Original PDF Flash format federal-trade-commission-cigarette-report-for-2004-and-2005  


Federal Trade Commission Cigarette Report For 2004 And 2005

Federal Trade Commission
Cigarette Report
For 2004 and 2005
ISSUED: 2007
I.
INTRODUCTION
This report is the latest in a series on cigarette sales, advertising, and promotion that the
Federal Trade Commission (“the Commission”) has prepared since 1967.
The statistical tables appended to this report provide information on domestic sales and
advertising and promotional activity for U.S.-manufactured cigarettes for the years 1963 through
2005. The tables were compiled from raw data contained in special reports submitted to the
Commission pursuant to compulsory process by the five major cigarette manufacturers in the United
States: Altria Group, Inc. (the ultimate parent of Philip Morris); Houchens Industries, Inc. (the
ultimate parent of Commonwealth Brands, Inc.); Loews Corp. (the ultimate parent of Lorillard
Tobacco Co.); Reynolds American, Inc. (the ultimate parent of R.J. Reynolds Tobacco Co. and Santa
Fe Natural Tobacco Company, Inc. and which acquired Brown & Williamson Tobacco Corp. in
2004); and Vector Group Ltd. (the ultimate parent of Liggett Group, Inc. and Vector Tobacco, Inc.).
II.
TOTAL CIGARETTE SALES AND ADVERTISING AND PROMOTIONAL
EXPENDITURES
The report shows that the total number of cigarettes sold or given away decreased by 4.2
billion cigarettes (1.1 percent) from 2003 to 2004, and then by 8.8 billion (2.4 percent) from 2004 to
2005; advertising and promotional expenditures declined from $15.15 billion in 2003 to $14.15
billion in 2004, and then to $13.11 billion in 2005. The largest single category of expenditures in
both 2004 and 2005 was price discounts paid to cigarette retailers or wholesalers in order to reduce
the price of cigarettes to consumers. This one category accounted for $10.93 billion (77.3 percent of
total advertising and promotional expenditures) in 2004, and $9.78 billion (74.6 percent of all
expenditures) in 2005.
Tables 1 and 1A display annual cigarette sales by manufacturers to wholesalers and retailers.
Table 1A displays the total number of cigarettes sold and given away in the years 2001 through 2005.1
In 2004, the major domestic cigarette manufacturers sold or gave away 363.4 billion cigarettes
domestically, down from 367.6 billion in 2003; in 2005, they sold or gave away 354.6 billion. Sales
rose from 360.5 billion in 2003 to 361.3 billion in 2004, and then declined to 351.6 billion in 2005,
while cigarettes given away decreased from 7.1 billion in 2003 to 2.1 billion in 2004, before rising to
3 billion in 2005.
Because the cigarette sales data reported to the Commission by the major manufacturers are
based on factory shipments, and thus can reflect changes in inventory holdings by cigarette
wholesalers and retailers, the Commission’s annual reports also include information from the
cigarette consumption series produced by the U.S. Department of Agriculture (USDA), which is
based on an estimate of the number of cigarettes actually consumed.2 USDA’s cigarette consumption
estimates, which are included in Table 1A, show a 3.0 percent decrease from 2003 to 2004 (from 400
billion cigarettes to 388 billion), and a 3.1 percent decrease from 2004 to 2005 (376 billion
cigarettes).
1 Cigarettes given away include all cigarettes distributed for free, whether through sampling,
coupons for free product, “buy 3 packs, get 1 free” type offers, or otherwise, as long as those
cigarettes were not reported as sold. For years prior to 2001, the Commission required the
manufacturers to report the number of cigarettes they sold but not the number they gave away. It
is possible, however, that in those earlier years, some manufacturers included in their sales
figures some cigarettes that were actually given away.
2 USDA’s estimates also include sales by smaller manufacturers and importers.
2
III.
ADVERTISING AND PROMOTIONAL EXPENDITURES BY CATEGORY
Tables 2 through 2C show the amounts spent on cigarette advertising and promotion for the
years 1970, and 1975 through 2005.3 These tables list the amounts spent on the different types of
media advertising (e.g., newspapers and magazines) and sales promotion activities (e.g., distribution
of cigarette samples), and also give the percentage of the total amount spent for the various types of
advertising and promotion.
Table 2C shows that overall, $14.15 billion was spent on cigarette advertising and promotion
in 2004, a decline from the record $15.15 reported by the major cigarette manufacturers in 2003.4
Spending declined another $1.04 billion, to $13.11 billion from 2004 to 2005.
Newspaper advertising expenditures decreased from $8.3 million in 2003 to $4.9 million in
2004 and then to $1.6 million in 2005, the smallest amount reported for this category since the
Commission began asking about newspaper spending in 1970. This advertising category accounts for
just over 1/100th of one percent of all expenditures. Although newspaper spending accounted for
23.1 percent of total expenditures in 1981, it has accounted for less than one percent of expenditures
since 1992.
The manufacturers reported spending $95.7 million on magazine advertising in 2004 – down
from $156.4 million in 2003 – and $44.8 million in 2005. Magazine advertising represented less than
one percent of total spending in both years. Spending on magazine advertising peaked in 1984, when
3 The reported figures include all advertising, merchandising, and promotional expenditures
related to cigarettes, regardless of whether such expenditures would constitute “commercial
speech” or would be protected from law enforcement action under the First Amendment. The
Commission began requiring tobacco companies to include expenditures for such protected
speech in 1989.
4 Definitions of the advertising and promotional expenditure categories currently used are
reported in Appendix A.
3
the cigarette companies reported spending $425.9 million (20.3 percent of total advertising and
promotional expenditures).
Spending on “outdoor” advertising declined from $32.6 million in 2003 to $17.1 million in
2004, and then to $9.8 million in 2005 (less than 1/10 of one percent of total spending). Beginning in
2002, “outdoor” advertising has been defined to mean billboards; signs and placards in arenas,
stadiums, and shopping malls (whether they are open air or enclosed); and any other advertisements
placed outdoors, regardless of their size, including those on cigarette retailer property. In prior years,
“outdoor” advertising was not precisely defined. In particular, it was not clear that signs in arenas,
shopping, stadiums, shopping malls, or on retailer property would have been reported in this category.
As they have since 2001, the companies reported that they made no expenditures on transit
advertising (i.e., advertising within or on private or public vehicles or any transportation facility) in
2004 or 2005. Transit advertising peaked at $60.2 million in 1991.5
Spending on point-of-sale promotional materials (ads posted at the retail location but
excluding outdoor ads on retailer property) declined from $165.6 million in 2003 to $163.6 million in
2004, before rising to $182.2 million in 2005. Point-of-sale advertising accounted for 1.2 percent and
1.4 percent of total advertising and promotion in 2004 and 2005, respectively. These expenditures
peaked in 1993 at $400.9 million.
Beginning in 2002, the “promotional allowance” category was broken into four new
categories: price discounts, promotional allowances paid to retailers, promotional allowances paid to
wholesalers, and other promotional allowances. For 2004 and 2005, the largest “promotional
allowance” category was price discounts paid to cigarette retailers or wholesalers in order to reduce
5 Prior to 2002, transit advertising was defined as advertising in or on public transportation
facilities.
