What will happen to Big Tobacco?

February 7th, 2014 § 0 comments

The cigarette-smoking lifestyle has been on the decline. Earlier this January marked the half-century anniversary since Luther Terry, U.S. Surgeon General, himself a long-time smoker, announced that smoking cigarettes caused lung cancer and possibly even heart-disease. His brazen call for the government to act was an early catalyst for the results we see today.

Cigarette-smoking has by no means disappeared, but it’s a far cry from 50 years ago when lighting-up was fashionable and commonplace. Grocery stores, restaurants, hospitals – everywhere you went you could smoke.

Source: http://cigarettezoom.com/

These days we can’t smoke on aircraft and most places indoors, although the legislated standards vary. Attitudes have changed and smokers often find themselves almost apologetically explaining their desire to smoke to people who catch them in the act of lighting up.


A change of heart

Canadian policy since 1997 has been to regulate the sale of cigarettes and restrict its promotion (translation: hide them inside innocuous white panels behind the cashier). In the U.S., taxes on cigarettes have been lower and they are generally more available. American pharmacy CVS is now making waves as the first U.S. healthcare company to begin phasing out tobacco sales, putting an end to the absurdity of selling both medication and the cause of disease.

Even with cigarettes estimated to rake in an estimated $1.5 billion annually for the company, investors have responded well and CVS Caremark stock value went up the day after the announcement: a good indication of competitors making similar moves in future. Moral reasons aside, the shift in public sentiment against smoking has doubtless had a tangible effect on such bold corporate decisions.

Before you begin to feel sorry for Big Tobacco taking such a beating, keep in mind that such changes are not echoed everywhere. It is true that there are now more former smokers than current smokers; and the percentage of smoking Americans has fallen from 42% of total population in 1964 to just 18% today. However, Asia is a wholly different story.

In countries like Australia, the U.K., and Canada, public demand has pushed policy to reduce sales by raising cigarette prices, creating a strong incentive for tobacco companies to move to regions with less legislation and less resistance to a cigarette-smoking culture. Big Tobacco takes a look at the global market and sees 1,959 cigarettes being smoked per person in South Korea, 1,841 in Japan and 1,711 per person in China. Huzzah! That’s more than the odd 1000 being smoked in the U.S. and Canada. It also sees that Russians smoked upwards of 2,750 per person! Disappointment all around when it’s realised that new restrictions being phased in by 2014 will make it a less attractive market, leaving eastern Asia as a better target.


Dodging certain death

Devising one response strategy is not sufficiently hedging your bets in a changing market, so geographical re-targeting is not the only card being played. $4.4 billion (CAD) was the direct healthcare cost for tobacco-related illnesses in Canada, according to a report in 2012. Similar estimates for the U.S. put the number at $96 (USD) billion. The $750 billion industry is well aware that the taxpayer and the government spender are now united in the decision to reject tobacco products in their current form. Which is why in 2012 Philip Morris International spent $250 million researching “harm-reduction” programs that develop various types of e-cigarettes. With persistence comparable to that of celebrity stalkers, it seems Big Tobacco is not going anywhere, for now.






CVS to become first major U.S. pharmacy to stop selling cigarettes (via Harvard Health Blog)

Who Smokes Most:  A surprising map of smoking rates by country (via The Washington Post)

Global study finds alarming rates of smoking in the Pacific and Asia (via Radio Australia)

Surgeon General’s 1964 report: making smoking history (via Harvard Health Blog)





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