Site Presented By
Monday, Nov 9, 2009
Big Tobacco money is being spent differently than before, but it's still targeting our youth.
Feb 10, 2000 | A smooth-looking sailor winks joyfully while an auburn-haired lovely flicks a Bic and fires up a Camel for the lucky lad. Two lonesome, studly cowboys ride the range at the foot of the snowcapped Rocky Mountains, an iconic picture of the eternally young and eternally immortal Marlboro Man.
From the backs of magazines such as Details, Sports Illustrated and Road & Track, these ads regularly reach young testosterone-charged readers. And, from slick sailors to old cowboys, tobacco ads exert more influence than ever these days, according to marketing experts and psychiatrists. While the percentage of Americans who smoke has decreased in the past 35 years, the percentage of American teens who smoke has risen in the past 10, and skyrocketing smoking rates worldwide show no signs of slowing down.
This appears to contradict the common perception that the Marlboro Man and his ilk are on the ropes. (Even the ad described above shows a very small cowboy figure as compared with the full-page Marlboro Man close-up of yesteryear.) The latest round of legal jousting has forced tobacco companies, previously banned from television and radio, to recuse themselves from billboards and print advertisements in youth markets.
With one marketing arm tied behind their backs, Philip Morris, R.J. Reynolds and the other tobacco merchants have struggled with free-falling stock values and public outcry from anti-smoking advocates. Standard & Poor's downgraded its recommendation on Philip Morris shares from "avoid" to "sell" on Dec. 28 because of the precarious position of the company.
Philip Morris and the other tobacco companies have passed only halfway through a brutal legal meat grinder that could cost them $200 billion or more in payments to the states over the next 25 years. And that could represent only the beginning of an endless litany of payouts that stretches ad infinitum. A Florida court now holds the key to what could be a painful $300 billion class-action payout to infirm smokers in the Citrus State -- the first of what could be many other class-action lawsuits.
The decline of smoking in the United States has been long and slow. Since 1964, the percentage of Americans who smoke has dropped from 65 percent to 25 percent, according to the Center for Advancement of Health. Add to that a marked decline in cigarette purchases over the past year (which most economists say resulted from higher prices caused by legal fees and settlement costs) and the business of addicting citizens to cigarettes seems destined for doom.
Anti-smoking advocates attribute the past year's declines and the long-term trend to more anti-smoking campaigns, rising health concerns and more expensive cigarettes. (The tobacco companies announced a 13-cent wholesale price increase the second week in January, the latest in a series of hikes.) On Jan. 19, virtually all the tobacco companies announced dramatically lower earnings due to declining consumption of the nic sticks in America and stagnant demand worldwide.
So why have a number of stock analysts started to claim that tobacco stocks are underpriced and a great buy? Why are more teens picking up the cancer sticks than in past generations? And why are anti-smoking activists in a huff about the numerous legal loopholes that they claim the tobacco companies are using to keep their business growing apace?
Although killing your customers is generally not a good business practice, the tobacco companies are expert marketers and smart businesspeople. And they appear poised for a solid business run in subsequent decades.
Witness the numbers. After decades of decline, the percentage of adult Americans who smoke is no longer going down, according to an article in the December Journal of the American Medical Association. On top of this, smoking rates outside the United States have skyrocketed and continue to climb, according to the World Health Organization.
"I think the tobacco industry is a very simple business," says Bill Godshall, executive director of SmokeFree Pennsylvania and a leading expert on tobacco industry issues. "These guys can raise the price of cigarettes to 10 or 15 bucks a pack and they could still make a profit. People will pay $150 a day for their heroin or cocaine habits. So at $2 a pack, cigarettes are very underpriced."
