How the tobacco industry is gaming Australian health regulations with marketing
In this cross-posting from The Conversation Steven Greenland of Swinburne University of Technology documents some of the methods tobacco companies are using to keep smokers hooked.
Australia’s tough tobacco regulations are acting as a catalyst for the industry to develop sophisticated marketing practices. These companies are gaming the system by anticipating regulatory impact and then using unregulated marketing elements to overcome it.
Australia has been a guiding light for countries looking to improve public health through the effective regulation of tobacco, which remains the world’s biggest cause of preventable illness and death, and still kills around 15,000 Australians annually.
December 2012 saw the implementation of Australia’s innovative plain packaging legislation, this was followed by four 12.5% annual tobacco tax excise increases. As a result the number of Australian smokers has fallen to a record low.
However the tobacco industry has used several strategies, including price reduction, brand differentiation and promoting the idea of healthier cigarettes, to undermine Australia’s new regulatory environment.
To offset price hikes manufacturers have expanded lower priced product ranges, with new ultra low priced brands. One example of this is the British American Tobacco Australia’s (BATA) Just Smokes, which sells for around 70% of the premium brand prices. BATA has also shifted Rothmans, previously a premium brand, into the economy segment by cutting its price by more than 30%.Pricing for packets
Plain packaging laws came in in 2012
Another pricing initiative is twin pack promotion. Most consumers recognise that progressively larger packs offer progressively lower unit prices – a lower cost per single item or single pack.
This used to be true for tobacco, with the largest cartons (usually with 200 cigarettes) offering best value. However, since 2012 discounted twin packs represent best value.
A supermarket twin pack, per cigarette price, is up to 10% cheaper than single packs – effectively discouraging single pack purchases. Australia’s leading brand Winfield twin pack, per cigarette price, is equal to or below that of larger cartons.
Regulatory price increases are financial deterrents to smoking. The low price branding and discounting strategies in Australia are clear attempts to get around these, and reduce smokers’ financial motivation to quit or cut down.
Heavily discounted twin packs also teach smokers, through financial reward and penalty, to buy twin rather than single packs. This is of particular concern since research shows that larger purchases trigger higher consumption.
In 2014 the industry claimed tobacco consumption had actually increased after plain packaging. While this was disproved, it suggests big tobacco anticipated increased consumption as smokers switched to twin pack purchase behaviour.
New tobacco products and promotions
Plain packaging was expected to restrict tobacco brands. However, after 2012 manufacturers introduced numerous new products, and brand ranges actually expanded.
For example, Australia’s leading brand Winfield supported more than 20 brand variants in 2015-2016 compared to just 12 in 2012-2013. Brand differentiation is a proven marketing approach for generating greater sales, with each variant targeting a specific consumer market segment.
Since plain packaging was introduced, tobacco companies have varied the names of brands as well. Names have evolved to include the information previously covered by packaging, such as colour and new product features. For example, Dunhill Infinite is now Dunhill Infinite White + Taste Flow Filter.
Today around 80% of Australia’s leading brands’ variant names include a colour, compared to less than half before plain packaging. Tobacco companies are also using colours to mislead consumers that certain product ranges are “healthier” options.
A universal colour code has been promoted by the industry in which smokers interpret lighter colours (white, silver, gold, yellow and blue) as being less harmful, and darker colours (red and black) as more harmful. Before plain packaging colour hues were a pack design component, now the myth of healthier tobacco options is perpetuated by colour names. This is disturbing from a public health perspective as it represents industry efforts to lessen smokers’ health motivations for quitting.
The effects of clever marketing
Australia’s tobacco regulations have significantly reduced smoking. However, their impact would be greater without unscrupulous industry initiatives to overcome and thwart them.
Industry response to plain packaging and excise increases have not been simple marketing efforts to increase sales, but illustrate cynical attempts to reduce financial and health motivations for quitting, and to encourage smokers to smoke more. Australian regulators, and those in other countries, should therefore consider further regulation.
Research suggests that future effective controls might include:
- Introducing a standard fixed per stick price for all cigarettes – preventing differentiation by price and cheaper brand options
- Prohibiting price variation by pack size – preventing volume discounting or twin pack promotion that encourage smokers to make larger purchases and smoke more
- Restricting pack size to a maximum of 10 or 20 cigarettes to limit increased consumption associated with larger pack sizes
- Banning colour variant names – removing colour-health connotations
- Restricting brand variant ranges, for example to one variant or representation per brand, to limit the way tobacco companies use differentiation to increase sales.
The tobacco industry is committed to gaming regulations, like plain packaging and tax excise increases, and developing approaches to undermine their impact. However, the Australian government is equally committed to reducing the national adult daily smoking rate to 10% by 2018. The additional tobacco controls outlined above should help the government achieve this.
Steven Greenland is associate professor at Swinburne University of Technology
This article was originally published on The Conversation. Read the original article.
this is a fantastic article thanks very much.
