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U.S. Cigarette Consumption: Past, Present, and Future

Date: 1900
Length: 12 pages
620856459-620856470
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Abstract

Notes changes in cigarette consumption over the years, factors affecting current consumption and what will affect future consumption. Cites cigarette consumption rates from 1950 to 1981 and states total U.S. consumption and per capita consumption increased by nearly 80 percent and 16 percent respectively, while per capita consumption more than tripled between 1920 and 1950. Notes consumption declines in 1954 and 1964 and attributes these to studies linking cigarette smoking to lung cancer and the Surgeon General's report on Smoking and Health. States 1981 per capita consumption was 13 percent below 1963 record, but notes total consumption has risen due to increases in the total population. Says the high of 45 percent of the adult population smoked in 1954 and 1958, male smoking rates peaked at 51 percent in the mid sixties and female smoking rates peaked at 33 percent in the mid-1970's. Indicates the Federal Trade Commission [FTC] health warning labels are a result of the 1964 Surgeon General's Report and that changes to the current wording have been proposed. Discusses the switch to filter tip cigarettes between 1950 and 1981, noting one percent of the market was filter-tipped in 1950, while 93 percent of U.S. production was filter-tipped in 1981 and indicates lower tar/lower nicotine cigarettes, changes in blends, increases in filter efficiency, changes in the air content of smoke occurred in conjunction with this changeover. Notes the amount of tobacco used per 1,000 cigarettes has decreased from 2.7 pounds in 1950 to 1.7 pounds in 1981, attributes this to technology that reduces leaf use and says only a 0.1 pound decrease was noted between 1925 and 1950. Restates the decline in smoking and ascribes this to the 1972 Surgeon General's report regarding passive smoking, laws that ban smoking, seperating smokers from non-smokers and anti-smoking campaigns. Compares total expenditures for the same periods, cites federal and state tax increases, notes a decline of disposable income but indicates there has been an overall increase in consumption from 1950 to 1981. Says total consumption decreased about one percent in 1982 due to an increase in retail prices, states the majority of the price hike was attributed to increased excise tax and price increases were phased in gradually. Suggests consumption will continue to decline and goes on to describe elasticity as "a concept that measures the degree of sensitivity a price change has on them purchases of a good or service." Lists consumer demand variables for cigarettes including "per capita disposable income, retail price, consumer tastes and preferences." Reviews prior studies of elasticity and suggests a drop of 4 or 5 percent by 1983. Describes age group demographics, notes changes though the years, says 15 to 24 year olds decline the most "(potential new smokers)", and this, with price increases may negatively effect consumption more. Reviews several scenarios of 1992 U.S. consumption of cigarettes and indicates the oulook is problematic as per capita consumption continues to decline and the overall rate of increase has also declined. Says cigarette consumption is difficult to predict, may decline 10 to 20 percent over the next ten years, faults Federal excise tax and anti-smoking efforts but states a decrease in taxes and stability of anti-smoking efforts could even out or even increase consumption by 10 percent.

Fields

Author
Grise, V.N.
Hypothesis
Design changes over time
Changes in cigarette design over the past half century.
Health effects
Design changes which have measurably altered health effects of cigarette smoke, both for smokers and nonsmokers.
Low-yield cigarettes
Modification of low yield products to assure that adequate levels of nicotine delivery are maintained, and effects of yield changes on toxicity and dependence.
Measuring human smoking behavior
Measuring the effects of changes in human smoking behavior on intake of nicotine and smoke constituents.
Toxicity and consumer intake
Development of scientifically valid procedures for measuring biological activity and neurological effects of nicotine and smoke constituents.
Keyword
1976 Health Interview Survey
Consumer acceptability (Consumer preference)
Consumption
Daily intake
Delivery modification
Elasticity
Low delivery (Reduced delivery)
Nicotine delivery (Smoke nicotine or nicotine yield)
Satisfaction
Sensory response
Smoker behavior (Human smoking behavior)
Puff parameters, daily intake, etc.
Smoking and Health
Tar/Nicotine ratio (Nicotine/Tar Ratio or T/N ratio)
Tobacco taste (Attribute measure)
Smoke Constituent
Nicotine
Total particulate matter
Design Component
Air dilution
Cellulose acetate filter (CA filter, Conventional filter)
Filter efficiency (FE)
Filter ventilation (Filter vents, air vents)
Flue-cured tobacco
Nicotine content (Tobacco nicotine content)
Total nicotine in the unburnt tobacco rod
Named Organization
Federal Trade Commission (Enforcement agency for laws against deceptive advertising)
Enforces laws against false and deceptive advertising, including ads for tobacco products. Ensures proper display of health warnings in ads and on tobacco products;collects and reports to Congress information concerning cigarette and smokeless tobacco advertising, sales expenditures, and the tar, nicotine, and carbon monoxide content of cigarettes.
