Do consumers of manufactured cigarettes respond differently to price changes compared with their Roll-Your-Own counterparts? Evidence from New Zealand

Transitions from and to roll-your-own tobacco, perceptions and health beliefs among smokers: findings from the EUREST-PLUS ITC Europe Surveys

BACKGROUND

The prevalence of roll-your-own tobacco (RYO) in Europe has been increasing. The aim of this study was to investigate transitions between factory-made (FM) cigarettes and RYO in a longitudinal sample of European smokers, and their perceptions of relative harmfulness and knowledge of health effects.

METHODS

We used data collected from the EUREST-PLUS ITC 6 European Country (6E) Surveys in 2016 (n = 6011 smokers) and in 2018 (n = 6027) in Germany, Greece, Hungary, Poland, Romania and Spain. A total of 3195 cohort respondents were interviewed in both years. Use of RYO and FM, knowledge of health effects of smoking as well as perceptions about RYO were assessed. We used logistic regression models to explore sociodemographic correlates of transitions from one product to the other, of perceptions and knowledge related to smoking health effects.

RESULTS

Approximately 7.4% of exclusive FM smokers transitioned to RYO and 29.5% of exclusive RYO smokers transitioned to FM cigarettes from 2016 to 2018. RYO use in 2018 was more frequent among smokers of low education and income, but none of these factors were associated with transitions. Most RYO smokers perceived RYO as cheaper than FM and 21.7% of them considered RYO to be less harmful than FM. Knowledge of the health effects of smoking was not associated with type of product smoked.

CONCLUSIONS

RYO is popular among European smokers; its lower cost seems to be a major factor for RYO users; reasons for transitions to and from RYO are less clear and need to be further investigated.

Impact of tobacco tax increases and industry pricing on smoking behaviours and inequalities: a mixed-methods study

Background

Increasing tobacco prices through taxation is very effective for reducing smoking prevalence and inequalities. For optimum effect, understanding how the tobacco industry and smokers respond is essential. Tobacco taxation changes occurred in the UK over the study period, including annual increases, a shift in structure from ad valorem to specific taxation and relatively higher increases on roll-your-own tobacco than on factory-made cigarettes.

Objectives

Understanding tobacco industry pricing strategies in response to tax changes and the impact of tax on smokers’ behaviour, including tax evasion and avoidance, as well as the effect on smoking inequalities. Synthesising findings to inform how taxation can be improved as a public health intervention.

Design

Qualitative analysis and evidence synthesis (commercial and Nielsen data) and longitudinal and aggregate cross-sectional analyses (International Tobacco Control Policy Evaluation Project data).

Setting

The UK, from 2002 to 2016.

Data sources and participants

Data were from the tobacco industry commercial literature and retail tobacco sales data (Nielsen, New York, NY, USA). Participants were a longitudinal cohort (with replenishment) of smokers and ex-smokers from 10 surveys of the International Tobacco Control Policy Evaluation Project (around 1500 participants per survey).

Main outcome measures

(1) Tobacco industry pricing strategies, (2) sales volumes and prices by segments over time and (3) smokers’ behaviours, including products purchased, sources, brands, consumption, quit attempts, success and sociodemographic differences.

Review methods

Tobacco industry commercial literature was searched for mentions of tobacco products and price segments, with 517 articles extracted.

Results

The tobacco industry increased prices on top of tax increases (overshifting), particularly on premium products, and, recently, the tobacco industry overshifted more on cheap roll-your-own tobacco than on factory-made cigarettes. Increasingly, price rises were from industry revenue generation rather than tax. The tobacco industry raised prices gradually to soften impact; this was less possible with larger tax increases. Budget measures to reduce cheap product availability failed due to new cheap factory-made products, price marking and small packs. In 2014, smokers could buy factory-made (roll-your-own tobacco) cigarettes at real prices similar to 2002. Exclusive roll-your-own tobacco and mixed factory-made cigarettes and roll-your-own tobacco use increased, whereas exclusive factory-made cigarette use decreased, alongside increased cheap product use, rather than quitting. Quitting behaviours were associated with higher taxes. Smokers consumed fewer factory-made cigarettes and reduced roll-your-own tobacco weight over time. Apparent illicit purchasing did not increase. Disadvantaged and dependent smokers struggled with tobacco affordability and were more likely to smoke cheaper products, but disadvantage did not affect quit success.

Limitations

Different for each data set; triangulation increased confidence.

Conclusions

The tobacco industry overshifted taxes and increased revenues, even when tax increases were high. Therefore, tobacco taxes can be further increased to reduce price differentials and recoup public health costs. Government strategies on illicit tobacco appear effective. Large, sudden tax increases would reduce the industry’s ability to manipulate prices, decrease affordability and increase quitting behaviours. More disadvantaged, and dependent, smokers need more help with quitting.

Future work

Assessing the impact of tax changes made since 2014; changing how tax changes are introduced (e.g. sudden intermittent or smaller continuous); and tax changes on tobacco initiation.

