COLUMN ONE : Targeting Foreign Smokers : As sales lag at home, U.S. tobacco firms try to conquer Asia and East Europe. In Hong Kong, Philip Morris once bought every newspaper front page to push Marlboro.

Let health groups call them drug pushers; let members of Congress hand them their heads. U.S. cigarette makers are riding high, now that the world is Marlboro Country.

Americans keep smoking less, but tobacco companies are finding more than enough foreigners to take their places. From the smoke-filled cafes of Eastern Europe to the billboard jungles of Asia, the firms are out there pitching--often using TV and other strategies they cannot use at home:

* In China, the world’s biggest tobacco market, Philip Morris has become the financial angel of professional soccer, underwriting the Marlboro Soccer League, named for the company’s flagship brand.

* In Prague, capital of the Czech Republic, R.J. Reynolds has marched couples down the aisle in “Camel” weddings, complete with Camel-insignia taxis to shuttle the guests.

* In the Philippines, Asia’s most Roman Catholic nation, promotional calendars display U.S. and local cigarette brands under a picture of the Virgin Mary.

* In chain-smoking Eastern Europe, the U.S. companies are becoming a huge force in cigarette manufacturing, with Philip Morris and Reynolds between them having entered into 14 joint ventures with state tobacco companies.

Here at home, tobacco companies are circling the wagons, fighting to save what they can of a shrinking market. But the industry’s big three--Philip Morris, R.J. Reynolds and Brown & Williamson--are seizing new turf in the developing world, where smoking is on the rise and American cigarettes still symbolize elegance and style.

With billions of dollars at stake, tobacco firms have turned to political heavyweights for help in penetrating foreign markets. Former British Prime Minister Margaret Thatcher is an adviser to Philip Morris--although neither she nor the firm will discuss her work or consulting fee, a reported $1 million.

The overseas push began years ago, as rising health concerns caused U.S. sales to fall. But recent events in Eastern Europe and Asia have quickened the pace.

In the newly independent states of the former Soviet Bloc, the collapse of communism has opened the floodgates to investment by tobacco firms. Eastern Europe has the world’s highest rates of smoking-related deaths, but it is also starved for capital. U.S.- and Europe-based tobacco multinationals have committed more than $1.5 billion to build or retool cigarette plants throughout the region--often in joint ventures with state tobacco monopolies that once had the business to themselves.

Across economically booming Asia--the only region where cigarette consumption, per capita, is clearly growing--the U.S. government has smashed trade barriers that kept out U.S. smokes. From 1986 to 1990, Japan, Taiwan, South Korea and Thailand each caved in to threats of trade sanctions, allowing American cigarettes to compete with monopoly brands.

The full-court press is paying big dividends. Although U.S. consumption has fallen in each of the last 10 years--and by 20% over the decade--cigarette exports have more than tripled and sales from U.S. tobacco plants abroad have surged.

Philip Morris alone sold 460 billion cigarettes abroad in 1993--nearly as many as Americans bought from the company and all its rivals combined.

“Our worldwide tobacco business has never been in better shape,” the firm recently told shareholders. “As large as we have grown, however, our brands only account for approximately 12% of the worldwide cigarette market--leaving plenty of room for profitable growth.”

Cigarette exports have also been one of the few bright spots in the U.S. trade picture, shaving the trade deficit by $23.5 billion over the last five years.

Not that the cigarette makers are turning their backs on America. Profit margins remain higher in the United States than abroad. Indeed, the companies will keep fighting smoking restrictions here--as Philip Morris did in its failed campaign on behalf of California’s Proposition 188--to preserve domestic sales and because other countries tend to copy U.S. smoking curbs.

But as time passes and the industry extends its global reach, its problems at home seem to matter less and less.

“For every smoker who quits in the U.S., two teen-agers start smoking in China,” said Dr. Judith Mackay, a Hong Kong-based physician and consultant who has advised Asian countries on tobacco control.

Twenty years ago, the wealthy, industrialized West led the world in smoking, according to tobacco consumption data compiled by the World Health Organization. Today, the situation essentially is reversed, with three poorer nations--Poland, Greece and Hungary--atop the list.

