Cigarette Use Among Young Drops, Posing Threat to Tobacco Industry

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Teenagers are smoking and using e-cigarettes much less now than a year ago. The trend is a threat to the financial success of the tobacco industry, which needs younger smokers to replace an aging customer base, some of whom die from use of tobacco.

According to the Centers for Disease Control and Prevention (CDC):

The number of middle and high school students who say they are current tobacco users – defined as having used a tobacco product in the past 30 days – dropped from 4.7 million in 2015 to 3.9 million in 2016, according to new data published by the Centers for Disease Control and Prevention (CDC) and the U.S. Food and Drug Administration’s (FDA) Center for Tobacco Products.

The decline in use of tobacco products was primarily driven by a drop in e-cigarette use among middle and high school students from 3 million in 2015 to just under 2.2 million in 2016. In addition, declines were also seen during 2015-2016 among high school students who used two or more tobacco products, any combustible tobacco products, and hookah.

Education about the dangers of tobacco and more regulation of cigarette sales to youth were among the reasons cited for the trend.

Earlier CDC data show that nine out of 10 smokers first tried tobacco before age 18. About 2,100 people in the same age group become regular smokers every day.

Over 36 million Americans smoke. The largest cigarette manufacturer, Altria, shipped 28.7 billion cigarettes in the first quarter of this year, 24.7 billion of them under the Marlboro brand. The total was down 2.7% compared to the first quarter of 2016, a trend that is a continuation of most recent quarter. These trends did not stop Altria’s earnings growth. Net earnings attributed to Altria Group Inc. (NYSE: MO) shareholders were $1.4 billion, up 15% from the same period in 2016.

Despite the earnings improvement, Altria cannot buck the trend of a drop in tobacco use among young people. At some point the attrition will affect both revenue and the bottom line. In terms of revenue, this already has started, and it will get worse.