Gallup
*United States Public Health Service (use United States Public Health Service)
HHSC (Health and Human Services Commission, Austin, TX)
Health and Human Services Commission, Austin, Texas
National Center for Health Statistics (Keeps statistics on health-related matters)
Plaintiff
Tobacco Tax Council
Tobacco Situation
Subject
Blends (Design)
Filters (Design)
health effects
Low Yield Cigarettes (Products)
Smoke Constituents
Smoke Nicotine (Measures)
T/N Ratios (Measures)

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Page 1: 0011980148
U.S. CIGARETFE CBNSUI~TION: PD~ST, PRESENT, AND FUTURE!/ bY Verner N. Grlse 2/ Introduction Cigarettes account for about 85 percent of the tobacco used in the United States and about 80 percent of the tobacco used worldwide. Consequently, changes that affect cigarette consumption significantly affect tobacco use and the tobacco industry. In this paper, I will discuss changes that have occurred In cigarette consumption in the past--mostly since 1950-- current consumption and factors affecting It, and factors that will affect consumption in the future. Cigarette Consumption - 1950 to 1981 Total consumption of cigarettes in the United States increased nearly 80 percent from 1950 to 1981 (table 1). Per capita consu~tion also increased, but only by 16 percent. Per capita consumption had core than tripled from 7920 to 1950 (tabTe Z). Per capita consumption clln~ed to 4,345 cigarettes in 1963 although there was e decline in 1954 following the release of the first stutLv linking cigarette smoking and lung cancer. Then, in 1964, after the release of the Surgeon General's report on smoking and health, per capita consu~ption started to gradually decTtne. By 1981, because of that report and several other things, per capita consumption was 73 percent below the 1963 record. However, iota) consu~tion has risen in most years because of increases in the total population. ~ntation at the 30th Tobacco Uorkers Conference, Williamsburg, VA, January 11, 1983. 2/ Agricultural Economist, Crops Branch, National Economics Division, - Economic Research Service, gSDA. 620S56459
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2 According to a Gellup poll conducted in June 1981, approxt~tely 35 pereent of adults smoke cigarettes; the lowest percentage since the inquiry began tn 1944 (~). A high of 45 percent of the adult popuTatfon smoked cigarettes in 1954 and 1958 [2). Smoking rates for males peaked at 51 percent of the male population in the mid-1960's. The rate had declined to 37 percent by 1979 (3). Feaale smoking rates peaked at about 33 percent of the female population in the mfd-1970's and have stabilized at about that rate according to Gallup polls. A survey by the Public Health Service indicates that female participation rates have declined, however (~). AS a result of the 1964 Surgeon General's report, the Federal Trade Commission (FTC) began to require health warning labels on cigarette packages and warnings on all cigarette adverttslng on July l, ]965, the first in a series of requirements relative to advertising and sale of cigarettes fn the United States. Beginning January E, 7971, legislation prohibited radio and television advertising and required a stronger worded warning on cigarette packages. The warning on cigarette packages now reads, =The Surgeon General has determined that cigarette smoking is dangerous to your health.= The current wording has not bean changed since 1971 although a number of proposals have been made to do so, The kind of cigarettes A~ertcans smoke has changed markedly between 1950 and 1981. By 1981, about 93 percent of cigarettes produced in the United States were filter-tipped compared with ] percent in 7950 (table 3). In conjunction with the switch to filter-tips, lower tar and nicotine cigarettes have become more prevalent as manufacturers have shifted blends, used~more efficient filters, and changed the air content of smoke {much of the control of tar and nicotine content is in the interaction of the paper and filter (~}. It is essential that cigarettes have a highly uniform tar G2085G4GO
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3 and nicotine content stnce s~kers are accustomed to a certain taste and brands ere heavily promoted as havtng a specific tar ~nd nicotine deliver. Low-tar, Tow-nicotine cigarettes bare been heavily promoted by ~nufacturers. In 1980, nearly 40 percent of manufacturers' advertising - expenditures went to promote the sale of cigarettes with 9 mt]lig~ems or Tess of tar. Yetm Tess than 20 percent of sales are in this category. However, low tar cigarettes have been gaining tn popularity. By 1980, 45 percent of UoS. cigarettes contained 15 milligrams or less of tar and the average tar level had dropped to 14 milligrams. The switch to fiTters, together with other technoTogfes that reduce leaf use, has lowered