Word: tobacco
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...federal and state taxes, the recession and America's rising health-consciousness, have taken their toll. Consumption was down half a percent last year, dropping from 627 billion cigarettes in 1981 to 624 billion last year. John Maxwell of Lehman Brothers Kuhn Loeb, Wall Street's leading tobacco-industry analyst, believes that cigarette sales dipped an additional 3% to 6% during this year's first quarter...
Perhaps the most important cause of the recent drop was the doubling, to 16? per pack, of the federal cigarette tax on Jan. 1. In addition, many states-14 since 1982-are pushing up their levies on smokes. Says Reynolds Tobacco Chairman Edward A. Horrigan Jr.: "The excise tax, coupled with state tax increases, caused a dramatic drop in sales during the first quarter of the year." Wisconsin has the dubious honor of having the highest state cigarette tax: 25? a pack, making total taxes on a pack 41?. Those increases helped push up the price of a standard pack...
Average prices now range from 72? in tobacco-growing North Carolina to $1.06 in Connecticut, but in New York City smokers can shell out $1.25 a pack. Gone are the days when smokes cost 22? in machines; a quarter bought a pack plus 3? change wrapped in the cellophane...
Industry insiders are split over the future of generics. James W. Johnston, an executive vice president of R.J. Reynolds Tobacco, strongly opposes following Liggett into generics. He and many other cigarette officials believe that the no-names are just a recession phenomenon. Says Johnston: "In my judgment, you've got to have the link between the consumer and an identifiable brand name. I predict that the success of generics will be short-lived." Liggett officials, on the other hand, believe that smokers will stick with their new, lower-cost smokes in better times. Says Dey: "There is still brand...
Despite recent sluggish sales, tobacco executives and cigarette-industry watchers believe the market will pick up as the recovery gathers strength and consumers become accustomed to the higher taxes. Says Horrigan of Reynolds: "We've bottomed out absolutely. We have a lot of strength." Cigarette-industry officials can only hope that Horrigan is not just blowing smoke...