Federal Trade Commission
Report to Congress For 1995,
Pursuant to the Federal Cigarette Labeling and Advertising Act
referred to below are available in PDF format.
This report is the latest in a series on cigarette sales, advertising, and promotion
that the Federal Trade Commission (the Commission) has submitted annually to Congress
since 1967 pursuant to the Federal Cigarette Labeling and Advertising Act:(1)
The Federal Trade Commission shall transmit a report to the Congress . .
. concerning (1) the current practices and methods of cigarette advertising and promotion,
and (2) such recommendations for legislation as it may deem appropriate.(2)
The statistical tables appended to this report provide information on domestic sales
and advertising and promotional activity for U.S. manufactured cigarettes for the years
1963 through 1995. The tables were compiled from raw data contained in special reports
submitted to the Commission pursuant to compulsory process by the five major cigarette
manufacturers in the United States: Brown & Williamson Tobacco Corporation, Liggett
Group, Inc., Lorillard Tobacco Company, Philip Morris Incorporated, and R.J. Reynolds
In April 1995, the Commission issued an order settling its charges that BAT's
acquisition of The American Tobacco Company would violate antitrust laws when B.A.T agreed
to divest itself of certain assets it proposed to acquire from American. In October 1996,
the Commission approved B.A.T's application to divest six brands, a manufacturing plant,
and certain related assets to Commonwealth Tobacco LLC.
On July 20, 1994, the Commission asked the National Cancer Institute ("NCI")
to convene a consensus conference to address certain issues concerning the FTC cigarette
testing methodology and ratings system. NCI convened the conference in December 1994. At
the close of the conference, the Ad Hoc Committee of the President's Cancer Panel issued a
statement recommending, inter alia, that certain changes be made both in the
method currently used to obtain cigarette tar, nicotine, and carbon monoxide yields and in
the manner in which information about those yields is communicated to consumers. In
October 1996, NCI published a report of the conference as the 7th monograph in its smoking
and tobacco control series: "The FTC Cigarette Test Method for Determining Tar,
Nicotine, and Carbon Monoxide Yields of U.S. Cigarettes: Report of the NCI Expert
Committee." In light of the concerns raised by the NCI conferees about the current
system, the Commission is giving careful consideration to possible changes in the test
On May 28, 1997, the Commission issued an administrative complaint against the R.J.
Reynolds Tobacco Company, alleging that the company's use of the "Joe Camel"
campaign to promote Camel brand cigarettes violated Section 5 of the FTC Act.
DISCUSSION OF THE DATA
Table 1 displays annual cigarette sales by manufacturers to wholesalers and retailers.
In 1995, the major domestic cigarette manufacturers sold 482.2 billion cigarettes
domestically, which is 8 billion fewer cigarettes than they sold in 1994. This 1.6 percent
decline from the 1994 level contrasts with a 6.2 percent increase in sales in 1994.
Cigarette sales have declined every year from 1985 through 1995, except for 1994.
The Commission's previous report to Congress noted that the volatility in cigarette
sales by manufacturers from 1992 to 1994 reflected in Table 1 was not seen in the
cigarette consumption series produced by the U.S. Department of Agriculture
("USDA"), which estimated consumption in those three years at 500 billion, 485
billion and 486 billion cigarettes, respectively.(4)
Construed together, the two data sets suggested that some increase in the number of
cigarettes actually sold to consumers occurred in 1994, but that the dramatic increase
reported to the Commission for that year likely reflected, in large part, changes in
inventories rather than actual retail sales. USDA consumption estimates remained
relatively steady for 1995 at 487 billion cigarettes.
Table 2 shows U.S. adult per capita cigarette sales per year, and is generated by
dividing manufacturers' sales to wholesalers and retailers by the U.S. adult population.
Per capita sales decreased from 2,516 in 1994 to 2,482 in 1995, a decrease of 1.3 percent,
or 34 cigarettes per person. Per capita sales had increased 4.2 percent, or 102
cigarettes, from 1993 to 1994. As with Table 1, that increase might have reflected changes
in wholesalers' and retailers' inventories.
Tables 3 through 3E show the amounts spent on cigarette advertising and promotion for
the years 1970, and 1975 through 1995.(5) These tables
break out the amounts spent on the different types of media advertising (e.g.,
newspapers and magazines) and sales promotion activities (e.g., distribution of
cigarette samples and specialty gift items) and also give the percentage of the total
amount spent for the various types of advertising and promotion.
Table 3E shows that overall, $4.9 billion was spent on cigarette advertising and
promotion in 1995, an increase of $62 million, or 1.2 percent, from the $4.83 billion
spent in 1994. Spending has increased every year since 1987, except for a $1.2 billion
decrease in 1994.
