Marlboro Friday

Marlboro Friday refers to Friday, April 2, 1993, when Philip Morris, the maker of Marlboro cigarettes, announced a drastic cut in the price of Marlboros to compete with generic cigarette makers. The company's stock tanked 26% immediately, wiping $10 billion off its market cap in a day.

The day is remembered as a landmark moment in the 1990s when many consumers moved away from name brand products in favor of cheaper generic products with prices 50% lower than their branded competitors. In its wake, money managers moved cash from name brand consumer goods makers such as Coca-Cola and Tambrands (the former maker of Tampax tampons) to technology stocks and generic consumer goods producers.

Even though Philip Morris's announcement caused the company to initially lose $10 billion off its market cap, Marlboro Friday marked the end of a price war. Other tobacco companies were priced out of the market, and only two years later, Philip Morris' stock had fully recovered from the Marlboro Friday loss. One marketing expert (Watts Wacker of Yankelovich Partners) stated in the New York Times that, "I believe the 1990's officially began with Marlboro's inability to sustain its price."

Philip Morris' recovery was partly due to the strength of its brands and customers' loyalty. Wacker explained that brands that can demonstrate value in terms of quality and price would grow in importance over time. In periods of diminished expectations, people want to manage their downside risk, and choose the products that work well for them. In turn, Wacker stated that those trends benefit the name brands that shoppers buy without thinking about it--consumers often want to avoid the time and stress of choosing between products.