Tobacco companies make an average of $2.50 per day from Canadian smokers

Earlier this month, Health Canada released new data on the average wholesale unit price of manufactured cigarettes sold in each Canadian province over the past 16 years. This data allows us to compare the revenue generated by cigarette manufacturers in each province during that period, including on a per-smoker basis and in comparison with revenues from tobacco taxes in each jurisdiction.

The "average" price says little about what an individual smoker pays, but says a lot about what the companies earn.

From the purchaser's perspective, the "average" wholesale price is not a helpful indicator. For the most part, few people pay the "average" price for a pack of cigarettes. Some brands cost more than others, some stores charge more than others, and some provinces charge more tax than others. 

From a corporate income perspective, however, the "average" price is a core indicator. And when combined with public data on volume of cigarettes sold in each province, it allows us to calculate the dollar value of smokers to the companies' overall bottom line.

The average wholesale price of cigarettes in Canadian provinces has increased by 75% to 123% over the past five years

After more than a decade of stable pricing, tobacco companies began to sharply increase their wholesale prices over the past 5 years, from a national average of $0.095 per cigarette in 2014 to $0.176 in 2019, providing them an additional 85% per cigarette sold. In some provinces the average price was higher, as was the rate of increase. This may be because smokers in some provinces purchase more expensive brands, or it may be because manufacturers charge higher prices or offer fewer price discounts to retailers in some provinces. Because of inflation, the adjusted value of these increases is somewhat less, but still significant, as shown below.

Tobacco companies make $300 more per year from smokers than they did 5 years ago

Nation-wide, the amount of revenue generated by the industry for each Canadian smoker rose from $517 in 2014 to $898 in 2019.

Differences between the provinces can be attributed to differences in the amount of cigarettes purchased (some may smoke more or may purchase contraband) as well as differences in the brands chosen or wholesale prices charged. In 2019, the companies made the most revenue from smokers in the three most western provinces (about $1,100 per year per smoker) and the least in Quebec ($750 per smoker). Their revenue from each smoker has increased by an average of 74% since 2014 - ranging from 53% in Alberta to 100% in Nova Scotia.

 

Tobacco companies earn about $2.50 per day from Canadian smokers

On a daily basis, smokers in Canada provide from $2.05 (Quebec) to $3.06 (British Columbia) in revenue to cigarette manufacturers. The companies earned $1.04 more per day from the 4.7 million smokers in 2019 than they did from than 5.4 million smokers of 2014 ($2.46 vs $1.42). In some provinces the increase was almost a double: in British Columbia the average smoker paid $3.06 in 2019, compared with $1.51 in 2014.   

Tobacco companies' wholesale revenue is increasing faster than provincial tobacco taxes.

Earlier this month we showed how federal tax revenue was lower and falling relative to wholesale prices. This new data allows us to see that across Canada, while provincial tax revenues are generally higher than industry revenues they are also falling behind. (Ontario collects less in tax revenue than the industry earns from sales in that province) The examples of the province with the highest excise taxes (Manitoba) and the lowest (Quebec) are shown below, with links to data for all provinces provided below. Tobacco taxes are reported for a financial year ending in March, while corporate revenue is provided for the calendar year. 

The take-away

• The business data Health Canada requires tobacco companies to report provides insight into their evolving pricing practices. These companies are generating significantly more revenue in recent years than historically.

Downloadable fact sheets

•  Wholesale Revenues Per Smoker
• Wholesale Revenues and tax revenues

E-cigarettes and respiratory disease: from "no available evidence" to "significant concern".

Do e-cigarettes cause respiratory diseases (other than EVALI)?

Almost three years have passed since the National Academies on Sciences Engineering and Medicine (NASEM) answered that question with a "we don't know" in their landmark review of the "Public Health Consequences of E-Cigarettes".

The panel of scientists charged with this review looked only at published research that was available before the end of August, 2017. At that time, there were few researchers engaged: of the 17 studies on e-cigarette users the NASEM panel looked at, six were conducted by the same (now somewhat controversial) research team.