4
the price of cigarettes to consumers (e.g., off-invoice discounts, buy downs, and voluntary price
reductions), which accounted for expenditures of $10.93 billion in 2004 (up from $10.81 billion in
2003) and $9.78 billion in 2005. In addition, the industry spent $542.2 million in 2004 (down from
$1.23 billion in 2003) and $435.8 million in 2005 on promotional allowances paid to cigarette
retailers in order to facilitate the sale or placement of cigarettes (e.g., payments for stocking, shelving,
displaying, and merchandising brands, volume rebates, and incentive payments), and $387.8 million
in 2004 and $410.4 million in 2005 on promotional allowances paid to cigarette wholesalers (e.g.,
payments for volume rebates, incentive payments, value-added services, and promotional executions).
Finally, $1.3 million was spent in 2004 and $1.5 million in 2005 on promotional allowances paid to
anyone else (other than retailers, wholesalers, and full-time company employees) involved in the
cigarette distribution and sales process, in order to facilitate the sale or placement of cigarettes. When
these four promotional allowance categories are combined, they total $11.86 billion for 2004
(accounting for 83.8 percent of all spending that year), and $10.62 billion in 2005 (81 percent of total
spending). In 2003, the companies reported expenditures of $12.72 billion on these categories (84.0
percent of total spending).
Money spent giving cigarette samples to the public (“sampling distribution”) decreased from
$17.9 million in 2003 to $11.6 million in 2004, before rising to $17.2 million in 2005. “Sampling”
was redefined in 2002 to include, among other things, when coupons are distributed for free cigarettes
and no purchase is required. Cigarette sampling expenditures have accounted for less than one
percent of total spending every year since 1992.
In 2002, the specialty item distribution category was broken into two new categories: branded
and non-branded. In 2004, $8 million was spent on branded specialty item distribution through the
mail, at promotional events, or by any means other than at the point-of-sale with the purchase of
5
cigarettes; that figure declined to $5.3 million in 2005.6 (Specialty items distributed along with the
purchase of cigarettes were redesignated as retail-value-added expenses beginning in 1988.) In 2004
and 2005, respectively, $216.6 million and $225.3 million was spent distributing non-branded, non-
cigarette items in connection with the marketing or promotion of cigarettes.7 The total of $224.6
million spent on specialty item distribution in 2004 accounts for 1.6 percent of total advertising and
promotional expenditures; the 2005 total of $230.5 million represents 1.8 percent of total spending.
In 2003, specialty item distribution expenditures were $264.2 million.
In 2004, expenditures for adult-only public entertainment category dropped to $140.1 million,
from $150.9 million in 2003; these expenditures then rose to $214.1 million in 2005. This category
includes public entertainment events (e.g., sponsorship of bar nights or concerts) that take place in an
adult-only facility and that display the name or logo of a company’s cigarettes or otherwise refer to
cigarettes. In 2004, another $115,000 was spent on general-audience public entertainment – i.e.,
events (e.g., sponsorship of a fishing tournament) that do not take place in an adult-only facility and
that display the name or logo of a company’s cigarettes or otherwise refer to cigarettes – down from
$32.8 million in 2003.8 General-audience public entertainment spending was $152,000 in 2005.
6 Branded specialty item distribution includes the practice of selling or giving to consumers
non-cigarette items such as T-shirts, caps, sunglasses, key chains, calendars, lighters, and
sporting goods bearing a cigarette brand’s name or logo.
7 Non-branded specialty item distribution includes the practice of giving consumers non-
cigarette items such as compact discs, lighters, and sporting goods in connection with the
marketing of cigarettes.
8 The cigarette companies also spent $220,000 in 2004 and $806,000 in 2005 on public
entertainment events displaying their corporate name, but not displaying the name or logo of any
brand of cigarettes or otherwise referring to cigarettes. These figures are not included in the total
advertising and promotional expenditures reported herein.
6
The companies also reported spending $28.2 million in 2004 and $30.6 million in 2005 on the
sponsorship of sports teams or individual athletes. This expenditure category accounted for 0.2
percent of all advertising and promotional expenditures in both years.
All reporting companies indicated that no money had been spent on endorsements and
testimonials for cigarettes in either 2004 or 2005. No expenditures have been reported in this
category since 1988.
The cigarette companies reported spending $93.8 million for direct mail advertising in 2004
($93.8 million had been spent in 2003), and $51.8 million in 2005.9
The industry reported spending $751.8 million on coupons in 2004 (an increase from the
$650.7 million reported in 2003). In 2005, spending on coupons rose to $870.1 million.10
Retail-value-added expenditures are the costs associated with offers such as “buy one, get one
free” and “buy three, get a free T-shirt,” where the bonus item is distributed at retail when the
cigarettes are purchased.11 The companies spent $636.2 million in 2004 and $725 million in 2005 on
retail-value-added involving free cigarettes. They also spent $14.3 million and $7.5 million in those
years on retail-value-added involving free non-cigarette items, down from $20.5 million in 2003.
Total retail-value-added expenditures were $650.6 million in 2004 and $732.5 million in 2005.
9 This category does not include direct mail containing coupons. Coupons sent via direct
mail were reported in the “coupon and retail-value-added” category from 1988 to 1996, but have
been reported separately since 1997.
10 In 2002, the Commission clarified that when coupons are distributed for free cigarettes and
no purchase is required to redeem them, such activities should be reported only as “sampling,”
not as “coupons.”
11 The cigarettes and the bonus items are often packaged together as a single unit.
7
In 2004, the companies reported spending $1.4 million on advertising on a company Internet
website; that figure rose to $2.7 million in 2005. They continued to report no expenditures on any
other Internet advertising (e.g., banner ads on third-party sites or direct mail advertising using e-mail).
The companies reported spending $346,000 on telephone advertising in 2004, a figure that
declined to $59,000 in 2005. This category includes expenses associated with telemarketing calls or
the operation of incoming telephone lines for consumers to participate in promotions or hear pre­
recorded product messages (but excludes costs associated with customer service representatives for
responding to consumer complaints or questions).
In 1988, the Commission began requiring the cigarette companies to report the total amount of
money they spent advertising and promoting sports and sporting events.12 This question is separate
from, and duplicative of, the reporting of the individual various advertising and promotion categories.
For example, money spent on a magazine advertisement promoting a cigarette-branded sports
tournament open to those of all ages is reported under the category “general-audience public
entertainment” and is also reported as an expenditure on “sports and sporting events.” Similarly,
expenditures on sponsorship of sports teams and individual athletes are reported under the category
“sponsorship” and are also reported as “sports and sporting events.” The major domestic cigarette
companies spent $28.2 million in 2004 and $30.6 million in 2005 on sports and sporting events, down
from $62.8 million in 2003. These amounts are the same as those reported for sponsorships (see p. 6,
12 This includes expenditures for: (1) the sponsoring, advertising, or promotion of sports or
sporting events; support of an individual, group, or sports team; and purchase of or support for
equipment, uniforms, sports facilities, and/or training facilities; (2) all expenditures for
advertising in the name of the cigarette company or any of its brands in a sports facility, on a
scoreboard, or in conjunction with the reporting of sports results; and (3) all expenditures for
functional promotional items (clothing, hats, etc.) connected with a sporting event.
