History Stories

On April 2, 1993, the stock price of Phillip Morris dropped a whopping 26 percent, the largest price drop of any company―until Facebook's July 2018 tumble.

In the early 1990s, you could still find cigarettes in restaurants, vending machines and the mouths of all kinds of consumers. For adults and teenagers alike, one brand overshadowed all the others: Marlboro. The filtered cigarettes in their red-and-white packages had a cult following thanks in part to the Marlboro Man, an iconic cowboy character who lent macho cool to the brand, and for decades he’d led a seemingly unstoppable tobacco juggernaut to billions of dollars of profits.

So how did Marlboro end up on the receiving end of the most punishing stock market tumble of its time?

That’s what happened on “Marlboro Friday.” On April 2, 1993, the stock price of its parent company, Phillip Morris, dropped a whopping 26 percent, the largest price drop of any company to date. The dip seemed to come out of nowhere. It threatened to tank the entire U.S. stock market—and shook American confidence not just in one of its most famous brands, but in the idea of brands themselves.

Marlboros had long been the world’s most popular cigarette. First sold in 1923, the cigarettes were initially marketed to women under theslogan “Mild as May.” But after World War II, as cigarette brands like Lucky Strike and Camel reigned supreme, the brand underwent a masculine makeover. The brand relaunched in 1955—targeted to lifelong male smokers. Featuring a new red-and-white package and a manly cowboy known only as the Marlboro Man, the cigarettes became a sensation.

By 1993, they had been the world’s bestselling cigarette for decades. So when the brand announced it would drop the cost of a pack by a whopping 40 cents, investors were shocked. Why would the world’s best-selling cigarette slash prices so boldly?

A Phillip Morris ad using the famous Marlboro Man cowboy character on a downtown Atlanta billboard. (Credit: In Pictures Ltd./Corbis via Getty Images)

A Phillip Morris ad using the famous Marlboro Man cowboy character on a downtown Atlanta billboard. (Credit: In Pictures Ltd./Corbis via Getty Images)

The reason was competition, the brand explained: Discount brands and smokers who consumed fewer cigarettes had made a preemptive strike necessary. But the strike felt more like a bomb to analysts, especially when they learned that Marlboro would invest in even more advertising.

“It’s not unlike a candidate who tries to win an election by attacking his or her opponent in a fiery speech in the morning and then pays for warm-and-fuzzy, mom-and-apple-pie commercials to appear that evening,”wroteThe New York Times’ Stuart Elliott. Market experts worried that the price cuts would undercut the brand’s long-term viability, regardless of how powerful its cowboy imagery and iconic branding.

Stockholders apparently agreed: When they company announced that it would knock 40 cents off the price of a pack, investors fled. The stock price fell 23 percent, the largest one-day price drop of any brand in history at the time. News of Philip Morris’s decline hit other stocks hard, too. Suddenly, investors weregetting rid of stocks associated with other big name brands like Campbell’s Soup, Nabisco, Wal-Mart and Coca-Cola. The Dow Jones Industrial Average fell 69.17 points.

The dustup—quickly dubbed “Marlboro Friday”—wasn’t just frightening from a stock market perspective. The shocking decline of one of America’s most beloved brands begged a scary question: What if the concept of branding itself was bogus?

“The 1980’s ended on that day,” consumer marketing researcher Watts WackertoldThe New York Times a year later. Suddenly the brand loyalty that had seemed so important during a decade and a half ruled by name brands was on shaky ground. Spooked by a lengthy recession, American consumers had begun shopping at new big-box stores like Wal-Mart, bought more generic products, and were more cautious about opening their wallets.

But stingy consumers were just the tip of the iceberg for Phillip Morris. Like a slow-motion Titanic, the company was about to steer into a public relations disaster and a societal sea change. Since the 1950s, individuals had been suing individual tobacco companies for ill health effects, like cancer, caused by smoking. And in May 1994, a little more than a year after Marlboro Friday, Mississippibecame the first state to sue tobacco companies.

It opened the floodgates: As more and more states sought compensation for the injuries caused by smoking, the depths of the tobacco industry’s participation in decades-long lies were revealed. It turns out that companies like Phillip Morrisknew about the ill effects of smoking and the addictive potential of nicotine as early as the 1950s, but that they had engaged in decades of deceptive marketing anyway.

As the health consequences of smoking became better publicized and the extent of the tobacco companies’ collusion became better known during the 1990s, the golden age of American smoking ended. (And news thatat least four of the actors who played the Marlboro Man had died of smoking-related illnesses didn’t exactly help the brand, either.)

So did Marlboro Friday really spell the death of other American brands? Not exactly. “Companies realized that they no longer simply slap their logos on billboards and call it a day,”writesThe Motley Fool’s Morgan Housel. “That was mere advertising. Successful branding meant that companies had to integrate their products into consumers’ lives—the brand needed to be an experience, a lifestyle, rather than just the face of a product.”

As the 1990s went on, brands like Gap, Apple and Starbucks managed to worm their way into consumers’ daily lives. And despite the blip, Marlboro—whose parent company, Phillip Morris, rebranded itself as Altria Group in the early 2000s in the face of rising political pressure on tobacco companies—is still considered to bethe most successful stock of all time.

Marlboro Friday may have been the worst day a brand had ever suffered at the time, but the Marlboro Man brushed himself off and did just fine.

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