With little to go on, the panel found "limited evidence" that on the one hand, e-cigarettes reduced some lung diseases for smokers that switched and, on the other, that it increased lung diseases for non-smokers that vaped. Generally, they concluded that not much was known: "Conclusion 11-1: There is no available evidence whether or not e-cigarettes cause respiratory diseases in humans."

Among their recommendations were a call for the U.S. Food and Drug Administration and others to give priority to funding research into respiratory effects of e-cigarettes. With additional research funding and interest, much more evidence of the impact of e-cigarettes on lung health is available. This post reports on the troubling results of two recently published studies.

Longitudinal study of smokers found e-cigarette users are 30% to 70% more likely to develop respiratory disease

Wubin Xie of Boston University followed 21,000 adults who were participating in the American longitudinal Population Assessment of Tobacco and Health (PATH) study. None of the individuals included in their review reported any respiratory disease at the outset of their participation.

Only a few years later, however, a large percentage of those using e-cigarettes reported respiratory conditions, including COPD, emphysema, chronic bronchitis, and asthma. After adjusting for all possible other factors, the research team found that e-cigarette use was associated with a 30% increase in the risks of chronic bronchitis and asthma, a 60% increase in the risk of chronic obstructive pulmonary disease (COPD), and a 70% increase in the risk of emphysema. They tested for reverse causation and found it not to be an explanatory factor. They repeated the analysis, restricting the analysis to those who had never smoked cigarettes. The results did not change substantially. While cigarette smoking is a known risk factor for respiratory diseases, this study shows that e-cigarette use is an additional independent risk factor for respiratory diseases.

Study: Wubin Xie and colleagues. Association of electronic cigarette use with incident respiratory conditions among US adults from 2013 to 2018.

A review and meta-analyses of the relationship of e-cigarette use and respiratory diseases finds e-cigarette users have a 40% increase in the risk of asthma and 50% increase in the risk of COPD

While Wubin Xie and colleagues were conducting their research in Boston, another group of researchers, Thomas Wills and colleagues were independently researching the same subject from their base in Hawaii, using very different methods. They reviewed past epidemiological studies and conducted meta-analyses of the association of e-cigarette use with asthma and COPD, controlling for cigarette use and other covariates. There were 15 studies in the asthma meta-analysis and 9 studies in the COPD meta-analysis. (Four of the papers they looked at were included in the NASEM review, the others did not meet their selection criteria).

The results of this systematic review were remarkably similar to those posted by Wubin Xie and colleagues: there was a 40% increase in the risk of asthma and a 50% increase in the risk of COPD. The researchers tested competing explanations including possible self-report bias, the possible "ill-worker-effect" and possible reverse causality. None of these alternative explanations stood up to their scrutiny, giving them confidence that the meta-analyses results reflect real relationships.

Dr. Wills and colleagues also provided an updated review of laboratory studies and found that e-cigarette vapours cause biological changes that can lead to respiratory diseases. These adverse biological changes were observed in cell cultures, animal studies and human studies.

The team also assessed their findings against the established criteria for inferring causal relationships, and found that they met the criteria of consistency, strength of effect, temporality, biological plausibility and, in some cases, dose-response gradient. They conclude that "E-cigarette use has consequences for asthma and COPD, which is of significant concern for respirology and public health." 

Study: Thomas Wills and colleagues. E-cigarette use and respiratory disorder: An integrative review and converging evidence from epidemiological and laboratory studies. 

Growing global concerns

Three years after the NASEM report a much larger body of evidence from independent researchers is available for review, and additional scientific panels have been commissioned by international organizations and national governments to consider the evidence. These reviews have been broader in scope, covering other health effects, not just respiratory diseases, and generally conclude that e-cigarettes are not safe.

These reviews include reports by or for the World Health Organization, the European Union, the Irish Government, the Government of the Netherlands, the Australian Government, and the Spanish Government.

In February 2020, the World Health Organization concluded "ENDS [electronic nicotine delivery systems] on their own are associated with increased risk of cardiovascular diseases and lung disorders and adverse effects on the development of the fetus during pregnancy. ENDS are undoubtedly harmful, should be strictly regulated, and, most importantly, must be kept away from children."

