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Marketplace Morning Report

Rise in cigarette sales linked to cheaper gas prices

Sally Herships Nov 9, 2015
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Cigarette sales have been declining for years. If you look at a graph of smokers going from the 1960’s to just a few years ago, it looks a steep downhill ski slope. But this year cigarette sales are up. Analysts say there are many reasons — an improving economy, the federal excise tax on cigarettes staying flat since 2009, and also, oddly, what’s happening at the gas pump.

You may not be allowed to smoke at gas stations, but you can certainly shop for cigarettes there. Dan Wood, a senior associate equity analyst at Morningstar, points out that about 70 percent of cigarettes are sold at convenience stores, where people are also often getting gas.

And this year gas prices are low.

“When gas prices come down, people have a little more money in their pocket. They feel a little more comfortable spending that money,” he said.

And they do. And it’s this behavior that’s partly led to an  increase in cigarette sales. This year the number of cigarettes Altria, the parent company of Philip Morris, sold, went up by about 1.5 percent.

Least you think that’s not a big deal, Wood points out “when you’re used to seeing 3-4 percent declines every year that’s actually really strong.”

However, said Wood, it’s very likely this bump in sales is just temporary. After all, these aren’t new smokers buying cigarettes. These are old customers — the ones who are already addicted.

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