8
supra), which means that in 2004 and 2005, unlike in prior years, the companies did not report any
“sports and sporting event” expenditures other than sponsorships.
In 2001, the Commission began requiring the major cigarette manufacturers to report
expenditures on advertisements directed to youth or their parents that are intended to reduce youth
smoking. For 2004, the companies reported spending $62.7 million on such advertising, a decrease
from the $72.9 million spent in 2003.13 In 2005, they reported spending $55.5 million. These figures
do not include contributions to third parties that engage in such programs.
Cigarette manufacturers reported that they paid no money or other form of compensation in
connection with the production or filming of any motion pictures or television shows in either 2004 or
2005, and that they paid no money or other form of compensation to anyone engaged in product
placement in motion pictures or television shows. The companies also reported that neither they nor
anyone working for them solicited the appearance of any cigarette product in any motion picture or
television show, or granted permission for the appearance of any cigarette product in any motion
picture or television show.
The data on cigarette “advertising and promotional” expenditures reported in Tables 2 through
2C were not collected in their present form until 1975. Therefore, Table 3 reports cigarette
advertising expenditures from 1963 through 1974.
IV.
TAR RATINGS, FILTERS, LENGTH, AND FLAVOR
Tables 4 and 4A give the domestic market share of cigarettes with tar ratings of 15 milligrams
(mg.) or less for the years 1967 through 2005. The data for the years since 1982 are further broken
down into sub-categories according to tar ratings, e.g., 3 mg. or less, 6 mg. or less, etc. (categories are
13 These expenditures are not included in the $14.15 billion and $13.11 billion reported in
Table 2C.
9
presented cumulatively). In 2004, cigarettes with tar ratings of 15 mg. or less constituted 84.8 percent
of the domestic cigarette market, while cigarettes with tar ratings of 3 mg. or less – the lowest rated
portion of the market – made up 0.8 percent of the market. In 2005, those figures were 83.5 percent
and 0.6 percent, respectively.
As shown in Tables 5 and 5A, filtered cigarettes have dominated the market since the
Commission began collecting this information in 1963. Filtered cigarettes held 99 percent of the
market in both 2004 and 2005.
Table 6 provides the domestic market share of the various cigarette length categories. The
King-size (79-88 mm.) category continues to be the biggest seller, with 62 percent of the market in
both 2004 and 2005. This category is followed by the Long (94-101 mm.) group, which held 35
percent of the market in both years. Ultra-Long (110-121 mm.) and Regular (68-72 mm.) cigarettes
accounted for two percent and one percent, respectively, of the market in both 2004 and 2005.
Table 7 gives the market share of menthol and non-menthol cigarettes. In 2004 and 2005, the
market share of menthol cigarettes was 27 percent, while non-menthols held 73 percent of the market.
Tables 8 and 8A relate to whether “tar” ratings are displayed on cigarette packaging. Table
8A shows: (1) the percentage of the overall cigarette market represented by varieties with different tar
ratings, and (2) within each tar group, the percentage of those varieties that discloses tar ratings on
their packs.14 Table 8A shows that cigarette varieties that printed tar ratings on their packs
represented only 1.2 percent of the overall market in 2004 and 0.9 percent in 2005.15 Cigarettes with
14 Prior to 2002, the Commission asked whether “tar and nicotine ratings” were displayed on
cigarette packaging.
15 Table 8A also corrects several figures that were reported erroneously in prior Reports.
10
tar ratings of 8-11 mg. represented 42.5 percent of the market in 2004 and 43.3 percent in 2005;
however, only 1.5 percent of these cigarettes disclosed their ratings on the pack in 2004, and only 1.2
percent did so in 2005. In contrast, 91.6 percent of cigarettes rated 3 mg. tar or less disclosed their
ratings on the pack in 2004, and 90.7 percent did so in 2005.
11
TABLE 1
TOTAL DOMESTIC CIGARETTE UNIT SALES
(IN BILLIONS OF INDIVIDUAL CIGARET TES)
T O T A L S A L ES R E P O R T E D B Y
CIGARETTE
U N I T C H A N G E
% C H A N G E
USDA CIGARETTE
YEAR
MANU FACTURERS*
F R O M P R IO R Y E A R
F R O M P R IO R Y E A R
CONSUM PTION ESTIMATES
1963
516 .5
---
---
523 .9
1964
505 .0
(11.5)
(2.2)
511 .2
1965
521 .1
16.1
3.2
528 .7
1966
529 .9
8.8
1.7
541 .2
1967
525 .8
5.9
1.1
549 .2
1968
540 .3
4.5
.8
545 .7
1969
527 .9
(12.4)
(2.3)
528 .9
1970
534 .2
6.3
1.1
536 .4
1971
547 .2
13.0
2.4
555 .1
1972
561 .7
14.5
2.7
566 .8
1973
584 .7
23.0
4.1
589 .7
1974
594 .5
9.8
1.7
599 .0
1975
603 .2
8.7
1.5
607 .2
1976
609 .9
6.7
1.1
613 .5
1977
612 .6
2.7
.4
617 .0
1978
615 .3
2.7
.4
616 .0
1979
621 .8
6.5
1.1
621 .5
1980
628 .2
6.4
1.0
631 .5
1981
636 .5
8.3
1.3
640 .0
1982
632 .5
(4.0)
(.6)
634 .0
1983
603 .6
(28.9)
(4.6)
600 .0
1984
608 .4
4.8
.8
600 .4
1985
599 .3
(9.1)
(1.5)
594 .0
1986
586 .4
(12.9)
(2.2)
583 .8
1987
575 .4
(11.0)
(1.9)
575 .0
1988
560 .7
(14.7)
(2.6)
562 .5
1989
525 .6
(35.1)
(6.3)
540 .0
1990
523 .7
(1.9)
(.4)
525 .0
1991
510 .9
(12.8)
(2.4)
510 .0
1992
506 .4
(4.5)
(.9)
500 .0
1993
461 .4
(45.0)
(8.9)
485 .0
1994
490 .2
28.8
6.2
486 .0
1995
482 .3
(7.9)
(1.6)
487 .0
1996
484 .1
1.8
0.4
487 .0
1997
478 .6
(5.5)
(1.1)
480 .0
1998
458 .6
(20.1)
(4.2)
465 .0
1999
411 .3
(47.2)
(10.3)
435 .0
2000
413 .9
2.6
.6
430 .0
*
Cigarettes sold by manufacturers to wholesalers and retailers within the U.S. and to armed forces personnel stationed outside
the U.S.
