Would a total ad ban be hazardous to tobacco industry's health?
Even as the American Medical Association was vowing Tuesday to eliminate tobacco advertising in the United States, another 1.636 billion cigarettes were rolling off the conveyor belts. To help sell this single day's production, the Federal Trade Commission (FTC) says, the US tobacco industry spent some $5 million a day this year. Typically the money was spent to portray young people playing touch football in the snow or romping at the beach, enjoying life's little pleasures -- and a cigarette.Skip to next paragraph
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Since being forced by Congress in 1971 to quit promoting smoking materials on television and radio, the six companies that dominate the US tobacco market have sunk their advertising roots deep into other American media -- especially magazines and newspapers.
In 1970, US tobacco companies spent $64.2 million advertising in newspapers, magazines, and on billboards, according to the FTC. That increased to about $1 billion in 1982, says Judy Wilkenfeld, the agency's director of cigarette advertising and testing.
Other advertising media, such as point-of-sales advertising, free samples, coupons, direct-mail testing, public entertainment, and public transit signs, accounted for about $1 billion more in 1982, she says.
Much more conservative estimates by Advertising Age magazine, based on three major categories of receipts, put the 1984 level of smokeless tobacco and cigarette advertising by newspapers, magazines, and outdoor companies at $881.8 million.
``I've spoken with quite a few tobacco industry executives and each and every one of them said advertising spending levels have remained fairly constant as a percentage of sales,'' one longtime industry observer says.
When inflation is taken into account, the total spent on tobacco advertising is not much higher than 1970 levels, he says. The FTC puts the 1970 total for all types of tobacco advertising at $314 million.
Whether rock steady or increasing rapidly, the advertising has apparently had an effect. Although the percentage of the US populace that smokes has declined in the last 20 years, individuals have been smoking more.
Cigarette sales rose steadily for more than a decade through 1981. Since then, a downturn saw US citizens smoke 600 billion cigarettes last year, compared with 640 billion in 1981. Still, sales of tobacco products reached a record $28.7 billion, according to the Tobacco Institute, an organization representing the industry.
A key point of contention between US health organizations and tobacco producers is whether much of the advertising is aimed at attracting youth. The 271,000-member American Medical Association (AMA) says the advertising is seductive. The industry disagrees.
Anne Browder, assistant to the president of the Tobacco Institute, says the advertising is aimed at cultivating brand loyalty only.
``If there is a ban on advertising, it would just reduce the [advertising] cost to the companies,'' Ms. Browder said. ``Advertising doesn't create smokers. That's something the AMA doesn't understand.''
With pressure increasing, industry analysts are divided on tobacco's future in the US.
Though profits are excellent, the market for tobacco products is not expected to grow, partly because of public awareness of health risks. In addition, analysts say Wall Street is concerned the industry might be open to huge liability losses if product-liability suits are won.
Indeed, diversification out of tobacco has been the name of the game for the big six: R. J. Reynolds, Philip Morris, American Brands, US Tobacco, Culbro, and Universal Leaf. The two biggest have led the way. Philip Morris recently plunked down $5.4 billion in cash to buy General Foods, and R. J. Reynolds acquired Nabisco for $4.9 billion in September.
But industry expert John C. Maxwell Jr. says outside pressure is not the main reason for diversification.
``If they didn't use all that cash to buy up other properties they'd look like a bank,'' says Mr. Maxwell, who says large cash reserves would create a takeover target.
Whether or not the US will be a smokeless society in the year 2000, as the AMA wants, may be problematic. But the association's recent attack on the tobacco industry is not without its own twist of irony.
It seems that in the early '50s, when some of the first medical studies showed that smoking might be harmful, the tobacco companies saw the danger and for the first time united to pool money and resources to form the Tobacco Institute. One of the institute's first multimillion-dollar donations was to the AMA for more study on smoking's health hazards, says Robert H. Miles, a professor at the Harvard Business School who has studied the industry.
At present there are no bills in Congress to ban cigarette advertising. Rep. Henry A. Waxman (D) of California has said his Health and the Environment Subcommittee will hold hearings on tobacco ads next year.