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May 17, 2011

Tobacco lobby's plain-pack threat not based on reality

British American Tobacco’s long threatened campaign against plain packs kicked off today. Has there ever been a more complete demonstration of Shakespeare's "the lady doth protest too much"?


British American Tobacco’s long-threatened campaign against plain packs kicked off today. Has there ever been a more complete demonstration of Shakespeare’s “the lady doth protest too much”?

It’s now very plain the global tobacco industry sees the move as arguably the greatest single threat it has ever faced, and is spending millions to say that — really, honestly — plain packs just won’t work and will cause chaos throughout the economy. I’ve done many interviews on this in the past year and even normally sceptical radio hosts quickly make the point that ordinary Australians are asking “well, if it won’t work, why are they so concerned and spending all this money?”

This farcical opposition is causing the industry to inhabit truly bizarre personae. We’ve seen the industry-as-friends-to-Treasury (“it will cause a tsunami of smuggling that will cause tax losses”). Compassionate friends of confused shop staff (“they won’t know where to find a brand … they all look the same” — actually, they will continue to be stacked in the same brand rows, fellas). But most amusing of all, is when it tries to cosy up to public health concerns, arguing it too really wants the government to introduce effective controls that will really cut use. Sure guys, we believe you.

Then we have the peculiar argument that given no country has ever introduced plain packaging there is no evidence that it will work in reducing sales. This has become a centrepiece of tobacco industry opposition — a modern example of satirist F. M. Cornford’s 1908 Principle of the Dangerous Precedent: “Every public action which is not customary either is wrong, or if it is right it is a dangerous precedent. It follows that nothing should ever be done for the first time.”

Today’s focus from BAT — splashed across today’s newspapers — is on the alleged impact on illegal sales, with an industry commissioned Deloitte report that claimed — wait for this — that 16% of all tobacco sales are illegal (that is, loose “chop chop” tobacco, counterfeit brands and duty-not-paid smuggled brands). This figure has been conjured from economic alchemy originally undertaken by Price Waterhouse Coopers that I critiqued on Croakey last year. So while one in six smokers apparently know where they can repeatedly buy illegal tobacco, strangely, with more than a billion dollars supposedly being lost, the gormless Federal Police with all their intelligence and resources and impressive history of major smuggling busts cannot find any of these same retail outlets and prosecute.

The PWC and Deloitte estimates contrast this with findings of the 2007 National Drug Strategy Household Survey (amazingly, not compared or even referenced by PWC) , which found that while 8.7% of adult Australians had ever smoked unbranded, only 0.2% of the population (about 33,000 people) used it more than half the time.

Smuggled tobacco is a major issue in nations with high corruption indexes and open borders. It has never been a major problem in Australia.

A leaked BAT internal training DVD from 2002 explains much about the industry’s real fears in plain packaging. Profitability in the tobacco industry today rests largely on high-priced premium brands, which are able to attract higher retail prices purely on the strength of branding and pack image. If all packs will look the same, many smokers will wonder why they should shell out far more for a pack that looks the same as every other brand except for brand name and that internal tobacco industry research shows cannot be distinguished from cheaper brands in blinded smoking experiments. The illusion that premium brands are “better” will evaporate, and much profitability with it.

David Crowe (now BAT CEO): “I mean, I can tell you categorically … [total sales] volume isn’t going to go up. OK, in this market we’ve got a government that’s very smart, they’re world class, they know exactly how to manage the tobacco industry and they’re doing it very well. Guys, the days of managing volume with the current business model is probably not relevant anymore. We’ve got to manage the market, we’re got to manage this percentage of trading profit.”

Romano Espinoza: “Another example is our guys in marketing and trade marketing, they need to sell five packs of Holidays to get the same profit they would get from one pack of Dunhill.”

Crowe: “I mean, five packs of Holidays for every pack of Dunhill, I mean it’s just a clear statement of fact of what our intentions are. If we don’t sell Dunhills and Bensons and Winfield, the amount of sheer volume we have to do of Holiday to make up for that is just ridiculous. I mean, the factory couldn’t produce it.”

Public health is not concerned about industry profitability, but with smoking rates and the diseases caused. If smokers were to drift down to lower-priced brands, smoking rates could well rise, particularly among low-income groups and kids who are most price responsive.

But there is an obvious solution, should this happen or if, as threatened, BAT slashed its prices by 70% (which would  cut only $2 from the cost of the pack). The government could easily restore the price by increasing excise duty by 20% overnight as it did in April 2010 when first announcing plain packs and the tax rise. Consideration could also be given to introducing a minimum or floor price on tobacco, as the Scottish parliament is actively considering for alcohol.


