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• 0 Relative to smokers in the other states, Californians reduced their cigarette consumption, increased their quit rates, and accelerated their switching to price a Y ~~ x ~U~~ V f ~~ , 11 J ~- t,'~ ~`y ~ ~,~L ~, )P %11 ell` 4 (V ~ >- " '2 J A9 r 7/ ,1Y 1\ Y \ ~ ~ ~ ~ . ~,.~ ~ ~ ~, ~, ~, - ~ qs~/' , ~. To: From: Subject: PHILIP MORRIS U. S. A. I N T E R- 0 F E' I C$ C O R R$ S P O N D E N C E+ Richmond, Virginia . Mr. Myron E. Johnston . Peggy G. Martin ~ Date: January 12, 1990 Effect of California State 3'ax Increase on Consumption per Day, Quitting Rates and Packings Smoked, 1988-89 (1st 3 Quarters) Effective January 1, 1989, the California cigarette tax rate_was increased from 10 cents per pack to 35 cents. Since the sales tax is calculated including the cigarette tax, this resulted in an increase of 27 cents per pack, representing a price increase of over 20 percent. This memo reports on an investigation of the responses to the price increase of the National POL panelists residing in California compared with those who are residents of the other states. Panelists were selected for investigation if they had answered brandupdate questionnaires in both 1988 (pre-tax) and 1989 (post-tax) calender years. In other words, these are the same people one year apart. Only the first three quarters of 1989 are available. The specific areas of study were changes in the number of cigarettes smoked per day, quitting rates and brand switching. ~ values. , j {_,

2 Consumption Rates, 1988-89 Californians smoked fewer cigarettes per day in 1988 than others in the rest of the country and even fewer in 1989 than 1988. The difference in their consumption rates between the years is almost three times as large as the difference for the rest of the sample. The data are shown in Table 1 and Figure 1. (Computations are only from those who smoked in both 1988 and 1989.) Table 1 Differences in Daily Consumption Rates, 1988-1989 for Californians and All Others (Smokers Only) All Others Californians Num Ave Qty Num Ave Qtv Year 29221 2472 1988 27.34 26.01 (pre-tax) 1989 26.98 25.00 (post-tax) Dif - .36 - 1.01 Figure 1 25 -_~ 15 -I 5 \ \ AI( Others Calif EQOty 1988 My 1989

3 Quitting Rates, 1988-89 Californians also quit smoking more frequently than those in the rest of the country (Table and Figure 2). Table 2 Differences in Quitting Rates, 1988-1989 for Californians and All Others , All Others Californians Num Pct Quit Num Pct Quit Year 29221 2472 1989 2.75 3.16 Dif .41 Figure 0 0 m a ~ C 0 U L 0 ~ 3 2 1 All Others Calif ® `/. Qu i ts 1989

4 Generic/Price Value Usage, 1988-89 Although the percent of Californians smoking generic/price value cigarettes has not previously been as large as for other smokers, they are switching into these brands at a higher rate now (Table and Figure 3). Table 3 Differences in Generic/Value Price Usage, 1988-1989 for Californians and Al1 Others ]Lll Num Others PGt Californians Num Pot Year 29221 2472 1988 14.69 6.99 1989 17.41 12.03 Dif 2.72 5.04 Figure 3 is S All Others Calif % 1989 `/. 1988

5 r A listing of the major brand families for 1988 and 1989 is in Appendix A for these smokers, showing the percentages each year and the difference. If there is anything further that you would like to see regarding these smokers, please feel free to ask. PGM:f Attachment cc: Ed Gee Jim Myracle Central File

