This paper builds on tobacco document research by analysing contemporary materials to explore how the global tobacco market has changed, how transnational tobacco companies (TTCs) are responding and the implications for tobacco control. The methods involved analysis of a variety of materials, including tobacco company annual reports, investor relations materials, financial analyst reports, market research reports and data. Once China, where TTCs have little market share, is excluded, global cigarette volumes are already declining. Nevertheless, industry profits continue to increase. This pattern is explained by the pricing power of TTCs—their ability to increase prices faster than volumes fall, a consequence of market failure. Pricing power is now fundamental to the long term future of TTCs. Consequently, and in light of growing regulations, the business model of the TTCs is changing. Product innovation is now a key marketing technique used to drive consumers to buy more expensive (ie, profitable) premium cigarettes. Contrary to established wisdom, high tobacco excise rates, particularly where increases in excise are gradual, can benefit TTCs by enabling price (profit) increases to be disguised. Large intermittent tax increases likely have a greater public health benefit. TTC investments in smokeless tobacco appear designed to eliminate competition between smokeless tobacco and cigarettes, thereby increasing the pricing power of TTCs while enabling them to harness the rhetoric of harm reduction. Monitoring TTCs can inform effective policy development. The value maximising approach of TTCs suggests that a ban on product innovation and more informed tobacco excise policies are needed.
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Funding This work is supported by grant No R01CA160695 from the United States National Cancer Institute. The ongoing industry monitoring that informs this paper is supported by funding from Cancer Research UK (grant No C27260/A12294) (http://www.cancerresearchuk.org) and Smokefree South West. ABG is supported by a Health Foundation Clinician Scientist Fellowship and is a member of the UK Centre for Tobacco Control Studies (UKCTCS), a UK Centre for Public Health Excellence which is supported by funding from the British Heart Foundation, Cancer Research UK, the Economic and Social Research Council, the Medical Research Council and the National Institute of Health Research, under the auspices of the UK Clinical Research Collaboration. The funders played no role in the study design, analysis and interpretation of the data, or writing of the report, or the decision to submit the article for publication. The content is solely the responsibility of the author and does not necessarily represent the official views of the funders.
Competing interests None.
Provenance and peer review Commissioned; externally peer reviewed.