Cigarette Marketing Budget Cut Sales Rise Despite $1.2 Billion Drop In Budget For Promotions

The cigarette industry spent $1.2 billion less on advertising and promotions in 1994 than in the previous year, the first drop in the industry’s massive marketing budget since 1986.

Cigarette makers spent $4.83 billion in 1994, down almost 20 percent from $6.03 billion the previous year, the Federal Trade Commission reported Wednesday.

Most of the drop came from promotions that directly hit consumers’ wallets: coupons, multiple-pack discounts and other so-called “value-added promotions.” Cigarette makers cut in half spending on such promotions, to $1.25 billion, down from an all-time high of $2.56 billion in 1993, the FTC said in its annual report to Congress.

Americans also got fewer free cigarette samples in 1994. That spending dropped to just $7 million in 1994, down from $40 million the previous year.

The decline in advertising and promotion spending follows a decision by tobacco companies in 1993 to drop prices on their premium brands by 20 percent to better compete with discount cigarettes, said securities analyst Emanuel Goldman with Paine Webber in San Francisco.

The companies needed “a cutback in certain marketing categories to at least try to ease the pain” of lower revenues, Goldman said.

Critics have blamed aggressive tobacco industry marketing for helping sway teenagers to smoke. After a two-year investigation, the Food and Drug Administration announced in August that within two years it will issue curbs on tobacco advertising and promotions in an effort to curb teen use.

Even as overall marketing expenditures dropped in 1994, tobacco companies did increase by $95 million their spending in the most controversial area of promotions: T-shirts, hats and other trinkets that bear cigarette brand names. They spent $850.8 million in 1994 on such promotions. Tobacco firms say they’re simply ad tools, while smoking foes charge that teenagers who own the popular items are more likely to smoke than their peers.

Even though marketing expenditures fell, domestic sales of cigarettes rose for the first time in 10 years. Tobacco firms sold 490.2 billion cigarettes in the United States in 1994, 28.8 billion more than the previous year.