Consumers Loosen Wallets for Cigarettes, Tighten for Beer and Soap

Tobacco tax increase stings but doesn’t deter smokers

Published: Tuesday, November 9, 2010 - 05:30

(ACSI: Ann Arbor, MI) -- Customer satisfaction dropped for several nondurables, while tobacco products rebounded from last year’s lows, according to a report released by the American Customer Satisfaction Index (ACSI). The report covers customer satisfaction with beer, soft drinks, tobacco, and personal care and cleaning products.

Cigarettes: higher prices? No longer much of a problem

The 2009 tax increase on cigarettes led to a sharp downturn in customer satisfaction, but a year later smokers appear to have recovered from the shock. The industry ACSI moves up 5.6 percent to a score of 76. All the major tobacco companies fare better, with Philip Morris up 7 percent to lead the industry at 77, followed by Reynolds American, up 4 percent to 75 to tie with the aggregate of all smaller tobacco brands (+6%).

“Sales taxes and higher prices typically have a dampening effect on tobacco demand, but not this time,” says Claes Fornell, founder of the ACSI and author of The Satisfied Customer: Winners and Losers in the Battle for Buyer Preference (Palgrave Macmillan, 2007). “With recent data showing overall consumption largely flat during the past two years, consumers seem to be shrugging off the tax increase and adjusting both expectations and budgets to accommodate the higher prices. But even with the current ACSI improvement, smoker satisfaction is still lower than before the tax hike.”

Beverages: Anheuser-Busch tanks

Beer-drinker satisfaction falls from its all-time high in 2009 by 2.4 percent to 82, driven by a sharp decline for Anheuser-Busch products. Last year, shortly after its acquisition by Belgian InBev, Anheuser-Busch recorded its best ACSI score ever and captured the industry lead. Now that gain has evaporated, as the company dropped 4 percent to an ACSI score of 82. Sales of the Budweiser brand fell by nearly 10 percent during the past year, the largest decline on record, as younger drinkers have increasingly turned to microbrews and low-calorie products. A-B’s weakness is Miller’s gain. Without improving, Miller claims the top ACSI spot among brewers, unchanged at 83. Molson Coors also remains unchanged, stalled at the bottom of the industry at 81.

Satisfaction with soft drinks also fell, but not by as much, down 1.2 percent to 84. Dr. Pepper Snapple Group dropped 1 percent to 85 but maintains its top position for a fifth straight year.
Pepsi is down 2 percent to 84 to tie Coca-Cola, which is unchanged. The aggregate of smaller soft drink brands—dominated by store brands, but also including labels such as Faygo and Shasta—anchors the bottom of the industry, down 7 percent to 79.

Personal care and cleaning products: Procter & Gamble stumbles

After three years of striking reliability with zero changes in either direction, customer satisfaction with personal care and cleaning products fell 2.4 percent to 83. With the exception of Colgate-Palmolive and Unilever, all companies experienced some decline.

Perennial leader Clorox is down 2 percent to 86, relinquishing the top spot to Unilever, unchanged at 87. Colgate-Palmolive edges up 2 percent to 85 to close in on Clorox, followed by Dial, down 1 percent to 83.

Much of the deterioration in the industry ACSI score is due to a plunge in customer satisfaction for market-share leader Procter & Gamble. P&G suffered a loss of 4 percent to 82, matching its lowest score since 2005. According to customer data, quality and pricing have contributed to P&G’s fall, which also is reflected in sluggish sales in several categories, especially hair care products.

“In the midst of the weakened economy and lower customer satisfaction, some consumers have abandoned P&G products in favor of lower-priced alternatives,” says Fornell. “If they find these alternatives satisfactory, it will be difficult for P&G to win customers back without offering price discounts.”

About The Author

American Customer Satisfaction Index ACSI

The American Customer Satisfaction Index (ACSI), founded at the University of Michigan’s Ross School of Business and produced by ACSI LLC, is a national economic indicator of customer evaluations of the quality of products and services available to household consumers in the United States. The national index is updated each quarter and scores on a zero-to-100 scale at the national level. The ACSI produces indexes for 10 economic sectors, 47 industries, more than 225 companies, and more than 200 federal or local government services.