TABLE 1A
TOTAL DOMESTIC CIGARETTE UNITS SOLD AND GIVEN AWAY
(IN BILLIONS OF INDIVIDUAL CIGARET TES)
UNIT
P E RC E N T
CH AN GE IN SO LD
CH AN GE IN SO LD
T O T A L N U M B E R
A N D G IV E N
A N D G IV E N
U S D A
UNITS
S O LD A N D G IV E N
A W A Y
A W A Y
CIGARETTE
UNITS
GIVEN
A W A Y A S R E PO R T ED
F R OM P R IO R
F R OM P R IO R
C O N S U M PT IO N
Y E A R
S O LD *
AW AY**
B Y M A N U F A C T U R E R S
Y E A R
Y E A R
ESTIMATES
2001
398 .3
3.9
402 .2
***
***
425 .0
2002
376 .4
11.1
387 .4
(14.8)
(3.7)
415 .0
2003
360 .5
7.1
367 .6
(19.8)
(5.1)
400 .0
2004
361 .3
2.1
363 .4
(4.2)
(1.1)
388 .0
2005
351 .6
3.0
354 .6
(8.8)
(2.4)
376 .0
*
Cigarettes sold by manufacturers to wholesalers and retailers within the U.S. and to armed forces personnel
stationed outside the U.S.
**
Cigarettes given away within the U.S. and to armed forces personnel stationed outside the U.S.
***
Prior to 2001, the Commission did not ask about cigarettes given away, although some cigarettes given away may
have been reported as sold.
TABLE 2
DO ME STIC CIGA RET TE ADV ERT ISING AND PRO MO TIO NAL EXP END ITU RES F OR Y EAR S 1970 , 1975-1985 (DOL LARS IN TH OU SAN DS)*
1970
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
Newspapers
$14,026
$104,460
$155,808
$190,677
$186,947
$240,978
$304,380
$358,096
$282,897
$200,563
$193,519
$203,527
3.9%
21.3%
24.4%
24.5%
21.4%
22.2%
24.5%
23.1%
15.8%
10.6%
9.2%
8.2%
Magazines
$50,018
$131,199
$148,032
$173,296
$184,236
$257,715
$266,208
$291,227
$349,229
$388,365
$425,912
$395,129
13.9%
26.6%
23.2%
22.2%
21.1%
23.8%
21.4%
18.8%
19.5%
20.4%
20.3%
16.0%
Outdoor
$7,338
$84,329
$102,689
$120,338
$149,010
$162,966
$193,333
$228,081
$266,925
$295,226
$284,927
$300,233
2.0%
17.2%
16.1%
15.4%
17.0%
15.0%
15.6%
14.7%
14.9%
15.5%
13.6%
12.1%
Transit
$5,354
$10,852
$19,341
$21,530
$22,899
$21,151
$26,160
$21,931
$24,135
$26,652
$25,817
$33,136
1.5%
2.2%
3.0%
2.8%
2.6%
2.1%
2.0%
1.4%
1.3%
1.4%
1.2%
1.3%
Point-of-Sale
$11,663
$35,317
$44,176
$46,220
$57,384
$66,096
$79,799
$98,968
$116,954
$170,059
$167,279
$142,921
3.2%
7.2%
6.9%
5.9%
6.6%
6.1%
6.4%
6.4%
6.5%
8.9%
8.0%
5.8%
Promotional Allowances
$33,789
$72,018
$82,523
$108,227
$125,148
$137,111
$179,094
$229,077
$272,269
$366,153
$363,247
$548,877
9.4%
14.7%
12.9%
13.9%
14.3%
12.7%
14.4%
14.8%
15.2%
19.3%
17.3%
22.2%
Sampling Distribution
$11,775
$24,196
$40,390
$47,683
$47,376
$64,286
$50,459
$81,522
$141,178
$125,968
$148,031
$140,565
3.3%
4.9%
6.3%
6.1%
5.4%
5.9%
4.1%
5.3%
7.9%
6.6%
7.1%
5.7%
Specialty Item Distribution
$5,652
$10,088
$20,030
$35,797
$48,281
$62,029
$69,248
$115,107
$95,246
$127,186
$140,431
$211,429
2.6%
2.1%
3.1%
4.6%
5.5%
5.7%
5.6%
7.5%
5.3%
6.6%
6.7%
8.5%
Public Entertainment
$544
$8,484
$7,946
$9,538
$11,590
$10,783
$16,914
$37,423
$63,168
$76,648
$59,988
$57,581
0.2%
1.7%
1.3%
1.2%
1.3%
1.0%
1.4%
2.4%
3.5%
4.0%
2.9%
2.3%
Other**
$220,841
$10,311
$18,182
$26,157
$42,100
$60,310
$56,694
$86,226
$181,813
$123,951
$286,035
$443,043
61.1%
2.0%
2.8%
3.4%
4.8%
5.6%
4.6%
5.6%
10.1%
6.5%
13.7%
17.9%
Total
$361,000
$491,254
$639,117
$779,463
$874,971
$1,083,425 $1,242,289
$1,547,658
$1,793,814
$1,900,771 $2,095,231 $2,476,441
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
*
Because of rounding, sums of percentages may not equal 100 percent.
**
Includes TV and Radio advertising expenditures of $207,324,000 and $12,492,000, respectively, for 1970. Broadcast advertising was banned after January 1, 1971.
Expenditures for direct mail, endorsements, testimonials, and audio-visual are included in the “All Others” category to avoid disclosure of individual company data.
