PHILIP MORRIS REVAMP COULD CUT STORE COSTS

RICHARD TURCSIK

NEW YORK -- A major restructuring plan at Philip Morris Cos. here could mean lower prices to retailers, according to securities analysts who follow the tobacco and food giant.

Philip Morris counts Marlboro and Virginia Slims cigarettes, Miller beer, Post Cereals, Oscar Mayer meats, Entenmann's cakes, Lender's bagels, Budget Gourmet, Jell-O and Kraft jellies and cheeses among its stable of brands. It said the restructuring plan, announced late in November, would significantly reduce its cost structure and improve future growth, profitability and cash flow.

The company said it will close or downsize approximately 40 manufacturing plants and eliminate 14,000 workers. It already said it was slashing 900 tobacco jobs in the Richmond, Va., area, and closing a Miller brewery in Fulton, N.Y., near Syracuse, by October 1994. Future beer for the Northeast will be supplied by Miller breweries in Eden, N.C.; Albany, Ga., and Trenton, Ohio.

"The actions reflect our determination to be the lowest cost competitor in all of our core operations, and will contribute to profit growth in all of our businesses next year," Michael A. Miles, Philip Morris chairman and chief executive officer, said in a statement.

"The beer industry has been flat and the competition has been very intense. Some of the original plans for expanding certain lines have been shelved for now, so Fulton represented excess capacity for Miller," said Will Thoretz, manager of financial communications at Philip Morris Management Corp.

"We're looking at closing or downsizing facilities that represent overcapacity for some of our products," he added. In recent months the conglomerate also has sold off its Birds Eye frozen vegetables and Sealtest/Breyers ice

cream operations.

Securities analysts told SN the restructurings at Philip Morris should make it a fiercer competitor.

"The restructuring could mean lower prices, if the savings are passed down," said Roy Burry, an analyst with Kidder Peabody & Co., here. "Investments have been made in making the factory, management and clerical support processes and staff work more efficient. As a result, at least a portion of the savings will be passed on to the consumer and the retailer."

Burry said Philip Morris may be able to reduce production costs, lower wholesale prices and still make the same profit.

"The restructuring will strengthen Philip Morris because it will allow them to create more streamlined operations and lower their costs so they can be more competitive in the marketplace across the board," said Barry Ziegler, an analyst with A. G. Edwards & Co., St. Louis.

Ziegler expects Philip Morris to continue to pursue strategic acquisitions, especially in the European confectionery business.

"This restructuring is very similar to what Procter & Gamble did," said Howard Penney, an analyst with Morgan Stanley & Co. here.

"They are exiting non-core businesses."