Targeting Specific Markets

Youth

A study published in the journal Archives of Pediatric and Adolescent Medicine found that cigarette marketing has increased the likelihood that youth would start smoking.  These company create images  associated with smoking in hope of transferring the idea that it is”cool” to smoke.  They magnify this idea of cool to create this lifestyle allusion by using images such as the the Marlboro cowboy instead of warning society of the health risks that come with this habit.

From 2004 to 2006, the three heavily advertised brands were: Marlboro, Newport, and Camel.  These three brands were also the preferred brands of cigarettes smoked by both high schoolers and middle schoolers.

    

Women

Not only has these company target teens but also women.  The Tobaccos companies produces brand especially for women. In January of 2007, R.J. Reynold introduced a new extension of its Camel brand that targeted women called Camel N0. 9.  The cigarettes came in a shiny black bow with flowery, hot pink or teal broders.  With that, the marketing campaign is comprised of social desirability and independence in which the add feature slim, attractive, fashionable women with messages similar to “Reach for  a Lucky instead of a sweet” to establish the associated between smoking and slimness.

 

Financials of Tabacco Industry Marketing

Tobacco companies send billions upon billion of dollars each year to market their products.  In 2006, cigarette companies spent abut $12.4 billion on advertising in the United States alone.  Although this number is from the $13.1 billion spent in 2005, it has more than double since 1997.  When broken down, the money these cigarette companies spent shakes out like this:

• $34 million per day,
• $42 for every person in the United States
• more than $275 for each U.S. smoker aged 18 years or older

When the marketing expenditures from 2006 were further broken down, the following four categories comprised of more than 90% of the money spent:

1. Price discounts paid to retailers or wholesalers to reduce the price of cigarettes ($9 billion, or 74% of total marketing expenditures)
2. Promotional allowances, such as payments to retailers or wholesalers for stocking, displaying, and merchandising particular brands ($905 million, or 7% of total marketing expenditures)
3. Retail value added involving bonus cigarettes ($817 million, or 6.5% of total marketing expenditures)
4. Coupons for smokers to purchase products ($625 million, or 5% of total marketing expenditures)

 

Cigarettes Invade College Campuses Despite Health Risks

Cigarettes Invade College Campuses Despite Health Risks

Despite knowledge among college students about the dangers of smoking, it is reported that  studies 21% of college students smoke cigarettes.

According to University of Missouri School of Medicine, college students are most likely to drink while partying and working.  This implies that students either drink as a coping mechanism for stress or are more inclined to smoke while in social situations.  It was also interesting the study found that smoking rates were highest at the beginning of the semester and over weekends.

-Lauren

http://medicine.missouri.edu/news/0147.php

 

 

The Truth 1200

http://youtu.be/gJTCWtcAews

The Truth campaign aims at exposing truths behind smoking. Other campaigns, such as the Idaho Meth Campaign believe that best way to discourage drug use is through scare tactics. This image appeared on a billboard on the highway in Idaho.

-Lauren

http://www.google.com/imgres?um=1&hl=en&sa=N&biw=1600&bih=732&tbm=isch&tbnid=Ck-kW6C8VjZZnM:&imgrefurl=http://www.spokesman.com/blogs/boise/2007/oct/16/graphic-ads-a-taste-of-whats-to-come/&docid=wOFSfhNpi7ULQM&imgurl=http://www.spokesmanreview.com/blogs/boise/media/r_methad.jpg&w=249&h=115&ei=h-BsT-L2JNOnsALHh6XzBQ&zoom=1&iact=hc&vpx=377&vpy=194&dur=6625&hovh=92&hovw=199&tx=137&ty=66&sig=107759619650740893393&page=1&tbnh=75&tbnw=163&start=0&ndsp=33&ved=1t:429,r:1,s:0

Smoking in America

Smoking in America

This site provides a map demonstrating the percentage of Americans that are daily smokers and occasional smokers in each state.

The map has terrifying results for people 18-35 smoking occasionally.  The map suggests that nearly every state in the US has at least 20% of the state population smoking occasionally in this age bracket.

