Neighborhood Disparities in the Price of the Cheapest Cigarettes in the United States

Abstract

Background:

There is evidence that the cheapest cigarettes cost even less in neighborhoods with higher proportions of youth, racial/ethnic minorities, and low-income residents. This study examined the relationship between the price of the cheapest cigarette pack and neighborhood demographics in a representative sample of tobacco retailers in the United States.

Methods:

Data collectors recorded price of the cheapest cigarette pack (regardless of brand) in 2,069 retailers in 2015. Multi-level linear modeling examined the relationship between price and store neighborhood (census tract) characteristics, specifically median household income and percentage of youth, Black, Asian/Pacific Islander, and Hispanic residents.

Results:

Average price for the cheapest pack was $5.17 (SD=1.73) and it was discounted in 19.7% of stores. The price was $0.04 less for each standard deviation increase in the percentage of youth and $0.22 less in neighborhoods with the lowest as compared to the highest median household incomes. Excluding excise taxes, the average price was $2.48 (SD=0.85), and associations with neighborhood demographics were similar.

Conclusion:

The cheapest cigarettes cost significantly less in neighborhoods with a greater percentage of youth and lower median household income. Non-tax mechanisms to increase price, such as minimum price laws and restrictions on discounts/coupons, may increase cheap cigarette prices.

Price is perhaps the most important determinant of smoking behavior.¹ Cheap cigarettes are a concern because they provide an economical way for individuals to start smoking and disincentivize smokers from reducing consumption or quitting.^2,3 Studies suggest that this is particularly true for young people and lower-income consumers who are especially responsive to price increases.³ In addition, cheap cigarettes are a vehicle for the tobacco industry to undermine government tax increases by under-shifting prices.^4,5

In the United States (US), where federal law requires that cigarette packs contain no fewer than the standard size of 20 sticks,⁶ there is growing evidence that the cheapest cigarettes, defined as the lowest price (regardless of brand) in each store, cost less in neighborhoods with higher proportions of youth and racial/ethnic minorities and in neighborhoods with lower median household income. For example, in California, two studies conducted in 2013 and 2014 found that the cheapest cigarette pack cost less in neighborhoods with a higher proportion of youth and lower median household incomes.^7,8 One of these studies also found that the cheapest pack cost less in neighborhoods with more Asian/Pacific Islanders.⁸ A 2012 US study of stores near schools found that the cheapest pack cost less in areas with lower median household income, but there were no significant relationships with other neighborhood demographic characteristics.⁷ Outside of the US, there is similar evidence of neighborhood variation in the price of the cheapest cigarettes and discount brands.^9–11 For example, in Australia the cheapest pack and discount brands cost less in areas of greater socioeconomic disadvantage.^9,11 Discount brands were also more likely to be sold below the recommended retail price in milk bars (convenience stores) in low socioeconomic neighborhoods.¹⁰

Given public health concerns about cheap cigarettes, additional research is needed to replicate previous findings and to extend what is known about retail marketing for these products. The present study examines the price of the cheapest cigarette pack, regardless of brand, and presence of discount in a representative sample of tobacco retailers in the US.

Methods

National store audit data were collected by Advancing Science and Practice in the Retail Environment, a research consortium. A two-stage sampling design was used to obtain a nationally representative sample of tobacco retail stores from the contiguous US. County and store selection are described elsewhere.¹² Store audits were conducted by data collectors in 40 states from May to August 2015, using an electronic audit form. When the data were collected, the federal excise tax on cigarettes was $1.01 and state taxes (for this sample) ranged from $0.17 to $4.35 per pack. Data on state excise taxes were obtained from the Campaign for Tobacco Free Kids (CFTFK). Data on local excise taxes came from the American Nonsmoker’s Rights Foundation, CFTFK, and the Tobacco Control Legal Consortium. Analyses were conducted on stores (n=2,069) for which the cheapest pack price was documented (96% of 2,157 eligible stores). The University of North Carolina Office of Human Research Ethics determined that the study was not human subjects research.

