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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"?
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
Crow (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."
Crow:
"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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