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21 thoughts on “Tobacco lobby’s plain-pack threat not based on reality

  1. simon.chapman

    Just informed that Malaysia recently introduced a floor or minimum price for tobacco, and here’s BAT blubbing about an associated 7.5% fall in demand

  2. Gavin Moodie

    I’m pleased to read that ordinary Australians are seeing thru BAT’s self interested rubbish.

  3. zut alors

    Mr Crow appears to be crowing too early with his threat. Even if the government lost a legal case they can still double (treble! quadruple!) the excise tax on tobacco. In fact, if they wanted to, they could ban it – with overwhelming majority support as 81% of the population are non-smokers. Mr Crow appears to have forgotten that the Australian government actually holds all the cards.

    Apart from that Mr Crow sounds like a charming bloke.

  4. Gavin Moodie

    Hi zut

    As a previous Crikey article demonstrated, the tobacco industry has a very weak to non existent case about loss of copyright, trade mark or other property right.

    However, the industry is presumably emboldened by Labor’s cave in to the miners, and another cave in is a worry.

    I expect the legislation will pass with the support of the Greens and at least some of the rural independents. But will the Coalition find a way of supporting big tobacco?

  5. zut alors


    If there was a referendum held next Saturday with the question ‘should tobacco be banned in Australia?’ I expect the result would be ‘yes’. Tobacco CEOs need to mull on that before they start throwing wild punches.

  6. Holden Back

    It all gave me the impression of swinging wildly, rather than throwing any ounch that might tell if it landed.

    I’m sure there are sock-puppets – both store-bought and home-made – personing the talk-back lines with the company line.

  7. Just Me

    “Guys, the days of managing volume with the current business model is probably not relevant anymore. We’ve got to manage the market, we’re got to manage this percentage of trading profit.”

    Translation: We can no longer convince more and more people to kill themselves slowly, just to enrich us. We can now only compete amongst ourselves to see which of us gets to kill the remaining ‘customers’ and how much profit margin can be squeezed out of their addiction.

    Sick puppies.

    Hope they and their shareholders go broke.

  8. zut alors

    Hey, Crikey, here’s a mission for Stephen Mayne: can we have a list of which superannuation funds invest in tobacco companies? It would make rivetting reading.

  9. Gavin Moodie

    I would oppose the prohibition of tobacco, just as I opposed the prohibition of alcohol and continue to oppose the prohibition of cannabis and many other recreational drugs.

  10. scottyea

    Well tobacco is a lucrative industry, made of corporations with shareholders. Industries and corporations form to make a profit. And it’s natural that corporate employees and captains of industry work to that end.
    On the other hand, the government has made hefty taxes from this trade over the years. Revenues.
    Then again, we have no-one to blame but ourselves if we buy them, blah, blah, blah.
    In a noble civilisation Government should protect the public from the predations of corporate institutional behaviour, i.e. exploitation. But it doesn’t; the idea is absurd.
    When did that happen? Was there ever a time? Can there be?

  11. geomac

    I would support a ban on tobacco as long as present smokers were not included. That approach would allow smokers to continue if they wished but not be penalised by the ban.
    I started smoking in 1967 as a teenager and well remember the catchy jingles and acceptance of smokes. I have COPD so I,ll never regain lost lung capacity. I support a ban not as an embittered smoker but as a health measure. I also realise a lot of people have legally become addicted to nicotine and shouldn,t be discriminated against.
    I don,t expect it to happen but BAT should realise that a legal case would be on shaky ground to say the least and that a ban could be a trump card if push comes to shove.

  12. Captain Planet

    I can’t say I could (in good conscience) support an outright ban on smoking – despite the fact that it would do a world of good for the health of many Australians.

    It’s just a civil liberties thing – prohibition of recreational drugs has been shown time and time again to criminalise hitherto law abiding citizens, provide income for organised crime syndicates, and fail dismally to cut usage rates or health outcomes.

    On the other hand, If my pre – school aged children inhale another lungfull of smoke from the selfish slobs who hang around within 10 feet of the entrance doors to shopping malls, airports, train stations, council offices, libraries, supermarkets, post offices, and lots of other places where I have a need to attend (and of course I have little choice but to take my children with me) I just may break my own code of nonviolence, and belt somebody.

    It has long been my opinion, that smoking can and should be banned in any and all public places which any member of the public might reasonably need, or want, to access.

