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Cigarettes - US - April 2010

It is increasingly difficult for smokers to light up—cigarette taxes are at an all-time high, and smoking bans have relegated smokers to “back rooms and alleyways.” Legislation makes marketing cigarettes nearly impossible, and the social milieu increasingly sees cigarette smoking as pernicious in spite of the vast sums that cigarette taxes afford to government budgets in the midst of a recessionary period.

In this adverse climate, this report offers insight into how manufacturers and marketers of tobacco products and e-cigarettes can bolster sales, including:

  • Which alternatives to pre-rolled cigarettes have gained market share, and which are likely to do so in the future
  • Which consumers are more likely to be most receptive to alternative products
  • In-depth exploration of recent changes to the law, and legislation still pending
  • Potential ways to market tobacco products despite rigid regulation
  • Which marketing messages will best resonate with smokers
  • Countering widespread animosity for cigarettes and smokers
  • Strengths of key players in the tobacco industry
  • How branding non-cigarette products can help tobacco companies

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Table of contents

  1. Scope and Themes

    • What you need to know
      • Definition
        • Data sources
          • Sales data
            • Market forecast
              • Consumer survey data
                • Abbreviations and terms
                  • Abbreviations
                    • Terms
                    • Executive Summary

                      • Market growth comes from tax hikes; the bell tolls for cigarettes
                        • Penetration for smoking continues to slide
                          • Competition from NRTs may hurt new smokeless products
                            • Pre-rolled cigarettes carry nearly all of sales; RYO on the rise
                              • Mass merchandiser channel sales on the rise
                                • Taxes, price hikes, test inelasticity
                                  • Bans, bans, and more bans
                                    • Marlboro still head and shoulders above crowd
                                      • Brands retain distinct qualities in spite of ad bans
                                        • In spite of hurdles, 40% of smokers interested in e-cigarettes
                                          • Innovators push smokeless options
                                            • Older smokers, whites, have higher daily consumption rates
                                              • Smokers want quality and show loyalty
                                                • Smokers interested in organic/natural
                                                • Insights and Opportunities

                                                  • NRTs
                                                    • Young interested in e-smokes, alternative products in general
                                                      • Branded e-cigarettes for women
                                                        • Marketing in nightclubs and bars
                                                          • Branded roll-your-own
                                                            • Room in the market for more organic/natural options
                                                              • High-end smokes for women
                                                                • Nudie magazines for men
                                                                  • Private clubs for smokers
                                                                  • Inspire Insights

                                                                      • Key points
                                                                        • Trend: Transparency
                                                                          • What's it about?
                                                                            • Implications: the case for increased transparency in the cigarette market
                                                                              • Public attitudes toward cigarettes/nicotine more stringent than common sense
                                                                                • The case for harm reduction
                                                                                  • Figure 1: Number of quitting attempts among those trying to quit and those who have quit, by gender, December 2009
                                                                                • Pack years should be a household term among smokers
                                                                                  • Assisting harm reduction with transparent facts
                                                                                  • Market Size and Forecast

                                                                                    • Key points
                                                                                      • Higher prices testing inelasticity
                                                                                          • Figure 2: Total U.S. sales and forecast of tobacco products*, at current prices, 2004-14
                                                                                          • Figure 3: Total U.S. sales and forecast of tobacco products*, at inflation-adjusted prices, 2004-14
                                                                                        • 2035: the end of the cigarette
                                                                                          • Municipalities to save toddlers and infants from cancer
                                                                                          • Competitive Context

                                                                                            • Key points
                                                                                              • Smokeless products vs. cessation products
                                                                                                • Figure 4: Use of NRTs to quit smoking, by age, December 2009
                                                                                              • Advertising and warnings encourage smokers to quit
                                                                                                • Figure 5: Attitudes towards quitting smoking ads, by gender, December 2009
                                                                                                • Figure 6: Attitudes towards quitting smoking ads, by age, December 2009
                                                                                            • Segment Performance

                                                                                              • Recession drives sales of cigarettes, despite price
                                                                                                • Figure 7: FDMx sales and forecast of tobacco products, at current prices, by segment, 2007 and 2009
                                                                                            • Segment Performance—Cigarettes

