With fewer smokers, Va. growers, cigarette makers seek new markets

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Some years, he gambled on raising more tobacco than he had contracts for, betting that the harvest in other tobacco-growing areas might fall short — a hurricane hitting tobacco farms in the Carolinas in the big growing regions east of Interstate 95 could send buyers scrambling for leaf.

But that’s a big gamble, given a cost of about $5,000 an acre to raise tobacco on the Old Belt.

There’s special fertilizer, the cost of running his cultivar with its spiders — think rimless spoked wheels — to pull and cover weeds, and above all the wages growers pay people to pull leaf.

Labor is 65% of a typical grower’s cost.

For the most part, those wages go to seasonal workers admitted for temporary stays with an H2A visa, with minimum wages dictated by the U.S. Department of Labor. This year, for people working in Virginia fields, they rose by just over 5% to $14.91; over the past five years, they have increased by nearly 22%.

Thompson opts for people to pick his leaf instead of the mechanical harvesters some growers use.

“You need people to say if a leaf is ripe or not,” he said. “You get a lot cleaner bale, too — no weeds or trash — and buyers want clean.”

Farms in Southside Virginia simply are not big enough for that kind of gross income per acre to yield enough money for anyone to be a full-time farmer.

Shrinking 

As the number of Virginia growers and the acreage planted fell in the 25 years after the master settlement, the value of what they sold fell to $107.6 million from $187.4 million — but the average gross for the small number of growers who kept raising tobacco rose to $352,000 from just under $32,000. Margins are squeezed, though.

Under the settlement, from 1998 to 2022 cigarette makers had paid $159 billion and those payments are to continue as long as the companies sell tobacco products.

States were free to use the funds as they chose, though the settlement urged them to step up spending on tobacco control and prevention programs. Last year, states used about 11% of the $6.38 billion of settlement payments they received for prevention and control efforts.

Virginia has so far received more than $3 billion.

It used the promise of future payments to issue bonds, and invested the proceeds.

Half of the income from those investments funds the state’s Tobacco Region Revitalization Commission’s efforts to ease the impact of falling tobacco sales on farmers and the towns that long depended on tobacco growers’ income.

The commission paid growers some $479 million to compensate them for losses they suffered as the U.S. Department of Agriculture cut tobacco quotas — the limits on the amount of tobacco they could sell — before USDA ended the program altogether by buying back quotas for $7 a pound (with $3 more for growers who held quotas).

Many producers used the money to pay off debt and keep their farms running while they shifted to other crops — but the big notion that they could grow vegetables never really panned out.

The processing, distribution and marketing systems that are needed to attract interest from supermarket chains did not come.

On top of that, soils in the Old Belt are not the most fertile. That’s good for tobacco, because it forces the plant to ripen quickly once its white or lavender-colored flowers are pulled off — “topped” as growers say. Other crops do not do as well.

Fewer cigarettes

Growing tobacco is shrinking. So is smoking.

The fraction of American adults who smoke cigarettes fell to 12.5% as of 2021, according to the Centers for Disease Control and Prevention. An additional 3.7% used e-cigarettes, 2.3% used smokeless tobacco — dip, snuff or snus — and 3.5% smoked cigars.

Just 2% of high school students smoked cigarettes. In 1997, 37.7% of high school boys and 34.7% of girls smoked cigarettes — more than double those numbers had tried it at some point, CDC reports show.

But vaping is popular: 14.1% of high school students use e-cigarettes — devices that often use synthetic nicotine rather than the tobacco-derived compound.

The year before the settlement, American tobacco companies sold 478.6 billion cigarettes, down sharply from the 1981 peak of 636.5 billion. But by 2020, the latest year for which data is available, sales had dropped to 203.7 billion, the Federal Trade Commission reported.

The way the companies market cigarettes changed dramatically, too. Promotional allowances — basically, price discounts, already the biggest marketing expense in 1997, the year before the settlement, at $2.44 billion — have climbed to $7.47 billion.

Meanwhile, the public presence of cigarettes almost disappeared.

The companies stopped spending on sponsorships, endorsements, entertainment events, sampling and advertising in newspapers, while magazine advertising fell to $4.3 million from $237 million; billboards to $1.8 million from $295.3 million. Spending on point-of-sale store displays fell from $552.6 million to $47.1 million.

Members of the 1,600-strong field sales force at Henrico-based tobacco giant Altria, manufacturer of the nation’s No. 1 cigarette brand, Marlboro, regularly visit stores with ideas for selling cigarettes. They have also convinced 197,000 retailers to sign contracts requiring them to post “We Card” signs. The signs warn buyers they may have to prove they are over 21 if they want to buy cigarettes, e-cigarettes, cigars or oral tobacco.

Altria signed up more than 137,000 stores for a scanner and software system based on an electronic scan of a consumer’s government-issued identification, such as a driver’s license, to purchase any tobacco product.

When a salesclerk scans a tobacco product for a sale, the system requires a scan of a driver’s license or similar ID before the transaction can continue. The scanner includes software that can confirm that the ID has not expired and that buyer is over 21.

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