c2-cigarette-RTR398TZ-Srdjan Zivulovic

How are cigarette companies so profitable if people are smoking less?

32%

Sales of cigarettes fell by 37% in the US in the last 15 years, meanwhile tobacco companies saw revenue from cigarettes grow by 32%, to $93.4 billion in 2016.

Published   |  Photo by Reuters/Srdjan Zivulovic
c2-cigarette-RTR398TZ-Srdjan Zivulovic
32%

A pack of cigarettes used to cost an average $3.73; now it costs $6.42. While companies lost smokers, they compensated by asking to pay more to keep their habit 🚬.

Last year, Americans spent more with cigarettes than on beer and soda combined, according the Wall Street Journal.

c2-cigarette-RTR398TZ-Srdjan Zivulovic
32%

The US also went from having seven large cigarette companies to only two. This has reduced costs and allowed them to price the products more freely.

These two companies, Altria (of Marlboro and Next) and Reynolds American (of Newport and Camel), produce eight of every 10 cigarettes in the US.

c2-cigarette-RTR398TZ-Srdjan Zivulovic
32%

Other reasons for the success of tobacco companies in the US include lower taxes than other developed countries and less regulation of branding and advertising.

c2-cigarette-RTR398TZ-Srdjan Zivulovic
32%

The positive results also appear in their stocks. While the S&P 500 Tobacco Index fell 22% from 1998 to 2002 📉, it grew 178% in the last ten years 📈, according the Wall Street Journal.

Published

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