The War in the Store
A ‘War in the Store’ Started Twenty Years Ago, and the battle still rages on…
Tobacco companies now spend the vast majority of their advertising and promotional dollars at the point of sale, vying for customer hearts and minds. This “War in the Store” was triggered in 1993 when Philip Morris heavily discounted its Marlboro brand, and other tobacco companies followed suit to compete.
While the Master Settlement Agreement of 1998 (an agreement between the major tobacco companies and 46 state attorney generals) curtailed some tobacco company advertising. For instance, by getting rid of Joe Camel and other cartoon characters and banning product ads on billboards and magazines, it left the store environment relatively free of restrictions. The tobacco industry took full advantage of the gap.
Point of sale (POS) marketing targets both consumers and retailers. POS promotions include exterior and interior tobacco advertisements, price discounts, product placement strategies, incentives offered to retailers to increase in-store marketing, and many other strategies.
Spending at the Point of Sale: Federal Trade Commission Reports
Cigarette companies have always valued the retail point of sale as an advertising channel, but in the last decade, spending on branded advertising and promotions at the point of sale has soared. In fact, the retail environment is now the lead channel for cigarette marketing, advertising, and promotional efforts.
The Federal Trade Commission has been preparing reports on sales, advertising, and promotions of cigarettes since 1967, using data gathered from the five major tobacco companies, Altria Group (Philip Morris products including Marlboro), Reynolds America (Camel, American Spirit), Commonwealth Brands (USA Gold, Phillies, Dutch Master), Lorillard (Newport), and Vector Group (Pyramid, Liggett). Since 1987, the FTC has tracked sales and promotions of smokeless tobacco from Altria Group (Copenhagen, Skoal), North Atlantic Trading Company (Trophy, Durango), Reynolds America (Grizzly), Swedish Match North America (Longhorn, General), and Swisher International (Redwood Snuff) . Reports are issued every few years and give tobacco control advocates detailed advertising and promotion spending reports in more than two dozen categories.
In 2019, the tobacco industry spent over 80% of their total marketing expenditures for cigarettes and smokeless tobacco directly in the retail environment. They spend the majority of this money on price discounts and promotional allowances to keep products cheap and visible at the point of sale. When factoring in price discounts and promotional allowances paid to wholesalers, which also ultimately reduce the price and promotion of products for consumers, the amount spent rises to over 97% of the tobacco industry’s total marketing budget.
- What are Price Discounts? Price discounts are what tobacco companies pay to cigarette retailers or wholesalers in order to reduce the price of cigarettes to consumers, including off-invoice discounts, buy-downs, voluntary price reductions, and trade programs.
- What are Promotional Allowances? Promotional allowances are what tobacco companies pay to either cigarettes retailers or wholesalers in order to facilitate the sale or placement of tobacco products. For retailers, this can include payments for stocking, shelving, displaying and merchandising brands, volume rebates, incentive payments, and the cost of tobacco products given to retailers for free for subsequent sale to consumers. For wholesalers, this can include payments for volume rebates, incentive payments, value added services, promotional execution and satisfaction of reporting requirements.
As seen in the table below, according to the Federal Trade Commission Cigarette and Smokeless Tobacco Report for 2019, the tobacco industry spent over $6.6 billion to advertise and promote their products in the retail environment. When factoring in price discounts and promotional allowances paid to wholesalers, this total rises to nearly $8 billion spent. While the total amount tobacco companies spend on marketing for cigarettes and smokeless tobacco decreased by 9% in 2019, the proportion that they spend directly in the retail environment increased by 1%. Price discounts remain the largest categories for both cigarettes and smokeless tobacco, totaling 85% of total industry spending on these products.
Spending aimed specifically at the retail point of sale is comprised of five categories: (a) point-of-sale advertisements, (b) price discounts to retailers, (c) promotional allowances to retailers, (d) retail-value added bonus tobacco products and bonus non-tobacco products, (e) coupons, and (f) consumer engagement. (Other marketing dollars not considered to be aimed at POS include, for example, dollars spent on direct mail, magazines, internet, or sponsorships.) We have included information about promotional allowances and price discounts to wholesalers to account for their role in reducing retail prices.
What Does Point of Sale Spending Buy the Tobacco Industry?
Heavy spending on marketing and promotions at the POS buy the tobacco companies many things – brand recognition, brand preference, tobacco product cravings and unplanned purchases, fewer successful quit attempts, perceived norms of higher smoking prevalence, and increased initiation and continuation of tobacco use, especially by youth, viewed as an important age group to fuel the tobacco companies’ futures.
Evidence suggests that tobacco ads at the point of sale may be most prevalent at stores that adolescents shop at frequently as well, and greater exposure to these POS ads and promotions is associated with greater likelihood of smoking.
Listen to our podcast episode about “The War in the Store:”
What You Can Do
Countertobacco.org is your complete resource to counteract tobacco product marketing at the point of sale. We offer a comprehensive toolkit to assist your efforts around six unique yet complementary policy solutions. On each page you will find an overview of the particular solution, research findings, tools, case studies, and links to additional partners and resources to help gather support for your work. See policy solutions in the “Next Steps” box above to see what may work best for your state or locality. Also use our evidence summaries for more information on special topics, such as tobacco stores near schools. Check out our glossary for a primer on POS terminology.
Take a look around the site and get in touch. Our goal has been to compile – in one place – everything you will need to counter tobacco at the point of sale. If you cannot find what you are looking for, please let us know. And, check back for periodic updates.