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July 12th, 2017:

Exposed: big tobacco’s behind-the-scenes ‘astroturf’ campaign to change vaping laws

Tobacco giant Philip Morris is running an under-the-radar campaign to convince federal politicians to legalise e-cigarettes containing nicotine, with anti-smoking campaigners accusing the company of using the same “astroturf” tactics it used in its fight against plain packaging.

http://www.smh.com.au/federal-politics/political-news/exposed-big-tobaccos-behindthescenes-astroturf-campaign-to-change-vaping-laws-20170712-gx9lsl.html

The multinational has been using its offshoot smokers’ rights lobby group – dubbed “I Deserve To Be Heard” – to contact Australian smokers and vapers and urge them to make submissions to a parliamentary probe into the use and marketing of e-cigarettes.

The company’s campaign – along with a coordinated push from Australia’s online vaping community – has seen the inquiry inundated with submissions from people who say vaping has helped them quit smoking and dramatically improved their health.

While health groups in Australia and across the globe continue to warn about the potential risks of nicotine vaping, 107 of the 108 submissions so far loaded on the inquiry’s website are strongly pro-vaping – and the vast majority follow a similar “personal story” template.

World renowned tobacco control expert Simon Chapman, an emeritus professor at the University of Sydney, said Philip Morris and other interest groups were “astroturfing” – trying to create the illusion of a big grass-roots pro-vaping movement that does not really exist.

“They’ve been actively recruiting people to put in submissions,” Professor Chapmen told Fairfax Media. “These are exactly the same tactics they used for plain packaging. They have dusted off the same software, the same template and just changed the content.”

E-cigarettes are a multi-billion-dollar business overseas but the sale and personal possession of nicotine e-cigarettes is illegal in Australia. Health groups fear that if the government relaxes the rules it could lead to a wave of seductive advertising that would lure young people into taking up the habit – and possibly serve as a gateway drug to other forms of smoking.

Philip Morris’s new campaign comes after it was ordered to pay the Australian government millions in legal costs over its failed bid to kill off world-first plain packaging laws.

The company used I Deserve To Be Heard in its plain packaging efforts but it has been largely sitting dormant in recent years. It fired back into life late last month with an email blast to members calling on them to “make their voices heard”, as the company intensifies its push into the increasingly lucrative international e-cigarette market.

“Australia’s laws on vaping are ridiculous. While the UK, USA, EU, Canada and New Zealand have all legalised or are legalising e-cigarettes, Australia completely lags behind. There’s no reason why e-cigarettes with nicotine shouldn’t be legal in Australia,” it said.

Company spokesman Patrick Muttart told Fairfax Media that Philip Morris was committed “to converting the world’s one billion plus smokers to smoke-free alternatives”. I Deserve to be Heard members had demonstrated a strong interest in the legalisation of smoke-free products, he said: “As such we wrote once to our membership, informed them of the inquiry and encouraged those interested to consider submitting.”

The submissions are also being coordinated by senior members of Vaper Cafe Australia, an online forum.

On June 7, a senior member of the forum identified as a 52-year-old man from Western Sydney urged users to “inundate” the inquiry with submissions. He offered a step-by-step guide on writing a submission.

Many of the 108 published submissions closely follow the template, in which people are urged to include “your age and gender, when you started smoking, how long you smoked for, how much you smoked and if you suffered any side effects from smoking”.

Australian Medical Association president Michael Gannon said the tobacco industry was aggressively pursuing the potential of e-cigarettes because it had given them the opportunity to “rebrand” themselves as part of the effort to reduce smoking – even there is no evidence e-cigarettes work as a deterrent.

“We must not allow e-cigarettes to become a socially acceptable alternative to smoking,” he said. “E-cigarettes essentially mimic or normalise the act of smoking. They can result in some smokers delaying their decision to quit, and they can send signals to children and young people that it is okay to smoke.”

But Dr Colin Mendelsohn, a tobacco treatment specialist in Sydney who advocates for e-cigarettes as a healthier alternative to smokes, said the AMA’s submission was “disgraceful” and accused it of using misleading data and ignoring international evidence that could save lives.