the amount of tobacco used per l,OOO cigarettes from 2.7 pounds in 1950 to 1.7 pounds in 1981 (tabTe 4). Between 1925 and 1950 the reduction per cigarette was less than 0.1 of a pound per 1,008 cigarettes. Despite the drop in tobacco use per cigarette, total tobacco used tn cigarettes has increased a little. However. use of domestically produced tobacco declined during the 1970's with much of the decline in flue-cured tobacco. As indicated earlier, the correlation between cigarette smoking and various diseases has caused the proportion of the population that smokes to decline. Just ten years ago cigarettes~ cigars, and pipes could be smoked aTmost anywhere. Then, the 1972 $uPgeon General's report on smoking and health reported a danger of passive smoking (involuntary smoking} which occurs from breathing ~n e smoke-filled room. The result has been laws in about three-fourths of the States that now either prohibit smelting in certain places or segregate smokers from nonsmokers. Various cities and counties also have simflar laws. The U.S. Department of Health and Human 6 0856461
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4 Services and voluntary health agencies are continuing efforts to discourage e~okingo The cumulative effects no doubt account for some of the downtrend in consumption. A study by Warner analyzed cigarette consumption by usin9 base data for years prior to the antl-smoklng campaigns. By 1975, the cumulative effect" of persistent publicity and related public policies showed actual per capita consumption had fallen below the predicted value (based on the 1947-63 trend)by 20 to 39 percent (6). Total expenditures for cigarettes in the United States increased sixfold from 1950 to IgBl--from $3.6 to ~21.Z billion (table S). Federal tax collections from sales ofclgarettes doubled from 19SO to 1981, while State tax collections rose tenfold duping this time period (table 9). In 1950 the Federal excise tax made up over half the manufacturers wholesale list price of cigarettes (~). By l9Bl, the Federal tax had fallen to less than a fifth of the wholesale list price. However, State and local taxes rose rapidly during the 1950's and 1960's to the extent that the sum of Federal and State taxes remelned near 50 percent of the average retail price. By the mid and late seventies, tax rates were no longer keeping up With inflation, and as e result, the sum of Federal and State excise tax Pates had dropped to about three-tenths of the retail price by lgB1, The proportion of disposable income spent for ciuarettas has been declining. In 1981, slightly mope than ] percent of it was spent on cigarettes compared with |.6 percent in 1965. Despite consumption drops for I or 2 years 4 times during the IgSO to 1981 period, consumption continued an overall upward trend. This leads to th@ question of whether the decline in 1982 and the enticipataddecline In 1983 Is another 2 year deviation from trend in cigarette consu~tion or whether the drop represents a change in the long term trend? No one knows 620856462
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for sure because of the mn~ factors that affect cigarette consumption, so let's examine the cutTent situation and then the factors that will affect future cigarette consu~tton in the United States. Cigarette Consumption - 19BZ and 1983 Total consumption of cigarettes in the United States probably dropped about 1 percent or 7 billion cigarettes in 1982. Except for a mlntscule decline in 1978, th~s was the first drop ~n total consumption since I969. Per capita consumption meanwhile has fallen to 3,778 cigarettes, the lowest level in 25 years. The drop in consumption stems largely from the big Jump in retail prices of cigarettes. Retail prices rose by 18 percent between Novembe) Ig81 and November 1982. Between September 1982 and November 1982 alone, the increase was 9 percent. The November to November increase in cigarette prices was nearly four t~mes that of the r~se for all consumer prices during the period; a reversal from the price changes of the 1970's when the overall consumer price index Pose more rapidly than cigarette prices. Much of the cigarette retail price jump is related to higher excise taxes on cigarettes, Nine States raised cigarette taxes in 198Z by an average of 4-1/2 cents a pack. By September 1982, the weighted average State cigarette tax was 14.2 cents a pack, 0.8 cents above a year earlier. Even more of the retail price increase is related to The Federal excise tax increase of 8 cents a pack. Although the tax did not beeon~ effective until January 1 1983, manufacturers raised prices to wholesalers in August, October, and Nove~er so the price increase would be gradual rather than all at once. The Federal excise tax on cigarettes has to be paid by manu- facturers before pa~taent is received from wholesalers. 6208564(;3
