Smoke and mirrors: Cigarette tobacco makers alter labels to sidestep tax hike
Nov 19th 2009 4:00PM
Updated Dec 4th 2009 4:54PM
A major tax increase on loose cigarette tobacco has caused pipe tobacco sales to surge dramatically this year. Historically, the tobacco industry manufactured around 270,000 pounds of pipe tobacco per month. Yet, in April, it hit 566,000 pounds, ultimately skyrocketing to 1.7 million pounds in August. While pipe smoking has risen somewhat in popularity since the recession began, mostly because it's a less expensive alternative to cigars, that dynamic is but a rounding error in the spectacular growth seen this year.
So, what's behind the pipe tobacco explosion? The real answer lies in another question: What's in a name?
In April, the tax on loose cigarette tobacco -- used to roll your own -- went from $1.10 a pound to $24.78. In response, manufacturers switched from selling cigarette filler to the pipe market. Many roll-your-own cigarette tobacco makers simply relabeled their products as pipe tobacco, which is taxed at a mere $2.83 per pound. Other brands, such as Criss Cross and Farmer's Gold, replaced their original products with pipe tobacco varieties. The cuts aren't exactly the same, but the tobacco will still work in rolling papers for those inclined to use it that way.
The manufacturers call the changes a matter of survival, saying the tax hike jeopardizes their ability to stay in business. But, anti-smoking groups see it as a ploy to beat the system ... and a tentative step onto a slippery slope.
The tobacco used to self-roll cigarettes is cut more finely and burns hotter and faster, according to Ron Melendi, general manager of De La Concha, a tobacconist in Manhattan. Pipe tobacco, on the other hand, is cut wider and tends to be coarser. As a result, they are not completely interchangeable. When asked if you could smoke cigarette tobacco in a pipe, Melendi replied, "Of course, you could do whatever you want ... but it's probably not going to be very interesting to the pipe smoker."
Deception for Profit or Adaptation for Survival?
The new tobacco offered by the manufacturers who used to sell cigarette tobacco is still said to be suitable for use in rolling papers. I've seen several roll-your-own cigarette smokers turn to traditional pipe tobacco just to experience the flavor, so the effective hybrids that are now on the market would deliver an experience even closer to smoking a pipe. Some amount of brand recognition and helpful nudging from retailers is expected to help consumers understand the change.
The anti-tobacco crowd objects to the subtle shift from cigarette to pipe tobacco, claiming that it's deceptive. They believe that tobacco manufacturers are making an end-run around the law. For the federal government, the problem is more concrete. The tax revenue lost as a result of this "rebranding" could be as much as $32 million a month.
An additional concern is that, for flavored tobacco, calling the product pipe tobacco renders impotent a federal ban on flavored cigarettes. Anti-smoking advocates note that a ban on flavored pipe tobacco does not exist.
For the manufacturers, however, the issue is being positioned as one of survival. A more than 2,000% tax increase, one may reason, is likely to alter buying and consumption patterns.
So, is this a clever adaptation to changing market conditions, or is it a ploy to beat the system? The changes in the products themselves seem to be substantial enough to ensure that the manufacturers are complying with the letter of the law ... but advocates are likely to call for changes. Either way, the war over tobacco rages on, with nobody willing to yield even an inch of hard-fought ground.
Disclosure: Tom Johansmeyer is a cigar smoker and occasionally smokes a pipe. He does not smoke cigarettes and does not consume flavored tobaccos of any kind.