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April, 2011:

Plain packaging will hit sales hard, and big tobacco is worried

20 April 2011

An example of what the new plain cigarette packets will look like.

So, the move to cigarette plain packaging will do nothing to reduce the rate of smoking, but it will be a pain in the proverbial for shopkeepers. I’m told this at least once an hour on talk radio, so it must be true.

But things aren’t always what they appear to be. I know this as a reformed tobacco executive. I was employed by Rothmans of Pall Mall from 1994 to 1998 in Queensland, NSW and Victoria in charge of about $250 million in annual supermarket sales.

Working for big tobacco is a double-edged sword. Sure, it’s a legal product, and you could get hit by a bus tomorrow (although I’d take my chances with the bus versus smoking). Over time, I started to feel the imaginary horns attached to my head, especially when asked by my child’s teacher what I did for a living.

But other than that, we ruled the world. In those days, cigarettes made up six of the top 10 supermarket products. Not exactly part of the fresh food mantra, but it wasn’t hard to get an audience with the bigwigs at short notice. The guys flogging baked beans and shoe polish had to stand in line. Our products were money in the bank.

The industry was cashed-up and was not afraid to spend it. The laws were slightly more relaxed, and often tobacco retailers had to do no more than sign a lease. The three tobacco companies would fight tooth and nail to do the shop-fit free, and in some cases pay the rent in exchange for the rights to a window display.

The rule of market share dictated that ”if it can’t be seen, it can’t be sold”. We employed all kinds of surveys measuring our visibility in stores, and lived and died by the results.

For marketing, the brand was everything. People don’t just smoke a brand, they are the brand. What’s inside the cigarette doesn’t really matter, but what the smoker thinks about themselves (true or not) is absolute. If you’re a bus driver, but aspire to being an internationalist with a passport to smoking pleasure, you’ll buy accordingly.

And it’s not just the brand, but the appearance of the pack . . . how it feels, the fonts used: everything was analysed and tested to the extreme.

When NSW tightened the noose on in-store advertising, cigarette package images were replaced with tantalising shots of sunflowers and Uluru. The theory was that people would associate these images with the colour of the brand they smoked. Publicly, the big round of packet health warnings in the ’90s was treated as a speed bump. Like a duck on a lake, beneath the surface things weren’t so calm. One of our bosses referred to the move as an ”absolute disaster” and our focus moved to producing retail stands and lighting that deflected from the top of the packet.

Removing cigarettes from visibility in stores has introduced an impediment to the process, but the allure of the brand still remains – even with an ugly health warning. Olive-green packets will not be cool; there will be no differentiation between one brand and the next. Even the mythology, for those of us who remember the Hoges and Stuart Wagstaff TV ads, will disappear.

The tobacco companies invest a lot in research, particularly in statistics. Every move in price and circumstance is modelled to the N-th degree. As the it-won’t-affect-us-honestly-it-won’t ads increase, you can bet they reflect the anxiety of the industry.

My opinion as a former insider? The proposed plain packaging changes will hit sales hard.

Craig Seitam is a marketing consultant.

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Poll: Should the government push through with legislation for plain packaging on cigarette packs?

YES 83%

Would you like to vote?

Read more:

ICC Views on the Current Australian Government Proposal to Mandate Plain Packaging

Download (PDF, 648KB)

Plain packaging bill to extinguish some tobacco trade marks

15 April 2011

Tim Wilson’s piece on the plain packaging legislation basically repeats the claims that have previously been made by him. Last year, I gave a detailed response to Tim’s claims about the Constitution and international treaties. A webcast of that response can be seen here.

As for the Constitutional argument that the legislation acquires property on other than just terms, Professor Craven, a noted Constitutional expert, has since observed on Radio National’s Background Briefing that the tobacco industry’s prospects of success are about the same as a three legged horse has of winning the Melbourne Cup. The reason for his view is simply explained. The extinction of rights or the reduction of rights is not relevant. The government or a third party must acquire property as a consequence of the legislation. The government does not wish to use the tobacco trade marks. Nor does it want third parties to do so. It does not desire to or intend to acquire any property. The proposition that prohibitions on the use of property do not constitute an acquisition of property was confirmed by the High Court as recently as 2009. In that case, the High Court held that the government was entitled to extinguish property rights in licences of farmers to take bore water.

