Winnipeg Free Press - PRINT EDITION

New law in Oz will test Big Tobacco's weird resilience

  • Print

Australians call them "Winnie Blues." Their favourite cigarettes will lose their familiar blue-and-white packets, however, under Australia's new plain-packaging law, which will take effect Dec. 1. As of that date all cigarettes must be sold in identical packs -- "drab dark brown" is the approved colour -- with the brand name set in standardized type.

The tobacco companies are angry. Plain packs are "plain stupid," declares the website of British American Tobacco (BAT), the second-largest non-state producer.

It ought to be a disaster for big tobacco. Governments started banning cigarette advertising on television in the 1960s and the marketing noose is tightening. Many governments ban ads in print media and oblige manufacturers to emblazon packs with gruesome warnings.

The pack itself survives as a badge of a smoker's taste. Lighter colours hint at relative healthiness. Tall, thin packs seem more feminine.

In the war on tobacco marketing, packaging is "the last major frontier," says David Hammond of the University of Waterloo in Canada. "That's why we're seeing such strong opposition."

Tobacco is a weirdly resilient industry, however. Consumption is shrinking in developed countries, but still rising in poorer ones. As GDP rises, smokers trade up to more expensive brands. The number of cigarettes smoked globally will shrink by nine per cent between 2015 and 2050, predicts Euromonitor International, a research firm, but tobacco firms are adept at wringing fatter profits from stagnant markets.

Addicted customers and high taxes make it relatively easy to raise prices, and a big hike for producers translates into only a small uptick for consumers. Tobacco's stigma keeps potential competitors at bay. BAT aims to raise its earnings per share annually by high single digits and often does better than that, partly by using its spare cash to buy back shares.

Big Tobacco can hardly complain that plain packs will dent demand. It insists that branding is all about market share, not recruiting new smokers. Really? The World Health Organization reckons a blanket advertising and promotion ban would cut puffing by seven per cent.

Kingsley Wheaton, BAT's head of regulation, says the injury lies elsewhere. For one thing, Australia's law amounts to an expropriation of intellectual property, which ought to worry other industries such as food and liquor. Australia's High Court rejected that claim, but the World Trade Organization is considering it.

The second claim is that plain packs will drive smokers into the black market, which would be the fourth-biggest manufacturer if it were a company. This is seen as the main threat to the business. Plain packs will encourage counterfeiters to produce knock-offs of many brands rather than only a few. And that, the cigarette-makers gleefully point out, will cut government revenue.

They are nothing if not ingenious: When regulators banned "light," they struck back with "smooth." Plain packs will not end the duel.

Plain packs may fit with a global back-to-basics mood. Some analysts think they could even help brands in their endless quest for differentiation. Faced with rows of identical boxes, Aussies will ask for their favourites by name. New brands will find it hard to break in. Incumbents may find the new regime rather cosy.

Calgary Stampeders 67%

Toronto Argonauts 33%

Republished from the Winnipeg Free Press print edition November 20, 2012 A11

Fact Check

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories?
Please use the form below and let us know.

* Required
  • Please post the headline of the story or the title of the video with the error.

  • Please post exactly what was wrong with the story.

  • Please indicate your source for the correct information.

  • Yes

    No

  • This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.

  • Cancel

Having problems with the form?

Contact Us Directly
  • Print

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.

letters

Make text: Larger | Smaller

LATEST VIDEO

Winnipeg Cheapskate: Home buying

View more like this

Photo Store Gallery

  • May 22, 2012 - 120522  - Westminster United Church photographed Tuesday May 22, 2012 .  John Woods / Winnipeg Free Press
  • Marc Gallant / Winnipeg Free Press. Local- WINTER FILE. Snowboarder at Stony Mountain Ski Hill. November 14, 2006.

View More Gallery Photos

Poll

Should the federal government be able to censor how Ottawa is portrayed in the CMHR?

View Results

Ads by Google