Trends in Tobacco Industry Marketing

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TRENDS IN TOBACCO INDUSTRY MARKETING In the November 1998 multi-state tobacco settlement, the major cigarette companies and UST (the biggest spit tobacco company) promised not to “take any action, directly or indirectly, to target youth. . . in the advertising, 1 promotion, or marketing of tobacco products.” These companies claim they have fully complied with the settlement and stopped marketing to youth. But studies show that tobacco-industry marketing spending has almost doubled since the set
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  1400 I Street NW - Suite 1200 - Washington, DC 20005Phone (202) 296-5469 · Fax (202) 296-5427 · www.tobaccofreekids.org   In the November 1998 multi-state tobacco settlement, the major cigarette companies and UST (the biggest spittobacco company) promised not to “take any action, directly or indirectly, to target youth. . . in the advertising,promotion, or marketing of tobacco products.” 1 These companies claim they have fully complied with thesettlement and stopped marketing to youth. But studies show that tobacco-industry marketing spending hasalmost doubled since the settlement, with much of the increase in strategies that reach and influence kids.In August 2006, U.S. District Court Judge Gladys Kessler released her final opinion in the U.S. Government’slandmark case against tobacco companies, describing how the tobacco companies continue to target youthwith sophisticated marketing campaigns. According to Judge Kessler,” … Defendants continue to engage inmany practices which target youth, and deny that they do so. Despite the provisions of the MSA, Defendantscontinue to track youth behavior and preferences and market to youth using imagery which appeals to theneeds and desires of adolescents.” 2   Increased Tobacco Industry Spending on Advertising and Promotion In 1999, the first year after the Master Settlement Agreement (MSA), the tobacco companies spent a record$8.4 billion on advertising and promotions, an increase of $1.5 billion, or 21 percent – and the largest one-year increase since the U.S. Federal Trade Commission (FTC) began tracking tobacco-industry marketingexpenditures in 1970. 3 By 2003, tobacco industry marketing had more than doubled to a record highspending of $15.4 billion. Much of this increase was in categories effective at reaching kids, including pricediscounts paid to cigarette retailers or wholesalers in order to reduce the price of cigarettes to consumers,two-for-one promotions that make cigarettes more affordable to kids and in-store advertising. Since 2005,cigarette marketing expenditures have declined slightly each year from $13.1 billion in 2005 to $12.5 billion in2006, $10.9 billion in 2007 and $9.9 billion in 2008 (the most recent available). However, smokeless tobaccomarketing expenditures are on the rise. Smokeless tobacco marketing increased to $354.1 million in 2006,an increase of 41.2 percent compared to 2005. The most recent FTC report reported that smokelesstobacco marketing increased to $411.3 million in 2007 and $547.9 million in 2008. When measured from2005, smokeless tobacco marketing has more than doubled (from $250.8 million to $547.9 million). 4  Notably, the year 2006 also marked a change in cigarette company strategy, with both R.J. Reynolds andPhilip Morris USA announcing the test-marketing of spitless, smokeless tobacco products called snus. Trendreports show that cigarette sales are declining, but smokeless tobacco sales are on the rise. 5   Tobacco Company Advertising and Promotional Spending, 1998-2008 (in billions) TRENDS IN TOBACCO INDUSTRY MARKETING $6.88 $8.41 $9.82 $11.45$12.70 $15.39 $14.38$13.36$12.84$11.28$10.50 $0$2$4$6$8$10$12$14$1619981999200020012002200320042005200620072008 Source: Federal Trade Commission, Cigarette and Smokeless Tobacco Report for 2007 and 2008, 2011  Tobacco Industry Continues to Market to Kids / 2  In-Store Tobacco Marketing Strategies Reaching Kids Tobacco companies spend the bulk of their marketing money at the retail stores with price discounts, primeproduct placement to attract buyers, and of course, advertisements. In 2008, of the $9.9 billion spent bycigarette companies on overall promotions, $9.2 billion, or 92 percent, was spent on point of saleadvertisements, price discounts, promotional allowances, or special deals such as buy-one-get-one-freeoffers. 6 Cigarette companies spent more than $163 million on advertising at retail stores in 2008, adecrease from the $198 million spent in 2007 and $242 million spent in 2006. Smokeless tobacco companiesspent $55.2 million on advertising at retail stores in 2008, an 88 percent increase over what they spent in2007 and more than double what they spent in 2006. 