Funding

This project was funded by the National Institute for Health Research (NIHR) Public Health Research programme and will be published in full in Public Health Research; Vol. 8, No. 6. See the NIHR Journals Library website for further project information.

Smokers' strategies across social grades to minimise the cost of smoking in a period with annual tax increases: evidence from a national survey in England

OBJECTIVES

To assess associations between smokers' strategies to minimise how much their smoking costs and cost of smoking among smokers across three social grades during a period of annual tax increases in England.

DESIGN

Repeat cross-sectional.

SETTING

England, May 2012-December 2016.

PARTICIPANTS

16 967 adult smokers in 56 monthly surveys with nationally representative samples.

MEASURES AND ANALYSIS

Weighted generalised additive models assessed associations between four cost-minimising strategies (factory-made and roll-your-own (RYO) cigarette consumption levels, illicit and cross-border purchases) and cost of smoking (£/week). We adjusted for inflation rate, age, gender and secular and seasonal trends.

RESULTS

Cost of smoking did not increase above the rate of inflation. Factory-made cigarette consumption decreased, while proportion of RYO and, to a much lesser extent, illicit and cross-border purchases increased. These trends were only evident in lowest social grade. Cost of smoking was 12.99% lower with consumption of 10 fewer factory-made cigarettes (95% CI -13.18 to -12.80) and 5.86% lower with consumption of 10 fewer RYO cigarettes (95% CI -5.66 to -6.06). Consumption levels accounted for 60% of variance in cost. Cross-border and illicit tobacco purchases were associated with 9.64% (95% CI -12.94 to -6.33) and 9.47% (95% CI -12.74 to -6.20) lower costs, respectively, but due to low prevalence, accounted for only 0.2% of variation. Associations were similar across social grades, although weaker for illicit and cross-border purchases and stronger for consumption in higher social grades compared with lower social grades.

CONCLUSION

During a period of annual tax increases, the weekly cost of smoking did not increase above inflation. Cost-minimising strategies increased, especially among more disadvantaged smokers. Reducing cigarette consumption and switching to RYO tobacco explained a large part of cost variation, while use of illicit and cross-border purchasing played only a minor role.

A comprehensive examination of own- and cross-price elasticities of tobacco and nicotine replacement products in the U.S

While much is known about the demand for cigarettes, research on the demand for non-cigarette tobacco products and the cross-price impacts among those products is limited. This study aims to comprehensively examine the own- and cross-price elasticities of demand for tobacco and nicotine replacement products (NRPs) in the U.S. We analyzed market-level quarterly data on sales and prices of 15 different types of tobacco products and NRPs from 2007 to 2014, compiled from retail store scanner data. Fixed effects models with controls were used to estimate their own-price elasticities and cross-price elasticities between cigarettes and the other 14 products. Our results show that, except for cigars, the demand for combustible tobacco products was generally elastic, with the estimated own-price elasticity >1 (10% increase in prices reduces sales by >10%). The own-price elasticities for smokeless tobacco products were smaller than those for combustible tobacco, although not always significant. The demand for electronic cigarettes and NRPs was found to be elastic. The cross-price elasticities with respect to cigarettes were positive for cigarillos, little cigars, loose tobacco, pipe tobacco, electronic cigarettes and NRPs, but only results for little cigars, loose tobacco, pipe tobacco, and dissolvable lozenges were consistently significant. Our findings suggest demand for tobacco products and NRPs was responsive to changes in their own prices. Substitutions or positive cross-price impacts between cigarettes and certain other products exist. It is important that tobacco control policies take into account both own- and cross-price impacts among tobacco products and NRTs.

Who uses rollies? Trends in product offerings, price and use of roll-your-own tobacco in Australia

Objective

We examined the roll-your-own (RYO) tobacco product market in Australia from 2001 to 2016. Trends in use of RYO tobacco among Australian adults were examined for 2004–2016.

Methods

Changes in brand availability, pouch sizes and lowest priced products were noted from trade magazines. Prevalence of smoking of RYO and factory-made (FM) cigarettes among those 18 years and older was obtained from five consecutive waves of a large (n>21 000) nationally representative triennial survey from 2004 to 2016. Trends in cigarette use were examined using logistic regression.

Results

Changes in the Australian RYO market from 2001 to 2016 included a doubling in the number of brands, progressively smaller pouch sizes with smaller increases in price than in traditional RYO and comparable FM products. While use of FM cigarettes declined between 2004 and 2016, the proportion of adults exclusively using RYO tobacco linearly increased with each survey wave (OR 1.03, 95% CI 1.02 to 1.05, p<0.001), from 1.2% in 2004 to 1.7% in 2016. Exclusive RYO use among current smokers increased more among females than males, and young adults compared with those aged 30 years or older, but did not differ by socioeconomic status.