It is true that the government has now worded the legislation so that even if a three legged horse does win the Melbourne Cup, it can still impose very significant restrictions on tobacco packaging. If you had a lawyer, you would expect them to give you an excellent fallback position, even in the event of the worst of all possible outcomes. It would not mean that the lawyer considers your position to be even marginally weak. It most certainly does not mean ‘oops’, as Tim inaccurately states.

Just by the way, the tobacco industry’s argument is that what the government will acquire is more effective health warnings although that’s not an acquisition of property. The interesting point is that tobacco’s complaint is that the measures will work to reduce smoking. This honesty is welcome.

As for the international law claims, Tim continues to refer to one short e-mail from one staff member of IP Australia. He chooses not to refer to IP Australia’s official statement describing Tim’s interpretation of the e-mail as ‘misleading and incorrect’.

What he also does not tell us is that major global tobacco companies held a meeting in 1994 at a cost of about US$650,000 to discuss this very issue. Due to discovery of the documents in the course of tobacco litigation in the US, we know that a presentation to that meeting revealed the carefully considered legal advice that TRIPS provided ‘little joy’ to the tobacco industry. See the overhead slides here.

Since then, there have been further developments that have further eroded the tobacco industry’s already untenable claims. First, there has been considerable jurisprudence at the WTO concerning the capacity of member nations to take independent regulatory action in respect of public health measures. See the webcast referred to above. Second, the guidelines to the Framework Convention on Tobacco Control which has over 170 signatories have now recommended the adoption of plain packaging.

Tim refers to Article 20 and Article 8 of the TRIPS agreement but manages to obfuscate the issue. If these measures are necessary for public health, they will be justifiably imposed within the meaning of Article 20.

The issue boils down to whether there is evidence that the measures are necessary for public health. The tobacco industry has always challenged the suggestion that there is evidence of any facts justifying any regulation of its industry. In 1994, its executives swore on oath before Congress that they did not believe that nicotine is addictive. Tobacco companies have denied that there is any evidence that smoking causes cancer, any evidence that it causes heart disease, any evidence that passive smoking is harmful and any evidence that bans on advertising would lower smoking rates. Now, they question the evidence that the packaging that they spend so much money and time on developing attracts non-smokers and continues to attract existing smokers.

Here’s the problem for Tim and the organisations that he may or may not represent. The Internet and the academic literature are swarming with evidence directly from the internal documents of marketing departments of tobacco companies of their use of packaging to attract and retain smokers, especially ‘young adults’. In addition, there are numerous studies, dating back to at least 1995, showing that plain packaging will have a negative effect on uptake of smoking. The WTO and the scientific world will assess the evidence from a neutral, disinterested perspective.

As for declarations of qualifications and interests: I am a Professor in the Faculty of Law at Monash University, specialising in intellectual property. Further details are available on my website. I am a member of the Expert Advisory Group referred to in the Consultation Paper. I have spoken to employees of the Cancer Council Victoria about this issue. No financial benefit has been offered, promised or provided to me. I have been given some nice sandwiches at meetings and I have now accepted assurances that the orange juice was fresh.

Professor Mark Davison teaches law at Monash University and is the author of several major works relating to intellectual property and competition law.

Implementation of the WHO Framework Convention on Tobacco Control in mainland China

As per China’s ratification of the WHO Framework
Convention on Tobacco Control (FCTC), it should have
implemented effective packaging and labelling measures
prior to 9 January 2009 and enacted a comprehensive
ban on all tobacco advertising, promotion and
sponsorship prior to 9 January 2011. In addition, universal
protection against secondhand tobacco smoke should
have been implemented before 9 January 2011 by
ensuring that all indoor workplaces, all indoor public
places, all public transportation and possibly other
(outdoor or quasi-outdoor) public places are free of
secondhand smoke. The authors conducted a review of
various sources of information to determine the current
status of FCTC implementation in mainland China. Even
though China has made considerable efforts to implement
the FCTC, there is still a significant gap between the
current state of affairs in China and the requirements of
the FCTC. The Chinese tobacco monopoly under which
commercial and other vested interests of the tobacco
industry are jeopardising tobacco control efforts is
thought to be the most crucial obstacle to the effective
implementation of the FCTC across the country.

