Federal Trade Commission 2003 Cigarette Report

The FTC's annual report on cigarette sales and advertising shows that the major tobacco manufacturers spent $15.15 billion on advertising and promotions in 2003, an increase of $2.68 billion, or 21.5%, from 2002 and the most ever reported to the Commission. However, spending on point-of-sale promotional advertisements declined from $260.9 million in 2002 to $165.6 million in 2003, a drop of nearly 37%. That is the lowest P-O-P spending total reported since 1987.The total number of cigarettes sold or given away by those manufacturers decreased by 19.8 billion (5.1%) from 2002 to 2003. The manufacturers also reported spending $72.9 million on advertisements intended to reduce youth smoking, a 1.8% decrease from the $74.2 million reported in 2002.According to the report, the major domestic cigarette manufacturers sold or gave away 367.6 billion cigarettes domestically in 2003, 19.8 billion fewer than the 387.4 billion they sold or gave away in 2002. Sales declined from 376.4 billion in 2002 to 360.5 billion in 2003, while the number of cigarettes given away decreased from 11.1 billion to 7.1 billion. This is the second report issued since the Commission subdivided its "promotional allowances" expenditure category into four new categories: price discounts, promotional allowances paid to retailers, promotional allowances paid to wholesalers, and other promotional allowances. In 2003, price discounts paid to retailers or wholesalers to reduce the price of cigarettes to consumers was the single largest category of expenditures reported by the manufacturers, accounting for $10.81 billion, or 71.4% of total spending. Together, the four categories of promotional expenditures totaled $12.72 billion, or 84.0% of all spending). In 2002, the companies reported cumulative expenditures of $9.66 billion on these four categories; price discounts was the single largest expenditure category at $7.87 billion. The two next largest spending categories in 2003 were retail-value-added involving free cigarettes (i.e., "buy two packs, get one free" types of offers, where the free cigarettes are given out at the point of purchase) and coupons, which accounted for $677.3 million (4.5% of total spending) and $650.7 million (4.3%), respectively. Newspaper advertising expenditures decreased from $25.5 million in 2002 to $8.3 million in 2003, the smallest amount spent on this category since the FTC began asking about it in 1970. Although newspaper spending accounted for 23.1% of total ad expenditures in 1981, it has accounted for less than 1% since 1992. Manufacturers spent $156.4 million on magazine advertising for cigarettes in 2003, an increase of 46.4% from 2002. Still, magazine advertising only represented 1.0% of total spending. Spending on outdoor advertising totaled $32.6 million in 2003, representing an increase of 34.8% from 2002, but still only making up 0.2% of total advertising and promotional spending. The report also contains data on money spent providing cigarette samples to the public, as well as on public entertainment, the sponsorship of sports teams or individual athletes, direct-mail expenditures, Internet advertising, and telephone advertising expenditures. The report also provides the domestic market share for various cigarette length categories, and the market share of menthol and non-menthol cigarettes.

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