TABLE 2A
DO ME STIC CIGA RET TE ADV ERT ISING AND PRO MO TIO NAL EXP END ITU RES F OR Y EAR S 1986 -1995 (DO LLAR S IN T HO USA ND S)*
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
Newspapers
$119,629
$95,810
$105,783
$76,993
$71,174
$48,212
$35,467
$36,220
$24,143
$19,122
5.0%
3.7%
3.2%
2.1%
1.8%
1.0%
0.7%
0.6%
0.5%
0.4%
Magazines
$340,160
$317,748
$355,055
$380,393
$328,143
$278,110
$237,061
$235,253
$251,644
$248,848
14.3%
12.3%
10.8%
10.5%
8.2%
6.0%
4.5%
3.9%
5.2%
5.1%
Outdoor
$301,822
$269,778
$319,293
$358,583
$375,627
$386,165
$295,657
$231,481
$240,024
$273,664
12.7%
10.5%
9.7%
9.9%
9.4%
8.3%
5.7%
3.8%
5.0%
5.6%
Transit
$34,725
$35,822
$44,379
$52,294
$60,249
$60,163
$53,293
$39,117
$29,323
$22,543
1.5%
1.4%
1.4%
1.4%
1.5%
1.3%
1.0%
0.6%
0.6%
0.5%
Point-of-Sale
$135,541
$153,494
$222,289
$241,809
$303,855
$344,580
$366,036
$400,943
$342,650
$259,035
5.7%
5.9%
6.8%
6.7%
7.6%
7.4%
7.0%
6.6%
7.1%
5.3%
Promotional Allowances
$630,036
$702,430
$879,703
$999,843
$1,021,427
$1,156,280
$1,514,026
$1,557,635
$1,678,917
$1,865,657
26.4%
27.2%
26.9%
27.6%
25.6%
24.9%
28.9%
25.8%
34.7%
38.1%
Sampling Distribution
$98,866
$55,020
$74,511
$57,771
$100,893
$56,970
$49,315
$40,202
$6,974
$13,836
4.1%
2.1%
2.3%
1.6%
2.5%
1.2%
0.9%
0.7%
0.1%
0.3%
Specialty Item Distribution
$210,128
$391,351
$190,003
$262,432
$307,037
$184,348
$339,997
$755,780
$850,810
$665,173
8.8%
15.2%
5.8%
7.3%
7.7%
4.0%
6.5%
12.5%
17.6%
13.6%
Public Entertainment
$71,439
$71,389
$88,072
$92,120
$125,094
$118,622
$89,739
$84,276
$81,292
$110,669
3.0%
2.8%
2.7%
2.5%
3.1%
2.6%
1.7%
1.4%
1.7%
2.3%
Direct Mail
$187,057
$187,931
$42,545
$45,498
$51,875
$65,002
$34,345
$31,463
$31,187
$34,618
7.9%
7.3%
1.3%
1.3%
1.3%
1.4%
0.7%
0.5%
0.7%
0.7%
Endorsements & Testimonials
$384
$376
$781
$0
$0
$0
$0
$0
$0
$0
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Coupons & Retail-Value-Added
**
**
$874,127
$959,965
$1,183,798
$1,882,905
$2,175,373
$2,559,387
$1,248,896
$1,348,378
26.7%
26.5%
29.6%
40.4%
41.6%
42.4%
25.8%
27.5%
Other***
$252,570
$299,355
$78,366
$89,290
$62,917
$68,758
$41,608
$63,680
$47,672
$33,680
10.0%
11.6%
2.4%
2.5%
1.6%
1.5%
0.8%
1.2%
1.0%
0.7%
Total
$2,382,357
$2,580,504
$3,274,853
$3,616,993
$3,992,008
$4,650,114
$5,231,917
$6,035,437
$4,833,532
$4,895,223
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
*
Because of rounding, sums of percentages may not equal 100 percent.
** Prior to 1987, the Commission did not specifically collect information on Coupons & Retail-Value-Added.
*** Expenditures for audio-visual are included in the “All Others” category to avoid disclosure of individual company data.
TABLE 2B
DOM ESTIC CIGARET TE ADV ERTISING AND PROM OTION AL EXPEN DITURES
FOR YEAR S 1996-2001 (DOLLARS IN TH OUSAN DS)*
1996
1997
1998
1999
2000
2001
Newspapers
$14,067
$16,980
$29,444
$50,952
$51,652
$31,676
0.3%
0.3%
0.4%
0.6%
0.5%
0.3%
Magazines
$243,046
$236,950
$281,296
$377,364
$294,916
$172,853
4.8%
4.2%
4.2%
4.6%
3.1%
1.5%
Outdoor
$292,261
$295,334
$294,721
$53,787
$9,262
$8,241
5.7%
5.2%
4.4%
0.7%
0.1%
0.1%
Transit
$28,865
$26,407
$40,158
$5,573
$4
$0
0.6%
0.5%
0.6%
0.1%
0.0%
0.0%
Point-of-Sale
$252,619
$305,360
$290,739
$329,429
$347,038
$284,319
4.9%
5.4%
4.3%
4.0%
3.6%
2.5%
Promotional Allowances
$2,150,838
$2,438,468
$2,878,919
$3,542,950
$3,913,997
$4,452,709
42.1%
43.1%
42.8%
43.0%
40.8%
39.7%
Sampling Distribution
$15,945
$22,065
$14,436
$33,711
$22,330
$17,175
0.3%
0.4%
0.2%
0.4%
0.2%
0.2%
Specialty Item Distribution
$544,345
$512,602
$355,835
$335,680
$327,826
$333,394
10.7%
9.6%
5.3%
4.1%
3.4%
3.0%
Public Entertainment
$171,177
$195,203
$248,536
$267,379
$309,610
$312,366
3.4%
3.4%
3.7%
3.3%
3.2%
2.8%
Direct Mail
$38,703
$37,310
$57,772
$94,610
$92,902
$133,947
0.8%
0.7%
0.9%
1.2%
1.0%
1.2%
Endorsements & Testimonials
$0
$0
$0
$0
$0
$0
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Coupons
$552,550
$624,199
$531,004
$705,299
$602,110
9.8%
9.3%
6.5%
7.4%
5.4%
$1,308,708**
Retail-Value-Added
25.6%
$970,363
$1,555,391
$2,559,883
$3,453,446
$4,761,792
17.1%
23.1%
31.1%
36.0%
42.5%
Internet
$432
$215
$125
$651
$949
$841
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Other***
$46,696
$50,207
$61,584
$54,658
$63,395
$104,797
0.9%
1.0%
0.9%
0.7%
0.7%
0.9%
Total
$5,107,700
$5,660,014
$6,733,157
$8,237,631
$9,592,627 $11,216,220
100%
100%
100%
100%
100%
100%
*
Because of rounding, sums of percentages may not equal 100 percent.
** Prior to 1997, Coupons and Retail-Value-Added were reported as a single category.
*** Expenditures for audio-visual are included in the “All Others” category to avoid disclosure of individual company data.
TABLE 2C
DOMESTIC CIGARETTE ADVERTISING AND PROMOTIONAL EXPENDITURES
FOR YEARS 2002-2005 (DOLLARS IN THOUSANDS)*
2002
2003
2004
2005
Newspapers
$25,538
$8,251
$4,913
$1,589
0.2%
0.1%
0.0%
0.0%
Magazines
$106,852
$156,394
$95,700
$44,777
0.9%
1.0%
0.7%
0.3%
Outdoor
$24,192
$32,599
$17,135
$9,821
0.2%
0.2%
0.1%
0.0%
Transit
$0
$0
$0
$0
0.0%
0.0%
0.0%
0.0%
Point-of-Sale
$260,902
$165,573
$163,621
$182,193
2.1%
1.1%
1.2%
1.4%
Price Discounts
$7,873,835 $10,808,239 $10,932,199
$9,776,069
63.2%
71.4%
77.3%
74.6%
Promotional Allowances – Retailers
$1,333,097
$1,229,327
$542,213
$435,830
10.7%
8.1%
3.8%
3.3%
Promotional Allowances – Wholesalers
$446,327
$683,067
$387,758
$410,363
3.6%
4.5%
2.7%
3.1%
Promotional Allowances – Other
$2,767
$2,786
$1,323
$1,493
0.0%
0.0%
0.0%
0.0%
Sampling Distribution
$28,777
$17,853
$11,649
$17,211
0.2%
0.1%
0.0%
0.1%
Specialty Item Distribution – Branded
$49,423
$9,195
$8,011
$5,255
0.4%
0.1%
0.0%
0.0%
Specialty Item Distribution - Non-Branded
$174,201
$254,956
$216,577
$225,279
1.4%
1.7%
1.5%
1.7%
Public Entertainment – Adult-Only
$219,016
$150,889
$140,137
$214,075
1.8%
1.0%
1.0%
1.6%
Public Entertainment – General-Audience
$34,089
$32,849
$115
$152
0.3%
0.2%
0.0%
0.0%
Sponsorships
$54,247
$31,371
$28,231
$30,575
0.4%
0.2%
0.2%
0.2%
Endorsements & Testimonials
$0
$0
$0
$0
0.0%
0.0%
0.0%
0.0%
Direct Mail
$111,319
$92,978
$93,836
$51,844
0.9%
0.6%
0.7%
0.0%
Coupons
$522,246
$650,653
$751,761
$870,137
4.2%
4.3%
5.3%
6.6%
Retail-Value-Added – Bonus Cigarettes
$1,060,304
$677,308
$636,221
$725,010
8.5%
4.5%
4.5%
5.5%
Retail-Value-Added – Non-Cigarette Bonus
$24,727
$20,535
$14,343
$7,526
0.2%
0.1%
0.1%
0.0%
Company Website
$940
$2,851
$1,401
$2,675
0.0%
0.0%
0.0%
0.0%
Internet – Other
$0
$0
$0
$0
0.0%
0.0%
0.0%
0.0%
Telephone
$679
$760
$346
$59
0.0%
0.0%
0.0%
0.0%
Other**
$112,879
$117,563
$102,369
$99,025
0.9%
0.8%
0.7%
0.8%
Total
$12,466,358 $15,145,998 $14,149,859
$13,110,958
100.0%
100.0%
100.0%
100.0%
*
Because of rounding, sums of percentages may not equal 100 percent.