ABSTRACTAs per China’s ratification of the WHO FrameworkConvention on Tobacco Control (FCTC), it should haveimplemented effective packaging and labelling measuresprior to 9 January 2009 and enacted a comprehensiveban on all tobacco advertising, promotion andsponsorship prior to 9 January 2011. In addition, universalprotection against secondhand tobacco smoke shouldhave been implemented before 9 January 2011 byensuring that all indoor workplaces, all indoor publicplaces, all public transportation and possibly other(outdoor or quasi-outdoor) public places are free ofsecondhand smoke. The authors conducted a review ofvarious sources of information to determine the currentstatus of FCTC implementation in mainland China. Eventhough China has made considerable efforts to implementthe FCTC, there is still a significant gap between thecurrent state of affairs in China and the requirements ofthe FCTC. The Chinese tobacco monopoly under whichcommercial and other vested interests of the tobaccoindustry are jeopardising tobacco control efforts isthought to be the most crucial obstacle to the effectiveimplementation of the FCTC across the country.

Download PDF : China FCTC. TC 11 07

Plain packaging could prevent nicotine habit

Plain cigarette packaging could help prevent people taking up smoking, according to new research led by Bristol scientists. The study, part of the work of the UK Centre for Tobacco Studies (UKCTCS), also showed that packaging would have little effect on those who already smoke on a daily basis.

The researchers monitored the eye movements of non-smokers, light smokers and daily smokers whilst looking at two different sorts of cigarette packets: both had identical health warnings but one was branded and one plain.

The results showed that the eyes of non-smokers and light smokers were drawn to the health warnings on plain packets more than on branded packets, suggesting that plain packaging enhances attention to health warnings.  Existing smokers did not seem to be affected by packaging modifications.

Marcus Munafò, Professor of Biological Psychology, who led the research said: “In this study we assessed the impact of plain packaging on visual attention towards health warning information and brand information on branded and plain cigarette packs, using eye tracking technology.”

“This technology provides a direct measure of eye gaze location and therefore the focus of visual attention.  It is plausible that the more someone looks at the health warnings, for example, the more likely those health warnings are going to be read and understood, with a subsequent impact on behaviour.”

Tobacco marketing has been banned in many countries as it encourages the uptake of smoking and makes it harder for smokers to quit.  In response, the tobacco industry has focused on unregulated marketing channels, including packaging, as a way of promoting its products.

Plain packaging has been proposed to address the issue of tobacco promotion, meaning every packet would be the same shape and colour, with standard typeface, colour and size for relevant legal markings and health warnings.

However, the tobacco industry has argued that there is no evidence to support the move and is campaigning against it.  This UKCTCS study provides important support for introducing plain packaging, as well as demonstrating exactly why the tobacco industry is fighting these plans so desperately.

The article will be published online by the scientific journal Addiction on 11 April 2011.

Accelerated tobacco control

The Lancet, Early Online Publication, 6 April 2011

The priority for immediate action is to achieve a suggested global goal by 2040 of a world essentially free fro

less than 5% of the population use tobacco. Full implementation of four of the Framework on Tobacco Control

would avert 5·5 million deaths over 10 years in 23 low-income and middle-income countries with a high burden

important outcome from the UN HLM will be renewed resolve to accelerate the full implementation of all as

(panel 4). This action will have immediate health and economic benefits because reduction in exposure to

direct and second hand, will reduce the burden of cardiovascular disease within 1 year and thus health expenses.

Download PDF : Priority actions for the NCD crisis The Lancet 2011

Plain packaging of cigarettes: a review of the evidence

Executive summary

This paper presents the findings of research over two decades and across five countries on the topic of plain packaging. It includes the results of more than 25 published experimental studies which have examined the likely impact of plain packaging on young people and current smokers (Section 5) [1]. It also summarises the results of research papers that analyse industry arguments about barriers to legislation resulting from international law and trade agreements (Section 7).