                                                                                              • Federal excise tax increases result in higher sales
                                                                                                • Figure 8: FDMx sales of cigarettes, 2004-09
                                                                                            • Segment Performance—Smokeless Tobacco

                                                                                              • Snus aim to build sales in otherwise declining sector
                                                                                                • Figure 9: FDMx sales of snuff and chewing tobacco, 2004-09
                                                                                            • Segment Performance—Roll-your-own

                                                                                              • Roll-your-own appeals to budget-conscious smokers
                                                                                                • Figure 10: FDMx sales of roll-your-own cigarettes, 2004-09
                                                                                            • Retail Distribution

                                                                                              • Convenience stores account for three quarters of sales
                                                                                                • Figure 11: U.S. sales of tobacco products, at current prices, by retailer, 2007 and 2009
                                                                                            • Market Drivers

                                                                                              • Key points
                                                                                                • Health risks
                                                                                                  • Majority of smokers plan to quit this year
                                                                                                    • Figure 12: Plans to quit smoking cigarettes, by household income, December 2009
                                                                                                  • Antagonism to smoking and smokers
                                                                                                    • Figure 13: Hatred of cigarette smoke, by gender, November 2009
                                                                                                  • Higher cost of cigarettes a deterrent to the habit
                                                                                                    • Flavored tobaccos outlawed, and menthol under scrutiny of FDA
                                                                                                      • New dissolvable tobacco products to come under FDA scrutiny
                                                                                                        • Online and mail order sale of tobacco facing legal battles
                                                                                                        • Market Drivers: Focus on Smoking Bans

                                                                                                          • Key points
                                                                                                            • Smoking bans now the norm, not the exception
                                                                                                                • Figure 14: Map of current and scheduled future statewide smoking bans, as of December 18, 2009
                                                                                                              • Companies ban smoking in and around workplace
                                                                                                                • Smoking regulations enter personal residences
                                                                                                                • Leading Companies

                                                                                                                  • Altria holds lion’s share of market
                                                                                                                    • Figure 15: FDMx sales of leading tobacco companies, 2007 and 2009
                                                                                                                • Brand Share—Cigarettes

                                                                                                                  • Marlboro carries nearly half of market
                                                                                                                      • Figure 16: FDMx brand sales of cigarettes in the U.S., 2007 and 2009
                                                                                                                  • Brand Share—Chewing Tobacco and Snuff

                                                                                                                    • Skoal remains the most popular brand, despite declining sales
                                                                                                                      • Figure 17: FDM brand sales of chewing tobacco, spitless tobacco, and snuff in the U.S., 2007 and 2009
                                                                                                                  • Brand Share—Roll-your-own

                                                                                                                    • Growth comes from top, bottom of the market
                                                                                                                      • Figure 18: FDMx brand sales of roll-your-own tobacco in the U.S., 2007 and 2009
                                                                                                                  • Brand Qualities

                                                                                                                    • Key points
                                                                                                                      • Marlboro (Altria)
                                                                                                                        • Newport (Lorillard)
                                                                                                                          • Camel (R.J. Reynolds)
                                                                                                                            • Camel first to market with smokeless spitless snus
                                                                                                                              • Kool (R.J. Reynolds)
                                                                                                                                • Winston (R.J. Reynolds)
                                                                                                                                  • Discount Brands
                                                                                                                                    • Pall Mall and Doral (R.J. Reynolds)
                                                                                                                                      • Basic
                                                                                                                                        • Niche-targeted Brands
                                                                                                                                          • Virginia Slims
                                                                                                                                            • Capri
                                                                                                                                              • American Spirits
                                                                                                                                                • Roll-your-own brands
                                                                                                                                                • Innovations and Innovators: Focus on E-cigarettes