Newspaper advertising expenditures decreased 20.8 percent between 1994 and 1995, from
$24.1 million to $19.1 million; this advertising category accounts for less than one-half
of 1 percent of all expenditures. Although newspaper spending accounted for 23.1 percent
of total expenditures in 1981, it has accounted for less than 1 percent of expenditures
A total of $248.8 million was spent on magazine advertising in 1995, a decrease of 1.1
percent from 1994. Magazine advertising represented 5.1 percent of total spending.
Spending on magazine advertising peaked in 1984, when the cigarette companies reported
spending $425.9 million, or 20.3 percent of total advertising and promotional
Spending on outdoor advertising totaled $273.7 million in 1995, an increase of $33.6
million from 1994, when $240.0 million was spent. In 1995, outdoor advertising
expenditures comprised 5.6 percent of total advertising and promotional spending, down
from a high of 15.5 percent in 1983.
Spending on transit advertising decreased from $29.3 million in 1994 to $22.5 million
in 1995, a drop of 23.2 percent; this category, like newspapers, accounts for only about
one-half of 1 percent of all expenditures.
Spending on point of sale promotional materials decreased by $83.7 million (24.4
percent) from 1994 ($342.7 million) to 1995 ($259.0 million). Point of sale advertising
accounted for 5.3 percent of total advertising and promotion in 1995, the first time it
has been below 6.0 percent since 1989.
Promotional allowances were $1.87 billion in 1995, up 11.1 percent from $1.68 billion
in 1994. In 1995, these expenditures accounted for 38.1 percent of the total advertising
and promotion expenditures. As in 1994, this was the largest category of advertising and
Money spent giving cigarette samples to the public ("sampling distribution")
rose from $7.0 million in 1994 to $13.8 million in 1995, an increase of 97.1 percent.
Sampling expenditures remained well below their pre-1994 levels, however: slightly more
than $100 million was spent in 1990 and just over $40 million in 1993. Cigarette sampling
distribution accounted for only 0.3 percent of the total spent on advertising and
promotion in 1995; these expenditures reached a high of 7.9 percent of the total spent on
advertising and promotion in 1982.
In 1995, $665.2 million was spent on specialty item distribution through the mail, at
promotional events, or by any means other than at the point-of-sale with the purchase of
cigarettes.(6) (Specialty items distributed along with the
purchase of cigarettes were redesignated as retail value added expenses beginning in
1988.) Specialty item distribution expenditures declined $185.6 million (21.8 percent)
from 1994, and accounted for 13.6 percent of total advertising and promotional
expenditures in 1995.
Spending on public entertainment increased by $29.3 million from 1994 to 1995 (36.1
percent). With expenditures reported at $110.7 million, public entertainment accounted for
2.3 percent of total advertising and promotion expenditures in 1995, the most it has been
since 1991, when it accounted for 2.6 percent of the total.
The cigarette companies reported a total of $34.6 million for direct mail advertising
in 1995, an increase of $3.4 million (11.0 percent) from the $31.2 million reported in
1994. This category does not include direct mail containing coupons. Coupons sent via
direct mail have been reported in the coupon and retail value added category since 1988.
All reporting companies indicated that no money had been spent on endorsements and
testimonials for cigarettes in 1995. No expenditures have been reported in this category
After dropping sharply from 1993 to 1994 (from $2.56 billion to $1.25 billion), coupons
and retail value added promotions expenditures increased slightly in 1995, rising $100
million (8.0 percent) to $1.35 billion. This category includes cents-off coupons, multiple
pack promotions, and retail value added offers.(7) The
cigarette companies were first asked to report these expenses as a distinct category in
1988, when $874 million was spent.
The Commission collects expenditure information in two categories that do not appear as
line items on the charts because they may span several categories. In 1988, the Commission
began requiring the cigarette companies to state separately the amount of money spent on
sports and sporting events. For 1995, the major domestic cigarette companies reported that
they spent $83 million on sports and sporting events,(8) an
increase of $7 million from 1994.
In 1989, the Commission began requiring the cigarette companies to declare whether any
money or other form of compensation had been paid to have any cigarette brand names or
tobacco products appear in any motion pictures or television shows. This practice has been
reported as unfunded since 1989.
The data on cigarette advertising and promotional expenditures reported in Tables 3
through 3D were not collected in their present form until 1975. Therefore, Tables 4 and 5,
which report cigarette advertising expenditures from 1963 through 1974 and 1970 through
1974, respectively, have been retained in the report for comparative purposes.
Tables 6 through 6C give the domestic market share of, and the percentage of total
cigarette advertising expenditures devoted to, cigarettes with tar ratings of 15
milligrams (mg.) or less for the years 1967 through 1995. The data are broken down into
separate categories according to tar ratings of less than 3, 6, 9, 12, and 15 mg.
