2010/09: Should Australia ban branding on cigarette packages?

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2010/09: Should Australia ban branding on cigarette packages?

What they said...
'There can be no justification for allowing any form of promotion for this uniquely dangerous and addictive product which it is illegal to sell to children'
The National Preventative Health Taskforce

'Attempts to introduce plain packaging into Australia ... [attack] a legitimate commercial business selling a legal product'
British American Tobacco (Australia)

The issue at a glance
On April 29, 2010, the Australian federal government announced that Australia would become the world's first country to ban logos and branding on cigarette packets.
Under proposed new laws, from 2012 cigarettes will be sold in plain, standardised packages carrying large, graphic warnings against smoking, while the brand name will only appear in small print.
On April 29, 2010, the government also raised taxes on cigarettes by 25 percent. The proceeds from the increased tax will be directed toward health care.

Background
[The following is an abbreviation of the federal Government's recent announcement of anti-smoking measures. The full text of this announcement can be read at http://www.aushealthcare.com.au/news/news_details.asp?nid=17072)

On April 29, 2010, the Rudd Government announced a wide-ranging package targeting smoking and its effects. This included:

a) The first increase in tobacco excise (above inflation) in more than a decade, an increase of 25 per cent
The Government will increase the excise and excise-equivalent customs duty rate applying to tobacco products by 25 per cent from midnight of April 29, 2010. The excise on cigarettes will increase from $0.2622 to $0.32775 per stick and loose leaf tobacco from $327.77 to $409.71 per kilogram of tobacco.
This will increase the price of a pack of 30 cigarettes by around $2.16. This measure is expected to cut total tobacco consumption by around six per cent and the number of smokers by two to three per cent - around 87,000 Australians.
It will provide an extra $5 billion over four years that, together with existing revenues collected from tobacco, will be directly invested in better health and hospitals through the National Health and Hospitals Network Fund.
Taxes on tobacco as a percentage of the retail price of tobacco are currently 62% in Australia, compared to 80% in France and 77.5% in the United Kingdom.

b) Cigarettes will have to be sold in plain packaging
All cigarettes will be sold in plain packaging by 1 July 2012. This removes one of the last forms of cigarette advertising available, and was a key recommendation of the National Preventative Health Taskforce.
The legislation will restrict or prohibit:
tobacco industry logos
brand imagery
colours
promotional text other than brand and product names in a standard colour, position, font style and size.

The Government will develop and test package design that will make cigarettes less appealing, particularly to young people. Graphic health warnings will be updated and expanded. Research shows that industry branding and packaging design reduce the effectiveness of graphic health warnings on tobacco products.
The National Preventative Health Taskforce concluded that 'there can be no justification for allowing any form of promotion for this uniquely dangerous and addictive product which it is illegal to sell to children', including packaging.

c) Restricting Australian internet advertising of tobacco products.
The Government will also legislate to restrict Australian internet advertising of tobacco products, bringing the internet into line with restrictions already in place in other media.

d) An extra $27.8 million is to be directed into anti-smoking campaigns.
The federal Government will boost investments in advertising campaigns by $27.8 million over four years, to a total of more than $85 million in the next four years.
This additional investment will be used for campaigns targeting people in high-need and highly disadvantaged groups such as low socio-economic communities and pregnant women and their partners.
This will extend and broaden the focus of the previous National Youth Tobacco Campaign. The first elements of the new campaigns will be rolled out by the end of 2010.

All four measures were recommendations of the National Preventative Health Taskforce. Through the Australian Taxation Office and Customs and Border Security the Government will continue its successful strong enforcement against the production and importation of illicit tobacco.

