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  • In this lecture, we are going to talk about tobacco’s response to the scientific evidence of the risks associated with smoking, and to government’s response to learning about the health risks of cigarette smoking.
  • Said would filter out many of the more harmful elements in cigarettes, if indeed there were any harmful elements. Sponsored entirely by Phillip Morris, extremely popular show in the 1950’s. So in response to the scientific evidence that was emerging about smoking being harmful to health and government beginning to take more of an interest in regulating it, cigarette companies took an aggressive move by making their presence more well known to consumers. Full cigarette, truly aimed at women, a market share that they felt hadn't’ really been tapped into fully.
  • Incredibly successful campaign focused on getting more men to smoke and even more particularly young men, and to get men who did smoke to change to the Marlboro brand.
  • Partly because of the ban on advertising on commercial TV, tobacco companies began to diversify both their interests, that is RJ Reynolds acquired Nabisco so that they were now in the food production business as well, and at the same time, they began to diversify in terms of how they advertised their tobacco products, Was a series of ads by Camel cigarettes that most researchers believe was focused on trying to encourage adolescents to begin smoking and to smoke Camel cigarettes. This was a cartoon character, which you generally wouldn’t think would be aimed at adults, so the idea here is that it was aimed at a younger set, presumably adolescents, and trying to get them to start to smoke.
  • Expanded their marketing efforts even more, they began to place their products in movies, For example, in Superman 2, Lois Lane smokes for the first time ever, after appearing for 50 years in comic books, she never was a smoker, but Phillip Morris paid $42,000 to the producers, and in exchange, they got 22 exposures to the Marlboro logo during the movie. Lois Lane has a package of Marlboro cigarettes sitting on her desk, at another point there is a character who is tossed into a van with a large Marlboro sign on the side of it, and in the climactic scene, Superman battles his nemesis through a maze of Marlboro billboards. Also happened in many other films. Started with the Joe Camel ads, but spread to showing scenes of smoking in movies that were targeted at a younger audience, like 101 Dalmatians, Regulations were not as strict. Were no more restrictions placed on tobacco products by the federal government.
  • Clearly, and probably of no surprise to you, the entities that benefit the most from liberal smoking policies are the tobacco manufacturers themselves. Here you see the top 4 tobacco companies in the world, their global share of the market, and their tobacco sales in billions of dollars as of the early 2000’s. and what you see is Phillip Morris as part of the Altria Group, had $47 billion in annual sales, British Tobacco company 30 billion dollars, RJ Reynolds tobacco $7.6 billion in annual sales, Interestingly enough, the china National Tobacco company, which has the largest market share, has much smaller fraction of tobacco sales, when measured in dollars, because in China, tobacco is much cheaper than it is in the U.S. Nonetheless, this is big business, there is clearly a lot of money at stake, and you can see why the tobacco companies have been fighting as hard as they have been fighting to make sure that their product is marketed to a large audience.
  • Those with money in the stock market or mutual funds may in fact be invested in companies like RJ Reynolds or Phillip Morris. Feel obliged in turn, to listen to their concerns, about regulation within that market. Linger longer and purchase more if they are allowed to smoke. General feeling without a lot of hard data is that their business is enhanced by allowing people to smoke. There is a whole group that you need to realize, from a political standpoint, a secondary group of entities that also profit from liberal regulation of the tobacco industry.
  • Clearly, a lot of families and consumers lose. This chart shows you annually, the amount of deaths due to smoking between 1997-2001. What you see, is that we literally have hundreds of thousands of deaths each year that are attributable to lung cancer,
  • There are also a secondary set of losers when there are liberal smoking policies. Loss of income as well as companionship. Insurance Co’s Paying out more money than they would otherwise. Extent that much of the health care costs associated with tobacco related illnesses is Medicare and Medicaid.
  • If on, the side of those who benefit from liberal smoking policies, we have billions of dollars of gain, what are the numbers on the negative side? It is very hard to quantify that in terms of dollars and cents, but what we do know is that
  • Clearly, the costs are quite high. They are in excess of 50 billion dollars a year. Recall, that the Altria Group earns about 30 billion dollars a year through the sales of their cigarettes. So, we are in a situation where the costs to some, that is generally the American Public, clearly outweigh the benefits to the private entity, the individual tobacco manufacturers. So, that is yet another reason why the government has gotten involved in the regulation of this market. Now, the question is, has the government’s regulation of this market in terms of regulating advertising, and trying to educated consumers, had any impact on smoking rates, and thus public health in this country? What you see here is a graph from a series of Gallup polls that have been done since the 1940’s, the trends in the percentages of Americans who smoke. And you can see, that beginning in the 1980’s, smoking rates did begin to decline in this country, quite precipitously, which coincides with the federal governments and the surgeon Generals getting more and more aggressive in trying to regulate the tobacco industry. So, there seems to be some indication that Americans have processed the education regarding smoking, and taken it to heart, and have begun to change their behaviors.