    If I set up a sawbench outside a major shopping centre entrance, and started cutting asbestos sheets all day with a grinder, such that everybody who entered or exited the doors got a few good breaths of asbestos fibres, and the contamination spread into the first 4 or 5 shops inside every time the automatic doors opened, I reckon some people would get upset. I reckon it would be less than 5 minutes before the centre management, a concerned citizen, or even the cops came and put a stop to my idiotic activities, forcing exposure to a class 1 carcinogen on the innocent public. But light up a cancer stick and do the same thing? Perfectly OK, apparently.

  13. LisaCrago

    What drivel, weak arguments and poorly drafted. Typical of the usual paternalistic rant.
    if you really believe in freedom, freedom of choice, then you can not condone the banning of tobacco
    If you really aspire to your individual liberty and respect the liberty of others you should stop telling people what they can put into their body.
    BAT is just doing what our liberal democratic free market capitalist system is set up to do, protect the corporation…

    alcohol, tobacco, processed foods, chemicals…. it is all killing us, but it is our own choice how we wish to live. The only responsibility ANY government should have in intervening is to provide information to facilitate an individual making an informed choice.

    plain packaged cigaret packets does NOT provide information, it takes it away.
    as soon as they took the nicoteen mglevels off of the packets (for your own good ?!) we had inportant information removed about how strong our addiction would be as per the mg level. Apparently we were not smart enough to be ‘trusted’ with such vital information. Now does this government think we are all so stupid that pritty pictures on packets make us smoke?

    some things governments should just keep out of and taking on BAT over packageing is one of them.

    I might not smoke but I will defend to the death your right to do so.
    Do I think BAT is evil? Yes. But there is much multinational evil in the world .

  14. AR

    As blackmailers BAT seem as braindead as immoral – ”send the ransom to my bank account..” – but can there not be a case of “threatening with menaces”?
    It is reported/quoted that they are saying that they will lower prices which will mean more smoking (if not smokers…) and acknowledge that this will have serious health consequences.
    In principal, I object to banning anything that people willingly ingest/consume but tobacco is, like asbestos – perfect example Cap’nP, something forced on the public in general, by selfish/inconsiderate individuals.

  15. gregb

    Lisacrago, you conveniently forget that when smokers get lung cancer and take six months to die in hospital that costs all of us. For the hospitals, lost tax revenue of people dying when they could still be productive, etc, lost parents. Not to mention the health costs when smokers are still “healthy” because smokers get things like pneumonia more often. Why should I pay for other people’s death wish? And what about second hand smoke? The government has a duty to protect all of us, not just smokers.

  16. Captain Planet

    @ LisaCrago,

    I might not smoke but I will defend to the death your right to do so.

    Really? How gobsmackingly noble of you.

    I must question your choice of cause, however.

    You’d really be willing to die so that people have the right to smoke?

    Are you feeling all right?

    I tell you what, we need people as kamikaze and absolutist as you.

    Would you be willing to die for my children’s right to avoid exposure to tobacco smoke (a known carcinogen) in public places where their presence is unavoidable?

    Cool. We can set ourselves on fire in front of Sydney Airport (where the smokers congregate) together.

  17. rhwombat

    Lisacrago: What a load of glibertarian crap. The core business of tobacco has always been to make obscene profit by addiction. There is no “right” to provide and market the most addictive and harmful drug known for profit. How do you feel about slavery? Same motive, same mechanism, same beneficiaries: big capitalist pirates and their paid minions. You are obviously one of the latter.

  18. cassandra

    between the excise that they pay on every packet of fags and the time that they dont spend collecting the old age pension, most smokers are probably saving you money gregb

  19. westral

    Two things, first all tobacco company employees and shareholders should be legally required to smoke two packs of cigarettes per day. Second all smokers should be required to register and the tobacco companies would be required to meet all their health costs. It may not be practical which is the real pity.

  20. Captain Planet

    I clearly remember an interview with the Marlboro man before he died of Cancer. He related a story of how he showed up to a commercial shoot in the USA in the middle of the 20th Century, and noticed after an hour or two that of the dozen or so tobacco company executives present, not one of them was smoking.

    The Marlboro man (I forget his name) asked them why they weren’t smoking. Their reply?

    “We reserve the right to smoke for the poor, the black, and the stupid”.

    Ahhhhh nice work guys. Right up there with Cluster bomb manufacturers and the people who have the job of denying people medical care in the States. It must be great to go home every day knowing you’ve made a difference.

  21. stephen

    Big Tobacco see this plain packaging as Total War. I believe they will eventually lose,but they won’t go down easily. Expect some desperate measures from the Big Boys.


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