Tobacco industry's price-cutting ploy

Since the 1^er In September 2021, some cigarette packs in France fell below the €10 threshold, while others increased slightly. This was a tactic used by tobacco companies to attract younger consumers and circumvent tax increases that reduce smoking rates and the number of smokers.

The French press has widely reported the price reductions (-10 or -20 cents) shown on the 1^er September some cigarette brands, thus ensuring them free and illegal advertising. This price reduction is, however, only very partial, affecting only certain references within the same brand while others see a slight increase, most prices remaining unchanged[1]A maneuver by the tobacco industry that is being played out on several levels, both with consumers, public authorities and their own competitors.

A very relative drop, to compensate for the crumbling of the market

One of the objectives of this price reduction is to create attractive products, particularly for young people and working-class people, whose budgets are tighter. By lowering certain products below the psychological threshold of €10, manufacturers are seeking to boost a cigarette market that is shrinking a little more each year. They are therefore agreeing to slightly reduce their margins by lowering their selling prices in order to renew and retain their audience, while widening a gap that makes them more attractive compared to their competitors. These few reductions are partly offset by increases on so-called "premium" products. A strategy which, according to British American Tobacco (BAT, owner of Lucky Strike, Camel, Vogue, Rothmans, etc.), is supposed to illustrate "a price war between cigarette manufacturers"[2], but which looks more like a quasi-advertising operation, in order to get people talking about it.

A circumvention of tax policies

"These are not variations decided by the health or tax authorities, but an approach by manufacturers to circumvent the regular price increases.", says Loïc Josseran, president of the Alliance Against Tobacco (ACT)[3]This relative drop in prices is taking place in a context where the Ministry of Public Accounts has mentioned a moratorium on tobacco tax increases in 2021 and 2022, which the industry intends to implement and take advantage of. However, many countries have been able to verify that significant and regular increases in the price of tobacco, through an increase in taxes and excise duties, constitute one of the best ways to reduce the number of smokers. It is therefore also to counter the high price policy that tobacco manufacturers are seeking to break the €10 threshold, while public health associations are recommending a pack at €15 in 2025 with the aim of achieving a tobacco-free generation by 2030. This attitude also demonstrates that they are far from giving up the profits generated by "combustible" cigarettes, despite reassuring speeches announcing the end of smoked tobacco. When the media mentions cigarette brands and their price variations, cigarette manufacturers are simultaneously providing themselves with completely illegal advertising and reaching the widest possible audience.

One of the most persistent prejudices about taxation, still shared by 56% of French people[4], is to consider tobacco as a financial windfall for the State. However, the taxes collected on sales only amounted to 16 billion euros in 2020[5] while medical care alone is estimated at 26 billion euros, representing an annual loss of 10 to 13 billion euros for public finances. Savings on pensions, an argument often put forward, only allow savings of 1.8 billion euros, while the total social cost of smoking is estimated at 120 billion euros.[6].

Keywords: tobacco prices, taxes, circumvention, ACT, taxation

©Generation Without Tobacco

MF

---

[1] Official Journal, Order of July 23, 2021 approving the retail prices of tobacco manufactured in France, excluding overseas departments, JORF n°0187 of August 13, 2021, consulted on September 3, 2021. [2] From Sois J, Le Figaro, Cigarettes: why the price of some packs is falling, published on 1^er September 2021, accessed September 3, 2021. [3] Lerouge S, The Cross, Falling tobacco prices: trend or marketing strategy?, published on 1^er September 2021, accessed September 3, 2021. [4] BVA, ACT #1 indicators – quarterly survey carried out in November by BVA for ACT on the perception of tobacco in France. , published December 14, 2020, accessed September 3, 2021. [5] Laboureix JP (dir.), Social security accounts, report, volume 1, September 2020, 312 p. [6] Kopp P, The social cost of drugs in France, OFDT, December 2015, 75 p. National Committee Against Smoking |