Are tobacco companies profiting from death and disease? Or are they simply doing their job by delivering a return on investment? These are two sides of an argument that has been relegated to the minor leagues of national attention, and by doing so we are allowing the latter argument (the status quo) to win.
This is a pivotal moment for the future of smoking, public health and corporate profit making and it's flying almost completely under the radar. Congressman Henry Waxman, a public health champion, is retiring and while CVS took a leap forward in banning sales of cigarettes, the global smoking industry is still a behemoth.
Even though smoking causes 480,000 annual deaths in the United States alone, our leaders here in the U.S. as well as governments abroad are showing minimal distress. The number of smokers and cigarettes produced are on the rise due to population growth. The 1.1 billion smokers around the world are projected to rise to upwards of 1.64 billion by 2025. The beneficiaries will be the world's six largest tobacco companies, who together control 81% of the tobacco industry's market share. Put simply, I am concerned by our leader's lack of concern.
In the United States, the soon-retiring Henry Waxman (D-CA) has been Congress’ most fervent critic of the American tobacco industry, and his Chairmanship of the House Subcommittee on Health and the Environment from 1980 to 1994 allowed him to expose many now famous lies proferred by the heads of Big Tobacco. Waxman held numerous hearings meant to grill the so-called "Seven Dwarves" (the heads of Philip Morris U.S.A., RJ Reynolds, U.S. Tobacco, Lorillard Tobacco, Liggett Group, Brown and Williamson and the American Tobacco Company) on areas of health policy, corporate social responsibility and possible racketeering. When testifying under oath before the Waxman subcommittee, all seven claimed that "nicotine is not addictive" on national TV in one infamous 1994 hearing.
Yet there's always a David for every Goliath. While our regulators here in America have made solid inroads into labeling and normalization of smoking areas, retailers also have the capability to fight back.
On February 5, CVS announced an end to the sale of all tobacco products at each of its 7,600 stores across the U.S. by October 1, 2014. "Put simply, the sale of tobacco products is inconsistent with our purpose," says Larry J. Merlo, the CEO of health products retailer CVS Caremark. With the corporate status quo seeming to value record profits above any semblance of social responsibility, it is refreshing to see a big company like CVS make a $2 billion annual sacrifice for the greater good.
This small victory shows that government doesn’t have to be the sole emissary of responsibility against the global tobacco behemoth, but rather it has allies in the fight against six companies that together are a monopolizing force that profits from destroying the lungs and wallets of the world's consumers. A shocking 81% of the market share in the global tobacco industry is controlled by these six multinational corporations.
1. China National Tobacco Corporation (Beijing, China)
China Tobacco has 37.1% market share in the global tobacco industry, mainly from targeting China's 350+ million smokers. It has $91.7 billion annual revenue and $16 billion annual profits, one of the highest margins for any non-financial services company.
State-owned China Tobacco manufactures 2.1 of the 5.9 trillion cigarettes made each year.
2. Philip Morris International (New York City, USA)
Philip Morris International maintains 17.4% of the global tobacco market share. The company enjoys $67.7 billion annual revenue with $7.5 billion annual profits and is a separate entity from the smaller Altria Group/Philip Morris U.S.A., which only produces products for the U.S. market.
As recently as 15 years ago, Philip Morris was the largest tobacco company in the world by a comfortable margin.
3. British American Tobacco (London, United Kingdom)
[British American Tobacco was founded in 1902 and currently holds 12.0% global market share. Annual revenue is $58.1 billion and annual profits total $4.2 billion.
After decades of strong marketing in Africa, the Nigerian government has filed a massive $42.4 billion lawsuit seeking to cover past and future healthcare costs caused by smoking.
4. Japan Tobacco International (Geneva, Switzerland)
Japan Tobacco International has 9.6% of global market share. It has $65.9 billion annual revenue and $1.5 billion annual profits. Due to stricter regulations in the markets they serve, Japan Tobacco's profits are a fraction of Philip Morris International's despite almost identical annual revenue.
The Quebec Superior Court in Canada is suing the company to recoup some of the massive healthcare costs caused by smoking.
5. Imperial Tobacco (Bristol, United Kingdom)
Imperial Tobacco used to be a minor player in the global tobacco industry, but through a series of aggressive acquisitions they have clawed their way to 4.9% global market share from a paltry 0.8% in 2000. Imperial is the fifth largest tobacco company by market share, with $38.4 billion annual revenue and $2 billion annual profits.
Imperial Tobacco is the world's largest producer of cigars, rolling papers, and fine-cut tobacco.
6. Altria Group, Inc./Philip Morris U.S.A. (Richmond, Virginia)
Philip Morris U.S.A. was recently re-branded as the more benign 'Altria Group, Inc.' The company enjoys 2.8% of global market share, with $24.4 billion annual revenue and a surprisingly high $3.9 billion in annual profits. Philip Morris International was spun off in 2008 to evade taxes on U.S. operations, and now manages all overseas markets and takes in much more total revenue than Altria.
Philip Morris U.S.A. is the second most active lobbying organization in America, having spent $101 million lobbying Congress between 1998 and 2004 alone.
All other tobacco companies made up only 19% of the global tobacco industry in 2008, plummeting from 32.2% in 2000. This means that the Big 6 own a shocking 81% of world tobacco production, and have cannibalized 13.2% of the global tobacco industry since the year 2000.
Total revenue for the Big 6 in 2010 alone was $346.2 billion with $35.1 billion in pure profit, equivalent to the combined profits of Coca-Cola, Microsoft, and McDonald’s in the same year.