POP goes the power wall? Taking aim at tobacco promotional strategies utilised at retail.

T obacco firms face an increasingly stringent regulatory environment. Despite having fewer viable options in the promotional mix, industry promotional spending has persisted, reaching record levels. In the USA, $11.22 billion was spent on tobacco promotion during 2001. Once one form of promotion is banned, tobacco firms utilise other marketing strategies to continue communicating brand imagery. Radio and television advertising was no longer acceptable for cigarettes in New Zealand, the UK, the USA, Canada, and Australia, commencing in 1963, 1965, 1971, 1972, and 1976, respectively. Consequently, the tobacco industry shifted their promotional spending largely toward the print media. Individual tobacco companies also turned to sponsoring broadcast sports events to compensate for lost broadcast advertising exposure. In Canada, with the implementation of the Tobacco Products Control Act that stipulated a ban on tobacco product advertising, expenditures on sponsorship increased considerably during the late 1980s and early 1990s. And once bans were placed on tobacco sponsorship in countries such as Australia, Canada, and New Zealand, the tobacco industry placed further resources toward point-of-sale strategies, package design, trademark diversification, direct marketing campaigns, and ‘‘cigarette girls’’ who returned to bars and nightclubs. In the USA, a ban on billboard advertising, in accordance with the 1998 Master Settlement Agreement, prompted an increase in the prevalence of both interior and exterior tobacco advertising at retail outlets (fig 1). 11 Richard Pollay has remarked, ‘‘It’s like squeezing a balloon. You can shut down one media, but the problem just moves somewhere else’’. In the context of partial advertising bans, retail promotion, which consists of point-of-sale (POS) or point-of-purchase (POP) advertising, has become a central focus of tobacco marketing efforts. According to US advertising trade press, retail merchandising contracts are now the most potent part of a tobacco company’s marketing arsenal, and ‘‘the contracts are cigarette marketers’ primary marketing tool since the 1998 Master Settlement Agreement prohibited most tobacco advertising’’. A mere 2% of US tobacco advertising budgets was dedicated toward magazines, newspapers, and outdoor locations in 2001. Yet, when combining the point-of-sale advertising, promotional allowances (payments to retailers for shelf space), and retail value added (costs associated with bonus items distributed at retail when cigarettes are purchased) categories, Federal Trade Commission data reveal that US tobacco firms now spend 85% of their promotional dollars via retailers. A similar scenario is evident in Canada. Based on data gleaned from internal industry documents, ‘‘retail POS’’ and ‘‘trade promotion’’ accounted for 53% of the Canadian tobacco industry’s promotional budget in 1996. At the time, sponsorship was also permissible, generating 41% of promotional spending. Considering that a tobacco sponsorship ban has been implemented in Canada since October 2003, promotion at retail will presumably become even more prominent. Tobacco promotion at retail is pervasive. The Point of Purchase Advertising Institute monitors in-store advertising expenditures for 22 industries, and reveals that the tobacco industry is the top spender on in-store media. Merchants receive significantly more money for tobacco display allowances relative to other product categories. Feighery and colleagues, for example, compared incentive programmes among small retail outlets in Santa Clara, California for five different product types: tobacco, beer and wine, soft drinks, snack foods, and candy. They found that, among the five measured product categories, approximately 78% of incentive payments came from tobacco firms. US tobacco firms typically provide incentives to retailers in exchange for their brands having at least 40% of shelf space (Philip Morris and RJ Reynolds (RJR) purportedly negotiate for as much as 55%), obtaining desirable shelf placement, displaying promotional items and signage, meeting minimum sales volume standards, providing ‘‘buydowns’’ (retailers pass along reduced prices to consumers), and maintaining one of their brands as the cheapest available. 17–19 Some of these incentive programmes have undergone considerable scrutiny, being the subject of antitrust litigation initiated by competing tobacco firms. The Liggett Group filed an antitrust suit against RJR claiming that the firm’s ‘‘Everyday Low Pricing’’ programme was unfair. In an attempt to minimise the competitiveness of contending deep discount brands, RJR’s programme required that their brands, such as Best Value or Monarch, be the lowest priced offerings at retail. RJR, meanwhile, alleged that Philip Morris’ ‘‘Retail Leaders’’ programme, implemented in 1999, was anti-competitive because the firm had considerable clout with its market share and was forcing retailers to give brands, such as Marlboro, superior shelf positions. 20