                                                                                                                                                  • Key points
                                                                                                                                                    • E-cigarettes seen as healthier alternative… by some
                                                                                                                                                      • E-cigarette awareness at about half of online smokers
                                                                                                                                                        • Male smokers more in the know
                                                                                                                                                          • Figure 19: Awareness of e-cigarettes, by gender, December 2009
                                                                                                                                                        • High awareness among younger smokers
                                                                                                                                                          • Figure 20: Awareness of e-cigarettes, by age, December 2009
                                                                                                                                                        • Four in ten interested in e-cigarettes
                                                                                                                                                          • Figure 21: Interest in and usage of e-cigarettes, by age, December 2009
                                                                                                                                                          • Figure 22: Interest in and usage of e-cigarettes, by gender, December 2009
                                                                                                                                                        • Product drawbacks
                                                                                                                                                          • Figure 23: Obstacles to uptake of e-cigarettes, by gender, December 2009
                                                                                                                                                          • Figure 24: Obstacles to uptake of e-cigarettes, by age, December 2009
                                                                                                                                                        • Confusion over intent of product
                                                                                                                                                          • Men and younger smokers more optimistic about e-cigarette health benefits
                                                                                                                                                            • Figure 25: Attitudes toward health value of e-cigarettes, by gender, December 2009
                                                                                                                                                            • Figure 26: Attitudes toward health value of e-cigarettes, by age, December 2009
                                                                                                                                                        • Innovations and Innovators: Snus and Dissolvables

                                                                                                                                                          • Key points
                                                                                                                                                            • Snus smokeless tobacco hit national market in 2009 and 2010
                                                                                                                                                              • Camel testing “Dissolvables” line of smokeless tobacco
                                                                                                                                                                • Awareness: About one in six smokers currently interested in snus
                                                                                                                                                                  • Figure 27: Interest in snus among smokers, December 2009
                                                                                                                                                                • Women underwhelmed by snus, may require unique branding
                                                                                                                                                                  • Figure 28: Interest in snus among smokers, by gender, December 2009
                                                                                                                                                                • Under-45s upbeat about snus
                                                                                                                                                                  • Figure 29: Interest in snus among smokers, by age, December 2009
                                                                                                                                                                • Majority do not see snus as safer than cigarettes
                                                                                                                                                                  • Figure 30: Opinions on healthfulness of snus, by gender, December 2009
                                                                                                                                                                • Smokers aged 25-44 more likely to see snus as safer than cigarettes
                                                                                                                                                                  • Figure 31: Opinions on healthfulness of snus, by age, December 2009
                                                                                                                                                                • High-income smokers see the health benefit
                                                                                                                                                                  • Figure 32: Opinions on healthfulness of snus, by household income, December 2009
                                                                                                                                                              • Advertising and Promotion

                                                                                                                                                                • Key points
                                                                                                                                                                  • FDA furthers restrictions on cigarette promotion
                                                                                                                                                                    • Advertising restrictions on tobacco become more pronounced
                                                                                                                                                                      • Packaging laws change cigarette box appearances
                                                                                                                                                                        • Sporting events off limits for tobacco
                                                                                                                                                                          • Music-related events limited as well, but nightclubs still open for promotion
                                                                                                                                                                            • New FDA restrictions on means of display and merchandising present
                                                                                                                                                                              • Websites provide offers to existing adult smokers
                                                                                                                                                                                • Marlboro offers engaging brand website
                                                                                                                                                                                  • Camel website focuses primarily on new smokeless line
                                                                                                                                                                                    • Other brands lag in online presence
                                                                                                                                                                                      • Smokeless tobacco products featured not just on brand websites
                                                                                                                                                                                        • Social networking pages an option for e-cigarettes but not for tobacco products
                                                                                                                                                                                        • Incidence

                                                                                                                                                                                          • Key points
                                                                                                                                                                                            • Smoking decreases, especially among young people
                                                                                                                                                                                              • Figure 33: Smokers, by age, April 2008-June 2009
                                                                                                                                                                                            • Wealthy less likely to smoke
                                                                                                                                                                                              • Impact of trends in household income on brand selection: Marlboro to carry loses
                                                                                                                                                                                                • Figure 34: Smokers, by household income, April 2008-June 2009
                                                                                                                                                                                              • Marlboro to lose share as body of smokers shifts to lower-income consumers
                                                                                                                                                                                                • Figure 35: Brand of cigarettes smoked, by household income, April 2008-June 2009
                                                                                                                                                                                              • Education powerful in determining whether respondents smoke
                                                                                                                                                                                                • Figure 36: Smokers, by educational attainment, April 2008-June 2009
                                                                                                                                                                                              • Two thirds of smokers have tried to quit
                                                                                                                                                                                                • Figure 37: Smoking habits, by gender, December 2009
                                                                                                                                                                                              • Under-35s smoke socially
                                                                                                                                                                                                • Figure 38: Smoking habits, by age, December 2009
                                                                                                                                                                                            • Type of Cigarette Smoked