The main findings from this compilation of literature are as follows:

In a worldwide environment of increasing prohibition of tobacco advertising and sponsorship, the cigarette pack has become the key marketing tool employed by the tobacco industry to attract and retain customers. (Section 3)

The tobacco industry uses cigarette pack technologies and innovations in design to communicate particular attributes about each brand and by extension the personality and social status of its users. (Section 4)

Current pack colours and imagery can dilute the impact of graphic health warnings. (Section 5.2.1)

Unregulated package colouring and imagery contribute to consumers’ misperceptions that certain brands are safer than others. Removing colours from cigarette packs and misleading terms such as ‘smooth’, ‘gold’ and ‘silver’ would reduce false beliefs about the harmfulness of cigarettes. (Section 5.2.2)

Adults and adolescents perceive cigarettes in plain packs to be less appealing, less palatable, less satisfying and of lower quality compared to cigarettes in current packaging. Plain packaging would also affect young people’s perceptions about the characteristics and status of the people who smoke particular brands. (Section 5.2.3)

Plain packaging featuring larger graphic health warnings (75% front of pack) will both reduce the appeal of the pack and strengthen the impact of the warnings. (Section 5.2.4)

British American Tobacco has claimed that the legislation will not be effective, pointing to the results of an international analysis it has commissioned (and provided data for) on the impact of health warnings on sales. Health warnings have a different objective to plain packaging and monthly variations in sales data are not an appropriate indicator of effectiveness. In any case the data on which this analysis is based is highly selective and the specifications of the modelling incorrect in at least one important respect. (Section 7.1).

The Alliance of Australian Retailers alleges that plain packaging would damage retailer business, increasing transaction time at the counter due to difficulties in differentiating between brands. The AAR suggests that as a result, customers would switch to discount outlets. However, any loss of convenience at retail outlets will apply equally to discount and convenience outlets. Measures including labelling of the containers where packs are stored and brand names printed on packs in a clear font style and size would assist retailers to quickly indentify and retrieve particular brands. (Section 6.3 and 7.2)

The tobacco industry claims plain packaging represents an acquisition of intellectual property and as such is prohibited under the terms of various international trade agreements. The industry has suggested the Australian Government would be forced to compensate the industry in billions of dollars. Papers by experts in constitutional and trademark law on the other hand suggest that international agreements permit governments to restrict use of trademarks to protect public health. They advise that plain packaging will not be an acquisition of intellectual property, as the Government does not intend to use the logos or brand imagery; it will simply be restricting the use of these marketing tools on cigarette packages. If Courts were to rule that restriction of use of trademarks was an acquisition of property, then the legislation has been drafted to allow the use of trademarks with limitations. (Section 7.3)

Plain packaging has been carefully considered and researched in Australia and overseas for some 20 years, but contrary to claims by tobacco companies it has not been abandoned as a policy option. The paper provides links to statements by parliamentarians in New Zealand, the United Kingdom and the European Union, which are all either undertaking public consultation on plain packaging or have named plain packaging among proposals for future tobacco control strategies. (Section 7.4)

Companies have claimed that the legislation will reduce price and competition in the market. Opinions of industry analysts about the likely effects on competition are mixed. As pointed out by Deloitte MCS, future governments have open to them the option of further increasing excise and customs duty on tobacco products should average prices of tobacco products fall. (Section 7.5)

Tobacco industry claims that plain packaging will increase illicit trade are exaggerated and misleading. The industry’s estimation of the current size of the illicit market in Australia (15.9%) is based on one very small survey (949 people) with a very low response rate. The Government’s National Drug Strategy Household Survey of more than 23,000 people suggests that only about 0.3% of Australians (1.5% of smokers) use unbranded tobacco products ‘half the time or more’. The Australian Government’s draft plain packaging legislation specifies that anti-counterfeiting markings will be permitted on plain packaging, and the Australian Taxation Office and the Australian Customs and Border Protection Service should and no doubt will continue to vigorously pursue technologies and other surveillance and enforcement strategies to prevent the evasion of excise and customs duty in this country. (Section 7.6)

In summary there are strong grounds for believing that current packaging glamourises smoking and that tobacco products packaged in a standardised colour, typeface and form would:
improve the effectiveness of health warnings reduce misconceptions about relative harmfulness of various brands and reduce the overall appeal of smoking

The intensity of opposition to plain packaging legislation by tobacco companies suggests that tobacco industry executives believe that such measures will reduce sales and company profits.