Internet information
The federal Government's plain packaging of cigarettes announcement can be found on the Australian Healthcare and Hospitals Association's Internet site at http://www.aushealthcare.com.au/news/news_details.asp?nid=17072

In 2009 the National Preventative Health Taskforce issued a report titled, 'Australia: the healthiest country by 2020, National Preventative Health Strategy - the roadmap for action'. The index to this report can be found at http://www.preventativehealth.org.au/internet/preventativehealth/publishing.nsf/Content/nphs-roadmap
The recommendations specifically dealing with discouraging smoking can be found at http://www.preventativehealth.org.au/internet/preventativehealth/publishing.nsf/Content/CCD7323311E358BECA2575FD000859E1/$File/nphs-roadmap-4.pdf

'Mumbrella' is an Australian media and marketing site. On April 30, 2010, Adam Joseph , the Readership Director of the Herald Sun in Melbourne and a member of the Australian Marketing Institute's Victoria State Council, had an opinion piece published in 'Mumbrella' titled, 'Cigarette blanding won't kill cigarette branding'.
The full text of this opinion piece can be found at http://mumbrella.com.au/cigratte-blanding-wont-kill-cigarette-branding-24040

The Tobacco Reporter gives the tobacco industry's perspective on a number of issues affecting it. The Tobacco Reporter's homepage can be found at http://www.tobaccoreporter.com/home.php?id=1
The site's editorial archives can be found at http://www.tobaccoreporter.com/home.php?id=459
The Reporter's January 2010 editorial on packaging as product differentiation can be found at http://www.tobaccoreporter.com/home.php?id=119&cid=4&article_id=11137
The Reporter's January 2010 editorial on the challenges facing the industry can be found at
http://www.tobaccoreporter.com/home.php?id=119&cid=4&article_id=11136

On April 29, 2010, The Canberra Times produced a report titled 'Last coffin nail for sexy smokes?' by Danielle Cronin. The report looks at why the Government intends to change the law and the industry's response.
The full text of this article can be found at http://www.canberratimes.com.au/news/local/news/general/last-coffin-nail-for-sexy-smokes/1815835.aspx

MyBiz is Optus's online current affairs magazine. On April 30, 2010, My Biz published a report titled, 'Smokers huff and puff over cigarette laws' presenting the tobacco industry's perspective on the new regulations. The full text of this report can be found at http://mybiz.optus.com.au/news/133854//smokers-huff-and-puff-over-cigarette-laws.html

In 2009 Becky Freeman, Research Officer; Simon Chapman, Professor of Public Health
School of Public Health,University of Sydney; and Dr Matthew Rimmer, Senior Lecturer, Australian Centre for Intellectual Property in Agriculture, Australian National University College of Law prepared 'The case for the plain packaging of tobacco products'.
This is a very detailed report which repays careful reading. The full text of the report can be found at http://works.bepress.com/cgi/viewcontent.cgi?article=1041&context=matthew_rimmer

Arguments in favour of placing a ban on the branding cigarette packages
1. Cigarettes are a major health hazard
Chemical analysis shows that cigarettes are composed of many compounds and substances that are toxic. Among these are tar, which contains poisonous chemicals such as: ammonia, toluene and acetone; nicotine; carbon monoxide and hydrogen cyanide.
They also contain a variety of metals including lead, nickel, arsenic and cadmium and pesticides such as DDT and methoprene. Other chemicals such as benzene and naphthalene are added when cigarettes are being made.
The Cancer Council of Victoria's fact sheet on the effects of cigarette smoking states, 'Smoking is one of the leading preventable causes of death and disease in Australia, responsible for about 15,000 deaths annually. In 2003, tobacco caused more than one in every 10 deaths in Australia, and taking into consideration sickness and disability as well as deaths, tobacco caused more disease and injury in Australia than any other single risk factor. Tobacco is also responsible for most of all drug-caused deaths. In 2004-05, smoking caused 14 times as many deaths as alcohol, and 17 times the number of deaths due to illicit drug use.'
The Cancer Council of Victoria has also stated, 'It has been conservatively estimated that smoking kills about one half of all persistent users. Over the decades, the death toll from tobacco use has been vast. In the 50 years from 1950 (when the initial reports identifying smoking as a cause of lung cancer were published) to 2000, smoking is estimated to have killed 679,000 Australians.'
The social costs of smoking (including health costs) are estimated at $31.5 billion each year. Annually, over 750,000 hospital bed days are attributable to tobacco related diseases.
Statistics such as the above have led state and federal governments to take a variety of actions to discourage Australians from either taking up smoking or continuing the habit. The move to remove conspicuous branding from cigarette packages is part of a series of federal government initiatives intended to reduce the incidence of smoking within the Australian population as a means of promoting public health.

