FTC Issues Annual Report to Congress on Cigarette Sales and Advertising for 1996

The Federal Trade Commission's annual report to Congress on cigarette sales and advertising for 1996 shows a $212 million increase in advertising and promotional spending from 1995. According to the report, the cigarette industry spent $5.1 billion on advertising and promotional expenditures in 1996, 4 percent more than it spent in 1995. Despite the increase, spending remained below the $6.0 billion reported in 1993. Spending has increased annually since 1987, except for a $1.2 billion decrease from 1993 to 1994.

The 1996 annual report, released today, contains sales and marketing statistics for calendar year 1996 and historical data dating back to 1963, the year the FTC began collecting information on the cigarette industry.

The largest category of expenditures was promotional allowances, which accounted for 42 percent of all expenditures. Cigarette companies spent $2.15 billion in 1996 on promotional allowances (up from $1.87 billion in 1995), 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 hats or lighters given away at the point of sale with the purchase of cigarettes) decreased from $1.35 billion in 1995 to $1.31 billion in 1996. 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 $665.2 million in 1995 to $544.3 million in 1996.

Money spent giving cigarette samples to the public rose about 15.2 percent from 1995 to 1996 (increasing from $13.8 million to $15.9 million), although these expenditures remained well below their 1993 level of $40.2 million.

Continuing a long-term trend, the industry’s expenditures on advertising in newspapers declined 26.4 percent, from $19.1 million in 1995 to $14.1 million in 1996. Spending on magazine advertising decreased from $248.8 million in 1995 to $243 million in 1996, according to the FTC report, while outdoor advertising expenditures increased from $273.3 million to $292.3 million. Point-of-sale advertising expenditures decreased from $259 million in 1995 to $252.6 million in 1996.

In 1996, the Commission began collecting data from the major domestic cigarette manufacturers on expenditures relating to cigarette advertising on the Internet. The companies reported spending $432,000 on Internet advertising (0.01 percent of all advertising and promotional expenditures for the year.)

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.

The report also notes several significant actions taken by the Commission recently: (1) the issuance of an administrative complaint in May 1997 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; (2) the issuance of a notice in September 1997 requesting public comment on proposed revisions to the testing method used to determine the tar, nicotine and carbon monoxide ratings of cigarettes; and (3) the submission to the Congressional Task Force on Tobacco and Health in September 1997 of a report by staff members of the Bureaus of Economics, Competition and Consumer Protection examining the likely effect on cigarette prices and cigarette company profits of the proposed global tobacco settlement agreement.

Copies of the "Federal Trade Commission Report to Congress for 1996 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