In September 2020, based on evidence available up to April 2019, European Union's Scientific Committee on Health, Environmental and Emerging Risks (SCHEER) concluded that:

• for users of electronic cigarettes the overall weight of evidence for risks of local irritative damage to the respiratory tract is:
• moderate for heavy users of electronic cigarette due to the cumulative exposure to polyols, aldehydes and nicotine, and
• not to be excluded for average and light users. However, the overall reported incidence is low.

In June 2020, after reviewing 67 recent pertinent studies, the Irish Health Research Board concluded that e-cigarette use was responsible for "probable harms" due to respiratory diseases.

In April 2020, the Trimbos Institute reported to the Dutch government that "Newer studies provide more and more indications that the use of an e-cigarette could lead to damage to the respiratory tract and the cardiovascular system."

The Australian government website states categorically that e-cigarettes are not safe. The web-site goes on to state "many scientists are concerned that using e-cigarettes could increase risk of lung disease, heart disease and cancer."

A 2020 Spanish Health Department report states that the adverse short-term effects on the respiratory system are similar to those of cigarette smoking.

There is a growing global scientific consensus that e-cigarette use leads to increased risk of respiratory diseases.

Canadian government revenues from tobacco taxes fell by more than 8% in 2019-2020.

Earlier this week, the federal government tabled in parliament its annual report on public accounts. Together with similar reports from provincial governments (or budget statements where the public accounts are not yet ready), we now have a picture of the amount of taxes collected by Canadian governments on tobacco products over the past fiscal year - April 1, 2019 to March 31, 2020.

In all but one province (Manitoba), tobacco tax revenues were down. Last year a total of $7.64 billion were collected by territorial, provincial and federal governments in excise taxes imposed on cigarettes, cigars, smokeless, rawleaf, manufactured and other forms of tobacco. The previous year, the amount collected had totalled $8.29 billion. Links to tables of historic tax revenues and other data are provided below.  

Federal and provincial tobacco tax revenues are declining slowly, once adjusted for inflation.

Despite periodic increases in some provinces, tobacco tax revenues have been essentially flat (with a recent downward trend) for more than a decade, once inflation is taken into consideration. 

Several factors contribute to the amount of tobacco tax received by governments: the tax rate, the number of smokers and the volume of cigarettes smoked on which taxes have been avoided (illicit sales). Other than cigars (which account for less than 2% of federal tobacco tax revenue), tobacco products are taxed on a per-unit or per-weight basis and changes to retail prices have no impact on government revenues.

The average smoker provides more than twice as much tax revenue in some provinces than others.

Tobacco tax rates and the sale of untaxed tobacco vary significantly across Canadian provinces, and so too does the amount of tax received per average cigarette smoker. Ontario, which has the second-lowest cigarette tax rate and is believed to have the highest contraband rate, received the least revenue on a per-smoker basis ($650). Quebec, with the lowest tax-rate recieved slightly more ($775). Per-smoker revenue for the other provinces ranged from $1,200 to $1,625. In addition, federal tax revenues on tobacco products were about $650 per smoker. 

The impression that revenues per smoker have grown over the past 15 years is corrected once the revenues are adjusted for inflation. Both adjusted and unadjusted amounts are shown in the figures below.

(These figures are approximations only, as the Canadian Community Health Survey only provides estimates of the number of cigarette smokers and most public accounts only provide total combined revenues for all types of tobacco products. About 95% of the value of the wholesale tobacco market is for manufactured cigarettes.)

Tobacco industry revenues are increasing while tax revenues aren't.

Not all tobacco-related revenues are stagnant. Data released earlier this year by Health Canada (based on calendar, not fiscal years) show that although federal tax revenues have been stagnant, the revenue received through wholesale shipments has continued to climb.

From the information reported to and by Health Canada,  between 2009 and 2019 the volume of cigarette sales has fallen by 17% (from 28.6 to 23.9 billion), wholesale revenues on cigarette sales have climbed by 55% (from $2.7 billion to $4.2 billion) and cigarette taxes remitted to the federal government have increased by 25% (from $2.4 billion to $3 billion).

Related data sheets:

• Tax revenues from tobacco sales, 1990 to 2020
• Tax revenues per cigarette smoker, 2003 to 2020