2. Reducing brand loyalty may reduce cigarette consumption
It has been argued that product image is a significant part of why consumers continue to smoke cigarettes.
Cigarette brands enjoy the highest brand loyalty of all consumer products, with less than 10% changing brands annually. brand choices are usually made early during the life of a smoker, with a high concordance between the brand first smoked and the brand eventually selected as a usual brand.
The image projected by the package is an important element in establishing brand loyalty and is constantly reinforced every time the smoker takes out the pack to remove a cigarette. Unlike many products, cigarettes are not simply consumed and the package discarded. The pack remains on the smoker's person for some time while the contents is gradually consumed. This allows for a high degree of consumer identification with the product.
Research officer, Becky Freeman, and Professor Simon Chapman and Dr Matthew Richards have together investigated cigarette marketing as part of their work at the School of Public Health at the University of Sydney. In a report they stated, 'Packs can not only communicate the "personality" of a brand to smokers, but smokers can project these characteristics by handling and displaying the package throughout their daily routines. Just as designer clothing, accessories and cars serve as social cues to style, status, values and character so too can cigarette packs signify a range of attributes about users. As "badge products" cigarettes can reinforce the characteristics conjured by brand image.'
The job of the package in the case of the established smoker is to communicate to the smoker that that this is the brand he or she habitually smokes and to reinforce his or her sense of the distinctive features of the brand to which the smoker was initially attracted.

3. Removing brands on packets will make it harder to promote those brands, especially to young smokers
It has been claimed that brand image is a significant component of how cigarette companies promote their products.
It has been suggested that young smokers are particularly vulnerable to the appeal of image and that they will buy a given brand of cigarette because the image associated with that particular brand appeals to them in some way.
Becky Freeman is a research officer and Simon Chapman is a professor at the School of Public Health at the University of Sydney. In an opinion piece published in The National Times on April 29, 2010, Freeman and Chapman claimed, 'In studies with young people, plain packs were perceived as dull and boring, cheap-looking and reduced the flair and appeal associated with smoking.' Freeman and Chapman have further noted, 'Just as designer clothing, fashion accessories and fast cars serve as cues to style, status and character so too can a cigarette pack reinforce social identity.' Referring to the impact that attachment to the image associated with a particular brand can have, Freeman and Chapman have observed, 'Just as designer clothing, fashion accessories and fast cars serve as cues to style, status and character so too can a cigarette pack reinforce social identity.'
Young women are another group the tobacco industry targets via its packaging. Freeman and Chapman have stated, 'In the industry's own words, packs aimed at younger women should be "slick, sleek, flashy, glittery, shiny, silky, and bold". A brown box featuring a diseased lung can hardly be seen as fitting this glamorous description.'

4. Distinctive packaging is one of the last forms of advertising available to cigarette manufacturers
It has been argued that distinctive packaging and point of sale displays reduce the impact of bans on cigarette advertising.
Advertising bans have been put in place in many countries as it has been seen as unethical and irresponsible for governments to allow the promotion of a product which is a known serious threat to public health. The European Union and World Health Organization (WHO) have both specified that the advertising of tobacco should not be allowed. The WHO Framework Convention on Tobacco Control, which came into effect on 27 February 2005, requires that all of the 168 countries that agreed to the treaty ban tobacco advertising unless their constitution forbade it.
Some countries also impose legal requirements on the packaging of tobacco products. For example in the countries of the European Union, Turkey, Australia and South Africa, cigarette packs must be prominently labeled with the health risks associated with smoking. Canada, Australia, Thailand, Iceland and Brazil have also imposed labels upon cigarette packs warning smokers of the effects, and they include graphic images of the potential health effects of smoking.
In this context, it seems inconsistent that cigarette manufacturers can use their product packs as a form of promotion.
When there is less opportunity to establish brand imagery through traditional methods of advertising packaging plays an even more important role in establishing and driving brand image.
Investment firm Citigroup has stated that plain cigarette packaging is the 'biggest regulatory threat to the industry, as packaging is the most important way tobacco companies have to communicate with the consumer and differentiate their products'.