7 The increasing pervasiveness of tobacco promotion inretail outlets has been documented in several studies. A 2008 study in Tobacco Control  found that inCalifornia, the number of in-store cigarette advertisements increased from 22.7 to 24.9 between 2002 and2005. 8 An earlier study of California stores found that nearly 50 percent of the tobacco retailers had tobaccoads at young kids’ eye level (three feet or lower), and 23 percent had cigarette product displays within sixinches of candy. 9 One study showed that, despite the 1998 Master Settlement Agreement, 80 percent of retail outlets had interior tobacco advertising, 60 percent had exterior tobacco advertising, 52 percent hadtobacco promotions such as price discounts and gifts with purchase, and 73 percent had functional items(such as clocks, display racks, and doormats) marked with cigarette brands. 10  The issue of advertising in retail outlets is important because 75 percent of teens visit a convenience store atleast once a week and point-of-purchase advertising and displays have been found to increase averagetobacco sales by 12 percent. 11 A study published in the May 2007 issue of   Archives of Pediatrics and  Adolescent Medicine, concluded that the more cigarette marketing teens are exposed to in retail stores, themore likely they are to smoke, and that restricting these retail marketing practices would reduce youthsmoking. Specifically, the study found that retail cigarette advertising increased the likelihood that youthwould initiate smoking; tobacco company pricing strategies contributed to increases all along the smokingcontinuum, from initiation and experimentation to regular smoking; and cigarette promotions increased thelikelihood that youth will move from experimentation to regular smoking. 12   Cigarette Ads in Magazines with High Youth Readership In August 2001, a New England Journal of Medicine study showed that the cigarette companies increasedtheir advertising in youth-oriented magazines after the MSA was signed, especially for the three brands mostpopular with youth – Philip Morris’ Marlboro, R.J. Reynolds’ Camel, and Lorillard’s Newport. 13 Advertising for these brands in youth-oriented magazines (at least 15 percent youth readership or two million youth readers)increased from $58.5 million in 1998, before the MSA, to $67.4 million in 1999. Cigarette company spendingfor magazine ads declined from 1999 to 2000 but still remained above 1998 levels. And the ads for each of the top kid brands still reached more than 80 percent of U.S. youth an average of 17 times – which greatlyexceeds what the advertising industry considers adequate for effective reach.Moreover, the decline in the companies’ magazine advertising after 1999 occurred only after National Association of Attorneys General charged the cigarette companies with violating the MSA by increasing their ads in magazines with large youth readerships. In response, most of the major companies sharply curtailedtheir magazine advertising that reaches kids – Philip Morris entirely stopped advertising in magazines in2001 – but R.J. Reynolds did not stop until it was found guilty in a court of law of violating the MSA bymarketing to kids. 14 The state attorneys general enforcement efforts were primarily based on a May 2000study which revealed that after the settlement cigarette advertising in magazines with high youth readershipincreased by 33 percent, with four of the five leading youth brands (Marlboro, Camel, Kool and Newport)increasing their advertising spending in youth-oriented publications. 15   Although RJR claimed to have curtailed its advertising in magazines, it aggressively targeted girls and youngwomen in promotions for its new product Camel No. 9. Camel No. 9 was launched in January 2007 with ahuge campaign that cost an estimated $25 to $50 million and included full-page ads in women’s magazineswith high youth readership such as Glamour  , Cosmopolitan , Marie Claire , InStyle and Vogue . In addition tomagazine advertising, RJR saturated stores and bodegas with heavy point-of-sale marketing for Camel No. 9in New York City and other cities around the country. A 2010 study found that in the year after the Camel No. 9 campaign began, 44 percent of teen girls reportedhaving a favorite cigarette ad – up from 34 percent before the Camel No. 9 campaign began. Moreover,almost half of the teen girls who had specified Camel as their favorite cigarette ad had not indicated any  Tobacco Industry Continues to Market to Kids / 3 favorite ad previously. Because it successfully lead to brand identification and ultimately increased RJR’smarket share, the Camel No. 9 campaign targeted adolescent girls just as the Joe Camel campaigneffectively targeted youth. This study also confirmed that having a favorite cigarette ad increases the risksmoking initiation by 50 percent. 