The Federal Trade Commission's annual report on cigarette sales and advertising for 2001 shows that cigarette sales by manufacturers to wholesalers and retailers decreased 3.8 percent from 2000 levels, while advertising and promotional expenditures increased significantly. According to the report, the six largest cigarette manufacturers spent $11.22 billion on advertising and promotional expenditures in 2001, a 17 percent increase from the $9.59 billion spent in 2000. The industry's total expenditures were the most ever reported to the Commission. The major manufacturers also spent $79.4 million in 2001 on advertisements directed to youth or their parents that were intended to reduce youth smoking.
The 2001 report, released today, contains sales and marketing statistics for calendar year 2001 and historical data dating back to 1963, the year the FTC began collecting information from the cigarette industry.
The major manufacturers reported to the Commission that they sold 398.3 billion cigarettes domestically in 2001, 15.6 billion fewer than they sold in 2000. They also gave away 3.9 billion cigarettes in the United States in 2001.
The largest category of advertising and promotional expenditures was spending on retail value added - the costs associated with offers such as "buy one pack, get one free" and "buy three packs, get a free T-shirt," where the bonus item is distributed at retail when the cigarettes are purchased. Cigarette companies spent $4.76 billion in 2001 on retail value added (42.5 percent of total industry spending), up from $3.45 billion in 2000. At the same time, expenditures for distribution of specialty items (such as lighters) through the mail, at promotional events, or by any means other than at the point of sale with the purchase of cigarettes, increased from $327.8 million in 2000 to $333.4 million in 2001.
Promotional allowances, which include payments to retailers for shelf space, rose from $3.91 billion in 2000 to $4.45 billion in 2001 (39.7 percent of total industry spending).
Money spent giving cigarette samples to the public declined from $22.3 million in 2000 to $17.2 million in 2001, a decrease of 23.1 percent. Spending on discount coupons decreased from $705.3 million in 2000 to $602.1 million in 2001, a decline of 14.6 percent.
The industry's expenditures on advertising in newspapers were $31.7 million in 2001, a decrease of 38.7 percent from the $51.7 million spent in 2000. Spending on magazine advertising dropped from $294.9 million in 2000 to $172.9 million in 2001, according to the FTC report, while outdoor advertising expenditures decreased from $9.8 million to $8.2 million. No expenditures on transit advertising were reported for 2001. Point-of-sale advertising decreased by 18.1 percent, from $347 million in 2000 to $284.3 million in 2001. The cigarette companies spent $133.9 million for direct mail advertising in 2001, a 44.2 percent increase from the $92.9 million reported in 2000.
The industry reported spending $841,000 on Internet advertising in 2001. Spending on public entertainment (e.g., sponsorship of concerts, auto racing, and fishing tournaments) was $312.4 million in 2001, an increase of 0.9 percent from 2000.
The 2001 report also includes responses to expanded questions about product placement. The companies stated that in 2001, not only did they not pay money or any other compensation to have a cigarette appear in any movie or television show, but they did not solicit the appearance of a cigarette in any movie or television show, or grant permission for the appearance of any cigarette in any movie or television show.
The Commission vote to issue the report was 5-0.
Copies of the Federal Trade Commission Cigarette Report for 2001 are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1 877-382-4357), or use the complaint form at http://www.ftc.gov The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.
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(FTC Matter No. 022 3224)