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Alcohol And Tobacco Markets In US

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Discuss about the Alcohol and Tobacco Markets In US.



In United States, there is a growing concern for rising consumption of cigarette and alcoholic beverages. In order to put a restriction on cigarette consumption tax rates on cigarette has increased. The tax policy is successful in reducing cigarette demand. it is found that when cigarette demand reduces then beer and spirit demand also reduces indicating ac complementary relation. With an objective of reducing crime rate Isle of Man currently employs the strategy of banning cigarette for prisoners.   

Beer, Wine and Cigarette Markets

In United States beer market dominates other two most common beverages Wine and Sprit market. Hence, Beer occupies an important place in the category of Alcoholic beverages. American spends nearly $37 billion as recorded from bear retail selling in 2017 (, 2017). There is intensive competition among different brands. Some of the dominating brands in beer industry are Anheuser-Busch In Bev, Miller Coors, Heineken USA, Pabst and Boston Beer Co.

USA has the largest Wine market in World. Apart from domestic production United States import a large volume of Wine every year. Australia is one of the large exporters of Wine in USA. The sales in wine industry have an upward trend. In the wine market there are 90991 wineries as recorded in 2017 (, 2017). The preference and spending on Wine is increasing day by day encouraging Wine production and Sales.

US posses a large cigarette market as like alcoholic beverages. In the phase of anti smoking policies the producers in the market focus on developing newer product. In this regard the E-cigarette market is has become important. Regular cigarette, menthol cigarette, cigars are some of the varieties available in the market.

There is an interconnection between the alcohol and tobacco market. Most drinkers prefer to smoke at times of drinking. People consume alcohol in combination with cigarette. When a tax on cigarette increases price of cigarette then there is an obvious decrease in cigarette demand. Associated with this, US economy has a recorded a decline in alcohol consumption (, 2017). This shows a complementary relation between cigarette and alcohol demand. However, the decline is not uniform among for all alcoholic products. Beer is more closely related with cigarette than Wine and hence experiences a larger fall in its market demand due to taxation on cigarette. Any change in beer or cigarette market is likely to affect the other one.


Impact of health earning on packaging of cigarette     

Cigarette and bear are complementary goods. When demand for either of the product changed this has an impact on the other (Tauchmann et al., 2013). When cigarette tax reduces demand for cigarette then there is a decline in demand for beer as well. On account of health warning on cigarette packaging the demand for cigarette might reduces because of increasing awareness among people. When cigarette demand declines then beer demand will also decline. This is shown in figure 2. The demand curve will shift to the left and correspondingly price quantity of beer sold will also decline.

Impact of yeast shortage

Yeast is used as an in ingredient in preparing beer. Shortage in yeast supply lead supply obviously reduces production of beer. Supply of beer then fall short of its demand and causes a price hike in beer market (McKetin et al., 2014). In response to rising price demand for beer will fall. Those who purchase cigarette for consuming cigarette at time of drinking beer will reduce their purchase to some extent. Again demand curve for cigarette will move inward direction from DD to D1D1. With a reduced in cigarette market price will decline from P* to P1 and quantity purchased will fall from Q* to Q1.

The figure above shows how to complementary relation between cigarette and beer brings changes when market scenario changes in any of the two markets.

Cigarette ban and declining crime rate

Smoking is an addictive habit found in people of different age groups. To support their habits people often involve in different criminal activities. Crimes are more common among teenagers who do not have a steady source of income. Therefore, imposing ban on cigarette is expected to reduce crime rate such as stealing, smuggling and other types of crimes (Kulick, Prieger & Kleiman, 2016). The strategy taken in Isle of Man is quite different than traditional banning. There, the prisoners once entered the prison have to give up smoking at anyhow. They have no other options but to leave their habit.

The threat of giving up smoking works more intensively than punishment of mere imprisonment. This contributes to a significant decline in the crime rate. The accounted crime rate falls to nearly 14% after imposition of banning (, 2017). High community Spirit and low rate of unemployment has already kept crime rate low in Isle of Man. Additionally, banning cigarette in prisons has made crime rate even lower.

In the prison building, neither the inmates nor the guards are allowed to smoke. In order to provide assistance in completely giving up the habit nicotine patches are given. Any addiction has a direct impact on mental health (Sweeting & Hunt, 2015). Therefore, arrangement for counselling is given to the prisoners. Criminals for all types of conviction are brought under this policy. Therefore, people are doing away with even small crimes like fighting, stealing cars. The idea of cigarette ban thus helps to reduce crime rate largely.


The paper evaluates alcohol and tobacco market in United States. Market for beer, Wine and cigarette are closely evaluated and inter relationship between cigarette and alcohol product has been found to exits. The relation is more relevant for beer that that for Wine. Health warnings on cigarette affect beer market demand. Similarly yeast shortage in beer market affects cigarette purchase. Final focus of the paper is on the banning of cigarette in Isle of Man and an associated declining crime rate.



Drop in crime on Isle of Man attributed to Europe's only non-smoking prison. (2017). Mail Online. Retrieved 14 September 2017, from

Kulick, J., Prieger, J., & Kleiman, M. A. (2016). Unintended consequences of cigarette prohibition, regulation, and taxation. International Journal of Law, Crime and Justice, 46, 69-85.

Market, T. (2017). The State of the U.S. Beer Market. Retrieved 14 September 2017, from

McKetin, R., Chalmers, J., Sunderland, M., & Bright, D. A. (2014). Recreational drug use and binge drinking: Stimulant but not cannabis intoxication is associated with excessive alcohol consumption. Drug and alcohol review, 33(4), 436-445.

Statistics - The Wine Institute. (2017). Retrieved 14 September 2017, from

Sweeting, H., & Hunt, K. (2015). Prison Service’s Tobacco Strategy Group.

Tauchmann, H., Lenz, S., Requate, T., & Schmidt, C. M. (2013). Tobacco and alcohol: complements or substitutes?. Empirical Economics, 1-28.

Want people to drink less? Make their cigarettes more expensive. (2017). Washington Post. Retrieved 14 September 2017, from


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