AD SPENDING UP DESPITE DECLINE IN TOBACCO SALES

Cigarette Makers Cite Promotions, Direct Mail for Increase

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WASHINGTON (AdAge.com) -- The Federal Trade Commission today reported that tobacco makers dramatically increased their advertising and promotional spending in 2001 even as tobacco sales slipped 3.8%.

According to the FTC's annual report on tobacco, which reports figures several years late, spending jumped 17% to $11.22 billion in 2001, the most ever spent on tobacco.

That figure does not include the $79.4 million tobacco makers spent on efforts to reduce youth smoking, the FTC said.

Discounts and promotions
Tobacco makers noted the

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overall increase reflected heavy discounting and price promotions in the market, not what happened to actual media advertising. The FTC includes coupons and payments to retailers in tallying the total advertising and promotional spending.

Philip Morris USA in a statement said traditional brand advertising, which accounted for 8% of the company's expenditures in 2001, continued a four-year decline, down from 21% of overall spending in 1998.

"Philip Morris USA's reported expenditures reflect a decrease in traditional brand image advertising as a result of the company's voluntary reduction of advertising in magazines, newspapers and in retail stores," said Tina Walls, senior vice president of corporate affairs. "Philip Morris USA continues to take steps to reduce the overall visibility of its brand advertising and to ensure that it is marketing its products in a responsible way to adult smokers."

Big boost for direct mail
The FTC report acknowledged most of the spending was for promotion and that media advertising showed dramatic declines. Newspaper ads decreased 38.7% from to $31.7 million; magazine advertising dropped 41.4% to $17.9 million; while out-of-home advertising dropped 11% to $8.2 million. Point-of-sale advertising also decreased 18.1% to $62.7 million. Direct mail, however, increased 44.2% to $41 million.

Meanwhile promotional allowances rose 13.8% to $4.45 billion and retail value-added promotions grew 37.9% to $1.31 billion. The FTC said the value-added promotions represented the value of various promotions that allowed consumers to buy two packs and get one free, or buy several packs and get a T-shirt or other merchandise.

The report contains one of the few public disclosures of slotting fees paid by marketers to retailers to stock and display products.

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