The trend has raised deep concern among health authorities who fear that poor nations, struggling to eliminate malnutrition and lift standards of public health, face a looming, American-style epidemic of lung cancer. One particular concern is that aggressive advertising will boost smoking among women, who now smoke in low numbers in many of the countries receiving the cigarette makers’ attention.

“The developing countries are sitting on a time bomb,” said Richard Peto, a noted epidemiologist at the University of Oxford in England.

Worldwide, about 3 million people each year die of smoking-related causes--about 2 million of them in the developed world, according to estimates by the World Health Organization. If smoking patterns continue, the annual toll will reach 10 million by the 2020s--with about 7 million of the victims from the developing world. According to the estimates, about half the victims will die in middle age, losing on average 20 to 25 years of life expectancy.

Industry critics say that efforts to reduce the death toll are being undermined by the aggressive marketing of tobacco multinationals.

“We are not afraid of foreign cigarettes, but we are afraid of their marketing prowess,” said Dr. Hatai Chitanondh, a Thai physician who is president of the Asia and Pacific Assn. for Control of Tobacco. “They have the best brains in marketing.”

Developing nations are often “attracted to anything American, and promoting the Western lifestyle and linking these cigarettes to the United States makes them particularly attractive,” said Michael Eriksen, director of the U.S. Office on Smoking and Health, who termed the tobacco industry’s conduct “abysmal.”

The industry and its supporters reject the morbid arithmetic and logic of their critics. They say tobacco companies are merely competing for the loyalties of existing smokers, who in many cases had no choice until now of whose cigarettes to buy. Moreover, they argue, since U.S. brands invariably cost more in foreign markets than local brands, they do not make smoking more affordable to the poor.

“Smoking is not something like rock music, which America has just exported,” said Owen C. Smith, a vice president with Philip Morris International and president of the U.S. Cigarette Export Assn.

“There are hundreds of millions of smokers outside the United States,” he said, “and the . . . issue is whether those smokers will have the liberty to choose an American product or be restricted to smoking only those made by a protected . . . local industry.”

But few outside the industry believe its claim that advertising simply steals smokers from rival brands rather than triggering demand.

“Every marketing plan . . . involves both an element of market share and market expansion,” said Michael Pertschuk, former head of the Federal Trade Commission and co-director of the Advocacy Institute, a public interest group.

The marketing blitz has hit many countries where smoking was common but cigarette advertising was almost unknown.

In the newly independent states of Eastern Europe and in several Asian nations, state monopolies that supplied smokers did little or nothing to promote their brands.

The Western invasion, for instance, was a wake-up call in Japan, the world’s fourth-largest cigarette market. Japan Tobacco, the national monopoly, has become a big advertiser at home and is also hawking its brands abroad.

Beyond advertising’s immediate effects on smoking habits, critics fear that big media spending in target countries will induce a wave of self-censorship--such as the one that once chilled U.S. media coverage of smoking and health issues.

Cigarette advertising “will prevent the story from being told straight,” Peto said. “The more they (the tobacco companies) become established politically, the more difficult it’s going to be to get the information across to people.”

Anticipating the onslaught, some countries established restrictions or bans on tobacco advertising. But in many cases, the laws proved toothless or left loopholes that companies have been happy to exploit.

Consider Russia, whose Parliament last year banned tobacco ads from radio, TV and billboards--but without obvious effect. Russian media will not willingly sacrifice the revenue, and tobacco companies will not stop advertising as long as rivals continue to do so.

In Moscow, revolutionary statues and posters have given way to the logos and hues of Western cigarette brands, which appear on billboards, bus shelters and illuminated signs. Cigarette ads are an imposing feature of the cityscape--not only because there are lots of them, but because in many places there is little advertising of any other kind.

Indeed, wide-open Russia is a place where dedicated marketers can work off their wintertime blues. As cold and gloom descended on St. Petersburg last year, the R.J. Reynolds sales staff painted the town with the yellow and blue of the Camel brand. The troops brightened shops and kiosks with Camel stickers, posters and window frames, and within two weeks “725 locations were Camelized,” according to an account in a company newsletter.

As in the United States, the cigarette makers sponsor sporting and cultural events in Russia. Philip Morris underwrote a tour by the Bolshoi Ballet. R.J. Reynolds sponsored a rock festival last spring in St. Petersburg. According to a company spokeswoman, such sponsorships “play a crucial role in making sporting, cultural and entertainment events more affordable and more professional.”