He defended the submissions despite the coordination: “These are still genuine stories, many of whom have had their lives saved by vaping.”

The National Health and Medical Research Council says ‘there is currently insufficient evidence to support claims that e-cigarettes are safe”.

How big tobacco has survived death and taxes

The world’s five major tobacco companies are thriving, profitable and increasing sales, despite many predictions of the industry’s decline

https://www.theguardian.com/world/2017/jul/11/how-big-tobacco-has-survived-death-and-taxes

A casual observer could be forgiven for believing that the tobacco industry – for so long a fixture as permanent as its two main by-products, death and taxes – is itself on its last legs.

In the US, health officials have predicted that smoking rates in America could drop to as low as 5% by 2050, well within the lifetime of someone born today.

Last year, shareholders of UK-based Imperial Tobacco approved a decision to change the company’s century-old name to Imperial Brands, hinting at a move away from traditional cigarettes.

Even globe-straddling colossus Philip Morris International (PMI), owner of brands including Marlboro, has set its stall out for a “smoke-free” future, where nicotine addicts get their fix from vaping and other non-tobacco products.

Yet, for all of these predictions, one thing has remained unchanged: Big Tobacco is thriving, profitable and increasing its sales.

Excluding China, where the market is monopolised by the state, five major companies dominate the global tobacco trade – Philip Morris International (PMI), British American Tobacco, Japan Tobacco, Imperial Brands and Altria (the former US assets of PMI).

Between them in 2016, they shipped 2.27tn cigarettes, more than 300 for every man, woman and child on the planet, racking up combined sales of $150bn (£115bn). Their combined profits reached $35bn (£27bn), allowing investors in those companies to receive dividends of $19bn (£14.5bn).

Of these giants, one of the most powerful is British American Tobacco (BAT), the London-based firm that can trace its history back to 1902.

Run from Globe House, its headquarters next to the Thames river, BAT sells its brands in 200 countries and is market leader in 55 of them.

Far from looking to a future beyond tobacco, BAT is doing perfectly well as it stands.

At its annual meeting in March, chairman Richard Burrows toasted a “vintage year”, as profits rose to £5.2bn ($6.7bn) allowing the company’s shareholders to take a dividend worth an additional 10%.

The rewards were so great because BAT’s sales show no signs of the industry’s much-vaunted decline. The company sold 665bn cigarettes in 2016, nearly 100 for every human on earth and 2bn more than it sold the year before.

Cigarette sales among its so-called Global Drive Brands – Dunhill, Kent, Lucky Strike, Pall Mall and Rothmans – jumped 7% to 346bn.

In the section of its accounts that details non-cigarette sales, which the company terms “next generation products”, there is nothing to see.

The numbers are so small that they are considered immaterial to its financial results and do not need to be disclosed under stock market rules.

Yet the company’s traditional business continues to generate big headlines and bigger numbers. By the end of the year, BAT is likely to have completed a landmark $49bn deal to buy the 57.8% of US tobacco giant Reynolds American that it does not already own. A simultaneous shareholder vote next Wednesday by both firms is expected to agree the deal at Reynolds HQ in Winston-Salem, North Carolina, and BAT in London.

If US tobacco sales really are set to fall off a cliff, that would be a monumental strategic misstep.

But while the percentage of Americans who smoke is on the wane, the US remains a market with huge potential.

That’s because the population is rising, meaning that even as smoking rates decline in percentage terms, the actual number of smokers is relatively static at about 45 million people.

US cigarettes are also relatively cheap compared with prices in the UK, leaving some scope for the company to raise prices without losing customers.

Reynolds and BAT will also look to the future by pooling research on smokeless products, hoping to capture that growing market, though that won’t be the big money-spinner any time soon.

And then there is the developing world, where the rate at which governments and public opinion are turning against tobacco differ dramatically from wealthier economies.