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6 Retail cigarette prices probably increased further during December IgB2 and in January 1983 as the wholesale price increases were added. Further increases in prices are expected later in 1983, reflectlng added manufactur- ing costs of cigarettes and tax hikes by State and local governments, With the depressed econon~yj spending eo~itments are exceeding budget revenues in many States. so leglslators are seeking addJtieaal revenues. Because of increased prices of cigarettea in ]983, consumption is expected to continue to decline. The amount of the decline will depend on the nature of demand for cigarettes. £1astlelty (E} is a concept that measures the degree of sensitivity a price change has on the purchases of a good or service. Elasticity can be defined as the ratio of the relative change in the quantity demanded to the relatlve change in price. This ratio can fall into 3 categories; If E is greater than I, elasticity of demand is defined as elastic; if E=l, elasticity of demand is defined as unitary; if E is Tess than i~ elasticity of demand is defined as inelastic. If total revenue of the industry, after a price increase, is smaller than the total revenue obtaThed from the sate before the price increase, the demand is . elastic; if total revenue is larger, the demand is inelastic; and if total revenue stays the same, the demand is unitary. Consumer demand for cigarettes is related to several variables. Besides tile size of the aduit popu/ation, tile most signfficantfactors are per capita disposable income," retail price, and consumer tastes and preferences (including the perceived effect on healthJ (8). A humber of studies have estimated the price elastlcity of demand for clgarettes. The estimates vary but have generally been in the inelastic range. Lyon and Simon, using a quasi-experimental estimation technique determined the price eIasticity of demand for cigarettes to be -.S. The 620S56464
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7 most recent comprehensive analysis on the price elasticity of demand was by Lewit and Coate {9). They used data (19,266 usable observations of persons 20 to 74 years of age) from the ;976 Health Interview Surveyor the Nattomal Center fop hearth Statistics and used price dat~ from the Tobacco Tax Council (now part of the Tobacco Institute). They estimated a price elasticity of demand of -°42. Lewtt and Coate concluded that price impacts cigarette demand primarily by affecting the decision to begin smoking regularly among members of the population less than 25 years old. They estimated the price elasticity of demand for the 20 to 25 year old group at -°89 and concluded thet it is price elastic for teenagers. They also concluded that price effects are much larger for males than for females and determined that the fall-off in demand for cigarettes results largely from a decline in the number of people smoking rather than a reduction tn the number of cigarettes smoked per person. Based on an elasticity estimate of -.4, we can expect consumption to drop by about 4 percent as a result of the expected overall price increase of I0 percent. ~e are Iike;y to see one percent of the drop in 1982 and the other 3 percent in 1983. Other factors that push prices up more than the general price level, such as increased State taxes or higher costs, could cause consumption to drop even further in ;983, to as much as 4 or 5 percent. Population Estimates and Projections Although the adult population of the United states increased by 20 percent during the past lO years (1972 to 1982) the changes in various age groups differed greatly from the overall figures due largely to past fluctuations in fertility. The popu;atton age 15-19 dropped a little end is expected to drop even further over the next TOy ears (table 7). The population in this age group had risen by Z8 percent betHeen 1964 and 1974 CI_oo}. 6" .0S,SG465
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8 The population of s~oktng age (IB years and eider) increased during the • - past lO years as persons bern during the high fertility years after'World War lI vepTaced smaTTer cohorts who had advanced fn age~ The Z5 to ZB, 30 to 34, and 35 to 39 age groups all jumped by at least 35 percent. The n~er of people in both the 45 to 49 and 50 to 54 age groups declined. The population at different age groups will continue to change at widely different rates because of past changes tn birth rates, Over the next 8 years the population 18 and over will increase by lO percent. The population 15 to Z4 years old may decrease 15 percent, l~e growth rate for the age group 30 to 49 will be fairly large but the rate will decline for those in the 50 to 69 age Broup. Not only is the populablon of 75 to 24 year olds declining the most (potential new smokers) but price increases apparently affect their consumption sore. The number of new smokers may decline throughout the 1980's. U.S. Consumption of Cigarettesb~ 1992 Robert H. Mfiier, in the March IgSO Tobacco Situation, estimated that per capita cigarette consumption will decline by 10 to 25 percent by 7990 (]0). Hiller further stated that attitudes toward smoking have become less favorable and no-smoking laws have had an impact. ~ith about one-ninth more adult population, total U.