Measures

Cheapest Pack Price.

In each store, data collectors asked the cashier for the price of the cheapest single pack of cigarettes regardless of brand. They noted whether sales tax was included (yes/no) and whether the price was a sale/special price (yes/no).

Neighborhood characteristics.

Census tracts were used to define store neighborhoods and characteristics were obtained from American Community Survey (2011–2015) estimates: percent of the population that was Black, Asian/Pacific Islander, Hispanic, youth (ages 5 to 17), and median household income. Racial groups were non-Hispanic. Median household income was standardized at the county level and quartiled. All other neighborhood characteristics were standardized across the entire sample.

Store type.

Stores were categorized by data collectors and later consolidated into the following categories: convenience store; drug store/pharmacy; supermarket/grocery store; mass merchandiser; beer/wine/liquor store; tobacco shop; and other (e.g., donut shop).

Data Analysis

Sampling weights were used to obtain national estimates of the average price in dollars of the cheapest pack observed in stores. Sales tax was removed when included in the price because most advertised prices exclude sales tax.¹³ A mixed-effects linear model (2,069 stores in 97 counties) was used to examine the relationship between the cheapest pack price and census tract demographic characteristics, controlling for store type and US region. Stores were clustered within counties because there was limited clustering of stores at the census-tract level (73% of census tracts had 1 retailer). We modeled cheapest pack price (in cents) before sales tax but including federal, state and local excise tax. A subsequent model analyzed the cheapest price without excise taxes. Inter-rater reliability was examined for a subset of 104 stores. Reliability for price was high (ICC=0.91).

Results

Descriptive statistics

In 2015, the average price for the cheapest cigarette pack including excise tax in this representative sample of US tobacco retailers was $5.17 (SD=1.73; range: $1.83–$12.63). The average price for the cheapest pack in convenience stores, the most common type of retailer, was $5.01 (SD=1.62). The price for the cheapest pack was lowest in mass merchandisers (M=$4.34, SD=1.24), large retail chains that sell a range of goods including groceries, apparel and appliances, often at discount prices. Only 19.7% of the cheapest pack prices were advertised as sale/special prices. The average price of the cheapest pack without federal excise tax ($1.01), and state and local excise taxes, which ranged from $.17 to $6.16, was $2.48 (SD=0.85).

Mixed-effects Model

The price for the cheapest pack decreased as the percent of residents who were youth increased (Table 1). For each standard deviation (4.9 percentage point) increase in the percent of youth, the cheapest pack cost $0.04 less. In addition, compared to neighborhoods with the highest median household income, the cheapest pack was $0.22, $0.15, and $0.18 less in neighborhoods in the lowest, second, and third quartiles of median household income, respectively. There were no significant relationships between the cheapest pack price and other neighborhood demographics. Compared to convenience stores, where the majority of cigarettes are sold, the cheapest pack cost more in all other store types except mass merchandisers (e.g., Walmart, Family Dollar, Sam’s Club). Findings were similar when the cheapest pack price excluded excise taxes (available upon request).

Table 1.

Predictors of the Cheapest Cigarette Pack Price: United States, 2015 (N = 2069)

		Cheapest Pack Price (in cents)
	M (SD)/%	B	95% CI
Intercept		484.6	436.2, 532.9
Store Type
Convenience store (with and without gas)	53.2	Ref
Drug store/pharmacy	6.6	0.3	−12.1, 12.6
Beer, wine, liquor	9.8	35.8	25.2, 46.4
Grocery store/supermarket	17.3	14.0	5.8, 22.3
Mass Merchandiser	9.1	−37.4	−47.9, −26.9
Tobacco Shop	3.3	−4.3	−21.0, 12.5
Other establishment type	0.8	71.4	37.7, 105.1
Neighborhood Characteristics
Median Household Income, $
Q1	$32,549 (9,436)	−22.1	−33.5 −10.6
Q2	$46,559 (11,756)	−14.9	−24.8, −5.0
Q3	$60,813 (14,901)	−18.1	−27.0, −9.1
Q4	$88,945 (29,109)	Ref
School-age youth (5–17 years), %	16.4 (4.9)	−4.2	−7.7, −0.8
Black, %	12.8 (19.2)	−4.2	−8.8, 0.4
Asian/PI, %	4.9 (8.9)	0.1	−4.2, 4.3
Hispanic, %	17.5 (22.3)	0.7	−4.9, 6.3
Region
West		Ref
South		−54.0	−113.5, 5.4
Midwest		52.4	−13.7, 118.5
Northeast		232.9	163.5, 302.2