5. Legal objections to removing brands are without foundation
(The following is a summary of arguments presented by registered patent and trademark attorney Glen Gordon, on the Crikey website on May 5, 2010)
Cigarette companies have claimed they are losing some of their intellectual property rights, primarily their trademark and the copyright on the intellectual property of their present cigarette packaging.
However, the proposed new plain packaging will include the trademark, in small black letters in a standard font and position on the packet.
Most trademarks are registered in just this form, as plain words in upper case, and this type of registration covers the word in whatever form it is actually used - irrespective of whether it is in a fancy script or in a special colour or surrounded by graphics and attractive patterns. For example, the word mark 'Winfield' is Australian trademark registration No.369487 dating from December 18, 1981, and owned by British American Tobacco(BAT).
The primary right obtained from trademark registration is a negative right; it is actually the right to prevent other people from using the trademark. Thus, the change to plain packaging will not adversely affect this right. For instance, in the future if someone were to manufacture in Australia Winfield cigarettes in their present packaging for export to other countries, BAT would still be able to take action to prevent this.
The situation with copyright is broadly similar. It confers the right to take action against third parties who are copying and misusing the owner's old packaging artwork and this right unaffected by requiring plain packaging.

Arguments against placing a ban on the branding on cigarette packages
1. Such a ban violates international trademark laws
The tobacco industry claims it is heavily reliant upon trademark protection in order to communicate to consumers, and exclude rivals and competitors from the marketplace. For example Philip Morris has 159 trademarks listed on the United States trademark register related to tobacco. British American Tobacco Investments has 113 and Imperial Tobacco has 129.
The industry argues that plain packaging regulations would violate minimum obligations for the protection of intellectual property rights under a number of international trade agreements such as the Trade-Related Aspects of International Property Rights Agreement 1994, the North American Free Trade Agreement 1994, and the Paris Convention for the Protection of Industrial Property
1883.
Further, the industry argues that because trademarks can only be registered if they are used, they would lose the trademark protection afforded to their logos and symbols. Industry lawyers have insisted that plain packaging would curtail, or even annul, tobacco companies' most valuable assets - trademarks.
In a submission made to the Senate Standing Committee on Community Affairs in 2009, The Institute of Patent and Trade Mark Attorneys of Australia stated, 'The proposed amendments to the Trade Practices Act and the regulations to that Act are of concern to the Institute of Patent and Trade Mark Attorneys because those amendments have a significant impact on trade marks registered under the trade Marks Act as well as the rights of manufacturers, retailers and wholesalers to protect their intellectual property under the Trade Marks Act.'
British American Tobacco (Australia)has stated, ' Plain packaging is essentially a legal, as opposed to a health issue, as it deals with the use of trademarks and a company's right to use their brands.
Attempts to introduce plain packaging into Australia would see BATA take every action necessary to protect its brands and its right to compete as a legitimate commercial business selling a legal product.'
Tim Wilson, an intellectual property expert from the Institute of Public Affairs, has said the government could have to compensate tobacco companies up to $3bn for the loss of intellectual property rights if the measure went ahead.

2. Unbranded packaging will not remove consumer loyalty
It has been claimed that removing conspicuous branding from cigarette packages will not undermine consumer loyalty to particular brands.
Adam Joseph, Readership Director of the Herald Sun and a member of the Australian Marketing Institute's Victoria State Council, has stated, 'Most smokers have a very strong loyalty to their brand of choice. Assuming a smoker's memory is longer than that of a goldfish, there's a very good chance they will still remember the name of the brand of cigarette even without packaging to prompt them at point of sale every day.'
Research indicates that one third of all consumers who do not find their tobacco brand or pack size will walk out of an outlet without purchasing anything. This seems to indicate that brand loyalty is sufficiently strong that smokers will go to another sales outlet in order to be able to purchase the brand they prefer.