                                                                                                                                                                                              • Smokers’ tastes “lighten” as they get older
                                                                                                                                                                                                • Figure 39: Type of cigarettes smoked, by age, April 2008-June 2009
                                                                                                                                                                                            • Brand Choice

                                                                                                                                                                                              • Key points
                                                                                                                                                                                                • Marlboro retains largest market share
                                                                                                                                                                                                  • Younger smokers more apt to vary choice in cigarette purchase
                                                                                                                                                                                                    • Figure 40: Brand of cigarettes smoked, by age, April 2008-June 2009
                                                                                                                                                                                                • Frequency of Usage

                                                                                                                                                                                                  • Key points
                                                                                                                                                                                                    • Consumption increases with age to 65
                                                                                                                                                                                                      • Figure 41: Number of cigarettes smoked, by age, April 2008-June 2009
                                                                                                                                                                                                    • Intake on the rise for younger smokers
                                                                                                                                                                                                      • Figure 42: Smoking habits compared to a year ago, by age, December 2009
                                                                                                                                                                                                  • Interest in Alternative Products

                                                                                                                                                                                                      • Key points
                                                                                                                                                                                                        • Opportunities in branded alternatives to cigarettes
                                                                                                                                                                                                          • Figure 43: Interest in alternative tobacco products among smokers, December 2009
                                                                                                                                                                                                        • Gender difference in willingness to try non-cigarette tobacco products evident
                                                                                                                                                                                                          • Figure 44: Interest in alternative tobacco products among smokers, by gender, December 2009
                                                                                                                                                                                                        • Younger smokers show more interest in cigarette alternatives
                                                                                                                                                                                                          • Figure 45: Interest in alternative tobacco products among smokers, by age, December 2009
                                                                                                                                                                                                      • Healthfulness

                                                                                                                                                                                                        • Key points
                                                                                                                                                                                                          • Continued market opportunity for more organic/natural cigarette brands
                                                                                                                                                                                                            • Figure 46: Opinions on healthfulness of tobacco products, by gender, December 2009
                                                                                                                                                                                                          • Smokers aged 25-44 find non-cigarette tobacco formats safer
                                                                                                                                                                                                            • Figure 47: Opinions on healthfulness of tobacco products, by age, December 2009
                                                                                                                                                                                                          • High-income respondents look to non-cigarettes for a safer product
                                                                                                                                                                                                            • Figure 48: Opinions on healthfulness of tobacco products, by household income, December 2009
                                                                                                                                                                                                        • Brand Selection

                                                                                                                                                                                                          • Key points
                                                                                                                                                                                                            • Cigarettes more than just nicotine systems
                                                                                                                                                                                                              • Figure 49: Attitudes toward quality of cigarettes, by household income, December 2009
                                                                                                                                                                                                            • Loyalty to favorite brand strong
                                                                                                                                                                                                              • Women are more likely to stay with their favorite brand
                                                                                                                                                                                                                • Figure 50: Attitudes toward brands of cigarettes, by gender, December 2009
                                                                                                                                                                                                              • Young smokers more apt to switch between favorite brands
                                                                                                                                                                                                                • Figure 51: Attitudes toward brands of cigarettes, by age, December 2009
                                                                                                                                                                                                              • Smokers more willing to switch between blends than brands
                                                                                                                                                                                                                • Figure 52: Attitudes toward switching between brands of cigarettes, by gender, December 2009
                                                                                                                                                                                                              • Older smokers show little interest in variety
                                                                                                                                                                                                                • Figure 53: Attitudes toward switching between brands of cigarettes, by age, December 2009
                                                                                                                                                                                                            • Race and Hispanic Origin

