Tobacco: Tobacco products – cigarette consumption down; exports up; tobacco product prices; taxes and health issues

Tobacco products – cigarette consumption down; exports up; tobacco product prices; taxes and health issues – U.S. Dept. of Agriculture. Economic Research Service report

Cigarette Consumption Down; Exports Up

Despite an increase in cigarette exports, U.S. cigarette production will likely decline 1 to 2 percent from 1990’s high level as inventories are reduced. The anticipated 16-percent increase in cigarette exports will likely offset falling domestic consumption. During January-September 1991, U.S. consumption totaled about 380 billion cigarettes, 3 percent, or 13 billion, less than a year earlier. [Tabular Data Omitted]

Cigarette smoking may decline further during the next 12 months because of increased prices, anti-smoking publicity, declining social acceptance of cigarette smoking, and further restrictions on where people can smoke. Although sales of low-tar, low-nicotine cigarettes rose sharply from 1970 to 1981, they declined from 60 percent of the market in 1981 to 52 percent in 1985. However, the percentage rose to 57 percent last year and is expected to remain near that level this year.

Retail tobacco product prices in October 1991 were 11 percent higher than a year earlier. The increase is more than three times the rate of increase in all consumer prices during the period. Cigarette manufacturers have raised prices four times since last December by a total of about 14 percent. Also, 11 States and the District of Columbia raised cigarette excise taxes this year, compared with 9 States in 1990 and 15 in 1989. By July, the weighted average State tax was 26.8 cents a pack, 2.7 cents above a year earlier. The Federal excise tax was increased 4 cents to 20 cents a pack on January 1, 1991, and will rise another 4 cents to 24 cents a pack on January 1, 1993.

Use of Other Tobacco Products Mixed

Production of chewing tobacco fell in third-quarter 1991 from a year earlier, and total production for the first three quarters was down. Production for the year may fall about 2 percent from last year’s 72.9 million pounds. However, during the first 9 months, snuff production was about 4 percent above the same period in 1990.

Third-quarter domestic use of smoking tobacco – including imports – was down from a year earlier. For all of 1991, smoking tobacco consumption is expected to fall about 5 percent.

Consumption of large cigars (including cigarillos) totaled 1.5 billion during January-August, 6 percent less than a year earlier. The yearly total will likely be down about the same amount. With rising prices and changes in smoking habits, sales of lower priced cigars have fallen, and a larger proportion of the total sales volume has become concentrated in the higher price categories. This pattern is expected to continue. [Tabular Data Omitted]

Supreme Court To Rehear Case on Cigarette Labelling

In January, the U.S. Supreme Court is scheduled to hear new arguments in the case, Cipollone vs. Liggett Group, Inc., to help it decide if cigarette manufacturers may be sued for allegedly misrepresenting the dangers to smokers. In arguments in October, the eight justices were apparently evenly split on whether the Federal law requiring health warnings on cigarette packages and ads in effect precludes lawsuits by smokers who blame cigarette tobacco companies for their illnesses.

Bill Would Raise Federal Excise Tax Sharply

A bill (H.R. 3689) cited as the “Community Health Care Act of 1991” would provide for universal access to health benefits through a federally financed insurance program administered by the States. Funding would be provided by raising the Federal cigarette excise tax to 61 cents per pack of 20 and increasing the excise tax on distilled spirits.

Trends in Tobacco Product Consumption

U.S. cigarette consumption rose 70 percent from 1950 to 1981, but fell about 20 percent from 1981 to 1991. Consumption is expected to continue to fall in the 1990’s because of tax hikes, health concerns, declining social acceptance of tobacco use, and smoking restrictions.

Cigar and smoking tobacco consumption has dropped steadily since 1970 and is expected to continue downward during the 1990’s. Snuff consumption rose steadily from the mid-1970’s to the mid-1980’s because of large advertising expenditures and a shift away from cigarettes, cigars, and smoking tobacco. Snuff consumption fell in 1986 and 1987, but has rebounded the last 4 years. However, consumption of chewing tobacco (the other smokeless tobacco product) continues to decline. [Tabular Data Omitted]

PHOTO : Figure 1 Consumer Price Index and Tobacco Product Prices

PHOTO : Figure 2 Cigarettes Produced and Tobacco Used

COPYRIGHT 1991 For more information, contact US Department of Agriculture Economic Research Service. Phone: 1-800-999-6779 (8:30-5:00 ET).

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