The Marlboro Man – an iconic advertising symbol for tobacco products at a time of widespread use – rode off into the sunset many years ago. Legal and social restrictions have taken their toll on demand for these products as an aggregate both in the US and many major export markets, and new regulations hold the potential to exact further losses. Nevertheless, for the US tobacco industry, some bright spots remain.
Cigarette Use Continues to Decline
Cigarettes represent the leading tobacco product both in terms of demand and shipments. Between 2005 and 2015, US demand for cigarettes fell at an average annual rate of 2.0%. According to the Centers for Disease Control and Prevention (CDC), the share of US adults who smoke cigarettes declined from 21% in 2005 to 15% in 2015. The rate of consumption among smokers fell as well.
Ongoing consumer education efforts, the proliferation of smoking bans in public and private places, and the emergence of new substitutes contributed to these trends. In addition, the federal government raised excise taxes on cigarettes three times between December 2005 and April 2009. The largest such increase occurred in 2009, when the Children’s Health Insurance Program Reauthorization Act raised the federal excise tax on small cigarettes from $0.39 to just over $1.00 per pack. According to the CDC, the combined federal and average state tax burden amounted to $2.21 per pack. As the data show, the increase in cost heightened a decline in cigarette use that was already underway.
New Regulations a Potential Blow to the Market
Rather than abandoning tobacco products altogether, however, many consumers shifted their consumption from cigarettes to products with lower tax and/or regulatory burdens, such as chewing tobacco, cigars, and e-cigarettes. But many of these advantages may evaporate under heightened regulatory scrutiny.
In May 2016, the Food and Drug Administration (FDA) extended its authority, which had previously focused mostly on cigarettes, to cover all tobacco products. Under the new rule, all tobacco product manufacturers must submit to regulatory oversight for product ingredients and obtain approval for new products. The impact on makers of premium and hand-rolled products, which were not exempted from the regulation, is expected to be particularly acute due to the small scale and regulatory inexperience characteristic of many of these firms. The FDA rules are expected to be less burdensome to major cigar manufacturers, many of which also produce cigarettes and therefore already possess considerable experience with FDA compliance.
Want to Learn More? Let Us Illuminate the Market for You
To uncover areas of projected growth for the US tobacco industry, see Tobacco Products: United States, a report published by the Freedonia Focus Reports division of The Freedonia Group. The report includes data and analysis covering US tobacco product demand and shipments by type for 2005-2015 with projections to 2020. The report discusses market drivers and constraints, and provides information on leading companies competing in the US industry.
Tobacco products are segmented by type in terms of:
- chewing and smoking tobacco
- other products such as electronic cigarettes and reconstituted and homogenized tobacco.
While you’re there, check out some of our related reports, such as:
About the Author
Erica Keenan is a Market Research Analyst at Freedonia Focus Reports. She holds degrees and certificates in biomedical science and data science, and her experience as an analyst spans multiple industries. Her areas of research include agriculture, food, and consumer products.