                                                                                                                                                                                                              • Key points
                                                                                                                                                                                                                • Blacks show highest percentage of smoking by race
                                                                                                                                                                                                                  • Figure 54: Smokers, by race/Hispanic origin, April 2008-June 2009
                                                                                                                                                                                                                • White smokers have the heaviest habit
                                                                                                                                                                                                                  • Figure 55: Number of cigarettes smoked, by race/Hispanic origin, April 2008-June 2009
                                                                                                                                                                                                                • White smokers most influential on market share
                                                                                                                                                                                                                  • Figure 56: Type of cigarettes smoked, by race/Hispanic origin, April 2008-June 2009
                                                                                                                                                                                                              • Cluster Analysis

                                                                                                                                                                                                                  • Alternatives
                                                                                                                                                                                                                    • Demographics
                                                                                                                                                                                                                      • Characteristics
                                                                                                                                                                                                                        • Opportunity
                                                                                                                                                                                                                          • Distinguishers
                                                                                                                                                                                                                            • Demographics
                                                                                                                                                                                                                              • Characteristics
                                                                                                                                                                                                                                • Opportunity
                                                                                                                                                                                                                                  • Straight Cigs
                                                                                                                                                                                                                                    • Demographics
                                                                                                                                                                                                                                      • Who they are
                                                                                                                                                                                                                                        • Opportunity
                                                                                                                                                                                                                                          • Cluster characteristics
                                                                                                                                                                                                                                            • Figure 57: Cigarette clusters, December 2009
                                                                                                                                                                                                                                            • Figure 58: Smoking status, by cigarette clusters, December 2009
                                                                                                                                                                                                                                            • Figure 59: Nicotine and tobacco product usage, by cigarette clusters, December 2009
                                                                                                                                                                                                                                            • Figure 60: Interest in trying tobacco and nicotine products, by cigarette clusters, December 2009
                                                                                                                                                                                                                                            • Figure 61: Attitudes toward smoking, by cigarette clusters, December 2009
                                                                                                                                                                                                                                            • Figure 62: Factors in cigarette brand selection, by cigarette clusters, December 2009
                                                                                                                                                                                                                                          • Cluster demographics
                                                                                                                                                                                                                                            • Figure 63: Cigarette clusters, by gender, December 2009
                                                                                                                                                                                                                                            • Figure 64: Cigarette clusters, by age, December 2009
                                                                                                                                                                                                                                            • Figure 65: Cigarette clusters, by HH income, December 2009
                                                                                                                                                                                                                                            • Figure 66: Cigarette clusters, by race, December 2009
                                                                                                                                                                                                                                            • Figure 67: Cigarette clusters, by Hispanic origin, December 2009
                                                                                                                                                                                                                                          • Cluster methodology
                                                                                                                                                                                                                                          • IRI/Builders—Key Household Purchase Measures

                                                                                                                                                                                                                                              • Overview
                                                                                                                                                                                                                                                • Cigarettes/single pack
                                                                                                                                                                                                                                                  • Consumer insights on key purchase measures—cigarettes/single pack
                                                                                                                                                                                                                                                    • Brand map
                                                                                                                                                                                                                                                      • Figure 68: Brand map, selected brands of cigarettes/single pack, buying rate by household penetration, 2009*
                                                                                                                                                                                                                                                    • Brand leader characteristics
                                                                                                                                                                                                                                                      • Key purchase measures
                                                                                                                                                                                                                                                        • Figure 69: Key purchase measures for the top brands of cigarettes/single pack, by household penetration, 2009*
                                                                                                                                                                                                                                                      • Cigarettes multipack/carton
                                                                                                                                                                                                                                                        • Consumer insights on key purchase measures—cigarettes multipack/carton
                                                                                                                                                                                                                                                          • Brand map
                                                                                                                                                                                                                                                            • Figure 70: Brand map, selected brands—multipack/carton, buying rate by household penetration, 2009*
                                                                                                                                                                                                                                                          • Brand leader characteristics
                                                                                                                                                                                                                                                            • Key purchase measures
                                                                                                                                                                                                                                                              • Figure 71: Key purchase measures for top brands—multipack/carton, by household penetration, 2009*
                                                                                                                                                                                                                                                          • Appendix: FDA Jurisdiction Over E-Cigarettes

