Evening star. [volume] (Washington, D.C.) 1854-1972, 1933-01-10
PRICE CUT MAY AID
CIGARETTE SALES
Tobacco Interests Watch e.
feet of Latest Reduction
in Popular Brands.
Special Dispatch to The Star.

| Special Dispatch to The Star.
| NEW YORK, January 10.-The effect
OF the latest cigarette price reduction
! Is being watched by the tobacco and
allied industries for several reasons
Cigarettes use 40 per cent of the leaf
| tobacco consumed in this country, they
form large part of the second most
important source of Federal revenue
not to mention taxes in many States
and directly and indirectly they afford
employment to thousands
The reduction came after cigarette
production showed decrease for the
first time in 20 years The four large
| companies-American Tobacco, r. j.
Reynolds, Liggett & Myers and P. Loril-
lard-in reducing their wholesale prices,
on the basis of current sales, may be
decreasing their annual revenues by
S60,00O.000.
Tax Is Uniform.
Prices were revised to meet compe-
tition from four smaller companies
Brown IL Williamson, Axiom Fisher,
Larus d Bro. and Continental To-
bacco-that had been selling 10-cent
| cigarettes and to recover sales lost by
the ''roll-your- movement, a re-
sultant of the depression
The Federal Treasury durong 1881 OBJ
| tanned $456,843,0O0 through Govern
ment receipts from tobacco, of which
S424,533,0 900 came from internal revenue
collections and 100000 from import
duties. Tobacco as a revenue source
mat year was exceeded only by the in
come tax Unless these tax rates are
revised, the present cigarette price re-
duction will not affect Federal revenues
because the tax is uniformly SO per
1000. Thus the smoker of 20 cigarettes
daily pays the Federal Government
$21.90 year in taxes
Cigarette production in 1901 amount
ed to 2,277,979,167 and rose steadily to
123,810,000.000 in 1890, but the next
year fell to 113, 449 ,049 900 and last year
was estimated around 100000, 600, 900.
Advertising, smoking by women, new
methods of manufacturing and packag-
ing and the modern tempo, which led
to the demand for a short, quick smoke,
explain the huge expansion. The de-
preston brought about the decrease
through curtailed purchasing power, the
"roll-your-ow movement and in
creased taxes by States on cigarettes.
Looking for a source of new revenue,
some States taxed cigarettes, but the
results were contrary to expectations.
Per capita consumption in the whole
United States is 975l, but. the total
per capita consumption of tax-paid
cigarettes in Iowa, Kansas, North Da-
kota, South Dakota and Utah amounts
to only ALB. A smoker will pay a
Federal tax of 6 cents on a package of
20 cigarettes, but when the State puts
on an additional tax of cents the
smoker reduces his purchases.
The latest price reduction will have
no immediate effect on the growers of
tobacco, who received on the average
3 cents pound more for their smaller
1882 crop than for the 1881 crop. This
increased cost of 1882 tobacco will not
at once hit cigarette company revenues,
because tobacco costs are averaged over
several years.
Production Costs Low.
Lower prices, however, will have to
produce increased sales volume if pres
ent profit rates are to be maintained,
or there must be reduction of costs.
Cigarette manufacturing already is
highly mechanical, so not much can
be cut off from production costs. Up
to the present, however, wages have
been relatively little changed. Unlike
some lines, cigarette makers cannot
lower quality when they cut prices,
because the business is too competitive
to permit such a step,
Wall Street believes that tobacco
stocks in recent sessions have been
oversold and that revenues of the
Big Four" will not be much affected.
Certainly the trade, with a wealth of
knowledge about selling arrangements,
offers no fiat prediction about profit
reductions. Dividend meetings of to-
bacco companies in the next few weeks
are awaited with interest.
(Copyright, 1880