There is little outward opposition to the smoke that seems to hang everywhere, with park benches as likely to be smoky as nightclubs and cafes.

“We’re not teaching them to smoke,” Constantin Ohanian, an R.J. Reynolds vice president, said in his St. Petersburg office last May as he used a lighter shaped like a hand grenade to fire up a cigarette. “People here want to smoke, and we are providing them with what they want.”

Every autumn, Polish health authorities stage a national stop-smoking day to coincide with today’s Great American Smokeout. But this year, tobacco companies have tried to upstage it with a simultaneous contest offering prizes for smokers, according to Dr. Witold Zatonski, a Polish physician and chairman of the International Union Against Cancer’s tobacco and health program in Eastern Europe.

The effort was especially “cynical” in Poland, “a country in which premature death in adult men . . . is rising,” Zatonski complained.

Weaning Poles from the smoking habit “is not very easy,” he said, because “the tobacco industry is having (a) quite different goal.”

In Hungary, as in Russia, companies have found ways around the ban on cigarette advertising. Dressed in the stripes and colors of Western brands, young women distribute free samples in cafes and bars. In the capital, Budapest, brand names such as Marlboro and Lucky Strike, sold by British-based BAT Industries, have been incorporated in the names of pubs and coffeehouses.

“Camel Boots” footwear stores project the brand’s image of rugged, outdoor adventure. A German-based subsidiary runs Camel Boots, according to an R.J. Reynolds official in Hungary. But the stores are “not a cigarette promotion tool,” the official insisted.

Hungary has seen the stirrings of anti-smoking activism. In Budapest last year, protesters pasted skulls and painted the Hungarian word for “cancer” on cigarette posters.

Meanwhile, though, the industry is seeking more freedom to promote its brands.

The head of corporate relations for Philip Morris in Hungary wrote the local heads of rival firms in December, 1992, suggesting that an industry delegation “should try to test the limits of the flexibility of the government and have a better understanding about the relation of power among ministries.”

“The industry should continue to talk to high-level politicians to maintain pressure on the bureaucracy,” said the letter, whose contents were confirmed by company officials.

Although less visible than advertising, the industry’s investment in cigarette plants in Eastern Europe is even more dramatic.

Leading the way is Philip Morris, which has committed more than $800 million to eight joint ventures in Russia, Lithuania, Kazakhstan, Ukraine, Poland, Hungary, the former East Germany and the Czech Republic--where the company says it is the largest U.S. investor.

Critics say the tobacco industry’s growing hold on Eastern Europe will interfere with smoking control efforts. “They’re buying political influence by going into these countries and saying, ‘We want to help you with your economy,’ ” said Scott Ballin, chairman of the Coalition on Smoking OR Health, a U.S. anti-smoking group. “You don’t bite the hand that feeds you.”

Asia, with 54% of the world’s people, holds even more promise in the long run. In many Asian countries, smoking rates are high among men but low among women--leaving room for market expansion.

Asian anti-smoking efforts are gathering strength, but cigarette sales still are forecast to rise 13% during the 1990s, according to Euromonitor International, a market research organization.

Economic growth and rising disposable incomes, along with less awareness of health risks than in the West, all favor the industry.

In the Philippines, where nearly two-thirds of men and one-fifth of women smoke, a 1990 survey found that 57% of respondents were unaware that cigarettes cause cancer, according to the British journal Tobacco Control.

In China, which consumes one-third of all the cigarettes in the world, the government has signed joint manufacturing agreements with three Western tobacco giants and has agreed to begin opening its market to import brands by the end of this year.

Asian countries hold “vast potential” and are being “heavily targeted by the tobacco multinationals,” a recent Euromonitor report said.

“Apart from their great financial strength and worldwide marketing experience, the multinationals are in a good position to exploit the emerging markets . . . because of their global reputation and the inherent cosmopolitan nature of their brand images,” the report said.

American firms have already increased Asian tobacco sales by billions of dollars, thanks to help from the U.S. government. U.S. trade negotiators pressured Japan, South Korea, Taiwan and Thailand--which all had tobacco monopolies--to open their markets to American cigarettes. At the industry’s insistence, trade officials further demanded that U.S. firms be free to advertise their brands, even though cigarette advertising in the four countries had been virtually nonexistent.