16   Also in 2007, despite a prohibition in the 1998 state tobacco settlement on the use of cartoons to marketcigarettes, RJR ran a giant multi-page ad for the company’s new “collaboration between Camel andindependent artists and record labels,” called The Farm, in Rolling Stone magazine, whose readers includemore than 1.5 million youth. Four pages of the fold-out ad featured numerous cartoon drawings of animals,monsters and images from outer space. The cartoon foldout is not the only aspect of the spread that clearlyappeals to kids. Another page features an image of a spiral-bound notebook similar to those often carried byhigh school students with the title “Indie Rock Universe;” doodles of a guitar, spaceships and other images abored student might draw; and the phrase, “an alternate dimension where everyone wears Black Converse.”Only after public health groups raised objection and eight state attorneys general sued the company did RJRremove the ad and suspend The Farm campaign. Shortly thereafter, RJR announced that it would stopadvertising RJR-brand cigarettes in magazines. However, that leaves the door open to advertise other cigarette and tobacco product brands – including RJR-brand smokeless product Camel Snus – under the other Reynolds American subsidiaries, such as American Spirit cigarettes and Copenhagen smokeless tobacco. Cigarette Advertising Still Attracts Youth The 2008 National Cancer Institute report, The Role of the Media in Promoting and Reducing Tobacco Use ,which reviewed the research on how mass media channels have been used to encourage and discouragesmoking, concluded that tobacco company advertising and promotion is causally linked to increased tobaccouse and youth smoking initiation. The report also details how tobacco companies are using non-traditionalcommunication channels such as the Internet and viral or stealth marketing to sidestep restrictions ontraditional marketing venues, such as magazine and billboard ads. 17  Not surprisingly, cigarettes that are the most popular among kids are those that are also heavily advertised. 18  For example, a 2007 report released by the American Legacy Foundation found that 78 percent of youth(ages 13-18) usually smoke the three most marketed brands – Marlboro, Newport, and Camel. 19 A nationalsurvey from the U.S. Centers for Disease Control and Prevention found the same trend – 52.3 percent of highschool students and 43.3 percent of middle school students prefer Marlboro, 21.4 percent of high schoolstudents and 26.4 percent of middle school students prefer Newport cigarettes, and 12.8 percent of highschool students and 8.5 percent of middle school students prefer Camel cigarettes 20   U.S. Tobacco Company Marketing To Youth Abroad   As tobacco companies go global and face even fewer marketing restrictions outside the U.S., they haveclearly shown that they intend to return to their old deceptive ways to draw in young smokers. In August2001, The New York Times reported that in other countries, Philip Morris hires minors as “Marlboro girls” tohand out free packs of Marlboros and other Philip Morris brands, with some of the free packs going to kids. 21   A global survey of teenagers found that in some countries, as many as 25 percent had been offered freecigarettes by tobacco-company reps. 22 For instance, tobacco brands and labels are prominent on childrenand infant clothing and toys, and tobacco companies even own clothing stores using names of their mostpopular brands – like Camel Safari Boutique and Marlboro Classics. Tobacco companies continue tosponsor events that are popular with youth, such as music concerts, Formula 1 races, and soccer teams.   Campaign for Tobacco-Free Kids, August 19, 2011 / Meg Riordan More information on tobacco company marketing to kids is available athttp://www.tobaccofreekids.org/facts_issues/fact_sheets/toll/tobacco_kids/marketing/.More information on tobacco company marketing to kids in other countries is available athttp://tobaccofreecenter.org/resources/advertising_promotion. 1 Full copies of the Master Settlement Agreements are available athttp://www.naag.org/settlement_docs.php. 2   U.S. V. Philip Morris USA, Inc., et al. , No. 99-CV-02496GK (U.S. Dist. Ct., D.C.), Final Opinion, August 17, 2006,http://www.tobaccofreekids.org/reports/doj/FinalOpinion.pdf . Pages 1607-1608. 