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A ‘defensive’ stock

BAT increased its revenues in every region bar Asia-Pacific last year, with the developing world doing more than its share of the heavy lifting.

Among the “key markets” listed in its annual report are Indonesia and Egypt – and for good reason.

The World Health Organisation projects smoking rates in Indonesia to increase by 2025, with the number of smokers growing from 73m to 97m based on current trends.

Egypt is another key market where smoking rates are projected to grow, with up to 21m Egyptians forecast to be smokers by 2025, compared to 14m in 2015.

One only has to look at BAT’s roster of investors for evidence of the confidence that well-informed institutions with deep pockets have in the future of cigarettes, even if that future is less bright in the West.

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It’s a list that features nearly every major investment company in the world, testament to the safe bet that tobacco giants such as BAT offer to investors.

Top of the share register is BlackRock, the all-powerful asset manager that has a stake in nearly every major listed company in the world, managing investors’ funds of approximately $5.4tn, more than the economy of Japan.

Some way further down the list is Woodford Investment Management, run by Neil Woodford, a figure held in awe in London for his uncanny ability to make money.

He famously invests a huge chunk of his portfolio in tobacco, explaining that he is not paid to make moral judgments but to make money for clients.

Tobacco is attractive to investors – including councils in the UK – because it is seen as a “defensive” stock, in other words a good place to invest money that you are not prepared to lose.

The shares rarely decline in value even when times are tough and also deliver a steady income from annual dividends.

The huge rewards on offer for investors mean that those who manage the great behemoths of tobacco are also handsomely rewarded.

BAT chief executive Nicandro Durante is no exception. He was handed a package of cash and shares worth $10m (£7.6m) last year, taking his earnings over six years to a cool $44m (£34m).

When fellow directors are included, the 14-strong BAT boardroom enjoyed a combined $18m (£14m) payday in 2016.

There are other perks. Durante gets free tax advice from the company, a personal driver and security for his homes, in London and Brazil.

Both executives and non-executives also have access to a walk-in GP clinic near BAT’s headquarters at Globe House in London, enjoying the benefits of a National Health Service that has been estimated to spend up to $6.5bn (£5bn) a year on smoking-related illnesses.

BAT’s board earn their corn as much for their network of connections as they do for their hard work.

Burrows is a former governor of Bank of Ireland, while senior independent director Kieran Poynter is a managing partner of Big Four accountancy PricewaterhouseCoopers and previously advised the UK’s Treasury.

Its non-executive directors boast a string of similar appointments at multinational companies. Savio Kwan, for instance, was chief operating officer of China’s largest internet business, Alibaba.

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Ann Godbehere ran the finances of Northern Rock after its bailout and also serves on the boards of mining giant Rio Tinto, Swiss bank UBS and insurer Prudential.

Nor does the company’s network of influence end there.

While it does not donate money directly to British political parties, it does funnel cash to influential right-leaning thinktank the Institute of Economic Affairs.

BAT gives the IEA around $52,000 (£40,000) a year, a sum equivalent to about 5% what the organisation pays its staff, some of whom appear frequently in the media to criticise tobacco control legislation such as plain packaging.

Chief among those staff is director-general Mark Littlewood, a former press spokesman for the Liberal Democrats and one-time adviser to David Cameron.

Littlewood has been a vocal critic of tobacco control legislation such as the ban on smoking in pubs, as well as plain packaging.

The IEA has also received funding from Philip Morris International and Japan Tobacco International.

The BAT bosses

Nicandro Durante – chief executive

Nicandro Durante joined Brazilian subsidiary Souza Cruz in 1981, and rose through the ranks over three decades until he was appointed chief executive in 2011.

He had impressed the company’s senior management during a two-year stint as regional director for Africa and the Middle East, key areas of future growth for tobacco companies facing up to declining smoking rates in more developed economies.

Born to Italian parents in 1956 in Sao Paulo, he played football for the city’s Corinthians team in his teens before going into business.

Married with two children, Durante stopped smoking cigarettes in favour of cigars, but has no qualms about tobacco, which he described as a “very ethical” industry in a 2012 interview with the Financial Times.

