Big Tobacco in the Marketplace

Posted 7th April 2016 by Dave Cross
Smoking rates continue to decline and yet the financial position of tobacco companies manages to remain stable. The American market contraction should be bad news as sales slump but maybe one clue is that it’s gone from 268 billion cigarettes to a mere 257 billion. How else are they changing to cope?

Firstly, thanks to legislation, their outlet for advertising has been restricted. Even so, they have employed a more intelligence-based approach and trimmed spending in this area by almost a quarter of billion dollars. The savings from more efficient business practises are allowing them to invest in global smoking markets and developing their business models for the vape industry.

A history of influencing decision-making is now being brought to bear on this new venture. Big T companies are experienced at using lobbying, third parties with similar goals and grassroots advocacy groups. Reports also reveal how they have paid in the region of $63 million to politician campaign funds in order to aid them in their venture to craft legislation that benefits them over long-standing vape companies – ensuring the power remains controlled by tobacco and pharmaceutical companies when it comes to nicotine products.

And this suits the anti-vape agenda. Stanton Glantz likened the companies to Star Trek’s Borg in their ability to keep coming on the attack in their quest for victory. And it makes attacking the entire vape industry justifiable in their eyes. A lobbyist for the pharma-funded American Cancer Society said: “You build this infrastructure for regulating e-cigarettes on a faulty promise that they're somehow a healthy product. While the scientific consensus is that they may be safer than traditional cigarettes, that doesn't mean they're safe.”

But it matters little now that long-term vapers consider themselves and the community apart from Big Tobacco. As far as politicians and campaigners are concerned, if we aren’t one and the same now then we will be in the very near future – ignoring that it will be them who engineered this situation through the legislation they enacted and continue to develop.

Tobacco shares have traditionally been a route companies used to bolster their business activities; Big T earns well and pays out big, benefiting the politicians who support them. This looks to be a similar play in the sector targeted by Big T as the independent Electronic Cigarettes International announced their dividend of $0.40 per share last week - an excellent percentage return on a share valued at a low of $0.17 and a high of $0.95.

The success Big T is experiencing in exploiting the new market has Glantz & Co. worried, but not the American Council for Science and Health (ACSH). Even IF, they argue, the market attracts experimenting youths then it will still be “less addictive than energy drinks” and “less permanent than a tattoo”.

The ACSH article points out that all successful markets consolidate as they enter maturity and there is no historical precedent for the vape industry to be any different. Small companies can’t afford the same investment into safety standards and consistency of manufacture, they posit, and Big T’s gradual expansion will confer benefits to consumers.

Tobacco industry companies aren’t just coping with the impact of the electronic cigarette market, at some point vapers won’t know anything but them. Meanwhile Glantz’ friends don’t care if smokers lose out just as long as they can make sure Big Tobacco do too.

 Dave Cross
Article by Dave Cross
Freelance writer, physicist, karateka, dog walker