$. consumption may remain about the same to as much as 13 percent lower. Since those projections of 2years ago, a new dimension has been added, The first Federal excise tax increase in over 30 years went into effect on January I, ]gB3; more States than usual raised excise taxes on cigarettes in 7982. Because of the great need for revenue there will be pressure for many States to raise exc~se taxes in ig83. In 1982= for the first time in lO years, retail cigarette prices Increased mope rapidly than the average of ali other prices. G208,BG4GG
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Several scenarios can be visualized for cigarette consumption in the 1980's. At this ttme, the Most liEely scenario is geFsfmfsttc. Let's trace through the effects of what I see as the most lfkeTy scenario. The Federal excise tax was doubled to 16 cents on January 1. Although tt is scheduTed to return to B cents a pack on October I, lgSS, the projected U.S, budget deficits suggest it is doubtful the tax will be reduced. In fact, it may well increase by another 4 to 8 cents a pack later in the 1980's. In addition, because of increased revenue needs, State excise taxes may be raised by 5 to 10 cents a pack in 8 to 10 States a ~ear. Anti-smoking efforts may continue at least at current levels and could very wen increase. The number of public places such as restaurants, stores, office buildings, etc~, that prohibit smoking or segregate smokers and nonsBokers may increase. In addition, the population shifts indicated for this decade--a decrease in the ~ounger adult groups--suggests a further lessening of cigarette consumption. With the scenario outlined above, total U.S. domestic cigarette consumption may decline I0 to 20 percent by lgg2. Although the most likely scenario at this time is for cigarette consu~tion in the United States to dec?ine an average of 1 to 2 percent a year to )992, one can visualize a different scenario with somewhat different results. This scenario would have the following elements. The Federal excise tax on cigaretteewould return to 8 ce~ts a pack on October 1, Tg8g and no further increases in the tax would occur by 1992. Economic activity would gain such that only 4 or 5 States would increase excise taxes each year and by an average of less than 5 cents a pack. Anti-smoking efforts would remafn at current levels or decline. FewedminJstrattve or legislative actions would be taken to limit cigarette smoking in public places. ~o new shocks, such as a ~or new finding linking smoking end health, ~ould occur to dampen cigarette consumption. This scenario could
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7O resuTt ~n to~al consumption changtn9 7~tt]e to a 10 percent ~ncrease. Even under th~$ scenario° per captta consumption wou~d 1~keTy contfnue to drop. Based on govePnment revenue needs ~t th~$ t~mew the Scenario outlined above does not appear as reasonable as the f~rst one. Yet, historically, total cigarette consumption dropped during "health scares" ~n 1953-54, again tn lg64, and a third t~me ~n 196B and 1969, only ~o rebound and continue ~ts upward trend. However, the rate of the tncrease ha5 declined. Certainly th~s could happen a~atn, but the heavy ~eT~ance over the 7ast year on c~garette$ as a source of tax revenue would have to be reversed. ConcTus~on~ U.S. c~gare~e consumptlun du~ng the n~xt ~0 years ~s d~cult to predict. Its leve~ depends on ex~se ta~ ~ncre~$e~ and ante-snaking activities+ a~ ~e]] as o~her factors such a5 real tnc~me$~ research ~tnd~ng$ abou~ smoking and health, and advert~s|ng and promotion activ~t4es by c~g~e+.~e manufacturers. A number of ~tud~es have been made on the price eT~st~¢~ o~ demand for c~g~rette$° $evera7 have ~nd~cated an ~nelas~tc response of -.4 ~o -.5. The recent doubling o~ the Federal exc~se tax may re~ul~ ~n c~gar~tte consumption ~[~opp~ng by 4 or 5 percent. Over the nex~ IO.vears, c~garette consumption may drop ~0 to 20 percen~ tf ~he Federa7 exctse tax ~s ~ncreased ~r~her, an~-smokfng e~or~s a¢ceTera~e, ~d ~f ~arge numbers o~ $~aCe~ ~nc~ease their Q×c|se ~a×e$ by re]at~veT~ large amounts. ~, On ~he other hand, the Feder~1 exc|$e ~ax returns to 8 cent~ a pack ~n 1985 as now ~cbeduled~ only a few $~a~e~ ra~e exc~se ~axe~, and anal-smoking a¢~v~t~ stabt1~zes or declines, tot~1 consumption mgh~ stay about the same as ~n ]982 or even r~se a~ much as 10 pQrcent. 6208S6468

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