Why are tobacco companies’ profits still booming – despite government regulation and declining smoking rates?
http://www.aljazeera.com/programmes/countingthecost/2017/06/big-tobacco-big-profits-170603092904305.html
Smoking kills. So if you’re in an industry where your product is known to be damaging the health of people who buy it, then you should, in theory, go out of business.
But shares in companies listed in the Bloomberg tobacco producers index have risen 351 percent since 2009, making it one of the best investments of the past decade.
Graphic warning labels and taxes seem to have some effect on reducing the number of smokers but less so on industry profits which keep rising. And investors can’t quit buying the stocks because operating profits continue to go up.
Although some pension funds and life insurers have turned their back on the sector, it’s still not enough to hit big tobacco where it hurts.
Different tax regimes around the world mostly account for the difference in price of cigarettes. But governments are not as hooked as the consumers who buy cigarettes.
Consumers cough up for higher prices because they crave the drug in tobacco – nicotine. Without nicotine addiction, there would be no tobacco industry.
The tobacco industry knows this and has diversified to develop other nicotine products like E-cigarettes. The electronic cigarette market has grown from just $50m in 2005 to an estimated $7.5bn last year, according to Euromonitor. It’s all part of the unique economy of addiction.
New evidence suggests the dangers of cigarettes in the United States have increased despite the fall of smoking rates in recent years. A new study has found that so-called “light” cigarettes may be behind a spike in lung cancer cases, as Heidi Zhou-Castro reports.
Jeremias Paul from the World Health Organization joins Counting the Cost from Geneva to discuss the unique dynamics of the nicotine economy.
Paul thinks the tobacco industry should pay more taxes because they’re making a profit out of people’s addiction.
“If they cause death, they should be taxed to death. In the latest global adult tobacco survey, there was a reduction in tobacco use of about 20 percent, which essentially proves increasing taxes regenerates a lot of revenues but at the same time reduces consumption.”