Altria Group: Joint Ventures 2005

Altria Group: Joint Ventures

2005 Joint Venture with the China National Tobacco Corporation

In 2005, the Altria Group, an international operating company that contains Philip Morris International (PMI) within its embrace created a joint agreement with the China National Tobacco Corporation (CNTC). Altria derives most of its revenue from the tobacco industry, an industry that is being subject to increasing bad publicity within the United States and threatened regulation by congress, as well as potential lawsuits. However, in the developing world, publicity against smoking is not nearly as pervasive in the media and culture and people often eagerly seek to embrace iconic Phillip Morris images that seem to embody material, capitalist prosperity and American values like ruggedness and individualism.

With this in mind PMI established an international equity joint venture with China National Tobacco Import and Export Group Corporation (CNTIEGC). Each party will hold 50% of the shares of the newly-formed company ("The China National Tobacco Corporation and Philip Morris International announce the establishment of a long-term strategic cooperative partnership," 2005, Altria Group). The venture is a clear example of a diversification strategy to garner greater profits for Altria. The resulting product sold abroad will not be cheaper than competitors, but it will sell a unique brand of rugged, Western 'Americanness' personified by the Marlboro man to an emerging Chinese middle class, eager to embrace what they see as the trappings of capitalistic success in their choice of brands. Without such an agreement, as American public sentiment against tobacco grows increasingly vociferous, and as lawsuits against tobacco companies grow in popularity, the Altria's reliance upon its American market could become dangerous to its health as a company (no pun intended). Thus it must continue to seek to expand its already impressive international market, and further diversify its market segments to include the developing world. Smokers in the developed world, even outside the U.S., may become a dying breed, but not so in China. However, the difficulties of doing business with Chinese companies given the legal complexities of the Chinese environment and government could pose a possible threat to Altria's success as a company, serving the needs of the large Chinese market and drawing upon growing Chinese wealth.

2007 Joint Venture: Molson-Coors

Altria has used a different corporate strategy to cope with the pressures created by having to deal with the market dominance of Anheuser-Busch worldwide. Although Altria is a large corporate conglomerate, within its alcoholic subsidiaries it cannot sell at volume like Anheuser-Busch, to maximize value, cut costs, and to keep the beverage's price point low for commercial beer drinkers (the target market). Altria's division SABMiller and Canadian brewer Molson- Coors thus combined their U.S. brewing operations into a joint venture called MillerCoors in 2007. "The joint venture will be 58% owned by SABMiller and 42% owned by Molson-Coors with each having an equal voting interest in an all-out effort to cut costs to better compete against the dominance of Anheuser-Busch (NYSE:BUD) and the solid Budweiser brands" ("Altria: The hidden SABMiller & Molson Coors winner," 2007, 247 Wall Street.).