FTC's Annual Report to Congress on Cigarette Sales and Advertising for 1995

The Federal Trade Commission's annual report to Congress on cigarette sales and advertising for 1995 shows a slight increase in advertising and promotional spending from 1994. According to the report, the cigarette industry spent $4.9 billion on advertising and promotional expenditures in 1995, 1.2 percent more than it spent in 1994. Spending has increased annually since 1987, except for a $1.2 billion decrease in 1994.

The 1995 annual report, released today, contains sales and marketing statistics for calendar year 1995 and historical data dating back to 1963, the year the FTC began collecting information on the cigarette industry.

The largest category of advertising and promotional expenditures was promotional allowances, which accounted for 38 percent of all expenditures. Cigarette companies spent $1.87 billion in 1995 on promotional allowances (up from $1.7 billion in 1994), which include payments to retailers for shelf space.

Spending on discount coupons, multiple-pack promotions ("buy one, get one free"), and retail value-added offers (non-cigarette items, such as key chains or lighters given away at the point of sale with the purchase of cigarettes) increased from $1.25 billion in 1994 to $1.35 billion in 1995, but remained well below the 1993 level of $2.56 billion. At the same time, expenditures for distribution of branded specialty items through the mail, at promotional events, or by any means other than at the point of sale with the purchase of cigarettes declined from $851 million in 1994 to $665.2 million in 1995.

Money spent giving cigarette samples to the public nearly doubled from 1994 to 1995 (increasing from $7 million to $13.8 million), although these expenditures remained well below their pre-1994 levels.

Continuing a long-term trend, the industry's expenditures on advertising in newspapers declined 20 percent, from $24.1 million in 1994 to $19.1 million in 1995. Although newspaper spending accounted for 23.1 percent of total expenditures in 1981, it accounted for only 0.4 percent of total industry spending in 1995.

Spending on magazine advertising decreased from $251.6 million in 1994 to $248.8 million in 1995, according to the FTC report, while outdoor advertising expenditures increased from $240 million to $273.3 million. Point-of-sale advertising expenditures decreased from $342.7 million in 1994 to $259 million in 1995, a decline of 24.4 percent.

As in every year since 1989, the industry reported that no 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.

According to the FTC report, domestic cigarette sales to wholesalers and retailers fell from 490.2 billion cigarettes in 1994 to 482.2 billion in 1995, a decline of 1.6 percent. Cigarette sales from manufacturers to wholesalers and retailers have declined every year from 1985 through 1995, except for 1994, when sales rose by 28.8 billion units (6.2 percent). The Commission's previous report to Congress (issued in October 1996) had noted that the volatility in sales reported to the Commission was not reflected in the U.S. Department of Agriculture's cigarette consumption estimates, and that "[c]onstrued together, the two data sets suggest that some increase in the number of cigarettes actually sold to consumers occurred in 1994, but that the dramatic increase reported to the Commission likely reflects, in large part, changes in inventories rather than actual retail sales." USDA consumption estimates remained relatively steady for 1995.

Copies of the "Federal Trade Commission Report to Congress for 1995 Pursuant to the Federal Cigarette Labeling and Advertising Act" are available at the FTC's World Wide Web Site, and from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest FTC news as it is announced, call the FTC's 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 at: http://www.ftc.gov