  • This graph is another way of looking at the same issue, which is what has happened to smoking rates, but here we are looking at the per capital cigarette consumption in the United States. Again, you see a rather dramatic decline in the number of cigarettes being consumed by Americans, per year, beginning in the 1980’s. So we go from a high in 1960 of a little over 4,000 cigarettes per year being consumed by the average American, to something under 2,000 cigarettes per year being consumed by 2004. So, all the signs are that the government regulation in this particular market has been very effective in terms of changing behavior. We certainly haven’t gotten smoking rates down to zero, but they are much lower than they were prior to government intervention, and as a consequence, consumer and family health is much better than it otherwise would have been.
  • Included product placement in movies, underwriting sporting events and the like. Clearly the first set of winners are the tobacco companies in terms of their profits, the secondary set are those that benefit from the advertising, lobbying, and the like. Those who are losers are certainly those who lose their own life or a family member’s life. Secondary losers are the government, insurance companies, employers, and families. Tobacco companies know, and government knows, if you are going to expand the market for cigarettes, you need to do it by getting to the youth and getting them to initiate smoking at a very young age, get addicted to nicotine, and then not be able to stop. So, what were are going to focus on in the next lecture is youth and tobacco.

Tobacco 2 Tobacco 2 Presentation Transcript

  • Tobacco’s Response
  • 1950’s
    Disputed research findings in ads and articles
    Developed “safer” filter cigarettes
    Many TV shows sponsored by cigarette companies, most notably
    “I Love Lucy” – Philip Morris
    “Your Hit Parade” – Lucky Strike
    1960’s
    1968, Philip Morris introduces Virginia Slims brand, aimed at women
  • 1960’s
    MARLBORO Country ad campaign is launched. “Come to where the flavor is. Come to Marlboro Country.”
    Marlboro sales begin growing at 10% a year
    View slide
  • 1970’s, tobacco manufacturers begin to diversify (e.g., RJR Nabisco)
    Sports sponsorship takes off:
    RJR sponsorship of NASCAR’s NASCAR Grand National Division begins
    Virginia Slims Tennis begins with Billie Jean King a prime promoter
    Joe Camel is born
    View slide
  • 1980’s and 1990’s
    Product placement in movies
    Targeting of teenagers
    Increased international marketing
    Lobbying efforts
  • Who benefits from liberal smoking policies?
  • But, who else profits?
    Investors who own tobacco company stock ( you and me????)
    Elected officials who get campaign contributions
    Bars/restaurants (increased business)
    Media that get revenue from product placement (movies, magazines)
    Media that get revenue from advertising (impact on coverage of tobacco-related news)
    Sporting events that are sponsored by tobacco (e.g., NASCAR, women’s professional tennis)
  • Who Loses from Liberal Smoking Policies?
    Source: CDC, 2/28/07
  • Who else loses from liberal smoking policies?
    Those who are exposed to second-hand smoke (e.g., family members)
    Families who lose members prematurely
    Health and life insurance companies
    Employers (lost productivity)
    Government (Medicare and Medicaid health insurance coverage)
  • What are the numbers?
    Every year, 350,000 Americans die prematurely from diseases caused by cigarette smoking
    Direct health care costs are $30.4 billion per year
    Smoking-related Medicaid costs alone are $12.9 billion per year
    In addition, there is $23.3 billion lost each year in lost productivity due to excess morbidity and mortality
  • Trends in the Percentage of Americans Who Smoke
    Source: Gallup Polls. http://www.gallup.com/poll/109048/us-smoking-rate-still-coming-down.aspx
  • Consumer’s Response
  • Reviewing
    As government has increased its regulation of the tobacco market, tobacco companies have found new ways to market their products
    Health consequences of tobacco use are substantial
    There is a secondary set of “winners” and “loser” with respect to tobacco use
    Tobacco use is declining in the U.S. suggesting that government regulations are working
    “Jury is still out” on the impact of the FDA’s new regulatory authority
    A key element may be what’s happening to (youth) initiation rates