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Tobacco Rebounds as Prices Rise Despite Fewer Smokers

Image: Tobacco Rebounds as Prices Rise Despite Fewer Smokers

Row of tobacco leaves curing in a barn. (Melinda Fawver/Dreamstime.com)

By    |   Monday, 24 Apr 2017 02:16 PM

Tobacco revenue has rebounded in America despite the fact that fewer people are smoking and smoking areas are as restricted as ever.

According to the Euromonitor, an independent market-research firm, Americans spent more on cigarettes than soda and beer combined from retail stores in 2016, the Wall Street Journal reported. Tobacco companies have been able to raise prices and implement cost-cutting measures to increase profits, noted the Journal.

The industry also survived a mountain of legal settlements and regulatory changes that cost it millions, wrote the Journal. The changes led to a series of consolidations cutting the number major companies in the market from seven to two – Altria and Newport maker Reynolds American Inc.

"We came out of a challenging period," Marty Barrington, chief executive of Marlboro maker Altria Group Inc., which makes Marlboro, told the Wall Street Journal.

The Centers for Disease Control and Prevention reported that tobacco companies continue to aggressively spend on advertising. The companies spent more than $9 billion marketing cigarettes and smokeless tobacco in the United States in 2014.

The CDC said cigarette advertising and promotional expenses totaled approximately $8.49 billion in 2014 — down from $8.95 billion during 2013. The agency said 80 percent of the advertising was spent on price discounts paid to cigarette retailers or wholesalers to reduce the cost of cigarettes to consumers.

Euromonitor reported, according to the Wall Street Journal, that the volume of cigarettes sold fell 37 percent from 2001 to 2016 while tobacco companies raised prices to increase revenues 32 percent to $93.4 billion in 2016.

According to the Tobacco Manufacturers Association, the average pack of cigarettes has increased from $3.73 in 2001 to $6.42 in 2016, wrote the Wall Street Journal. In turn, operating profits for manufacturers have increased 77 percent since 2006 to $18.4 billion in 2016, noted the newspaper.

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Tobacco revenue has rebounded in America despite the fact that fewer people are smoking and smoking areas are as restricted as ever.
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2017-16-24
Monday, 24 Apr 2017 02:16 PM
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