(categories are presented cumulatively).
In 1995, 72.7 percent of the domestic cigarette market was cigarettes with tar ratings
of 15 mg. or less. The market share of cigarettes rated 15 mg. or less has increased
gradually since 1982, when it accounted for 52.2 percent.
Since 1979, the cigarette companies have reported that the majority of advertising and
promotional spending has been devoted to cigarettes with tar ratings of 15 mg. or less. In
1995, 73.9 percent of all advertising and promotion was spent on cigarettes with tar
ratings of 15 mg. or less.
As shown in Table 7, filtered cigarettes have dominated the market since the Commission
began collecting this information in 1963, rising from 58 percent at that time to 97
percent in 1992. The market share of filtered cigarettes remained constant in 1995 at 97
percent. Table 8 shows that the cigarette companies have reported a close correlation
between advertising and promotion expenditures and domestic market share for filter
cigarettes in recent years.
Table 9 provides the domestic market share of the various cigarette length categories.
The King-size (79-88 mm) category continues to be the biggest seller, with 57 percent of
the market. This category is followed by the Long (94-101 mm) group, which holds 40
percent of the market. Regular (68-72 mm) and Ultra-Long (110-121 mm) cigarettes continued
to account for 1 percent and 2 percent, respectively, of the market in 1995.
Tables 10 through 10B provide the domestic market share and percentage of total
advertising and promotional expenditures devoted to Long and Ultra-Long cigarettes for
1967 through 1995. In 1995, the market share of longer cigarettes and the percentage of
total advertising and promotional expenditures devoted to those cigarettes both decreased
from 43 percent to 42 percent.
Table 11 gives the market share of menthol and non-menthol cigarettes. In 1995, the
market share of menthol cigarettes remained at 25 percent, while non-menthols held 75
percent of the market.
In 1994, the Commission began requiring the cigarette companies to indicate whether
"tar" and nicotine ratings were displayed on cigarette packaging and
advertising. Table 12 shows that cigarette varieties that printed tar and nicotine ratings
on their packs represented only 6.1 percent of the overall market in 1995, down slightly
from 6.3 percent in 1994. Table 12 also shows: (1) the percentage of the overall cigarette
market represented by varieties with different tar ratings, and (2) within each tar group,
the market share of those varieties that disclose tar and nicotine ratings on their packs.
1. Pub. L. No. 89-92, 79 Stat. 282 (1965), as
amended by Pub. L. No. 98-474, 98 Stat. 2204 (1984) and by Pub. L. No. 99-92, § 11,
99 Stat. 393, 402-04 (1985), current version at 15 U.S.C. § 1331 (1982 & Supp.
2. 15 U.S.C. § 1337(b) (Supp. IV 1986).
3. In 1995, B.A.T Industries, the parent corporation
of Brown & Williamson, acquired The American Tobacco Company.
4. USDA, Tobacco Situation and Outlook Report,
TBS-236, June 1996, Table 1, p. 4. Differences between the FTC and USDA series may reflect
changes in inventory holdings by cigarette wholesalers and retailers. Shifts in
inventories can influence the numbers of cigarettes sold annually by cigarette
manufacturers to wholesalers and retailers, which is the statistic reported to the FTC and
contained in the annual cigarette reports. In contrast, year-to-year changes in wholesaler
inventories are not reflected in the USDA series, which is based on an estimate of the
number of cigarettes actually sold to consumers.
5. The reported figures include all advertising,
merchandising, and promotional expenditures related to cigarettes, regardless of whether
such advertising would constitute "commercial speech" or would be protected from
law enforcement action under the First Amendment. The Commission began requiring tobacco
companies to include expenditures for such protected speech in 1989.
6. Specialty item advertising is the practice of
branding items such as T-shirts, caps, sunglasses, key chains, calendars, lighters and
sporting goods with a brand's logo, and then giving them away or selling them to
7. Multiple pack offers are additional packs of
cigarettes that are given free with cigarette purchases, such as "buy one, get one
free." Retail value added offers include non-cigarette items, such as key chains or
lighters, given away at the point of sale with the purchase of cigarettes.
8. This includes expenditures for: (1) the
sponsoring, advertising or promotion of sports or sporting events; support of an
individual, group, or sports team; and purchase of or support for equipment, uniforms,
sports facilities and/or training facilities; (2) all expenditures for advertising in the
name of the cigarette company or any of its brands in a sports facility, on a scoreboard,
or in conjunction with the reporting of sports results; and (3) all expenditures for
functional promotional items (clothing, hats, etc.) connected with a sporting event.