Japan agreed to permit a wide range of advertising, including TV commercials. Taiwan and South Korea also accepted some forms of cigarette advertising.

Exports to the four countries last year reached about 65 billion cigarettes. In Japan, U.S. brands have captured about 18% of the market.

What skilled marketers can do in Asia is reflected in Marlboro’s conquest of Hong Kong--an accomplishment detailed in an oral history exhibit at the Smithsonian Institution’s Center for Advertising History.

Marlboro was a nothing brand in Hong Kong, with less than 1% of the market, when Philip Morris began its campaign in 1976.

The company discovered that Marlboro’s cowboy symbol was an ambiguous figure to the Chinese--rugged and tough, but also an itinerant who slept outdoors and could be perceived as a coolie. So Philip Morris produced new TV spots for Hong Kong in which the cowboy was presented as a boss--a clean-cut man of property who lived in a big ranch house and rode a white horse, a symbol of luck.

When Marlboro dislodged Reynolds’ Winston cigarettes as America’s most popular brand in rankings compiled by a U.S. analyst, Philip Morris made it a big event in Hong Kong. A well-known TV personality was flown to New York and stationed outside Philip Morris’ Park Avenue headquarters to make the announcement by live satellite link.

Another time, Philip Morris bought the front pages of all of Hong Kong’s major newspapers for an “advertorial” on the success of Marlboro, recalled William I. Campbell, former vice president of Philip Morris Asia and now president of Philip Morris USA.

“So on the given day, Jan. 10 or something like that, you go past . . . the street newsstand, and . . . all of the 10 newspapers, they all have the same front page,” Campbell told a Smithsonian interviewer. “That was great fun.”

Marlboro soon became Hong Kong’s leading brand and now holds a market share of more than 40%.

Tobacco firms in Asia cannot always use the weapons that Marlboro employed in Hong Kong. Hong Kong itself has placed limits on tobacco ads; in Thailand, direct cigarette advertising is banned.

But Philip Morris, the world’s biggest tobacco company, still does what it can.

Last year in Bangkok, the company staged a pair of concerts in its “Superband” series with Tony Bennett and the McCoy Tyner Trio. It announced that it would donate proceeds to a charity founded by Thailand’s most revered figure, its king.

In Asia, as in the United States, Philip Morris has sought to win friends and quiet critics through lavish support of the arts. This fall, it underwrote a gala international arts competition for the six countries of the Assn. of Southeast Asian Nations.

The cigarette makers have shown real ingenuity in Malaysia. The country banned direct TV advertising of cigarette brands, so the U.S. and European tobacco firms have attached their brand names and logos to a host of unrelated products and services for which no ad restrictions exist.

Malaysia, for example, has Salem Power Stations--youth-oriented music stores named for R.J. Reynolds’ popular menthol brand.

There also have been lavish TV ads for “Salem Holidays.” Attractive young couples stroll through alpine scenery as music plays and a narrator intones: “Salem High Country--a world of refreshment!” But there is no information on destinations, travel dates or prices, and a travel agency’s name appears only in the fine print.

When a documentary film crew from Yorkshire Television of England sent a representative to book a Salem Holiday, the travel agent told him: “No, no, no. We only advertise the name.”

“Salem Power Station and Salem Holidays . . . are real businesses,” R.J. Reynolds said in a written response to questions from The Times. “Neither sell cigarettes,” the statement said. Use of the Salem name “is consistent with practices around the world to extend valuable trademarks to unrelated products.”

Correspondent Sam Loewenberg in Budapest and Emily Harris of The Times’ Moscow Bureau contributed to this report.

NEXT: The opening of the world’s most prized cigarette market--China.

Tobacco’s Long Road

Americans are smoking less--much less--than in years past, dropping from the ranks of the world’s biggest smokers per capita. But U.S. tobacco companies are making up for declining domestic consumption by dramatically boosting cigarette exports and sales fromm factories abroad.

