Brands use competitive price labels to avoid restrictions on marketing
https://www.theguardian.com/society/2017/apr/09/tobacco-companies-flout-law-plain-packaging
An insider in the tobacco industry has revealed some of the unscrupulous tactics it is using to avoid new restrictions governing the marketing of cigarettes that come into force next month.
One strategy – sticking competitive pricing labels on packets, a move designed to attract cost-conscious poorer smokers who make up the majority of the market – is already in breach of the regulations, according to legal advice obtained by Action on Smoking and Health (Ash).
The whistleblower, until recently employed by Imperial Tobacco, one of the UK’s largest companies, told the Observer that all four of the industry’s main players were employing a range of branding initiatives involving pack design to differentiate their products before the new regulations come into force on 20 May. From this date, cigarettes must be sold in dark green packs of 20 that carry health warnings covering at least 65% of the box.
Plain packaging was first introduced in May last year. “Any branded stock you see out there now will have been produced before 20 May last year,” said the whistleblower who used the pseudonym, Martin Sempah. “So the cigarette companies have been on a massive stock building exercise to make sure they have their branded packs in the market for as long as possible, to leverage the brand benefit.” But, under the new regulations, any packs manufactured after 20 May last year must be devoid of eye-catching price labels, something that severely limits the tobacco companies’ ability to market them aggressively.
“Price with cigarettes is massive,” Sempah said. “It’s what drives growth in market share. You get your price mark wrong and you can lose market share and millions. The issue for Imperial was that from 20 May 2016 until 20 May 2017 they’d have branded packs out there but no way of controlling the price on them.”
The solution was to employ a separate agency to add promotional price stickers to the packets’ cellophane wrappers, a practice known in the trade as “stickering”, that, according to Sempah, involved “millions and millions” of packs and which the tobacco firms insist is not in breach of the regulations because it is not part of the manufacturing process.
Imperial employed an agency called Clipper to add the stickers, Sempah said. Ash has written to the other three major tobacco companies –JTI, BAT and PMI – saying it is aware that they have been employing a similar strategy.
The health organisation has received a legal opinion from Peter Oliver, a barrister at Monckton Chambers, that suggests the strategy breaches the regulations which state that cigarette packets must be wrapped in cellophane that is “clear and transparent” and must not be “coloured or marked”.
“Once again, the tobacco companies seem to be stretching the law to snapping point,” said Deborah Arnott, chief executive of Ash. “They have already wasted thousands of legal hours and millions of pounds in fees trying to get the standardised packaging rules scrapped and failed miserably. Now it seems they are trying to get round the rules, by adding stickers to cigarette packs after the 20 May 2016 and claiming that this is not part of the production process. But, as our legal opinion confirms, such claims are false and the behaviour unlawful. We would like to see appropriate enforcement action taken against any tobacco manufacturer engaged in this practice without delay.”
Stickering is only one weapon in the industry’s arsenal, Sempah suggested. “When the regulations came out they started to look for loopholes. They said: how can we use particular varnishes and finishes on our plain packs to make them more tactile in a person’s hands, to make them more attractive? Do we use a different type of foil? If you look at a pack of Marlboro Gold it has got a trademark type of foil – it’s resealable. There are methods they are using to get round the regulations to increase the brand equity in their packs.”
Another strategy is to use key words to signify different “strengths” of cigarette – something that is banned. The word “real” is being used to suggest “full flavour” while “bright” denotes cigarettes that were once labelled ‘light’.
Two, separately wrapped, packs of 10 cigarettes inserted inside a 20-size pack have been developed to appeal to smokers who prefer smaller packs.“They’re going to be investing a lot more in festivals and nightclubs,” Sempah said. “You can’t say ‘sponsored by’ but you can create a fantastic experience which kind of looks like a cigarette brand.
“For example, last year Golden Virginia did stuff at the Latitude festival. They had a bar and a smoking area – all green furniture and green T-shirts for staff. It was a slightly different green from Golden Virginia and it was called Roll and Rock rather than Golden Virginia but at the bar you could only buy Golden Virginia.”
In their written responses to Ash all four tobacco companies and Clipper insisted that they complied with all the regulations. Sempah said most in the tobacco industry doubted the marketing strategies would have much of an impact in the long run. “Nobody really expects this to work, but there’s so many big salaries tied up in marketing in the tobacco companies they have to try to make it work.”