Against All Odds, the U.S. Tobacco Industry Is Rolling in Money – By Jennifer Maloney and Saabira Chaudhuri April 23, 2017 1:31 p.m. ET


Profits are booming, despite government regulation, huge legal settlements and fewer smokers

Revenues for U.S. tobacco companies hit $117 billion in 2016, up from $78 billion in 2001. How the industry succeeded despite lawsuits, rising taxes and declining smoking rates. Illustration: Heather Seidel/The Wall Street Journal

TOBACCOVILLE, N.C.—It’s a great time to be a cigarette company again.

Far fewer Americans are smoking, and yet U.S. tobacco revenue is soaring, thanks to years of steady price hikes. Americans spent more at retail stores on cigarettes in 2016 than they did on soda and beer combined, according to independent market-research firm Euromonitor International. Consolidation and cost cutting are boosting profit. Big Tobacco shares are on a roll.

Two decades ago, such a boom didn’t seem possible. The industry faced a future of increasing regulation and declining sales, as older smokers quit and fewer young people picked up the habit. States were suing for billions of dollars. Bankruptcies for some players seemed just around the corner.

Things didn’t turn out so badly, though. Costs from an avalanche of legal settlements and regulatory requirements have been heavy, but they haven’t put any big players out of business. Cigarette makers found they could more than make up for falling volumes with higher prices.

“We came out of a challenging period,” said Marty Barrington, chief executive of Marlboro maker Altria Group Inc., in an interview.

The number of cigarettes sold in the U.S. fell by 37% from 2001 to 2016, according to Euromonitor. Over the same period, though, companies raised prices, boosting cigarette revenue by 32%, to an estimated $93.4 billion last year. An average pack in the U.S. cost an estimated $6.42 in 2016, up from $3.73 in 2001, according to TMA, an industry trade group.

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