3 U.S. Federal Trade Commission (FTC), Cigarette Report for 2003 , 2005 [data for top six manufacturers only]http://www.ftc.gov/reports/cigarette05/050809cigrpt.pdf . FTC, Federal Trade Commission Smokeless Tobacco Report for the Years 2000 and 2001 , August 2003,http://www.ftc.gov/os/2003/08/2k2k1smokeless.pdf [top five manufacturers].  Tobacco Industry Continues to Market to Kids / 4 4 U.S. Federal Trade Commission (FTC), Smokeless Tobacco Report for 2007 and 2008  , 2011,http://www.ftc.gov/os/2011/07/110729smokelesstobaccoreport.pdf . Data for top 5 manufacturers only. 5 U.S. Alcohol and Tobacco Tax and Trade Bureau Tobacco Statistics,http://www.ttb.gov/tobacco/tobacco-stats.shtml.Goldman Sachs, May c-store; cigarette volume declines appear to be moderating  , June 5, 2009. 6 U.S. Federal Trade Commission (FTC), Cigarette Report for 2007 and 2008  , 2011,http://www.ftc.gov/os/2011/07/110729cigarettereport.pdf . 7 U.S. Federal Trade Commission (FTC), Cigarette Report for 2007 and 2008  , 2011,http://www.ftc.gov/os/2011/07/110729cigarettereport.pdf . See also, FTC, Smokeless Tobacco Report for 2007 and 2008  ,2011,http://www.ftc.gov/os/2011/07/110729smokelesstobaccoreport.pdf . Data for top 5 manufacturers only. 8 Feighery, EC, et al., “An examination of trends in amount and type of cigarette advertising and sales promotions inCalifornia stores, 2002-2005,” Tobacco Control  (published online), February 26, 2008. 9 Feighery, E, et al., “Cigarette advertising and promotional strategies in retail outlets: results of a statewide survey inCalifornia,” Tobacco Control  10L:184-188, 2001. 10 Wakefield, M, et al., “Changes at the point of purchase for tobacco following the 1999 tobacco billboard advertisingban,” University of Illinois at Chicago. Research Paper Series, No. 4, July 2000. 11   The 1999 annual report of the promotion industry, a PROMO magazine special report, Overland Park, 1999; Feighery,E, et al., “Cigarette advertising and promotional strategies in retail outlets: results of a statewide survey in California,” Tobacco Control  10L:184-188, 2001. 12 Slater, SJ, et al., “The Impact of Retail Cigarette Marketing Practices on Youth Smoking Uptake,”  Archives of Pediatrics and Adolescent Medicine 161:440-445, May 2007.   13 King, C & Siegel, M, “The Master Settlement Agreement with the Tobacco Industry and Cigarette Advertising inMagazines,” New England Journal of Medicine 345(7):504-511, August 16, 2001. 14 Statement of Decision, People of the State of California v. R.J. Reynolds Tobacco Co. , Superior Court of California,County of San Diego, Case No. GIC 764118, June 6, 2002,http://ag.ca.gov/newsalerts/release.php?id=863&year=2002&month=6. 15 Bowker, D & Hamilton, M, “Cigarette Advertising Expenditures before and After the Master Settlement Agreement:Preliminary Findings,” Massachusetts Department of Public Health,http://tobaccofreekids.org/reports/addicting/magazines/connolly.pdf , May 15, 2000. See also, TFK Factsheet, TobaccoMarketing That Reaches Kids Point-Of-Purchase Advertising and Promotions ,http://www.tobaccofreekids.org/research/factsheets/pdf/0075.pdf . 16 Pierce, JP, et al., “Camel No. 9 Cigarette-Marketing Campaign Targeted Young Teenage Girls,” Pediatrics 125(4):619-626, April 2010. 17 National Cancer Institute, The Role of the Media in Promoting and Reducing Tobacco Use, Smoking and TobaccoControl Monograph No. 19, NIH Pub. No. 07-6242, June 2008,http://cancercontrol.cancer.gov/tcrb/monographs/19/m19_complete.pdf . 18 U.S. Centers for Disease Control and Prevention (CDC), “Cigarette Brand Preference Among Middle and High SchoolStudents Who Are Established Smokers—United States, 2004 and 2006,” Morbidity and Mortality Weekly Report (MMWR) 58(05):112-115, February 13, 2009,http://www.cdc.gov/mmwr/preview/mmwrhtml/mm5805a3.htm. 19 American Legacy Foundation, “Cigarette Preferences Among Youth – Results from the 2006 Legacy Media TrackingOnline (LMTO),” First Look Report 17  , June 2007,http://americanlegacy.org/Files/FINAL_FL17_singles.pdf . 20 CDC, “Cigarette Brand Preference Among Middle and High School Students Who Are Established Smokers—UnitedStates, 2004 and 2006,” MMWR  58(05):112-115, February 13, 2009,http://www.cdc.gov/mmwr/preview/mmwrhtml/mm5805a3.htm. 21 Winte, G, “Big Tobacco Is Accused of Crossing an Age Line,” The New York Times , August 24, 2001. 22 Warren, C, et al., Tobacco Use by Youth: A Surveillance Report from the Global Youth Tobacco Survey Project  ,Bulletin of the World Health Organization, 78(7), 2000.
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