Tobacco companies invest significant resources in marketing. The 3-year total marketing expenditure of the 15 companies covered by the index is USD23 billion. Nearly two-thirds of this amount is allocated to high-risk products.
Only six companies in the index invest a higher percentage of their marketing budgets in reduced-risk products, namely: British American Tobacco Plc (BAT), Imperial Brands Plc (Imperial), Japan Tobacco Inc (JTI), KT&G Corp (KT&G), Philip Morris International Inc (PMI), and Swedish Match AB (Swedish Match). Swedish Match marketing expenditure on reduced-risk products was largely driven by the country-wide rollout of non-tobacco nicotine pouches in the US in 2019. PMI has created IQOS online stores in multiple markets to support the growth of its heated tobacco brand. Conversely, all of these companies continue to invest significant amounts of marketing funds in high- risk products. Swedish Match support its traditional US cigar business with marketing funds and expects to: “increase its investments in marketing, distribution and sales efforts in both existing and new markets.” KT&G partially attributes the growth of its international business in traditional high-risk tobacco categories to “aggressive marketing campaigns against multinational corporations.”
Marketing resources should shift to reduced-risk alternatives to support the transition of existing smokers to reduced-risk alternatives.
Marketing activities vary greatly between countries and categories due in part to regulatory differences. While investments in television and media promotions are prohibited, there are still wide variations in point of sale advertising, display promotions, and other communications activities for reduced-risk products specifically. Overall, the legal framework in low-medium income countries, where companies sell almost exclusively high- risk products, is less stringent compared to high-medium income countries.
While the index acknowledges that certain marketing costs are incurred purely for regulatory purposes, it encourages companies not to allocate additional marketing spend to high-risk products. Marketing resources should shift to reduced-risk alternatives to support the transition of existing smokers to reduced-risk alternatives.