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The Truth About Tobacco Industry Retail Practices

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The Truth About Tobacco Industry Retail Practices The truth about tobacco industry retail practices HIGHLIGHTS • The largest U.S. cigarette and smokeless tobacco manufacturers spent over $8.6 billion in 2014 on advertising and promotional expenditures in the retail environment, including advertisements posted at the retail location, price discounts, promotional allowances, coupons and sampling. • The advertising and promotional efforts of tobacco companies in the retail environment cause the initiation and progression of tobacco use among young people. • Tobacco retailers include convenience stores, supermarkets, liquor stores, newsstands and pharmacies. These tobacco retailers are often more heavily populated in areas with a greater number of minority and low-income populations. • Tobacco companies use a variety of methods in the retail environment to advertise and promote their products, including: » Reducing the prices of their products to circumvent higher taxes by dropping wholesale prices and employing tactics such as couponing, multipack discounts (e.g., buy-two-get-one-free or buy-two- for-one deals) and price discounts (e.g., $2.50 off one pack); » Promoting products in the retail environment by using displays and advertisements, providing retailers with incentives for advertising their products; and » Paying retailers to strategically place tobacco products front-and-center in retail environments which are easy-to-see for customers, often around the checkout counter. • Several states and localities have implemented policies around the retail environment, supplementing and augmenting federal restrictions. APRIL 2017 | truthinitiative.org p 1 BACKGROUND Over $8.6 billion was Tobacco companies make extensive use of the retail environment to reach both current and future spent on POS marketing, customers by advertising and promoting their products and normalizing the presence of tobacco products in amounting to almost everyday life.1-3 Point-of-sale (POS) tobacco marketing, includes product displays and placement, exterior and $990,000 every hour. interior advertisements, and promotional and price incentives to consumers.4,5 While retail display, price discounting and promotional The industry’s investment in POS marketing reveals practices and policies may include anything related the importance it places on this consumer sales tool. to the retail environment (including health warnings, In 2014, the tobacco industry spent nearly $9.1 billion minimum legal sales age*, and tobacco taxation), on marketing its cigarette and smokeless tobacco this resource focuses on tobacco-retailer licensing, products. Over $8.6 billion (or 95.4%) of that was spent retailer density, price discounting, retail placement and on POS marketing, amounting to almost $990,000 every promotional practices. What follows does not cover 2,3 hour. the online tobacco retail environment or focus on the rapidly developing e-cigarette industry and its retail and This fact sheet and policy resource reviews the science promotional practices. around POS marketing and the huge impact it has on driving smoking behavior, particularly among youth and *Truth Initiative strongly supports raising the minimum age of sale young adults. State and local governments have been to 21 for all tobacco products, as part of a strong tobacco control the centers of innovation to combat this impact and this policy program. Our policy statement on this issue is available at http://truthinitiative.org/news/where-we-stand-raising-tobacco- document also highlights some of the best examples of age-21. policies in this area. APRIL 2017 | truthinitiative.org p 2 ADVERTISING AND PROMOTIONAL EXPENDITURES BY THE LARGEST U.S. CIGARETTE AND SMOKELESS TOBACCO MANUFACTURERS2,3 2013 2014 Point-of-Sale $87,956,000 $271,144,000 (advertisements posted at the retail location, excluding outdoor advertising) Price Discounts $7,925,119,000 $7,121,252,000 (payments made to retailers and wholesalers to reduce the price of tobacco products to consumers, including off-invoice discounts, buy-downs, voluntary price reductions and trade programs) Promotional Allowances $763,297,000 $702,114,000 (payments made to retailers and wholesalers to facilitate the sale or placement of tobacco products, including payments made for stocking, shelving, displaying and merchandising brands, volume rebates, incentive payments and the cost of tobacco products given to retailers for free for subsequent sale to consumers) Coupons $281,025,000 $561,772,000 Sampling $6,369,000 $8,030,000 (smokeless tobacco only) Total $9,063,766,000 $8,664,312,000 APRIL 2017 | truthinitiative.org p 3 IMPACT OF POS TOBACCO MARKETING Tobacco product sales The reason the industry invests in POS marketing is