U.S. cigarette makers boost discounts as smokers turn away

WASHINGTON Tue May 21, 2013 5:10pm EDT

WASHINGTON May 21 (Reuters) - Cigarette companies are boosting the money they spend on giveaways and similar promotions in the United States as they attempt to pitch to a declining pool of cigarette smokers.

The U.S. Federal Trade Commission, which has periodically put out a report on tobacco sales since 1967, said on Tuesday that 274 billion cigarettes were sold or given away in 2011, the most recent year for which data was available.

A decade earlier, in 2001, major tobacco companies sold or gave away 402 billion cigarettes in the United States. Volume declined in each of the intervening years.

The number of U.S. smokers has been declining steadily. As of 2011, roughly 19 percent of U.S. adults smoked cigarettes, compared with about 33 percent in 1980, according to the Centers for Disease Control and Prevention.

Advertising spending on cigarettes, meanwhile, ramped up in 2011 for the first time since 2003, rising to $8.4 billion from $8 billion in 2010.

The steady decline in tobacco use is despite the fact that the companies are steadily increasing what they spend on advertising and promotions, with the vast majority of that spending currently going for giveaways of various stripes.

The giveaways ranged from coupons for free cigarettes to "buy two, get one free" deals to sampling, the FTC said.

The biggest category of spending was for discounts and on promotional allowances such as paying retailers to stock their cigarettes. That category rose from $7.27 billion in 2010, or 90.4 percent of all promotional spending, to $7.75 billion, or 92.7 percent in 2011, the FTC said.

Spending on newspaper advertising has dwindled in the past two decades to just $549,000 in 2011 from $1.6 million in 2005, the FTC said.

The commission cited data from Altria Group, Inc., Commonwealth Brands, Inc., Lorillard Inc., Reynolds American, Inc. and Vector Group, Ltd.

Although conventional cigarette use fell, the value of smokeless tobacco sales increased from 2010 to 2011, rising from $2.78 billion in U.S. sales to $2.94 billion. Advertising and promotions also rose, from $444.2 million to $451.7 million in 2011, with discounts the largest single category, the FTC said.