Plain packaging on cigarettes makes UK anti-smoking stance clear
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Advertising and branding on cigarette packs in the UK will be outlawed on Saturday, the latest step in a decades-long anti-tobacco campaign.
The new rules will mean cigarettes can be sold only in mud-green boxes accompanied by graphic health warnings — another attempt to get Britons to kick a habit estimated to be responsible for one in 11 of all deaths worldwide. The move follows bans in recent years on tobacco billboards and sponsorship as well as the ban on smoking in pubs.
Smoking rates have been falling in the UK for decades but 19 per cent of adults still smoke, according to NHS data from 2014, the most recent available. Anti-tobacco initiatives have also not succeeded in deterring new generations from smoking: almost one in five secondary school pupils said they had tried it.
The introduction of plain packs will not make large numbers of smokers quit overnight but Action on Smoking and Health, a charity, said the benefits would become clear “once we have a generation of young people who haven’t been exposed to marketing through the pack”.
The tobacco industry says the measure is heavy handed, will cause cigarette smuggling to increase and is driven not by evidence that it will work but by the “dogma of certain pressure groups”.
But while the tobacco companies may be worried about the impact of the measure on sales, they are undeniably in excellent financial health: their profits are more than twice the size of many other consumer-goods businesses.
Philip Morris, for example, had a global operating profit margin of 40 per cent, compared with 15 per cent for Unilever and 23 per cent for Coca-Cola last year, according to analysts from Société Générale. British American Tobacco is the UK’s fourth most valuable company by market capitalisation.
Owen Bennett, tobacco analyst at Jefferies, the investment bank, said the plain packs could lead to “an erosion of brand equity” that could reduce the tobacco companies’ ability to raise prices, which they need to do to counteract the effect of falling sales.
Apart from that, the impact of the ban is unclear. In Australia, which brought in plain packs in 2012, there was a rise in illicit cigarettes while smokers traded down to cheaper brands, Mr Bennett said — though both those factors are already in evidence in the UK.
One result could be tobacco companies doing deals with retailers that in effect enlist shop assistants to act as salesmen — a tactic Imperial Brands, owner of Winston, Gauloises and Drum, among others, was particularly good at in Australia, Mr Bennett said. “Surprisingly, retailers have a lot of influence as consumers see them as being knowledgable.”
Imperial has hinted at this approach this year. “It’s very much a partnership we look for with retailers and we’ve been very successful at it,” Alison Cooper, chief executive, said. “We’ve been phenomenally successful in [Australia]. Our market share . . . our profits and our revenues have grown in that market, so commercially, we’re very capable in terms of operating in plain-packaging markets.”
Also coming into force is a new “tax floor” on cigarettes designed to combat a recent pricing tactic. When taxes have been increased, cigarette companies have been keeping the retail price of cheap brands low and raising the price of premium brands by more than the tax rise.
“They keep some products cheap to keep the poorest and most price-conscious smokers still hooked and also to have some brands that the young can afford,” said Anna Gilmore, public health professor at Bath university.
Apart from protecting their traditional business, tobacco companies might be spurred by plain packaging to move into other, less harmful products.
Tobacco companies have invested heavily in developing ecigarettes that produce a nicotine vapour, as well as products that produce a vapour by heating rather than burning tobacco. “Reduced-risk products are going to be increasingly important to them,” said Ms Gilmore.
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