Department of Defense Among Top Ten Tobacco Retailers
Department of Defense Among Top Ten Tobacco Retailers
October 22, 1996. The Department of Defense is one of the largest tobacco retailers in the nation, at the same time DOD is trying to increase preparedness among members of the Armed Services.
Six DOD services sell tobacco at a subsidized rate to servicemen and women and reservists and veterans. These are: AAFES [Army and Air Force Exchange Service], NESC [Navy Exchange Service Command], DCA [Defense Commissary Agency], MCES [Marine Corps Exchange Service], CGES [Coast Guard Exchange Service], and VCS [Veterans Commissary Service]. Among them, they sell hundreds of millions of dollars of subsidized smokes, CONUS [continental US] and overseas.
AAFES alone is one of the largest tobacco retailers in the nation. I received their sales figures recently. There is a direct correlation between their sales in a state and the cigarette tax in that state. The subsidy is real effective at getting them into the exchange stores.
Therefore, the military exchanges have set up a pricing/profit structure [assisted by lucrative contracts from the tobacco companies] that encourages strong marketing of cigarettes to servicemembers.
There are huge quantities of tobacco flowing through military hands, and the profits for those exchange services are astonishing. Not only is there an outright profit in the 30-40% range, but they get very lucrative product placement fees based on how they display the product. Each tobacco company contracts with the government through a *Director of Military Sales*.
Army & Air Force Exchange Service
Attn: Cindy Reiber
FOIA Administrator
Corporate Communications
P.O. Box 660202
Dallas, TX 75266-0202
214-312-2011
Here's an example of what I recently received from AAFES recently:
- Statistics on cigarette/tobacco sales by base location.
- Total tobacco sales worldwide and nationwide.
- Copies of contracts with the major tobacco companies.
- AAFES Annual Reports
- Guidelines & procedures for tobacco sales and marketing for military
- All memos from AAFES's electronic bulletin board for tobacco
- AAFES Board Meeting Minutes
- Memorandum of Understanding (MOU) on the new Tobacco Pricing Policy
- AAFES Strategic Plans and five year plans
- AAFES Sourcing List for tobacco products
I also have received comparable materials from each of the other agencies. I'll leave it as an exercise for the reader if you want to contact the other exchange services.
One last question: why such duplication? Why are there six exchange services doing essentially the same job? And why is the DOD doing such a good job marketing cigarettes at the same time it is trying to reduce tobacco use among soldiers, and while the VA incurs such huge medical expenses treating veterans with smoking-related diseases?
Michael Ravnitzky
Further Information on Tobacco Sales in the Military from the New York Times Editorial, The Pentagon Tries to Kick the Habit (October 25, 1996)
At military commissaries around the world, cigarettes and other tobacco products are sold at prices 30 to 60 percent lower than those charged by commercial grocery stores. That is because commissaries receive about $900 million in government subsidies each year to help cover overhead costs. That allows them to sell goods for only 5 percent above cost. Low prices, in turn, help commissaries move 58 million cartons of cigarettes a year, for a total of $458 million in sales of cigarettes and chewing tobacco.
Those high sales reflect a 32 percent smoking rate among the 1.4 million active-duty military personnel, higher than the 25 percent among the general population. The Defense Department estimates that its many smokers incur about $530 million a year in health-care costs and $345 million in lost productivity.
. . . Although commissaries will continue to sell them, the Pentagon will transfer the responsibility for pricing from the commissaries to post exchanges, the military equivalent of department stores. Since the exchanges are not subsidized, they are able to charge prices that are still below the private market but higher than the commissary rate.
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