** Expenditures for audio-visual are included in the “All Others” category to avoid disclosure of individual company data.
TABLE 3
DOMESTIC CIGARETTE ADVERTISING EXPENDITURES
BY MEDIA FOR YEARS 1963 - 1974*
(MILLIONS OF DOLLARS)
YEAR
TV
RAD IO
NEWSPAPER
MAGAZINES
DIRECT
BILLBOARD/
OTHER
TOTAL
POSTER/
OUTDO OR/
TRA NSIT
1963
$15 1.7
31.6
45.6
13.2
NA
7.4
249 .5
1964
170 .2
25.5
45.2
14.6
NA
5.8
261 .3
1965
175 .6
24.8
41.9
14.7
NA
6.0
263 .0
1966
198 .0
31.3
43.4
17.9
NA
6.9
297 .5
1967
226 .9
17.5
41.2
20.3
NA
6.0
311 .5
1968
217 .2
21.3
44.6
21.6
NA
6.0
310 .7
1969
221 .3
13.6
48.7
13.4
NA
8.9
305 .9
1970
205 .0
12.4
14.7
49.5
16.9
11.7
4.5
314 .7
1971
2.2
0
59.3
98.3
27.0
60.6
4.2
251 .6
1972
0
0
63.1
96.1
22.9
67.5
8.0
257 .6
1973
0
0
65.3
92.4
15.2
63.2
11.4
247 .5
1974
0
0
80.5
114 .6
31.1
71.4
9.2
306 .8
*
The data reported in Tables 2 through 2C were not collected in their present form until 1975. Thus, Table 3, which
reports cigarette advertising expenditures from 1963 through 197 4, has been retained in this report for comparative
purpo ses.
TABLE 4
DOMESTIC MARKET SHARE OF CIGARETTES BY TAR YIELD
Market share of cigarettes having tar yields of:
Year
15 mg. or less
12 mg. or less
9 mg. or less
6 mg. or less
3 mg. or less
1967
2.0%
NA
NA
NA
NA
1968
2.5%
NA
NA
NA
NA
1969
3.0%
NA
NA
NA
NA
1970
3.6%
NA
NA
NA
NA
1971
3.8%
NA
NA
NA
NA
1972
6.6%
NA
NA
NA
NA
1973
8.9%
NA
NA
NA
NA
1974
8.9%
NA
NA
NA
NA
1975
13.5%
NA
NA
NA
NA
1976
15.9%
NA
NA
NA
NA
1977
22.7%
NA
NA
NA
NA
1978
27.5%
NA
NA
NA
NA
1979
40.9%
NA
NA
NA
NA
1980
44.8%
NA
NA
NA
NA
1981
56.0%
NA
NA
NA
NA
1982
52.2%
43.8%
27.8%
8.9%
2.9%
1983
53.1%
44.9%
27.9%
9.4%
3.1%
1984
51.0%
43.4%
26.3%
9.4%
2.9%
1985
51.9%
43.1%
25.3%
8.4%
2.3%
1986
52.6%
44.5%
22.3%
9.9%
2.6%
1987
55.4%
47.8%
20.2%
10.0%
2.5%
1988
54.2%
48.7%
20.1%
10.7%
3.1%
1989
55.1%
48.4%
21.5%
11.4%
2.4%
1990
60.6%
51.5%
25.5%
12.2%
2.8%
TABLE 4A
DOMESTIC MARKET SHARE OF CIGARETTES BY TAR YIELD
Market share of cigarettes having tar yields of:
Year
15 mg. or less
12 mg. or less
9 mg. or less
6 mg. or less
3 mg. or less
1991
60.5%
52.6%
22.0%
12.7%
2.6%
1992
68.7%
52.9%
24.9%
12.7%
2.5%
1993
66.5%
53.3%
23.4%
12.6%
1.9%
1994
71.2%
53.7%
23.1%
12.3%
2.1%
1995
72.7%
53.6%
27.1%
12.2%
2.2%
1996
67.4%
55.5%
22.3%
11.9%
1.9%
1997
70.2%
55.6%
21.9%
11.5%
1.7%
1998
81.9%
56.8%
22.9%
13.2%
1.6%
1999
86.6%
57.4%
25.3%
13.6%
1.6%
2000
87.1%
50.4%
23.7%
13.6%
1.3%
2001
85.2%
58.1%
22.6%
13.2%
1.0%
2002
84.9%
58.2%
22.5%
12.9%
0.9%
2003
84.9%
59.5%
22.5%
12.6%
0.8%*
2004
84.8%
57.7%
19.2%
11.5%
0.8%
2005
83.5%
58.4%
18.7%
11.5%
0.6%
* This figure wa s erro neously rep orted as 1.0 % in the Co mmission’s p revio us rep ort.
TABLE 5
DOMESTIC MARKET SHARE OF FILTER
AND NON-FILTER CIGARETTES
YEAR
NON-FILTER FILTER
CHARCOAL NON-CHARCOAL
1963
42%
58%
*
*
1964
39%
61%
*
*
1965
36%
64%
*
*
1966
32%
68%
*
*
1967
28%
72%
*
*
1968
26%
74%
6%
68%
1969
23%
77%
6%
71%
1970
20%
80%
6%
74%
1971
18%
82%
6%
76%
1972
16%
84%
6%
87%
1973
15%
85%
5%
80%
1974
14%
86%
5%
81%
1975
13%
87%
5%
82%
1976
12%
88%
4%
84%
1977
10%
90%
4%
86%
1978
10%
90%
3%
87%
1979
9%
91%
3%
88%
1980
8%
92%
3%
89%
1981
8%
92%
2%
90%
1982
7%
93%
2%
91%
1983
7%
93%
2%
91%
1984
7%
93%
2%
91%
1985
6%
94%
1%
93%
1986
6%
94%
1%
93%
1987
4%
96%
**
**
*
Figures for charcoal filter cigarettes for the years 1963 through 1967 were not obtained.