According to a recent Forbes article, these states ranked within the states with the highest smoking rates:

1. West VA

2. Indiana

3.Kentucky

4. Missouri

5. Oklahoma

One the other hand, these states were among states with the lowest smoking rates:

1. Utah

2. California

3. New Jersey

4. Maryland

5. Hawaii

-Lauren

http://www.forbes.com/2010/02/18/smoking-nicotine-addiction-lifestyle-health-lung-cancer-lowest_slide_6.html

http://labs.slate.com/articles/cigarette-map/

 

Why Big Tobacco Should Lobby for Marijuana Legalization

The long-term outlook for retailing cigarettes in the US looks pretty grim. For the past 30 years, the average consumption has been decreasing dramatically, while the average price has been increasing. There is little to no public, celebrity, or medical support for the habit. Advertising is illegal, and older smokers are drying faster than teens are beginning to smoke.

In the past 2 decades, cigarettes have been expelled from public buildings, then bars and restaurants, and they are now being outlawed in some public, outdoor spaces.  If these trends continue, smoking rates are expected to be between 12% and 3% by the year 2030[1]

• Therefore, if big tobacco wants to survive as an industry, it needs to diversify.  Here are a few things that tobacco companies have going for them:
• They have the machinery to turn crops into cigarettes on a large scale basis
• They have preexisting relationships with distributors to deliver their product to consumers
• They are expert marketers
• They have a multimillion dollar lobbying group in Washington.
• Tobacco companies, (even with existing bans on radio and tv advertising) have deep-seeded brands and images that could potentially be tied in to different products.

Given all of these strategic capabilities, I believe that cigarette companies should move their lobbying efforts towards marijuana legalization, then produce and sell marijuana cigarettes. CNBC expects the current American marijuana market to be a $40 billion per year,[2] and that market is comprised of just a handful of states that have legalized medical marijuana.

Tobacco companies could combine products and sell cigarettes containing both THC and nicotine, also they could use their global supply chain to import cannabis from around the world and excel in both in quality and quantity.  Above all, big tobacco is one of the few industries whose public perception could actually improve from diversifying into the marijuana industry. [3]

-Zachery Poche

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[1] http://tobaccocontrol.bmj.com/content/18/3/183.full

[2] http://www.cnbc.com/id/36177544/Business_Model_Debate_Big_Tobacco_Vs_Big_Pharma

[3] http://whalen.wordpress.com/2010/04/21/legalize-marijuana-says-big-tobacco/

 

Tobacco Dollars

Make no mistake about it: tobacco is a booming business.

And it’s creating monstrous profits for big tobacco businesses. Philip Morris International (PMI) has posted gains every year for the past half decade. As a matter of fact, revenues for 2011 totalled over $12 billion, approximately $2.2 billion more than 2010. Business is a boomin’.

Even amidst the stringent American regulations regarding the sale and use of tabacco, PMI is able to branch out and exploit the ignorance of less developed countries, most notably the BRIC states. These are the fundamental drivers behind revenue. The breakdown of revenues by geography, located below, shows that Asia is the fastest growing segment, and not without good reason. Percentage of cigarette companies’ foreign revenue:

As mentioned in our class study, China has more smokers than the United States has inhabitants. The market is astronomical. This is due in part to the ignorance of the dangers of smoking. As long as companies continue to exploit this, profits will be there to make and dividends will be hefty. PMI’s earnings per share this year were 4.85, up from 3.92 in 2010. Dividends paid equalled $2.44 per share, This is a significant increase, and it rests on the company’s ability to leverage its market share in the European Union and China as demonstrated below. Dollar-value of cigarette companies’ foreign revenue: (in thousands)

The main drivers of this industry are the cultural implications of smoking. Nobody enjoys the act of smoking a cigarette for the first time, but it represents a social practice that different cultures associate with a multitude of things that cause people to light up everyday. Obviously, it is an addictive habit, which does all the work of PMI’s profits, but as long as companies such as PMI have marketing budgets to advertise to developing nations, people will smoke and continue to do so. Not only will they continue to smoke, but they will drive the profits through the roof as has been evidenced by the steady increase of PMI’s net income. Knowledge is key as the rates of smokers in America is at record lows and the EU has shown a pronounced decline. Now consumers have a choice to make to stop and help kids like the one below.

http://www.youtube.com/watch?v=x4c_wI6kQyE