{"id":987735672,"date":"2024-12-02T12:14:42","date_gmt":"2024-12-02T11:14:42","guid":{"rendered":"https:\/\/p4h.world\/?p=987735672"},"modified":"2024-12-02T12:17:16","modified_gmt":"2024-12-02T11:17:16","slug":"big-tobacco-continues-to-thrive-off-health-harming-products","status":"publish","type":"post","link":"https:\/\/p4h.world\/en\/big-tobacco-continues-to-thrive-off-health-harming-products\/","title":{"rendered":"Big Tobacco Continues to Thrive off Health-Harming Products"},"content":{"rendered":"

[et_pb_section fb_built=”1″ admin_label=”!! PLEASE DO NOT EDIT !!!” _builder_version=”4.19.5″ _module_preset=”default” global_colors_info=”{}”][et_pb_row use_custom_gutter=”on” gutter_width=”1″ admin_label=”!!! PLEASE DO NOT EDIT !!!” _builder_version=”4.20.4″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.19.5″ _module_preset=”default” global_colors_info=”{}”][et_pb_text admin_label=”SUMMARY” _builder_version=”4.21.0″ _module_preset=”default” custom_padding=”10px||20px||false|false” global_colors_info=”{}”]Tobacco, alcohol, and sugar-sweetened beverage (SSB) industries showed strong financial performance during and after the pandemic, despite initial setbacks. Experts urge raising health taxes to curb consumption and offset industry resistance.<\/strong><\/p>\n

This blog post was first published by the Center for Global Development on 19 November, 2024<\/strong>[\/et_pb_text][et_pb_text admin_label=”TEXT – BLOCK 1 ” _builder_version=”4.21.0″ _module_preset=”default” custom_padding=”||1em||false|false” global_colors_info=”{}”]<\/p>\n

Last month, Philip Morris International (PMI), the largest global tobacco company by market capitalization, posted bumper third quarter 2024 results. Similarly, Altria, another of the world\u2019s largest producers of tobacco and cigarettes, posted\u00a0unexpectedly robust financial results<\/a>\u00a0for Q3 2024, with quarterly profits of $2.9 billion. A\u00a0new CGD note<\/a>\u00a0published today explores the financial performance of big tobacco companies, alongside alcohol and sugar-sweetened beverage (SSB) industries, during and after the COVID-19 pandemic; we find that financial results have been strong, especially for tobacco companies, and that the argument to raise excise taxes on these products is just as valid now as it was before the pandemic.<\/p>\n

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During the COVID-19 pandemic in 2020, countries faced a dilemma. On the one hand, they urgently needed to raise revenue to pay for healthcare and other vital services. On the other hand, individuals and companies were struggling and called for tax breaks and other support measures.<\/p>\n

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Health taxes on tobacco, alcohol, and SSBs could have been a way for governments to simultaneously raise revenue and improve health, reducing the burden on over-strained healthcare services. However, the industries behind these products fiercely pushed back, claiming they needed government support in the form of postponed or lowered tax payments in order to weather the pandemic. They further argued that increased taxes would raise costs for\u00a0<\/strong>consumers in an era of rising inflation, encourage illicit product consumption, and cut employment.<\/p>\n

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Alas, industry arguments countering tax rises seem to have been heeded. In the years since the pandemic, tobacco tax increases have stalled, with the average tax share of cigarette retail price increasing only marginally from\u00a041.4 percent in 2020 to 42 percent in 2022<\/a>.\u00a0 The number of countries reporting using alcohol taxes has decreased, and while there has been a substantial increase in the number of countries taxing SSBs, the rates are far lower than evidence suggests they ought to be.\u00a0<\/p>\n

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In our\u00a0new note<\/a>, we use Euromonitor data for 99 countries and financial reports for large tobacco, alcohol, and SSB firms listed in the United States, to ask,\u00a0<\/strong>\u201cwas this protection of industry interests really necessary?\u201d While we know many industries suffered during the pandemic, did this trend hold for tobacco, alcohol, and SSB companies?\u00a0<\/p>\n

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Our findings emphasize that\u00a0arguments for raising health taxes to curb consumption remain just as valid now as they were before the pandemic<\/strong>. We find that the generally adverse impact of the pandemic on company profits did not hold for tobacco companies and was merely temporary for alcohol and SSB companies.\u00a0<\/p>\n

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Figure 1: Global sales value of cigarettes, alcohol, and sugar-sweetened beverages, 2013\u201323<\/strong><\/p>\n

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Data Source: Euromonitor<\/em><\/p>\n

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For four large multinational tobacco companies (PMI, Altria, British American Tobacco, and Imperial Brands), we confirm that sales revenues held up during the pandemic (US$106 billion in 2020 compared to US$104 billion in 2019); gross profit margins increased; and gross profits and net profits (adjusted for special factors) were maintained. This is despite the fact that the global sales volume of cigarettes has been slowly decreasing for many years\u2014in other words, volume decreases were offset by price increases, reflecting tobacco companies\u2019 strong control of pricing and the price inelasticity of demand during the pandemic.<\/p>\n