Note. Bold text indicates p < .05. Asian/PI = Asian or Pacific Islander. Median household income was quartiled. All other neighborhood tract characteristics were standardized. For example, the cheapest pack price cost $.04 less with each standard deviation increase in the percentage of youth.

Discussion

In the present study, the cheapest cigarette pack cost less in neighborhoods with a higher proportion of youth and in neighborhoods with lower median household incomes. Youth and low-income smokers are especially price sensitive,³ so lower prices for the cheapest cigarettes in neighborhoods with high proportions of these groups may contribute to smoking among youth and widen socioeconomic disparities. The average price for the cheapest pack in 2015 was 18% less than national estimates of the average pack price in the US.¹⁴

Legislation that establishes a price below which cigarettes cannot be sold (minimum floor price laws; MPL) and restrictions on price promotions could limit availability of cheap cigarettes and reduce variability in prices. A simulation study found that a MPL that sets a floor price at a state’s average pack price would raise the price of cigarettes by $0.33, reduce cigarette consumption by 4%, and have a pro-equity effect on reducing socioeconomic disparities in smoking.¹⁵ State and local governments have the authority to establish MPLs and regulate price promotions.¹⁶ Cigarette prices can also be raised through taxes. In the US taxes on cigarettes are levied at federal, state and local (e.g., county) levels. State taxes vary widely due, in part, to legal preemption and other political obstacles.¹⁷ Non-tax price policy approaches, such as MPLs, may be an effective complement to taxes.¹⁵

These findings provide insights into just how cheap the tobacco industry sells cigarettes. Approximately half of the average price of the cheapest cigarettes came from excise taxes. Prior research indicates that the tobacco industry targets particular demographic groups, such as youth.¹⁸ Findings from this study suggest that the tobacco industry may try to encourage experimentation among youth with cheap prices. The industry may also keep prices lowest in neighborhoods where residents have limited financial resources to promote smoking.

Findings should be interpreted considering study limitations. Data collectors did not record information about brand or flavor for the cheapest pack. Brand may be an important factor in the observed variation in price. Future research should examine if price differences are due to different brands being sold by neighborhood or if there are different price points for the same brand by neighborhood. Prices for non-tobacco products would help illustrate whether these trends are unique to cigarette prices or consistent across products. In addition, the study was cross-sectional, precluding discussion of temporality. Neighborhood variation in the price of the cheapest cigarettes may drive demand, result from the tobacco industry responding to existing demand, or both. Also, the cost of doing business in neighborhoods with lower median household incomes may be cheaper than higher-income areas. Regardless, lower prices for the cheapest packs in neighborhoods with more youth and lower-income residents may undermine tobacco control efforts. Policies are needed that address the widespread availability of cheap cigarettes, in particular among neighborhoods with more youth and lower-income residents.

What is already known on this subject?

• Cheap cigarettes provide an economical way for individuals to start smoking and disincentivize quitting.

• Previous research suggests that the cheapest cigarettes cost less in neighborhoods with higher proportions of youth, racial/ethnic minorities and low-income residents.

What this study adds?

• This study is among the first to examine the relationship between the price of the cheapest pack of cigarettes and store neighborhood demographic characteristics in a representative sample of tobacco retailers in the United States.

• Findings from this study suggest that the cheapest cigarettes cost even less in neighborhoods with a greater percentage of youth and lower-income residents.