Consumers are not substituting electronic cigarettes for traditional cigarettes, a University of Kentucky researcher found during his study of habit formation with noncigarette products.
As principal investigator in a study funded by the Food and Drug Administration’s Center for Tobacco Products, Yuqing Zheng, an agricultural economist in the College of Agriculture, Food and Environment, studied usage in five categories of tobacco products, including cigarettes, e-cigarettes, smokeless tobacco, cigarillos and cigars.
Cigarettes account for about 80 percent of all tobacco sales.
“Cigarette purchases have dropped a bit, from about 90 percent to 80 percent of all tobacco products during the past 15 years, but it’s still a big player. Other tobacco product sales are growing, though — particularly e-cigarettes,” Zheng said.
The appearance of a new product on the market, such as e-cigarettes, spurred Zheng and the research team, comprised of the University of Georgia’s Chen Zhen; James Nonnemaker in the Public Health Research Division at RTI International; and Daniel Dench, a doctoral student in the City University of New York, to study data collected from convenience stores from 30 U.S. markets.
They examined the data for any empirical evidence to suggest e-cigarettes had become a substitute for traditional cigarettes.
The team also modeled consumer response to price changes and advertising. One way they reviewed the data was looking at cross price elasticity.
“If e-cigarette prices go up, making them too expensive, you might think people would switch to traditional cigarettes,” he said. “In that case, we would see cigarette demand going up, indicating people are substituting cigarettes for e-cigarettes. But we’re not finding that relationship, based on the economics.”
He did, however, discover a relationship between e-cigarettes and television advertising. Comparing three years of sales data to expenditures on television and magazine e-cigarette advertising, Zheng found a correlation between television ads and an increased demand for e-cigarettes.
“This adds to the policy discussion,” he said. “While cigarettes are strictly regulated in terms of advertising, there are no advertising restrictions on e-cigarettes.”
Smokeless tobacco product advertising increased demand for those products, as well. He did not find any significant impact on e-cigarette demand arising from magazine advertising.
Based on the strength of a previous period’s consumption compared to the current period, Zheng’s data also indicated that consumers displayed some type of habit-forming behavior with all five tobacco products in the study.
“If they used it in the last period, they are likely to continue to use it. And we found that e-cigarette displayed the highest degree of habit formation,” Zheng said.
He attributes that to three things. First, most e-cigarettes contain nicotine, which is known to be addictive. E-cigarettes can also be used in many places that do not permit cigarettes. And finally, unlike cigarettes, people often draw on them for long periods of time, since they don’t burn out as a traditional cigarette would.
“We should emphasize that a lot of people say e-cigarettes are less harmful than cigarettes, although there is no scientific conclusion on this yet,” Zheng said. “But definitely, manufacturers are advertising e-cigarettes as a tobacco-cessation product.”
Zheng’s study also concluded that traditional cigarettes showed the least price elasticity, meaning that a price increase does not greatly affect demand. Generally speaking, consumers of non-cigarette tobacco products are more responsive to price increases.
The American Journal of Agricultural Economics recently published Zheng’s study.