Conclusions

In contrast to substantial declines in FM cigarette use, exclusive use of RYO cigarettes increased in Australians since 2004, particularly among females and young adults. This has corresponded to a period of substantial changes to the RYO market, including progressively smaller and relatively more affordable products. Policy action to reduce price-related marketing and correct consumer misinformation about RYO tobacco are urgently required.

Price, tax and tobacco product substitution in Zambia: findings from the ITC Zambia Surveys

BACKGROUND

In Zambia, the number of cigarette users is growing, and the lack of strong tax policies is likely an important cause. When adjusted for inflation, levels of tobacco tax have not changed since 2007. Moreover, roll-your-own (RYO) tobacco, a less-costly alternative to factory-made (FM) cigarettes, is highly prevalent.

DATA AND METHODS

We modelled the probability of FM and RYO cigarette smoking using individual-level data obtained from the 2012 and 2014 waves of the International Tobacco Control (ITC) Zambia Survey. We used two estimation methods: the standard estimation method involving separate random effects probit models and a method involving a system of equations (incorporating bivariate seemingly unrelated random effects probit) to estimate price elasticities of FM and RYO cigarettes and their cross-price elasticities.

RESULTS

The estimated price elasticities of smoking prevalence are -0.20 and -0.03 for FM and RYO cigarettes, respectively. FM and RYO are substitutes; that is, when the price of one of the products goes up, some smokers switch to the other product. The effects are stronger for substitution from FM to RYO than vice versa.

CONCLUSIONS

This study affirms that increasing cigarette tax with corresponding price increases could significantly reduce cigarette use in Zambia. Furthermore, reducing between-product price differences would reduce substitution from FM to RYO. Since RYO use is associated with lower socioeconomic status, efforts to decrease RYO use, including through tax/price approaches and cessation assistance, would decrease health inequalities in Zambian society and reduce the negative economic consequences of tobacco use experienced by the poor.

Price elasticity of demand of non-cigarette tobacco products: a systematic review and meta-analysis

OBJECTIVE

To systematically review the price elasticity of demand of non-cigarette tobacco products.

DATA SOURCES

Medline, Embase, EconLit and the Web of Science without language or time restrictions.

STUDY SELECTION

Two reviewers screened title and abstracts, then full texts, independently and in duplicate. We based eligibility criteria on study design (interventional or observational), population (individuals or communities without geographic restrictions), intervention (price change) and outcome (change in demand).

DATA EXTRACTION

We abstracted data on study features, outcome measures, statistical approach, and single best own- and cross-price elasticity estimates with respect to cigarettes. We conducted a random effects meta-analysis for estimates of similar product, outcome and country income level. For other studies we reported median elasticities by product and country income level.

DATA SYNTHESIS

We analysed 36 studies from 15 countries yielding 125 elasticity estimates. A 10% price increase would reduce demand by: 8.3% for cigars (95% CI 2.9 to 13.8), 6.4% for roll your owns (95% CI 4.3 to 8.4), 5.7% for bidis (95% CI 4.3 to 7.1) and 2.1% for smokeless tobacco (95% CI -0.6 to 4.8). Median price elasticities for all ten products were also negative. Results from few studies that examined cross-price elasticity suggested a positive substitution effect between cigarette and non-cigarette tobacco products.

CONCLUSIONS

There is sufficient evidence in support of the effectiveness of price increases to reduce consumption of non-cigarette tobacco products as it is for cigarettes. Positive substitutability between cigarette and non-cigarette tobacco products suggest that tax and price increases need to be simultaneous and comparable across all tobacco products.

Tobacco industry strategies undermine government tax policy: evidence from commercial data

OBJECTIVE

Taxation equitably reduces smoking, the leading cause of health inequalities. The tobacco industry (TI) can, however, undermine the public health gains realised from tobacco taxation through its pricing strategies. This study aims to examine contemporary TI pricing strategies in the UK and implications for tobacco tax policy.

DESIGN

Review of commercial literature and longitudinal analysis of tobacco sales and price data.

SETTING

A high-income country with comprehensive tobacco control policies and high tobacco taxes (UK).

PARTICIPANTS

2009 to 2015 Nielsen Scantrak electronic point of sale systems data.

MAIN OUTCOME MEASURES

Tobacco segmentation; monthly prices, sales volumes of and net revenue from roll-your-own (RYO) and factory-made (FM) cigarettes by segment; use of price-marking and pack sizes.

RESULTS

The literature review and sales data concurred that both RYO and FM cigarettes were segmented by price. Despite regular tax increases, average real prices for the cheapest FM and RYO segments remained steady from 2013 while volumes grew. Low prices were maintained through reductions in the size of packs and price-marking. Each year, at the point the budget is implemented, the TI drops its revenue by up to 18 pence per pack, absorbing the tax increases (undershifting). Undershifting is most marked for the cheapest segments.

CONCLUSIONS

The TI currently uses a variety of strategies to keep tobacco cheap. The implementation of standardised packaging will prevent small pack sizes and price-marking but further changes in tax policy are needed to minimise the TI's attempts to prevent sudden price increases.