“Gaming the system?” What do you expect them to do? I am not a smoker and never have been, my father has numerous health issues directly related to smoking….BUT, I find something fundamentally wrong with plain packaging, increased taxes and a government telling brands what they can and cant do. I think that smoking should either be legal or illegal.The government wants the tax it gets off cigarettes as well as appearing to be anti tobacco. Dont get me wrong I dont think they should be able to advertise or promote as it can find its way back to kids but im sick of the nanny state rules that enforce rules that stop grown adults from seeing a brand on product they are legally allowed to buy.
I guess it is to do with corporate social responsibility, or lack of it. The marketing of a harmful product with tactics that encourage smokers smoke more and that deceive consumers into believing some brand options are less harmful than others is fundamentally wrong. Since tobacco companies cannot behave in a socially responsible manner they need to be regulated.
If the government didn’t need the duty money they’d make smoking illegal overnight. The sad fact is they rely on it, so they embark on a series of phoney battles as part of their phoney war on tobacco. Until they do make it illegal, it’s wise to take all the government’s pronouncements on the subject with a bucket of salt. They only stoke up public indignation against the industry when they need a common enemy at the ballot box. Fact is, when history looks back at our recent governments, they’ll judge them as collaborators who allowed swathes of the population they were elected to protect to die, just so they could pug a whole in the budget — all the while whining about how much the health effects cost.
It’s not just a tobacco industry issue. It’s a government one, as well.
Naming and shaming the ad agencies who work with big tobacco. Who are they, who are their leaders? Name and shame them.
Hey, thanks for letting me know which brands have dropped their prices – really appreciate you getting the word out.
Cheers.
How can you complain about the legal marketing practices of a legal product?
This article is borne of old mate’s personal frustration at the proliferation of smoking in today’s society rather than being based in any actual fact about ‘gaming’ or unethical practices. As long as the product is legal, there is absolutely no issue whatsoever with the action being taken by these companies. His article should simply be titled “Tobacco companies, please just stop being in business”
Once tobacco does become illegal, let’s see if he starts on pharmaceuticals, alcohol and health and beauty products who also ‘game the system’.
No I’m not a smoker, nor do I work for tobacco companies. I’m just sick and tired of living in a society where everyone knows what’s best for everyone else and whingers seem to get more air time than anybody else.
P.S. If anybody in today’s world doesn’t know that smoking is bad for them then natural selection should be allowed to take its course.
I think you missed the point. Being legal and being ethical are two different things.
Very well put. There are some utter ar3holes in positions of power in our society who could not give two hoots about the greater good of our society. Who are the agencies who work with big tobacco (they probably speak loudly about their ‘pro-bono’ work and not the shady work with tobacco scum…); name them! Who are the agencies and who are the staff working on the tobacco accounts?
all of the big ad agencies work on Tobacco brands and are very open about it, including down to the individuals – naming and shaming wont help as they are already open and visible with their involvements (just check linkedin) – i am not a smoker myself but i dont have any issue with people advertising their brands – we are all adults and can choose what we decide to consume…..from my experience some of the tobacco companies regulate themselves harder than the government led advisory boards and they are all investing heavily in finding healthy variants that dont cause harm to smokers or people in their immediate vicinity – perhaps thats where we should be focusing rather than taking away someone’s personal choice – alcohol, fuels, sugar, high fat content foods, paper – the list is endless are all bad for us so where do we stop telling people what they can/cant consume…….
I think it has all been said in the posts to date. I also am a long time non smoker. Factories and power stations belch smoke and pollution, diesel and petrol buses, trucks and cars, trains, airoplanes, open fires etc. but we can’t easily sue them, so we get in on the smokers and those who allow it in their public places. The Government does the one thing it’s really good at, it delivers the appearance of doing the right thing, by allowing legislation to damn smokers, damn the tobacco industry, and block advertising, but silently, and for all practical purposes transparently, grabs a big tax and excise duty from it. The “Chop Chop” complaint from Government is a case in point, it seems to me that it’s less of a problem to government as a health issue, more importantly, it simply robs them of their proper share of the revenue.
As I mentioned in my earlier post Richard getting companies to behave in a socially responsible manner is important. Where public health suffers as a result of company activities, then action should be taken to try and prevent them.
Do you not thing, Steve Greenland, that taking away their advertising rights, and insisting on packaging design, and anti smoking slogans, and frightening anti smoking images, is action [quote] ” taken to try and prevent them.” [unquote]
the banning of smoking in public places and not allowing smoking and non smoking restaurants, pubs etc. Is a blatant reaction (possibly an over-reaction) to the fear of litigation. I am against smoking and I think people who indulge in it are foolish, but the world is a dangerous place, petrol stations, gas cylinders, electricity, explosives stores, automobiles, horses and even bicycles are dangerous to exist with. Warn the people and educate them, but otherwise, either ban it or allow it to continue.
If the Government was half serious about actually helping smokers quit, then overnight the problem could be solved by making them a prescription only product. You go to the doctor, get a script for a few cartons, pay $2 per packet, and collect them at a Chemist.
Why not? The government complains that despite it making around $9 billion from smoking taxes and excise, it costs the country around $32 billion. So give up the $9 billion in taxes and put it under the control of the Health Department.
Why not? Because they want the $9 billion.
And they just made up the $32 billion number. It’s all about revenue.