FTC Report to Congress Shows Increases in Smokeless Tobacco Revenues and Advertising and Promotional Expenditures

Advertising and promotion expenditures for smokeless tobacco products reached $236.7 million in 2001, according to a biennial Federal Trade Commission report. The report shows that promotional allowances (e.g. payments made to retailers to facilitate sales) and retail value added (offers such as “buy one, get one free” or “buy three, get free hat,” where the smokeless tobacco product and the bonus item often are packaged together as a single unit) were the top expenditure categories in 2001, with coupons and magazine advertising also contributing substantially to industry spending. The $236.7 million spent in 2001 represented a 39 percent increase over the previously reported 1999 expenditure figure of $170.2 million. With only two exceptions, advertising and promotion expenditures have increased every year since 1987, when slightly less than $68 million was spent.

This 2003 report includes new 2000 and 2001 data on sales, and advertising and promotional expenditures. The report shows that the total number of pounds of smokeless tobacco sold by manufacturers to wholesalers and retailers increased from 1999 (109.4 million pounds) to 2000 (111.7 million pounds), and then again in 2001 (112.2 million pounds). Sales revenues received by the manufacturers also rose in both years: $1.99 billion in 2000 (up from $1.94 billion in 1999) and $2.13 billion in 2001. Revenues have increased each year since 1985.

Moist snuff has been the leader in smokeless tobacco revenues and marketing expenditures since the Commission began collecting these data and this trend continued in 2000 and 2001. Moist snuff revenues in those two years were $1.63 billion and $1.77 billion, respectively, more than the combined sales of the other kinds of smokeless tobacco. Advertising and promotional expenditures for moist snuff – $207.8 million in 2000 and $218.7 million in 2001 – also exceeded the expenditures for all other types of smokeless tobacco combined. More pounds of moist snuff were sold in 2000 (61.5 million) and 2001 (63.9 million) than the other types of smokeless tobacco combined. Before 1996, loose leaf/chewing tobacco had been the leading seller in terms of total pounds sold.

In addition to providing the total amount of annual advertising and promotional expenditures, the report also breaks down those expenditures by category. In 2000, more money was spent on retail value added than on any other expenditure category – $64.9 million – with promotional allowances in second place at $45.4 million. In 2001, promotional allowances led the way with $60.9 million and retail value added was second with $43.2 million in spending.

Copies of the news release and the “Smokeless Tobacco Report for 2000 and 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.