Federal Trade Commission Cigarette Report for 1999

The Federal Trade Commission's annual report on cigarette sales and advertising for 1999 shows that cigarette sales fell from 1998 to1999, but advertising and promotional expenditures increased significantly. According to the report, which details the first year of spending affected by the tobacco industry's Master Settlement Agreement (MSA) with the Attorneys General of 46 states, the five largest cigarette manufacturers spent $8.24 billion on advertising and promotional expenditures in 1999, a 22.3 percent increase from the $6.73 billion spent in 1998. (The MSA imposed phased-in restrictions on the companies' use of outdoor advertising and brand-name sponsorships, their distribution of free samples, and their distribution and sale of apparel and merchandise with brand-name logos.) The industry's total expenditures were the most ever reported to the Commission.

The 1999 report, released today, contains sales and marketing statistics for calendar year 1999 and historical data dating back to 1963, the year the FTC began collecting information from the cigarette industry.

In 1999, the manufacturers reported to the Commission that they sold 411.3 billion cigarettes domestically, which is 47.2 billion fewer than they sold in 1998. The largest category of advertising and promotional expenditures was promotional allowances, which include payments to retailers for shelf space. Cigarette companies spent $3.54 billion in 1999 on promotional allowances (43 percent of total industry spending), up from $2.88 billion in 1998.

Spending on retail value added - which includes both multiple-pack promotions ("buy one, get one free") and non-cigarette items, such as hats or lighters, given away at the point-of-sale with the purchase of cigarettes - rose from $1.56 billion in 1998 to $2.56 billion in 1999, an increase of 64.6 percent. At the same time, expenditures for distribution of branded 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 declined from $355.8 million in 1998 to $335.7 million in

1999. Money spent giving cigarette samples to the public rose from $14.4 million in 1998 to $33.7 million in 1999, an increase of 133.5 percent. In contrast, spending on discount coupons declined from $624.2 million in 1998 to $531 million in 1999.

The industry's expenditures on advertising in newspapers rose 73 percent, from $29.4 million in 1998 to $51 million in 1999, but even with that increase, newspaper spending accounted for just over ½ percent of all expenditures. Spending on magazine advertising increased from $281.3 million in 1998 to $377.4 million, according to the FTC report, while outdoor advertising expenditures plummeted from $294.7 million to $53.8 million and transit advertising declined from $40.2 million in 1998 to $5.6 million in 1999. Point-of-sale advertising increased from $290.7 million in 1998 to $329.4 million in 1999. The cigarette companies reported a total of $94.6 million for direct mail advertising in 1999, 63.8 percent more than the $57.8 million reported in 1998.

The industry reported spending $650,000 on Internet advertising in 1999. Spending on public entertainment (e.g., sponsorship of concerts, auto racing, and fishing tournaments) was $267.4 million in 1999, an increase of 7.6 percent from 1998 to 1999.

Copies of the "Federal Trade Commission Cigarette Report for 1999" 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; 1-877-FTC-HELP (1-877-382-4357); TDD for the hearing impaired 202-326-2502. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web site.

(FTC File No. 002-3207)