- Better jobs market and cheap gasoline driving cigarette sales
- Public-health groups alarmed by pause in long-term drop
For the first time in more than a decade, Americans appear to be smoking more.
A confluence of factors -- from a better jobs market to cheaper gasoline to reductions in government anti-smoking programs -- are driving a months-long pickup in cigarette sales, analysts say. If current trends hold, 2015 could mark the first year since 2002 that sales volumes increase.
Not even tobacco companies are suggesting the long-term decline in smoking in the U.S. is reversing itself. Indeed, executives predict annual volumes will keep falling over time.
But recent data pointing to a slight increase in pack sales this year nonetheless underscore worrisome trends for public health officials. While the number of smokers in the U.S. has steadily declined, some smokers now seem to be lighting up more. Others are turning to chewing tobacco and electronic cigarettes to supplement cigarette habits rather than quit.
To public-health groups, any signs that the declines in smoking might be leveling off is cause for alarm and renewed anti-smoking efforts.
“Anytime cigarette sales aren’t going down, that’s cause for concern,” said Vince Willmore, spokesman for the Campaign for Tobacco Free Kids. “We’re talking about the No. 1 cause of preventable death in our country.”
This year’s apparent bounce largely reflects the improving economy, particularly rising employment, analysts say. Gasoline prices are also a factor. Smokers as a group tend to have lower incomes than non-smokers, and some are using the money they’re saving at the pump to buy cigarettes.
“Those gas price savings are a big benefit,” said Vivien Azer, an analyst at Cowen & Co. Sixty percent of cigarette sales happen at convenience stores and gas stations, she said.
Tobacco companies continue to spend aggressively on marketing, and the industry -- and its investors -- have been profiting from those efforts. At Reynolds American Inc., the second-largest U.S. tobacco seller, cigarette volumes rose 12 percent during the first nine months of 2015, including sales from its recently acquired Newport brand, according to company filings. Altria Group Inc., the No. 1 seller and the maker of Marlboro, reported a 1.5 percent increase.
Both companies’ share prices have posted strong performances this year. Reynolds has gained 39 percent, closing at $44.63 on Friday. Altria is up 16 percent at $57.09.
Both companies say industrywide volume actually fell marginally during the first nine months of the year. Many executives predict that over time U.S. pack sales will continue to fall by 3 percent to 4 percent annually. Since 1964, when the U.S. Surgeon General released the first report on smoking and health, the smoking rate among U.S. adults has fallen to 18 percent from 42 percent, as of data released in 2014.
“Year after year after year, if you average any sort of collection of time together, you’re going to see that 3 to 4 percent when you’re looking at the long term,” said Sarah Knakmuhs, Altria’s vice president of investor relations.
That’s one reason large tobacco companies have pushed aggressively into the fast-growing market for e-cigarettes. These battery-powered devices, which deliver a puff of nicotine-laced vapor, are seen as less harmful than traditional cigarettes.
But e-cigarette use has also exploded among teenagers, a development some anti-smoking groups warn could hook a new generation on nicotine. Many adult smokers are using these devices along with traditional tobacco, rather than as substitutes.
“E-cigarettes and hookah are now the most common tobacco products used among kids,” said Brian King, a spokesman for the Centers for Disease Control and Prevention. About three-quarters of adult e-cigarette users also smoke regular cigarettes, he said.
“We’re seeing a large preponderance of dual use of products, particularly e-cigarettes and cigarettes,” King said.
The shift comes at a time when government anti-smoking efforts have lost some momentum. In previous years, increased excise taxes and government-sponsored prevention and cessation programs had helped reduce smoking. The federal excise tax on cigarettes was last increased in 2009, when the tax on a pack went up by 62 cents -- and smoking declined markedly. There has not been a federal excise tax increase since.
At the state level, only two of the 50 states are spending the recommended amount on tobacco-control measures, with total state outlays on such programs projected to be about $490 million this year, the CDC said. That’s dwarfed by tobacco industry spending on marketing and promoting cigarettes and smokeless tobacco products. Such spending reached about $9.6 billion in 2012, the most recent year for which the Federal Trade Commission has released data.
“The bottom line is that when we implement effective strategies to reduce tobacco use, especially cigarette tax increases, cigarette sales go down,” said Willmore of the Campaign for Tobacco Free Kids. “When we don’t implement those strategies, cigarette sales level off.”