increase by roughly 30 simple: it works. For example, tobacco product sales increase by roughly 30 percent when discounts and percent when discounts promotions are advertised in stores.1 and promotions are POS marketing is associated with impulse purchases advertised in stores. of tobacco products. Cigarette displays at the point- of-sale tempt smokers to buy tobacco, even among customers not intending to do so and smokers trying to quit.6 In a 2009 study of adult daily smokers, unintended cigarette purchases were made by 22 percent of study participants, and POS displays caused nearly four times as many unplanned purchases as planned purchases.7 Another study found that 11.3 percent of cigarette pack buying was described as unplanned. Young adults (18- 24 years of age) in particular were more likely to make unplanned cigarette pack purchases.8 These impulse purchases are sometimes made instead of a planned purchase on items like food.9 Retail marketing, in-store advertising and display is also associated with compromising quit attempts.10,11 A study interviewing smokers who had attempted to quit in the last six months, found that the high visibility of tobacco product advertising in-store was highly tempting and stymied cessation attempts.11 Another study found that higher exposure to in-store advertising and price promotion at the point-of-sale was associated with a lower probability of successful quitting among adult smokers.12 APRIL 2017 | truthinitiative.org p 4 YOUTH Youth are especially affected by POS marketing. Advertising and promotional efforts of tobacco companies cause the initiation and progression of tobacco use among young people.1,13-15 Studies show that tobacco use is associated with exposure to retail advertising and relative ease of in-store access to tobacco products.1 Some studies have shown that youth who were frequently exposed to POS tobacco marketing were twice as likely to try or initiate smoking than those who were not as frequently exposed.15 Frequent exposure to tobacco product advertising and marketing at retail normalizes tobacco and smoking for youth over time and makes them more likely to smoke.14,16,17 POS marketing is also associated with youth brand preference.1,18 Youth who described frequent exposure Youth who were to tobacco marketing in retail stores had a greater likelihood of attributing positive imagery to users of frequently exposed to specific tobacco-product brands. Other studies show that youth who view photos of stores with tobacco POS tobacco marketing displays and advertising, have a greater likelihood of overestimating the percentage of adolescents and were twice as likely young adults who smoke, and they believe that tobacco products are easier to buy than those who view photos to try smoking than without retail tobacco advertising. Research also those who were not as shows that young adult smokers prefer tobacco brands marketed most heavily in the convenience store closest frequently exposed. to their schools.1 APRIL 2017 | truthinitiative.org p 5 LICENSING AND RETAILER DENSITY Retailer density is an important predictor of youth and young adult smoking. This is unsurprising since, as noted above, youth are especially susceptible to POS marketing. As the number of tobacco retailers increase, so does exposure to tobacco advertising and promotion. An estimated 375,000 retailers sell tobacco products in the U.S. That is equivalent to 27 times more tobacco retailers than there are McDonald’s and 28 times more tobacco retailers than there are Starbucks.19 Of these U.S. tobacco retailers, an estimated 48 percent are convenience stores (with and without gas), 25 percent are supermarkets, 13 percent are off-premise liquor stores, seven percent are pharmacies, four percent are tobacco shops and three percent are discount department stores, warehouse stores, and newsstands.19 The number of tobacco retailers that are pharmacies may be underestimated as many supermarkets and warehouses also contain retail pharmacies. There are 27 times more tobacco retailers than there are McDonald’s and 28 times more tobacco retailers than there are Starbucks in the U.S. Experimental smoking among youth is correlated NUMBER OF TOBACCO RETAILERS VERSUS MCDONALD’S with the number of tobacco retailers in high school AND STARBUCKS IN THE U.S. neighborhoods and in communities where youth live.1 In one study, the incidence of smoking was significantly higher among students in schools with the highest 400,000 density of surrounding tobacco retailers compared with 375,000 20 students in schools without any tobacco retail outlets. 350,000 Tobacco retailers are disproportionately located in more heavily populated in areas with a greater number 300,000 of minority and low-income populations.21,22 This may account for the significantly higher percentage of youth 250,000 and
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