Five things you should know about Big Tobacco

Posted in: Business and society, Consumers, Health, Research

 

Every January numerous smokers make an attempt to break their deadly addiction to smoking. This is little wonder given that cigarettes are forecast to kill 1 billion people globally during the 21st Century. If that is not motivation enough to give up, Dr J Robert Branston shares five key research findings about the tobacco industry that might help you to view smoking cigarettes, and the companies that produce them, in a new light.

Tobacco companies are enormously profitable

The high cost of cigarettes and other tobacco products is often attributed to high (and increasing) taxes. Tobacco taxes are indeed deliberately high in many countries, but manufacturing tobacco products is still an inordinately profitable business. The profits of the world’s six largest transnational tobacco companies (TTC) was US$44.1bn in 2013 - the equivalent of the combined profits of the Coca-Cola Company, Walt Disney, General Mills, FedEx, AT&T, Google, McDonald’s and Starbucks in the same year.  In the UK, research shows that tobacco industry profit margins are up to 68%, meaning for every £100 the company earns, after paying tobacco taxes it is left with profits of a whopping £68.  Typically most consumer staple companies can only generate profit margins of 10% to 20%, meaning tobacco really is a market like no other.  Not only do cigarettes kill many of their long-term users even when used as directed, but the companies producing such deadly products earn huge profits in the process.

Tobacco company actions encourage smoking

With so much profit at stake, tobacco companies need to continue selling cigarettes. To maintain the status quo, the industry needs a stream of new smokers to offset those that quit, and those that unfortunately die prematurely before they are willing or able to do so.

The industry has become increasingly clever at offering cigarette products over a wide range of price points, and then using the pricing to undermine the quit-encouraging effects of tax increases. This allows them to make large profits from those willing to pay the highest prices, while also attracting more price-sensitive individuals with cut-price offerings. Such segmentation happens in many industries, but the tobacco industry takes this to a whole new level.

It is claimed that other practices used by the tobacco industry to maintain profits and customers include adjusting the composition of tobacco products to make them more appealing and addictive (especially to the young); getting involved in tobacco smuggling; introducing products with filters and with labels such as ‘lights’ to suggest less harmful products (when they are not); and it has even been alleged that they bribed and manipulated government officials to influence tobacco regulation.

Consumers will only smoke if they are aware of and attracted to cigarettes, so tobacco companies continue to spend significant sums on promotion. Direct advertising, sporting and event sponsorship, packet design, display stand designs, and even paying to ensure tobacco appears in movies have all been used to promote tobacco. Where one avenue has been closed (e.g. direct advertising) other methods (e.g. sports sponsorship) have been developed. The tobacco industry is a master at undermining the effects of measures that restrict its ability to sell cigarettes.

UK is a world leader in tobacco control

The number of smokers is falling. In the UK, for instance, smoking has dropped from 45.6% of the over-16 population in 1974, to 16.1% in 2016.  One reason is the increasing level of tobacco control regulations introduced in most countries.  These range from high taxes and limits on where smoking can take place, to restrictions on which products that can be sold, where and to whom.

The UK is a world leader in tobacco control measures, despite being the parent country of two of the world’s biggest transnational tobacco companies.  Most recently the UK become the second country after Australia to introducing standardised drab tobacco packaging with even more space given to graphic health warnings.

Nicotine was traditionally used as an insecticide but isn’t the main source of harm

Most people are well aware that smoking is bad for human health, but there is much confusion about nicotine.  The nicotine in tobacco smoke is one of the reasons smokers crave cigarettes, so it is often assumed it must therefore be very harmful. Indeed, nicotine was traditionally used as an insecticide, and is chemically related to the neonicotinoid insecticides which were restricted by the EU in 2013 because of concerns about their impact on honeybees. Despite these concerns, however, most of the physical harm caused by smoking is actually thought to come from the tar and the thousands of other chemicals in the smoke rather than the nicotine.  Providing nicotine in a form which omits the harm-causing smoke has the potential to significantly improve smokers’ health.  Here again the UK is a world leader, in that its current regulations and approach to public health are creating a wider market for nicotine products to help displace cigarettes.

Markets for nicotine could actually provide health benefits

For many years the only mainstream ways to access nicotine were either smoking tobacco or through products like gums and patches.  Now new nicotine products have started to emerge, most notably e-cigarettes and heat-not-burn tobacco products. These provide nicotine to users in a manner akin to smoking, but without burning tobacco.

Whilst medical studies continue to explore the risks associated with these products, current evidence suggests that e-cigarettes are significantly less risky than smoked tobacco.  It therefore seems highly likely that existing tobacco smokers can significantly improve their health if they switch to alternative sources of nicotine.  That is happening already to some extent in markets like the UK, where the high price of tobacco makes e-cigarettes a cheaper choice.

However, such trends will be maximised if a market environment can be created that allows transnational tobacco firms to maintain their profits by deliberately moving their customers away from smoked tobacco products.  By aligning corporate profits with public health, the power of the market could under certain conditions help to address the health crisis caused by smoking tobacco.

 

Header image  The Killing Fields by Matthias Weinberger, published under licence CC BY-NC-ND 2.0

 

 

Posted in: Business and society, Consumers, Health, Research

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