03 Jun Question Section 1 Headlines of people and companies suing
Question
Section 1
Headlines of people and companies suing tobacco makers are nearly an everyday occurrence.
More and more smoking is becoming less cool as the dangers of the drug are becoming
clearer. Yet despite the costs of this habit, nearly 25% of adults still smoke, helping fuel one of
the largest industries in America. The following graph illustrates the decline of people who
smoke throughout the years CDC graph
History:
Cigarettes and tobacco has a quite unique history. Over 6000 years ago tobacco became
popular due to the beliefs that it could cure almost anything. This idea was popular until the
1500s and is the cause of tobacco spreading throughout the world. This worldwide popularity
served the early United States well due to the large crops of tobacco in the colonies and was
used for a large part of the funding for the Revolutionary war. Not long after the product was
found to be dangerous and addictive. Scientists found that nicotine was a poison as early as
1826. However the demand for cigarettes grew and grew, finding a height in the two World
Wars. Cigarettes were freely distributed to soldiers overseas (sometimes even part of the food
ration), which led to the popularity and sales of tobacco products during the wars. Soldiers would
come back and be healthy customers for the large tobacco companies. During the 1950s more
and more evidence was found that smoking caused lung cancer and soon after in 1964 the first
surgeon generals warning on cigarette packages was seen. As more people realize the danger
of the product, smoking is gradually fading from popularity and major lawsuits are taking place
to
hold the tobacco companies responsible for their products. The tobacco timeline
Company Makeup:
Tobacco companies today are very powerful and few in number. Phillip Morris and RJ Reynolds
control over 75% of the United States cigarette market (Phillip Morris website). These two
companies basically form an oligopoly. They offer very similar products and between the two
they control most of the market share. However, these companies for the most part have not
formed a cartel because there is a lot of competition between them. They spent billions each
year on advertising, lowering profits for both. This behavior is contrary to that of a good cartel.
Also, these two companies have diversified over the years in an attempt to avoid some of the
attacks on the cigarette market. Phillip Morris also runs Miller Brewing and Kraft foods. RJ
Reynolds also has business on kitchen products (Reynolds wrap aluminum foil) and also own
Nabisco. This diversification is partly to downplay the tobacco production of the companies
which is currently under fire. Also, the companies are preparing themselves for the future, in
which cigarettes and tobacco might prove too costly to produce. However, despite this
diversification in the cigarette businesses, tobacco is still a huge commodity to the United
States. In 2006, there was $90 billion in tobacco products sold in the United Sates. This is vital
to many of the southern states where a large percentage of tobacco is grown. North Carolina
and Kentucky accounted for over two-thirds of this production. Tobacco remains a vital part of
the economies for these states.
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