Up In Smoke: Tobacco Ads Continue To Wane, Promo Spending Soars

Print and outdoor media, which once were the mainstays of cigarette brand advertising following the category's eviction from TV and radio, continue to erode and now represent only a miniscule share of marketing spending by the major tobacco companies, according to the 2004 edition of an annual report released Friday by the Federal Trade Commission.

The report, which is based on a compilation of 2002 domestic marketing expenditures data supplied by the six largest tobacco marketers, find that magazines now account for less that 1 percent of tobacco marketing spending, down from 1.5 percent in 2001. Newspapers have fallen to a 0.2 percent share from 0.3 percent in 2001. The declining media spending shares come amid an overall increase in cigarette brand marketing spending, which rose 11 percent to $12.47 billion in 2002 from $11.22 billion in 2001.

The data reveals that cigarette brands are pumping more money into consumer and trade promotions to either boost marketing support and distribution through retails or to get consumers to sample cigarette brands directly. Price discounts accounted for nearly two-thirds (63.2 percent) of 2002 marketing outlays, while retail promotional allowances accounted for 10.7 percent.



Moreover, the decline in overall ad spending, which also includes $74.2 million in ads directed at youth and/or their parents that was intended to reduce youth smoking.

In terms of media strategies, cigarette brands still depend heavily on magazines, investing $106.9 million on the print medium, followed by newspapers, which took in $25.5 million in 2003. Outdoor reaped $24.2 million, while transit media got zero cigarette ad dollars. The largest single media outlay went to point-of-sale advertising, which took in $260.9 million, followed by direct mail, which totaled $111.1 million.

Amid the overall decline in traditional media spending, cigarette brands have been loath to invest in new media, and they have eschewed the kind of branded entertainment/product integration that the category was known for during its pioneering days, and which has become the rage on Madison Avenue.

During 2002, cigarette brands spent only $940,000 on Internet websites, and spent no money on other forms of Internet advertising, including banner adds, or email advertising.

Cigarette marketers also said they paid no money or other forms of compensation to have any cigarette brand names or tobacco products appear in any motion pictures or television shows. That practice has been reported as "unfounded" since 1989.

Cigarette Brand Ad/Promo Spending (In Millions)

Spending Share
Newspapers $25.5 0.2%
Magazines $106.9 0.9%
Outdoor $24.2 0.2%
Transit $0 0.0%
Point-of-Sale $260.9 2.1%
Price Discounts $7,873.8 63.2%
Promotional Allowances - Retailers $1,333.1 10.7%
Promotional Allowances - Wholesalers $446.3 3.6%
Promotional Allowances - Other $2.8 0.0%
Sampling Distribution $28.8 0.2%
Specialty Item Distribution - Branded $49.4 0.4%
Specialty Item Distribution - Non-Branded $174.2 1.4%
Public Entertainment - Adult-Only $219.0 1.8%
Public Entertainment - General-Audience $34.1 0.3%
Sponsorships $54.2 0.4%
Endorsements & Testimonials $0 0.0%
Direct Mail $111.3 0.9%
Coupons $522.2 4.2%
Retail Value Added - Bonus Cigarettes $1,060.3 8.5%
Retail Value Added - Non-Cigarette Bonus $24.7 0.2%
Company Web Site $0.9 0.0%
Internet - Other $0 0.0%
Telephone $679 0.0%
Other** $112.9 0.9%
Total $12,466.4 100.0%

Source: Federal Trade Commission from tobacco company reports, 2002 data.
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