technology to create a future without cigarettes. This was not just a rebranding exercise but a strategic move to align the company with global health trends and regulatory demands.
- Second, say it quietly. Despite the advertising bans, PMI sought to maintain a connection with its historical presence in F1 through its long-standing partnership with Ferrari. This partnership has been a cornerstone of Marlboro’s brand identity, and the challenge was to sustain this association without direct tobacco advertising.
Really???
Does a company like PMI truly care about a smoke-free future? Or, are they merely manoeuvring around regulations to exploit their prestige and legacy with RED CARS THAT GO FAST!
Look at the images above.
The font used in “Mission Winnow” (MW) almost exactly match the triangular imagery on a pack of Marlboro’s. This angular design, with the colour scheme of red is strategically crafted to evoke the subconscious association to MARLBORO, just like the barcode. Further, it can potentially trigger cigarette cravings (neuromarketing tactics).
The Good: Creative and Engaging Strategy
Mission Winnow’s strategy hinged on creating curiosity and indirect engagement. The ambiguous logo and messaging were deliberately designed to provoke interest and drive audiences to search for more information online. This approach allowed PMI to sidestep direct advertising bans while keeping the Marlboro brand relevant and visible.
The charity campaign’s alignment with innovation and progress resonated well with F1’s image of cutting-edge technology and high performance. By framing themselves as champions of a smoke-free future and technological advancement, PMI managed to craft a narrative, truthful or not, that complemented the ethos of F1.
The Bad: Controversy and Scrutiny
However, the campaign did not escape controversy. The abstract nature of Mission Winnow drew regulatory scrutiny, with critics accusing PMI of attempting to circumvent advertising bans. In 2010, the European Union had already taken issue with the barcode design that appeared to mimic Marlboro branding. The Mission Winnow campaign was seen by some as a continuation of this strategy, prompting investigations and public skepticism.
Moreover, the ambiguity of the campaign’s messaging led to confusion among consumers. Many were unclear about what Mission Winnow actually represented, which potentially diluted its impact and effectiveness. This lack of clarity, combined with the perceived disingenuousness of PMI’s smoke-free narrative, undermined the campaign’s credibility.
The Challenges Faced
The company had to ensure that Mission Winnow complied with all advertising laws while still achieving its marketing objectives. This required a delicate balance between innovation and compliance, creativity and legality.
Maintaining relevance and engagement without direct tobacco references was another major challenge. PMI had to rely on the historical association of Marlboro with F1 and the curiosity-driven engagement of the Mission Winnow campaign to keep the brand in the public eye.
The Successes
Despite the regulatory challenges whilst still achieving its marketing objectives, the campaign was a notable success. It successfully generated a high level of curiosity and online engagement. Fans and viewers, intrigued by the mysterious logo and messaging, searched for more information, keeping PMI and Marlboro in public conversation.
Furthermore, Mission Winnow allowed PMI to maintain a visible presence in F1 despite the advertising bans. This ensured ongoing brand recognition and association with Ferrari’s success, a critical factor in sustaining Marlboro’s brand equity.
Lessons Learned
- Firstly, the power of curiosity cannot be underestimated. Guerrilla marketing can effectively drive engagement by leveraging intrigue and leading consumers to seek out information voluntarily.
- Secondly, navigating regulatory landscapes requires a careful balance between compliance and effective messaging. Creative approaches must be both legally sound and engaging to be successful.
- Thirdly, clarity in messaging is crucial. While abstract campaigns can generate interest, ensuring that the core message is understood by the audience enhances the campaign’s impact and credibility.
- Lastly, adaptability is key. PMI’s ability to modify the campaign in response to regulatory scrutiny highlights the importance of flexibility in marketing strategies.
Final Words.
Motorsport was the answer.
It was solution to the tobacco industry’s conundrum of where to advertise, becoming the fertile ground for their lucrative marketing strategies.
From the 1970s to the 2010s, this strategic partnership showcased the enduring power of brand association in consumer psychology.
The sight of a red car adorned with white lettering instantly triggers associations with Marlboro, illustrating how deeply ingrained these associations can become over time. It is a neurological connection.
This legacy underscores the true value of long-term investments in brand association and the meticulous planning required to navigate regulatory landscapes while staying relevant in the hearts and minds of consumers.
Aggressive, yet calculated and undeniably ingenious.
