How big is Big Tobacco’s marketing budget?
Here is another reminder of how big Big Tobacco is: It spent more than $9 billion marketing cigarettes and smokeless tobacco in 2014.
The Federal Trade Commission just released its cigarette and smokeless tobacco reports for 2014, which show that the top tobacco companies spent $8.49 billion marketing cigarettes and $600 million marketing smokeless tobacco. It may be hard to believe, but the cigarette report marks a decline from the previous year’s expenditure of $8.95 billion on cigarette promotion and advertising. Industry spending on smokeless tobacco marketing, however, increased from $503.2 million in 2013 to $600.8 million in 2014.
Highlights from the 2014 report reveal some familiar patterns and some shifts in where Big Tobacco is spending its marketing budget.
Discounts stay at the top
Tobacco companies continue to spend the most money so consumers can spend less (and smoke more). Price discounts have topped the list of expenditure categories every year since 2002, and 2014 was no different.
Companies paid retailers and wholesalers $6.8 billion to discount prices, which accounted for 80 percent of their marketing spending in 2014. That was down slightly from 2013, when discounts made up 85 percent of total spending at $7.6 billion.
Companies increased investment in another type of discount: coupons. They doubled their expenditure on coupons from $248.8 million in 2013 to $521 million in 2014, making it the third biggest category of spending.
Discounts and coupons threaten to counteract the impact of raising the price of tobacco products, which is one of the most effective ways to drive down the smoking rate, especially among young people. For example, raising the cost of cigarettes to $10 per pack—the U.S. Surgeon General’s recommended price—would result in 4.8 million fewer smokers between the ages of 12 to 25 years old. Today, the average price of cigarettes is only about $6 per pack.
Pay for display
Promotional allowances that provide incentives for the placement of cigarettes, including on shelves or displays, remained the second largest spending area, at 7.4 percent, behind discounts. Companies spent $623.6 million for promotional allowances to wholesalers and retailers in 2014, down from $688.5 million in 2013.
Spending categories that saw increases from 2013 to 2014 include adult-only public entertainment, such as bars and concert venues; company websites; point-of-sale materials, such as advertisements inside retailers; non-branded specialty items and direct mail.
Smokeless spending continues to increase
Smokeless tobacco marketing budgets continued to go up in 2014, just as they had in 2013. Overall, spending increased by more than $150 million from 2012 to 2014.
Price discounts also made up the largest spending category for smokeless tobacco, accounting for $357.2 million, or 59 percent, of total spending in 2014.