Tobacco marketing budgets have fallen 13.5% and cigarette sales are down, while smokeless tobacco marketing and sales are fluctuating, according to two new reports from the Federal Trade Commission.
The top five tobacco companies spent $13.11 billion on cigarette marketing in 2005, down from the peak of $15.15 billion in 2003 and $14.15 billion in 2004, according to the report released last week.
About three-quarters of those marketing dollars were spent on discounts for retailers and wholesalers, to fund price cuts for consumers. Those trade-promotion allowances totaled $10.9 billion in 2004 (77.3% of total advertising and promotion spending), and $9.78 billion in 2005, (74.6% of total spending).
The reports have consumer advocates calling on Congress to enact pending legislation that would give the Food & Drug Administration authority to regulate cigarette sales and marketing. While legislators have considered similar bills in the past, observers think the current bill has a better chance of passing, since the Democrats now hold the majority in Congress.
Marketers sold 351.6 billion cigarettes in 2005, down 2.7% from the 361.3 billion sold in 2004, according to the FTC report.
But marketers gave away 3 billion cigarettes in 2005, up nearly 43% from 2.1 billion in 2004, but down dramatically from the 7 billion in 2003. That includes cigarettes distributed through couponing, buy-one-get-one offers, and sampling.
Despite that, overall cigarette consumption is down: Consumers smoked 376 billion cigarettes in 2005, down 6% from 2003, according to a separate report from the U.S. Department of Agriculture.
Consumption has fallen every year since 1998, when the Master Settlement Agreement between states and tobacco companies put aggressive marketing restrictions in place. Sales have fallen every year too, except for 2000, when they rose a slight 0.6%, according to FTC data.
A second report on the much smaller smokeless tobacco segment found that marketing spending hit its peak of $250.8 million in 2005, up 8.5% from the year before. Sales, on the other hand, peaked in 2004 at $2.62 billion, then fell a slight 0.4% to $2.61 billion in 2005.
Consumer advocacy groups say there’s still too much tobacco marketing. They blame price discounts, especially, for undercutting efforts to curb smoking among kids.
“It is especially troubling that tobacco companies continue to spend the bulk of their marketing dollars on price discounts that make cigarettes more affordable to children, the most price-sensitive customers, and undermine state efforts to reduce tobacco use by increasing tobacco taxes,” said Matthew Myers, president of Campaign for Tobacco-Free Kids, in a statement. “Not coincidentally, spending on tobacco price discounts skyrocketed … as numerous states were implementing tobacco tax increases. These massive tobacco marketing expenditures, especially price discounts, are a key reason why progress in reducing both youth and adult smoking has stalled recently after a decade of significant progress.”
State and national tobacco-prevention programs will spend a total of only $597.5 million this year, according to the American Legacy Foundation, which runs the teen-targeted “truth” campaign.
Among the tobacco companies’ promotional activities that are tracked by the FTC’s primary report:
*Promotional allowances to retailers, primarily slotting and merchandising fees, were $435.8 million in 2005 ($542.2 million in 2004), down from $1.23 billion in 2003.
*Promotional allowances to wholesalers, including volume rebates and execution of consumer promotions, were $410.4 million in 2005 ($387.8 million in 2004)
*Ad specialties, given away at all venues except point of sale, was $230.6 million in 2005 ($224.6 million in 2004)
*Adult-venue entertainment was $214.1 million in 2005 ($140.1 million in 2004)
*P-O-P spending was $182.2 million in 2005 ($163.6 million in 2004)
*Sports and athlete sponsorships were $30.6 million in 2005 ($28.2 million in 2004)
*Sampling was $17.2 million in 2005 ($11.6 million in 2004).
None of the tobacco companies surveyed solicited or allowed the appearance of their cigarettes in movies or TV shows.
The FTC has issued reports on tobacco marketing and sales since 1967 for cigarettes, and 1987 for smokeless tobacco. The reports collect data from the parent companies of the five largest domestic manufacturers of cigarettes: Altria Group (Phillip Morris), Houchens Industries (Commonwealth Brands), Loews Corp. (Lorillard Tobacco Co.), Reynolds American (R.J. Reynolds Tobacco Co. and Santa Fe Natural Tobacco Co.) and Vector Group (Liggett Group and Vector Tobacco).
The smokeless tobacco leaders who report to the FTC are North Atlantic Trading Co. (National Tobacco Co.), Swedish Match North America, Swisher International Group, UST Inc. (U.S. Smokeless Tobacco Co.) and Conwood LLC (Conwood Sales Co.).
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