RESUMEN
INTRODUCTION: Taxes on tobacco products are an efficient way of reducing consumption. However, they are only effective if passed on to consumers with higher prices. This study aims to examine tobacco industry (TI) pricing strategies in response to tax increases, and whether they differ by price segments or presentation (packs or individual sticks) in Colombia. This is the first such academic study in Latin America and the first anywhere to include the market for single sticks. METHODS: Using data on cigarette pricing/taxation from a survey of smokers (2016-2017) and official government data on pricing (2007-2019), the TI's pricing strategies were examined, split by brand, price segments, different sized packs and single cigarettes. RESULTS: The TI employed targeted pricing strategies in Colombia: differentially shifting taxes; and launching new brands/brand variants. The industry overshifted taxes when increases were smaller and predictable, but used undershifting more when there was a larger increase in 2017, after which it mostly overshifted on budget and premium (but undershifted mid-priced) brands. The prices for single sticks increased more than the tax increase in 2017 when their consumption also increased. CONCLUSION: The pricing strategies identified suggest excise taxes can be increased further, particularly the specific component, to reduce the price gap between brand segments. Brands should be restricted to a single variant along with prohibitions on launching new brands/brand variants. Lastly, since the pricing of single sticks does not match the pattern of packs, more monitoring of their sales and distribution is required, especially since they promote consumption and hinder effective implementation of tobacco tax policies.
RESUMEN
BACKGROUND: By 2016, tobacco industry provided the only illicit trade estimates in Colombia and used these to discourage tax increases since the 1990s. To establish the viability of a threefold hike in the excise tax, policy makers needed unbiased estimates of the illicit cigarette. OBJECTIVE: To estimate the size of illicit cigarette trade in five Colombian cities (63% of the market), analyse characteristics of smokers of illicit cigarettes and compare market share results with one industry-funded survey. METHODS: Street cross-sectional survey with smokers' self-report on consumption pattern, last purchase information and direct observation of smoker's packs. Sampling frame: smokers, men and women, 12 years old or older, all income levels, resident in five Colombian cities (Bogotá, Medellín, Cali, Cartagena and Cúcuta) with 1 733 316 smokers in 2013. Sample size 1697, simple random sample by city, sampling weights based on age groups and cities. Confidence level 95%, margin of error 3.5% for Bogotá and Medellín and 5% for the other three cities. Data collection period: 24 August-14 September 2016. RESULTS: Illicit cigarettes represent 3.5% of consumption in the five cities, a much lower estimate than the industry data. There are significant differences across cities, with Bogotá at the bottom (1.5%) and Cúcuta at the top (22.8%). CONCLUSION: The low overall penetration of illicit cigarettes in Colombia indicates that the industry's warnings against tax increases are not justified. The limited importance of tax levels as determinant of consumption of illicit cigarettes is also suggested by the differences across cities, all of them with the same tax regime.