Tobacco Companies Profit at the Expense of Tobacco Farmer

Tobacco Companies Profit at the Expense of Tobacco Farmers
Between 1990 and 1998, Philip Morris’ international tobacco profits more than tripled, from $1.3
billion to $4.97 billion.8 The leaf dealers have also been prospering. Universal, for example, saw
its profits jump 23 percent in 1998, to $258 million.9 Even as their share prices plummet,
tobacco company executives have seen their salaries soar. In 1999, Philip Morris Chairman
Geoffrey Bible collected $20.6 million in salary, bonuses and stock options.10 Meanwhile, the
companies have been pressuring farmers to sell their tobacco at lower and lower prices. In
1998, the average U.S. tobacco farm had a net income of only $19,597.11
The disparity between the earnings of the farmers and the industry is clearly illustrated in the
United States. Between 1980 and 1998, the inflation-adjusted cost of growing tobacco
increased by nearly 200 percent. Yet during the same period, the average price per pound that
tobacco companies paid for flue-cured tobacco leaf rose just 19 percent, while the price they
paid for burley increased by only 14 percent. At the same time, these companies raised the
price of cigarettes by over 250 percent. Accordingly, from 1980 to 1998, the tobacco growers’
share of each dollar spent in the United States on a pack of cigarettes dropped from seven
cents to about two cents, while the cigarette companies’ share increased from 37 to 49 cents.
Since then, the tobacco growers’ share has shrunk even further, while the cigarette companies’
share continues to grow.12