Tobacco Firms’ Ad Spending Up Despite Pact’s Restrictions

The tobacco industry spent more on advertising and promotions in 1999, as cigarette sales have fallen, the Federal Trade Commission said in a report Tuesday.

In the first year of spending since new restrictions by 1998’s Master Settlement Agreement, Philip Morris Cos., R.J. Reynolds Tobacco Holding Inc. and other U.S. tobacco companies spent $8.24 billion on advertising and promotions, a 22.4% increase from $6.73 billion in 1998.

The spending was the most ever reported to the FTC.

In November 1998, the tobacco industry said it would pay about $206 billion to 46 states to settle suits brought by the attorneys general. As part of the settlement, the industry agreed to curb its advertising, including phased-in restrictions on outdoor advertising, brand-name sponsorships, distribution of free samples and apparel.

The FTC report said the tobacco industry sold 411.3 billion cigarettes domestically, 47.2 billion fewer than in 1998.

The tobacco companies spent $3.54 billion on promotional allowances in 1999, which include payments to retailers for shelf space, an increase from the $2.88 billion spent in 1998, the FTC said.

In addition, the companies spent $33.7 million giving away free samples, a 134% increase from the $14.4 million spent in 1998, the FTC said.

Outdoor advertising was cut to $53.8 million from $294.7 million, and transit advertising fell to $5.6 million from $40.2 million in 1998.

At the same time, newspaper advertisements rose 73% to $51 million in 1999 from $29.4 million in 1998. Advertisements in magazines rose to $377.4 million in 1999 from $281.3 million the year before, the FTC said.

In New York Stock Exchange trading, Philip Morris shares fell 10 cents to $49.50, R.J. Reynolds rose 50 cents to $57.73, Loews Corp. shares fell 19 cents to $113.89. British American Tobacco’s American depositary receipts fell 14 cents to $16.78 on the American Stock Exchange.