                                                                                                                                                                                                                                                            • FDA attempting to gain authority over e-cigarettes
                                                                                                                                                                                                                                                            • Appendix: E-Cigarette Data Among All Smokers

                                                                                                                                                                                                                                                                • Figure 72: Interest in and usage of e-cigarettes, by age, December 2009
                                                                                                                                                                                                                                                                • Figure 73: Interest in and usage of e-cigarettes, by gender, December 2009
                                                                                                                                                                                                                                                                • Figure 74: Obstacles to purchase of e-cigarettes, by gender, December 2009
                                                                                                                                                                                                                                                                • Figure 75: Obstacles to purchase of e-cigarettes, by age, December 2009
                                                                                                                                                                                                                                                                • Figure 76: Attitudes regarding health of e-cigarettes, by gender, December 2009
                                                                                                                                                                                                                                                                • Figure 77: Attitudes regarding health of e-cigarettes, by age, December 2009
                                                                                                                                                                                                                                                            • Appendix: Additional Useful Tables

                                                                                                                                                                                                                                                              • Aside from the celebratory cigar, non-smokers not interested in nicotine
                                                                                                                                                                                                                                                                • Figure 78: Interest in alternative tobacco products among non-smokers, December 2009
                                                                                                                                                                                                                                                              • Minority groups show elevated interest in menthol
                                                                                                                                                                                                                                                                • Figure 79: Type of cigarettes smoked, by race/Hispanic origin, April 2008-June 2009
                                                                                                                                                                                                                                                            • Appendix: Trade Associations

                                                                                                                                                                                                                                                              Companies Covered

                                                                                                                                                                                                                                                              • Altria Group, Inc.
                                                                                                                                                                                                                                                              • American Heart Association, Inc.
                                                                                                                                                                                                                                                              • American Medical Association (AMA)
                                                                                                                                                                                                                                                              • Budget Rent A Car System Inc.
                                                                                                                                                                                                                                                              • Bureau of Alcohol, Tobacco, Firearms & Explosives
                                                                                                                                                                                                                                                              • Bureau of Economic Analysis
                                                                                                                                                                                                                                                              • Centers for Disease Control and Prevention
                                                                                                                                                                                                                                                              • Clorox Company , The
                                                                                                                                                                                                                                                              • Condé Nast Publications Inc.
                                                                                                                                                                                                                                                              • Facebook, Inc.
                                                                                                                                                                                                                                                              • Food and Drug Administration
                                                                                                                                                                                                                                                              • General Electric Company
                                                                                                                                                                                                                                                              • Google, Inc.
                                                                                                                                                                                                                                                              • Greenfield Online
                                                                                                                                                                                                                                                              • Marlboro Classics
                                                                                                                                                                                                                                                              • Marriott International, Inc.
                                                                                                                                                                                                                                                              • Maxim Magazine
                                                                                                                                                                                                                                                              • MySpace.com
                                                                                                                                                                                                                                                              • National Association for Stock Car Auto Racing (NASCAR)
                                                                                                                                                                                                                                                              • National Cancer Institute (NCI)
                                                                                                                                                                                                                                                              • Penske Automotive Group, Inc.
                                                                                                                                                                                                                                                              • R.J. Reynolds Tobacco Holdings, Inc.
                                                                                                                                                                                                                                                              • SABMiller PLC
                                                                                                                                                                                                                                                              • Scotts Miracle-Gro Co.
                                                                                                                                                                                                                                                              • Social Security Administration
                                                                                                                                                                                                                                                              • Starwood Hotels & Resorts Worldwide, Inc.
                                                                                                                                                                                                                                                              • U.S. Bureau of Labor Statistics
                                                                                                                                                                                                                                                              • U.S. Bureau of the Census
                                                                                                                                                                                                                                                              • U.S. Department of Housing and Urban Development (HUD)
                                                                                                                                                                                                                                                              • USA Today
                                                                                                                                                                                                                                                              • Walmart Stores (USA)
                                                                                                                                                                                                                                                              • World Health Organization

                                                                                                                                                                                                                                                              Cigarettes - US - April 2010

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