** Beginning with 1987, figures for charcoal filter cigarettes have no longer been reported.
TABLE 5A
DOMESTIC MARKET SHARE OF FILTER
AND NON-FILTER CIGARETTES
YEAR
NON-FILTER FILTER
1988
5%
95%
1989
5%
95%
1990
5%
95%
1991
4%
96%
1992
3%
97%
1993
3%
97%
1994
3%
97%
1995
3%
97%
1996
3%
97%
1997
2%
98%
1998
2%
98%
1999
2%
98%
2000
2%
98%
2001
2%
98%
2002
2%
98%
2003
1%
99%
2004
1%
99%
2005
1%
99%
TABLE 6
DOMESTIC MARKET SHARE OF CIGARETTES
BY LENGTH IN MILLIMETERS (mm.)
YEAR
68-72 mm.
79-88 mm.
94-101 mm.
110-121 mm.
1967
14%
77%
9%
---
1968
12%
74%
13%
--- *
1969
11%
74%
16%
--- *
1970
9%
73%
18%
---
1971
8%
72%
20%
---
1972
8%
71%
21%
---
1973
7%
71%
22%
---
1974
6%
71%
23%
--- **
1975
6%
69%
24%
1%
1976
5%
69%
24%
2%
1977
5%
67%
26%
2%
1978
5%
65%
27%
2% *
1979
4%
65%
30%
2% *
1980
3%
63%
32%
2%
1981
3%
62%
33%
2%
1982
3%
61%
34%
2%
1983
3%
60%
34%
2%
1984
3%
59%
36%
2%
1985
3%
58%
37%
2%
1986
2%
58%
37%
3%
1987
2%
57%
38%
3%
1988
2%
57%
38%
2%
1989
2%
57%
39%
2%
1990
2%
57%
39%
2%
1991
2%
56%
40%
2%
1992
2%
56%
41%
2% *
1993
1%
55%
42%
2%
1994
1%
56%
41%
2%
1995
1%
57%
40%
2%
1996
1%
57%
40%
2%
1997
1%
58%
39%
2%
1998
1%
59%
38%
2%
1999
1%
59%
38%
2%
2000
1%
60%
37%
2%
2001
1%
60%
38%
1%
2002
1%
61%
37%
2%*
2003
1%
61%
36%
2%
2004
1%
62%
35%
2%
2005
1%
62%
35%
2%
*
Bec ause of roun ding, the total of the individual pe rcentages m ay not equa l 100 p ercent in some instances.
** The 11 0-121 mm . length was combined with 94-101 m m. length.
TABLE 7
DOMESTIC MARKET SHARE OF MENTHOL
AND NON-MENTHOL CIGARETTES
YEAR
MENTHOL
NON-MENTHOL
1963
16%
84%
1964
16%
84%
1965
18%
82%
1966
19%
81%
1967
20%
80%
1968
21%
79%
1969
22%
78%
1970
23%
77%
1971
24%
76%
1972
24%
76%
1973
25%
75%
1974
27%
73%
1975
27%
73%
1976
28%
72%
1977
28%
72%
1978
28%
72%
1979
29%
71%
1980
28%
72%
1981
28%
72%
1982
29%
71%
1983
28%
72%
1984
28%
72%
1985
28%
72%
1986
28%
72%
1987
28%
72%
1988
28%
72%
1989
27%
73%
1990
26%
74%
1991
27%
73%
1992
26%
74%
1993
26%
74%
1994
25%
75%
1995
25%
75%
1996
25%
75%
1997
25%
75%
1998
26%
74%
1999
26%
74%
2000
26%
74%
2001
26%
74%
2002
27%
73%
2003
27%
73%
2004
27%
73%
2005
27%
73%
TABLE 8
DISCLOSURE O F TAR AND NICOTINE RA TINGS
ON CIGARE TTE P ACKS (1994 -2001)
1994
1995
1996
1997
1998
1999
2000
2001
% of overall market that discloses
6.3%
6.3%
6.1%
5.8%
5.3%
4.1%
3.6%
1.8%
ratings on the pack
more than 15 mg.
market share of
28.8%
27.3%
32.7%
29.8%
18.0%
13.4%
12.9%
14.8%
tar
varieties in tar group
% that discloses
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
ratings on pack
12-15 mg. tar
market share of
19.3%
21.0%
15.3%
16.7%
29.1%
32.5%
39.0%
29.7%
varieties in tar group
% that discloses
0.0%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.0%
ratings on pack
8-11 mg. tar
market share of
38.6%
38.7%
39.2%
41.0%
39.4%
40.3%
33.9%
42.1%
varieties in tar group
% that discloses
2.4%
2.8%
2.6%
2.3%
3.2%
1.6%
0.7%
1.0%
ratings on pack
4-7 mg. tar
market share of
11.2%
10.8%
10.9%
10.8%
11.9%
12.2%
12.9%
12.5%
varieties in tar group
% that discloses
30.7%
30.1%
29.3%
28.6%
20.7%
16.2%
16.5%
3.7%
ratings on pack
3 mg. tar or less
market share of
2.1%
2.2%
1.9%
1.7%
1.6%
1.6%
1.3%
1.0%
varieties in tar group
% that discloses
91.8%
89.1%
97.2%
97.3%
97.4%
92.3%
92.0%
87.9%
ratings on pack
TABLE 8A
DISCLOSURE O F TAR RAT INGS
ON CIGARE TTE P ACKS (2002-2005)
2002
2003
2004
2005
% of overall market that discloses
1 .4 % *
1.2%
1.2%
0.9%
ratings on the pack
more than 15 mg.
market share of
15.1%
15.1%
15.2%
16.5%
tar
varieties in tar
group
% that discloses
0.0%
0.0%
0.0%
0.0%
ratings on pack
12-15 mg. tar
market share of
28.8%
28.9%
30.3%
28.3%
varieties in tar
group
% that discloses
0.0%
0.0%
0.0%
0.0%
ratings on pack
8-11 mg. tar
market share of
4 3.0 % *
4 3.2 % *
42.5%
43.3%
varieties in tar
group
% that discloses
0.9%
0 .8 % *
0.7%
0.6%
ratings on pack
4-7 mg. tar
market share of
12.2%
12.0%
11.2%
11.3%
varieties in tar
group
% that discloses
1.8%
1.5%
1.5%
1.2%
ratings on pack
3 mg. tar or less
market share of
0 .9 % *
0 .8 % *
0.8%
0.6%
varieties in tar
group
% that discloses
8 8.7 % *
8 9.9 % *
91.6%
90.7%
ratings on pack
* These figures wer e rep orted erron eously in the Comm ission’s p revio us rep ort.