3. Cigarette packaging is not intended to attract new smokers
Cigarette companies have claimed that no useful purpose will be served by removing brands from cigarette packages as the purpose of such branding is to enable established smokers to recognise their brand of choice, not to attract new smokers.
The industry denies that packs are a form of advertising. For example, the Tobacco Institute of New Zealand argued 'package stimuli, including the use of trade mark, are of no interest to people not already within the market for that specific product'.
In a review of challenges facing the tobacco industry in January 2010, The Tobacco Reporter noted, 'While the industry has by and large avoided appealing to underage consumers by steering clear of media such as the Internet, youth smoking continues to be a worrying phenomenon. Consumption in the teen segment is on the rise again in the United States, and youth smoking continues to be prevalent in much of the emerging world. In Indonesia, for example, 20 percent of smokers are in the 10-18 age group.' This observation suggests that the tobacco industry genuinely sees youth smoking as a problem and not something that it seeks to encourage.

4. Manufacturers will find other ways to brand
It has been suggested that cigarette manufacturers will find other means of product differentiation if they lose the capacity to distinctively mark the cigarette package.
Adam Joseph, Readership Director of the Herald Sun and a member of the Australian Marketing Institute's Victoria State Council, has stated, 'So if manufacturers can't brand the packaging, then what about the product itself? It's not too hard to imagine that the smoke makers might start to get creative with the actual paper they use to wrap the tobacco. Tradition says cigarette paper should be plain white - but there's no reason it always has to be so.
For instance, what if Marlboro - the scarlet brand - added a thin red stripe to the design of cigarette paper? When lighting up, this would clearly signal to a smoker - and to those around him or her - that they were a Marlboro Man or Marlboro Woman.'
It has also been suggested that cigarette companies might also design and market slip-covers or sleeves that could be put over the plain package and which could carry a brand and a logo. They could also promote branded cigarette cases and perhaps even cigarette holders baring company logos might make a return.
Professor Simon Chapman from the University of Sydney's School of Public Health has indicated his belief that manufacturers would find different ways to differentiate their cigarettes.
Professor Chapman stated, 'There are certainly companies around the world experimenting with different looks, coloured filters and sticks. They could make cigarettes in the shape of joints, for example, or in fluorescent paper.'

5. Removing brands may increase cigarette sales
Cigarette companies have claimed that plain packaging may actually increase smoking, especially among young people. It has been suggested that this may occur because in the absence of branding manufacturers might attempt to attract purchasers to their product by reducing the price. This may increase cigarette consumption, especially among adolescents for whom cost is a significant factor shaping their decision to purchase.
The availability of low budget generic brand cigarettes in the United States has been cited as evidence that plain packaging would be ineffective in reducing demand: the market for these low budget, brandless generics has been seen as demonstrating that smokers would still smoke such
products.
It has further been argued that removing high profile brands will actually encourage the greater manufacture and sale of these cheap generic brands as there will be less to distinguish them from the high profile brands. Such brands, it has been argued, are cheap enough to attract young smokers.
It has also been suggested that no brand packaging may appeal to young people as it would make smoking appear an act of rebellion, something more anti-authoritarian and high risk.
Consumers are less brand-loyal at the low end of the market, and this has facilitated the emergence of new players, such as Richland Express, importing cigarettes, and new brands, such as the Chinese cigarettes imported by Patron Group. These new brands have attracted a consumer base because of their low cost. Stripping the obvious markings from established brands is likely to accelerate trends toward these cheap brands of cigarette.
It has also been argued that the removal of obvious branding from high profile make will encourage counterfeiting and that these counterfeits are likely not to include government health warnings. Imperial Tobacco Australia spokesperson, Cathie Keogh, has stated, 'If the tobacco products are available in the same easy-to-copy plain packaging, it makes it much easier for counterfeiters to increase the volume of illicit trade in Australia, which is currently reported at about 12 per cent of the market. That illicit product won't have or may not have the health warnings on it. It won't be subject to ingredients reporting.'
Finally, it has been suggested that removing brands will have little impact on children's decisions to smoke as studies have shown that children's decisions about smoking are not predominantly determined by brand. A recent English study found, 'Three-quarters of the sample expressed no brand loyalty, but of those who did, taste of the cigarette was the main reason they gave for choosing it, although some made the choice because they considered that cigarette to be less harmful.'