In 2015, he fielded allegations from a former employee in Kenya that BAT bribed officials for various purposes, including the undermining of tobacco control laws.

BAT denies any wrongdoing. A spokesperson said: “We will not tolerate improper conduct in our business anywhere in the world and take any allegations of misconduct extremely seriously. We are investigating, through external legal advisors, allegations of misconduct and are liaising with the Serious Fraud Office and other relevant authorities.”

In 2016, Durante was handed a package of cash and shares worth $10m (£7.6m), taking his earnings over the past six years to a cool ($44m) £34m.

Richard Burrows – chairman

Addressing BAT’s shareholders earlier in 2017, Burrows toasted a “vintage year”, in which the company shrugged off bribery allegations in late 2015 to record rising profits.

Some investors were less keen on Burrows when he was named chairman in 2009.

Burrows had resigned as governor of Bank of Ireland, leaving the lender in dire straits, with big losses and mounting debt threatening its very survival.

Tens of thousands of the bank’s mortgage customers were plunged into negative equity and the lender eventually needed a state bailout that enraged many Irish people.

As the bosses of rival lenders faced public opprobrium for their stewardship of the country’s banking sector, Burrows got out just in time, landing the chairmanship of BAT in 2010.

But BAT wasn’t concerned by his record in banking, looking instead to his 22 years with Irish Distillers, during which time he was credited with turning Jameson whiskey into an internationally-recognised brand.

The Dubliner, 71, is a non-smoker who is married with four children and enjoys sailing and rugby.

He is also chairman of investment company Craven House Capital, whose assets includes beachfront land in Brazil. He is a non-executive director of Rentokil and Carlsberg.

Kieran Poynter – senior independent director

After a near 40-year career with global accounting giant PwC, which put him among the ranks of the UK’s best-paid accountants, Kieran Poynter joined BAT’s board as senior independent director.

He brought with him valuable connections, having served as an adviser to former UK chancellor of the exchequer Alistair Darling.

Poynter, a Chelsea FC season ticket holder, is a former director of the salubrious Royal Automobile Club, the gentleman’s club on London’s Pall Mall.

He also sits on the board of F&C Asset Management and IAG, the parent company of British Airways.

Ben Stevens – finance director

Ben Stevens looks after BAT’s money, and has spoken about how the company is growing market share and looking for acquisitions in Asia and North Africa.

Part of his role is trying to convince governments not to raise excise duty on cigarettes too quickly, according to an interview he gave with financialdirector.co.uk.

In the same interview, he referred to the need to have a “thick skin” because of the number of people “bashing tobacco companies”.

Stevens gave up smoking nearly 30 years ago, two years before joining the company. But said in 2013 that profits would come from “combustible tobacco” for the near future.

Tobacco: a deadly business – about this series

This series is focused on the damage caused by the tobacco industry, which continues to endanger the lives of millions of the world’s most vulnerable people

https://www.theguardian.com/world/2017/jul/11/tobacco-a-deadly-business-about-this-series

This content is funded by support provided, in part, by Vital Strategies with funding by Bloomberg Philanthropies. Content is editorially independent and its purpose is to shine a light on both the tobacco industry and the world’s most vulnerable populations, who disproportionately bear the brunt of the global health crisis resulting from tobacco consumption.

Although tobacco consumption remains one of the world’s greatest health threats, media coverage has decreased as the sense of urgency to address the issue has waned. This investigative reporting series seeks to renew the focus on tobacco consumption and deaths worldwide, contextualised through the duel lenses of global inequality and health.

All our journalism follows GNM’s published editorial code. The Guardian is committed to open journalism, recognising that the best understanding of the world is achieved when we collaborate, share knowledge, encourage debate, welcome challenge and harness the expertise of specialists and their communities.

Unless otherwise stated, all statements and materials posted on the website, including any statements regarding specific legislation, reflect the views of the individual contributors and not those of Vital Strategies and/or Bloomberg Philanthropies.