Diversification into other lines of business can especially make sense when the core product market is uncertain. Anticipating that the cigarette industry would continue to decline in the future, Philip Morris decided to diversify its product offerings and looked for acquisitions of unrelated products to decrease dependence on the future of tobacco. In 1970, it acquired Miller Brewing for $ 227 million. Miller was the eight largest U.S. breweries with a 4.4% market share. By 1972, under Philip Morris Miller grew to the 3rd largest brewer, behind Schlitz; in 1980, Miller overtook Schlitz to become the second largest brewer (Morris Case Study).
In line with the food product diversification strategy, Philip Morris approached Kraft in an attempt to create the leading international food company with estimated sales in excess of $20 Billion. To further illustrate Philip Morris's potential interest in Kraft, we need to examine the following reasons for what a company might ponder as potential reasons for diversification.