Further implications
The regulations proposed by the Australian federal Government is a world first. No other country in the world has yet to attempt to ban branding on cigarette packages. The proposal has been considered in a variety of jurisdictions but has not been put into effect. If the Australian legislation is successfully enacted and survives whatever legal challenges the tobacco industry mounts, similar legislation is likely to be put into place in many other countries.
Though it is impossible to confidently predict what its impact will be, the general reduction in cigarette smoking which has followed bans on cigarette advertising and the inclusion of health warnings on cigarette packets suggests that this measure is likely to see a further reduction in the number of Australians who smoke.
The plain package measure is not a stand-alone proposal. It is coupled with an excise increase which will cause the cost of cigarettes to rise, a new anti-cigarette advertising campaign and a ban on internet cigarette advertising. These last three measures are an important part of the total effort to reduce the number of smokers in Australia.
As the number of people taking up smoking and continuing to smoke declines, the government is going to have to very carefully target those particular demographics who are still smoking. Included among these groups are obviously young people. The government's new measures should all have an impact on young people who either smoke or are contemplating taking up the habit. Other key groups with a disproportionately high smoking profile are the unemployed, the mentally ill and Indigenous Australians. The Government may well need to develop quite specific strategies to discourage those in these groups from smoking.
The tobacco industry is likely to attempt to find other advertising avenues including package inserts and differentiating the cigarettes themselves. The National Preventative Health Taskforce's report predicted that cigarette manufacturers would adopt such strategies and warned that the Government must be prepared to ban these also.
Finally, as cigarette smoking becomes a more and more expensive habit and becomes a habit more particularly indulged in by lower socio-economic groups, it becomes likely that illicit tobacco (chop-chop) and illicit cigarettes will become a greater problem. Cigarette supply may begin to take on some of the characteristics of the illicit drug trade.

Newspaper items used in the compilation of this issue outline
The Australian: May 5, page 5, news item by Matthew Franklin, `Voters cynical about smokescreen on tobacco excise'.
http://www.theaustralian.com.au/politics/voters-cynical-about-smokescreen-on-tobacco-excise/story-e6frgczf-1225862284467

The Age: May 4, page 11, comment by Mark Davison, `Big tobacco's huff and puff is just hot air'.
http://www.theage.com.au/opinion/society-and-culture/big-tobaccos-huff-and-puff-is-just-hot-air-20100503-u3p0.html

The Age: May 2, page 5, news item by Danielle Teutsch, `No-frills packaging to prompt all-frills ciggies?'.
http://www.theage.com.au/national/nofrills-packaging-to-prompt-allfrills-ciggies-20100501-u0dh.html

The Age: May 2, page 5, news item by Gordon and Fyfe, `Blue haze has gone, but a few MPs puff on'.
http://www.theage.com.au/national/blue-haze-has-gone-but-a-few-mps-puff-on-20100501-u0df.html

The Australian: May 1, page 15, cartoon.

The Australian: May 1, page 4, news item by Sid Maher, `Colour crackdown on smokes'.
http://www.theaustralian.com.au/news/nation/colour-crackdown-on-cigarette-packaging/story-e6frg6nf-1225860819232

The Australian: April 30, page 13, editorial, `Deterrent or smokescreen?'.
http://www.theaustralian.com.au/news/opinion/deterrent-or-smokescreen/story-e6frg71x-1225860373261

The Australian: April 30, page 12, comment by Tim Wilson, `Plain packaging ploy likely to go up in smoke'.
http://www.theaustralian.com.au/news/opinion/plain-packaging-ploy-likely-to-go-up-in-smoke/story-e6frg6zo-1225860365444

The Age: April 30, page 11, comment by Fiona Sharkie, `Big tobacco's coughing fit a big tick for plain packaging'. (This is the same article as it appeared in the Brisbane Times)
http://www.brisbanetimes.com.au/opinion/society-and-culture/big-tobaccos-coughing-fit-a-big-tick-for-plain-packaging-20100429-tweu.html

The Age: April 30, page 10, editorial, `Plain package: elaborate content'.
http://www.theage.com.au/opinion/editorial/plain-package-elaborate-content-20100429-twck.html

The Age: April 30, page 10, Leunig cartoon.

The Age: May 13, page 3, news item by Mark Metherell, `Labor fails to tackle alcohol and junk-food giants'.
http://www.theage.com.au/national/labor-fails-to-tackle-alcohol-and-junkfood-giants-20100512-uy42.html