More Tobacco Marketing Troubles
As if potentially fatal health consequences, increasing implementation of banishment, rising prices, major advertising restrictions, falling consumption and the recently-imposed highest tax increase in federal history weren’t problems enough, tobacco marketers have been dealt another blow.
Last Monday, President Obama signed the Family Smoking Prevention and Tobacco Control Act into law, new legislation that places tobacco products under the Food and Drug Administration's regulation for the first time. With that bold move comes even tighter marketing restrictions, including replacing ads and store displays with black-and-white text and banning outdoor advertising within 1000 feet of a school or playground.
Philip Gorham, an equity analyst who covers the tobacco industry for Morningstar Inc. in Chicago, told Marketing News that cigarette sales will likely drop in the high single digits for the year, following a 3 to 4% annual decline since 2001.
Richmond, Va.-based Altria Group Inc., parent to Philip Morris, actually supported the measure, likely because as the nation's biggest and richest tobacco company, with profits exceeding $3 billion last year, it is likely best equipped to alter its products for renewed F.D.A. approval, according to The New York Times. Other companies, such as Winston-Salem, N.C.-based Reynolds American Inc.’s, are against legislation. The company's director of communications, David Howard, conceded to Marketing News that "there are changes that are going to happen down the road, and we are going to effectively compete in the marketplace under those guidelines. It will require us to continue to be creative.”
Until the changes take place, Big Tobacco will stick to the already restrictive playbook. Altria's Philip Morris USA Inc. is focusing on increasing its direct mail database for its cigarette brands, which currently contains information on around 30 million customers, via consumer outreach in bars and promotions like last summer’s Flavor Chase sweepstakes, which touted more than 88,000 prizes, says spokesman Greg Mathe. Reynolds' created and marketed a new cigarette product last fall, Camel Crush, that comes with a menthol capsule in the filter that can be opened during smoking. Through direct marketing and in-store, the product was pitched with a “Squeeze, Click, Change” tagline, and promoted at nightlife events around the country. And as the federal tax increase took effect in April, Reynolds’ offered temporary price reductions for Pall Mall cigarettes to increase market share.
But the future may well be in smokeless, which is growing by about 6 to 7% a year, Gorham says, partly because of new products positioned as more socially acceptable.
Camel Snus is a spitless tobacco, released nationwide by Winston-Salem, N.C.-based Reynolds American Inc.’s R.J. Reynolds Tobacco Co. earlier this year. The tobacco comes in a pouch that sits in the mouth.
Reynolds distributes various snus lifestyle guides to direct mail subscribers, following positive feedback from the first batch sent in February. Snus is sold cold from its own refrigerated case to signify freshness, says Rob Dunham, senior vice president of consumer marketing for R.J. Reynolds Tobacco. Images of Camel Snus in ads and on its Web site show beads of clear water lightly coating tins, nestled against a cool blue backdrop. An ad in People came with the tag line, “Your cigarettes may get jealous.” Philip Morris is developing its own Marlboro line for national distribution, while test sales in Indianapolis, Columbus and Portland continue for a Camel tobacco product that's totally dissolvable, Dunham says.
This all goes to show that even an allegedly unmarketable product can still be marketed - which, shameless plug, is the theme of our July 30th cover story, which explores how marketers for U.S. automakers, banks and business travel and other troubled industries are trying to sell their wares at a time of incredible scrutiny and financial difficulty. Coming to your mailbox soon members.