U.S. Cigarette Consumption (in billions of cigarettes) 1984: 600.4 1985: 594 1986: 583.8 1987: 575 1988: 562.5 1989: 540 1990: 525 1991: 510 1992: 500 1993: 485 1994*: 480 * Estimated

Source: USDA Tobacco Situation and Outlook Report

U.S. Cigarette Exports (in billions of cigarettes) 1984: 67.1 1985: 66.5 1986: 74.3 1987: 111.2 1988: 128.7 1989: 149.1 1990: 178.8 1991: 193.7 1992: 213 1993: 202 1994*: 207.5 * Estimated

Source: USDA Tobacco Situation and Outlook Report

Top 5 Cigarette Smoking Nations (1970-’72, annual average) Country: Cigarettes per adult Cuba: 4,220 Canada: 3,910 United States: 3,700 Switzerland: 3,460 United Kingdom: 3,030 1990-’92, annual average) Country: Cigarettes per adult Poland: 3,620 Greece: 3,590 Hungary: 3,260 Japan: 3,240 South Korea: 3,010 Source: World Health Organization

The two biggest U.S. tobacco companies--Philip Morris, maker of Marlboro and other brands, and R.J. Reynolds, whose signature product is Camel cigarettes--both record the majority of their sales outside the United States.

Worldwide Cigarette Sales, 1993*, in billions of cigarettes

Company U.S. sales International sales Total sales Philip Morris 196 459.7 655.7 R.J. Reynolds 141 174.7 315.7

Source: Company annual reports

* includes sales from factories abroad

Powerhouse Lobbyists

Seeking to penetrate foreign markets, tobacco companies have sought the help of some powerhouse lobbyists and advisers. Among them:

Margaret Thatcher: A critic of smoking while Britain’s prime minister, Thatcher has since become a consultant to the world’s biggest tobacco company, Philip Morris. Thatcher declined to be interviewed, and spokeswoman Miranda Granger would not discuss her work for Philip Morris, reportedly a three-year deal worth $1 million. The company was tight-lipped, too. “She’s a consultant on geopolitical affairs. End of statement,” said Elizabeth Cho of Philip Morris International. In a March, 1992, memo, Geoffrey C. Bible, then executive vice president and now president and chief executive of Philip Morris, outlined issues facing the firm’s tobacco and food businesses where Thatcher “may be able to offer guidance and assistance.”They included: “China Entry Strategy,” “Vietnam Entry Strategy,” “Singapore Anti-tobacco Programs”, and privatization of tobacco monopolies in Japan, Taiwan, Korea and Thailand.

Clayton Yeutter: U.S. trade representative and then secretary of agriculture in the Reagan and Bush administrations, Yeutter has since joined the board of British-based BAT Industries, the world’s second-largest tobacco company. As trade representative from 1985-89, Yeutter forced the governments of Taiwan, South Korea, and Japan to let in American tobacco products. Export sales by U.S. tobacco firms rose more than $1 billion per year. During at least part of his tenure as trade representative, the Yeutter family had stock in RJR Nabisco and Philip Morris--some in his name, some held in trust for a daughter, according to disclosure statements Yeutter filed. He sold the stock when he became agriculture secretary.

Carla A. Hills: Yeutter’s successor as U.S. trade representative from 1989-’93, Hills helped U.S. cigarette makers crack Thailand’s tobacco monopoly. Earlier this year, RJR and Philip Morris retained Hills’ law and consulting firms to help fight a Canadian proposal to require plain packaging of cigarettes sold in that country. In an opinion submitted to Canadian authorities, Hills concluded that the packaging rules would violate international trademark laws.

Richard V. Allen and Michael K. Deaver: In the mid-1980s, Allen, former national security advisor to President Reagan, was hired as a lobbyist by R.J. Reynolds in its battle to enter the South Korean tobacco market. As a countermeasure, Philip Morris hired Deaver, a former Reagan White House aide. Deaver was retained for $250,000 in response to rumors that Allen was telling the South Koreans that Philip Morris was aligned with Democrats and lacked influence in the Reagan White House. To shore up its Republican credentials, Philip Morris also engaged lobbyist Michelle Laxalt, daughter of former senator and Reagan confidante Paul Laxalt. When Deaver was tried in 1987 on charges of lying to Congress and a federal grand jury about his lobbying activities, a Philip Morris memo was introduced as evidence. The memo boasted that Deaver “was given a welcome ordinarily reserved for the highest foreign dignitaries” when he visited South Korea on Philip Morris’ behalf. However, South Korea did not open its doors to American cigarettes until 1988, in response to the threat of trade sanctions. Deaver was convicted and sentenced to probation, community service and a $100,000 fine.