APPENDIX A
2004-2005 Advertising and Promotional Expenditure Categories
Newspapers: Newspaper advertising; but excluding expenditures in connection with sampling,
specialty item distribution, public entertainment, endorsements, sponsorships, coupons, and retail-
value-added.
Magazines: Magazine advertising; but excluding expenditures in connection with sampling,
specialty item distribution, public entertainment, endorsements, sponsorships, coupons, and retail-
value-added.
Outdoor: Billboards; signs and placards in arenas, stadiums, and shopping malls, whether they are
open air or enclosed; and any other advertisements placed outdoors, regardless of their size, including
those on cigarette retailer property; but excluding expenditures in connection with sampling, specialty
item distribution, public entertainment, endorsements, sponsorships, coupons, and retail-value-added.
Audio-visual: Audio-visual or video advertising on any medium of electronic communication not
subject to the Federal Communications Commission’s jurisdiction, including screens at motion
picture theaters, video cassettes, and monitors in stores; but excluding expenditures in connection
with Internet advertising.
Transit: Advertising on or within private or public vehicles and all advertisements placed at, on or
within any bus stop, taxi stand, transportation waiting area, train station, airport, or any other
transportation facility; but excluding expenditures in connection with sampling, specialty item
distribution, public entertainment, endorsements, sponsorships, coupons, and retail-value-added.
Point-of-Sale: Point-of-sale advertisements; but excluding expenditures in connection with outdoor
advertising, sampling, specialty item distribution, public entertainment, endorsements, sponsorships,
coupons, and retail-value-added.
Price discounts: Price discounts paid to cigarette retailers or wholesalers in order to reduce the price
of cigarettes to consumers, including off-invoice discounts, buy downs, voluntary price reductions,
and trade programs; but excluding retail-value-added expenditures for promotions involving free
cigarettes and expenditures involving coupons.
Promotional Allowances – Retail: Promotional allowances paid to cigarette retailers in order to
facilitate the sale or placement of any cigarette, including payments for stocking, shelving, displaying
and merchandising brands, volume rebates, and incentive payments; but excluding expenditures in
connection with newspapers, magazines, outdoor, audio-visual, transit, direct mail, point-of-sale, and
price discounts.
Promotional Allowances – Wholesale: Promotional allowances paid to cigarette wholesalers in
order to facilitate the sale or placement of any cigarette, including payments for volume rebates,
incentive payments, value added services, promotional execution and satisfaction of reporting
requirements; but excluding expenditures in connection with newspapers, magazines, outdoor, audio­
visual, transit, direct mail, point-of-sale, price discounts, and retail promotional allowances.
Promotional Allowances – Other: Promotional allowances paid to any persons other than retailers,
wholesalers, and full-time company employees who are involved in the cigarette distribution and sales
process in order to facilitate the sale or placement of any cigarette; but excluding expenditures in
connection with newspapers, magazines, outdoor, audio-visual, transit, direct mail, point-of-sale,
price discounts, and retail and wholesale promotional allowances.
Sampling: Sampling of cigarettes, including the cost of the cigarettes, all associated excise taxes and
increased costs under the Master Settlement Agreement, and the cost of organizing, promoting, and
conducting sampling. Sampling includes the distribution of cigarettes for consumer testing or
evaluation when consumers are able to smoke the cigarettes outside of a facility operated by the
Company, but not the cost of actual clinical testing or market research associated with such cigarette
distributions. Sampling also includes the distribution of coupons for free cigarettes, when no
purchase or payment is required to obtain the coupons or cigarettes.
Specialty Item Distribution – Branded: All costs of distributing any item (other than cigarettes,
items the sole function of which is to advertise or promote cigarettes, or written or electronic
publications), whether distributed by sale, redemption of coupons, or otherwise, that bears the name,
logo, or an image of any portion of the package of any brand or variety of cigarettes, including the
cost of the items distributed but subtracting any payments received for the item. The costs associated
with distributing non-cigarette items in connection with sampling or retail-value-added programs are
reported in those categories, not as specialty item distribution.
Specialty Item Distribution – Non-Branded: All costs of distributing any item (other than
cigarettes, items the sole function of which is to advertise or promote cigarettes, or written or
electronic publications), whether distributed by sale, redemption of coupons, or otherwise, that does
not bear the name, logo, or an image of any portion of the package of any brand or variety of cigarette,
including the cost of the items distributed but subtracting any payments received for the item. The
costs associated with distributing non-cigarette items in connection with sampling or retail-value­
added programs are reported in those categories, not as specialty item distribution.
Direct Mail: Direct mail advertising; but excluding expenditures in connection with sampling,
specialty item distribution, public entertainment, endorsements, sponsorships, coupons, retail-value­
added, and Internet advertising.
Public Entertainment – Adult-Only: Public entertainment events bearing or otherwise displaying
the name or logo or an image of any portion of the package of any of a company’s cigarettes or
otherwise referring or relating to cigarettes, which take place in an adult-only facility, including all
expenditures made by the company in promoting and/or sponsoring such events.
Public Entertainment – General-Audience: Public entertainment events bearing or otherwise
displaying the name or logo or an image of any portion of the package of any of a company’s
cigarettes or otherwise referring or relating to cigarettes, which do not take place in an adult-only
facility, including all expenditures made by the company in promoting and/or sponsoring such events.
Retail-Value-Added – Bonus Cigarettes: Retail-value-added expenditures for promotions
involving free cigarettes (e.g., buy two packs, get one free), whether or not the free cigarettes are
physically bundled together with the purchased cigarettes, including all expenditures and costs
associated with the value added to the purchase of cigarettes (e.g., excise taxes paid for the free
cigarettes and increased costs under the Master Settlement Agreement).
Retail-Value-Added – Non-Cigarette Bonus: Retail-value-added expenditures for promotions
involving free non-cigarettes items (e.g., buy two packs, get a cigarette lighter), including all
expenditures and costs associated with the value added to the purchase of cigarettes.
Coupons: All costs associated with coupons for the reduction of the retail cost of cigarettes, whether
redeemed at the point-of-sale or by mail, including all costs associated with advertising or promotion,
design, printing, distribution, and redemption. However, when coupons are distributed for free
cigarettes and no purchase or payment is required to obtain the coupons or the cigarettes, these
activities are considered to be sampling and not couponing.
Sponsorships: Sponsorships of sports teams or individual athletes, but excluding endorsements.
Endorsements & Testimonials: Endorsements and testimonials.
Company Website: All expenditures associated with advertising on any company Internet website.
Internet – Other: Internet advertising other than on the Company’s own Internet website, including
on the World Wide Web, on commercial on-line services, and through electronic mail messages.
Telephone: Telephone advertising, including costs associated with the placement of telemarketing
calls or the operation of incoming telephone lines that allow consumers to participate in any
promotion or hear pre-recorded product messages; but excluding costs associated with having
customer service representatives available for responding to consumer complaints or questions.
All Other: Advertising and promotional expenditures not covered by another category.

Document Outline