[\/et_pb_text][et_pb_text admin_label=”TEXT – BLOCK 8″ _builder_version=”4.21.0″ _module_preset=”default” custom_padding=”||1em||false|false” global_colors_info=”{}”]For six large alcohol companies and seven large SSB companies, we find that sales revenue,\u00a0profit margins, and gross and net profits did fall during the pandemic in 2020, as declines from the hospitality sector were not fully offset by higher retail sales. The larger volume declines for alcohol and SSBs than for cigarettes likely reflects a proportionately greater impact from restrictions on social gatherings\u2014as these drinks are often consumed in social settings, while cigarettes are primarily purchased for own consumption. However, this decline was short-lived: by the end of 2021, sales revenue and profits for alcohol and SSB producers had almost completely recovered.[\/et_pb_text][ba_gradient_heading title=”Ever-increasing profits post-pandemic ” html_tag=”h3″ primary_color=”#455A64″ secondary_color=”#455A64″ admin_label=”HEADING (50-60 characters)” _builder_version=”4.21.0″ _module_preset=”default” title_font=”||||||||” title_font_size=”24px” title_line_height=”1em” custom_padding=”15px||10px||false|false” global_colors_info=”{}”][\/ba_gradient_heading][et_pb_text admin_label=”TEXT – BLOCK 9″ _builder_version=”4.21.0″ _module_preset=”default” custom_padding=”||1em||false|false” global_colors_info=”{}”]<\/p>\n

Over four-years on from the start of the pandemic, these industries have rebounded stronger than ever, as clearly shown by recent Big Tobacco earnings. After their strong third quarter 2024 results, PMI now forecasts a fourth consecutive year of sales volume growth since the start of the pandemic in 2020. On the back of higher pre-tax prices, including for its largest sales category (Marlboro cigarettes), and higher sales volumes, it raised its\u00a0profits estimate<\/a>\u00a0for 2024 substantially. Altria\u2019s\u00a0unexpectedly strong results<\/a>\u00a0for Q3 2024 resulted in an ~8 percent increase in its share price on the day of results release. While Altria cigarette sales did drop in the US, they still posted quarterly profits of $2.9 billion, boosted by price increases and share buybacks. And China Tobacco reported an incredible\u00a0$210 billion revenue in 2023<\/a>, up 4.3 percent from the previous year.\u00a0<\/p>\n

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Clearly, health taxes\u2014an effective policy tool to make these products less affordable and drive reductions in consumption\u2014have lagged during and after the pandemic. In the face of this challenge, the\u00a0Task Force on Fiscal Policy for Health<\/a>, co-chaired by Mike Bloomberg, Mia Amor Mottley, and Larry Summers, reconvened this year to provide recommendations for countries and international organizations. The\u00a0report<\/a>, released in September, found that all countries should significantly and regularly increase health taxes above the level of inflation, and improve their design, giving the highest priority to tobacco taxes. While many high-income countries may be (deservedly) proud of themselves for levying relatively high health tax rates, there is still room for improvement, and they cannot sit idly by as companies headquartered in their countries continue to make billions of dollars of profit through the sale of health-harming products in low- and middle-income countries. All countries must work together to share lessons of successful implementation, including how to counter industry resistance, and support others to increase and effectively design health taxes.\u00a0\u00a0<\/p>\n

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DISCLAIMER<\/h4>\n

CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.<\/span>[\/et_pb_text][et_pb_text quote_border_color=”#EA3A32″ admin_label=”OPTIONAL ELEMENT 1: YOU CAN ADD HERE A BLOCK QUOTE (250-300 ch.). TYPE THE SENTENCE, SELECT IT WITH THE MOUSE AND CLICK ON THE %22 ICON ON TOP.” _builder_version=”4.20.2″ _module_preset=”default” quote_font=”Oswald|||on|||||” quote_text_color=”#5EAABC” quote_font_size=”26px” quote_line_height=”1.3em” global_colors_info=”{}”][\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section]<\/p>\n","protected":false},"excerpt":{"rendered":"

Tobacco, alcohol, and sugar-sweetened beverage (SSB) industries showed strong financial performance during and after the pandemic, despite initial setbacks. Experts urge raising health taxes to curb consumption and offset industry resistance. This blog post was first published by the Center for Global Development on 19 November, 2024Last month, Philip Morris International (PMI), the largest global…<\/p>\n","protected":false},"author":51,"featured_media":987735854,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":"","_et_gb_content_width":""},"categories":[],"tags":[3047],"acf":[],"_links":{"self":[{"href":"https:\/\/p4h.world\/en\/wp-json\/wp\/v2\/posts\/987735672"}],"collection":[{"href":"https:\/\/p4h.world\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/p4h.world\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/p4h.world\/en\/wp-json\/wp\/v2\/users\/51"}],"replies":[{"embeddable":true,"href":"https:\/\/p4h.world\/en\/wp-json\/wp\/v2\/comments?post=987735672"}],"version-history":[{"count":22,"href":"https:\/\/p4h.world\/en\/wp-json\/wp\/v2\/posts\/987735672\/revisions"}],"predecessor-version":[{"id":987736467,"href":"https:\/\/p4h.world\/en\/wp-json\/wp\/v2\/posts\/987735672\/revisions\/987736467"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/p4h.world\/en\/wp-json\/wp\/v2\/media\/987735854"}],"wp:attachment":[{"href":"https:\/\/p4h.world\/en\/wp-json\/wp\/v2\/media?parent=987735672"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/p4h.world\/en\/wp-json\/wp\/v2\/categories?post=987735672"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/p4h.world\/en\/wp-json\/wp\/v2\/tags?post=987735672"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}