Appendix A The table shows the percent smoking each of the brand families in 1988-89 for I Californians and all others. The differences in percentages are also given. Many of the branded generics had only been introduced in late 1988 or early 1989. Some, like Alpine, became generic priced in 1989. Viceroy became a price value brand too late for this survey. 1. 3. Table 4 California A11 Others 1989 1988 Brand 1989 1988 % % Dif Family % % Dif 15.75 15.61 .14 Marlboro 14.94 15.33 - .39 6.81 7.29 - .48 Winston 13.14 13.86 - .72 11.07 11.24 - .17 B & H 3.90 4.28 - .38 .29 .40 - .11 Barclay .41 .50 - .09 .38 .57 - .19 Belair .89 1.08 - .19 2.84 3.16 - .32 Camel 2.65 2.73 - .08 1.13 1.25 - .12 Capri .75 .40 .35 4.26 5.54 -1.28 Carlton 2.09 2.07 .02 1.42 1.49 - .07 Eve .97 .88 .09 4.50 4.38 .12 Kent 2.71 2.86 - .15 2.34 2.58 - .24 Kool 3.35 3.51 - .16 .33 .32 .01 L & M .42 .47 - .05 .29 .24 .05 Lark .32 .32 .00 .63 .68 - .05 Lucky St .61 .78 - .17 .38 .40 - .02 Max .23 .25 - .02 4.10 4.25 - .15 Merit 5.68 5.63 .05 5.64 4.69 .95 More 2.19 2.29 - .10 .17 .16 .01 Multifilter .09 .10 - .01 .63 .40 .23 Newport 2.39 2.19 .20 2.63 2.51 .12 Now 1.71 1.79 - .08 .04 .04 .00 Old Gold .34 .34 .00 1.42 1.42 .00 Pall Mall 1.46 1.49 - .03 2.01 1.90 .11 Parliament 1.11 1.16 - .05 .25 .40 - .15 Players .16 .19 - .03 .67 .89 - .22 Raleigh 1.20 1.40 - .20 .25 .49 - .24 Ritz .06 .16 - .10 5.31 5.62 - .31 Salem 7.74 8.30 - .56 1.09 .93 .16 Saratoga .32 .37 - .05 .21 .28 - .07 Satin .12 .18 - .06 .17 .16 .01 Silva Thin .04 .06 - .02 .21 .20 .01 Tall .08 .08 .00 1.67 1.94 - .27 Tareyton .76 .75 .01 .04 .12 - .'08 Triumph .06 .10 - .04 1.42 1.58 - .16 True 1.04 1.07 - .03 1.17 1.73 - .56 Vantage 3.75 3.87 - .12 .58 .57 .01 Viceroy 1.14 .79 .35 5.64 5.54 .10 Va Slims 3.33 3.49 - .16 .26 .20 .06 Minor .06 .06 .00 Generic/Price Value .58 .00 .58 'Alpine .73 .08 .65 1.46 1.01 .45 Cambridge 3.61 2.88 .73 .84 1.17 - .33 Century 1.68 2.24 - .56 2.50 1.49 1.01 Doral 4.62 3.78 .84 1.09 .04 1.05 Malibu 1.36 .39 .97 .21 .20 .01 Players Lt .68 .81 - .13 .25 .04 .21 Pyramid .40 .00 .40 .63 .16 .47 Richland 1.19 .94 .25 .29 .36 - .07 ZMinor/new .24 .55 - .11 4.18 2.52 1.66 'Generic 2.90 3.02 - .12 12.03 6.99 5.04 Subtotal 17.41 14.69 2.72 Changed to price value, 1989. 2. New introductions/new codings--including American, Falcon, Magnum, Savvy, Total, etc. "Store" brands.

Samples were found by identifying mariboro 80-85 smokers each of the years, 1985 through 1989, and restricting the sampa.e to those who were still smoking the next year. The age groups se=.ected were the standasd ones for LiarLboro. hOiICE--some of the cells are vgry ymall.. Percent Mari,boro (Red) Smokers Switching to Prics Values by sex and Age Croups Age Group3 Males N < 25 25-34 35 + 1985-86 2543" 346 942 1255 86-87 pv 70 ~~ 2.31 2.34 3.19 1986-87 1895 199 679 1016 87-88 pv 51 * % 1.51 2.06 3.35 1987-88 1764 139 607 1018 1988-89 2025 152 621 1252 89-90 pv 96 ~ 4.61 2.90 5.67 19$9-90 2051 135 625 1291 90-91 pv 173 ~ 8.15 7.52 8.91 Females N < 25 25-34 35 + 1985-86 1766 346 644 776 86-87 pv 71 * § 3.47 3.1:~ 5.03 19£5-87 1341 2iC 513 618 87-88 pv 60 5.71 3.70 4.69 1987-88 1292 i54 495 643 88-89 pv 65 * $ 6.49 3.84 5.60 1989-89 1534 147 595 792 89-910 pv oy 0 4. 0e 5.~i 4 '. 7 Q 1989-90 1470 97 588 785 90--91 pv 129 % 7.22 8.67 9.04 * please be aware o` small sampe e sizes