What is the impact of plain cigarette packaging?
If you buy a packet of cigarettes, gone is the colourful branding – replaced by plain packaging, littered with health warnings and grim images. But does it work? Scientia professor John Roberts has been researching the impact of the change.
John Roberts : My research was really to work out whether an initiative that the federal government had undertaken had been successful in its aims or not. So in our research we looked at the effect of the plain packaging of cigarette products after the introduction of the government’s legislation to see whether it had been effective in reducing smoking consumption in Australia.
One part of the legislation was to make sure that graphic health warnings had to cover the majority of the package. Another part of the legislation was you were not allowed any logos or symbols, like a camel or a Phillip Morris Marlboro ensign.
This was very, very restrictive, and as you can imagine it reduced the differentiation in the market quite a bit.
We estimate about a 7.5% drop of sales of cigarettes, which amounts to about 67 million cigarettes less consumed as a direct result of the introduction of the plain packaging legislation.
BusinessThink: And how about a difference in sales channels? I’m looking here at the convenience stores versus the large grocery chains.
Roberts: The large grocery chains were probably more affected than convenience stores. About three-quarters of cigarettes are sold through the grocery channel and about one-quarter through convenience stores. And because convenience stores are better for impulse, if you need a cigarette you need a cigarette; whereas if you’re planning your cigarette product you’re probably more susceptible to what’s it costing today? How does it look? And so grocery was more affected than convenience.
BusinessThink: Sales have declined – is that across the board, or is there a difference between premium brands versus the cut price brands?
Roberts: Well, again, the premium brands were probably also more affected because [they] were now made to look daggy. The effect of the plain packaging legislation was that you were not allowed to put any of your logos on, you were not allowed to have any of your own colours. You had to have drab green. You were only allowed your brand name and a variant name in a certain font.
So, a lot of the forms of differentiation – how I make my product look more prestigious, and more appealing, and sexier than your product – a lot of those abilities disappeared.
But that hits the poor a lot more than it hits the rich because the poor basically notice the extra money; the poor smoke more than the well-off. And so by actually demonising to some extent cigarettes, and stopping cigarette manufacturers communicating – you know, this is a prestigious, cool, sophisticated brand – then to some extent this was getting to a part of the market the taxes are not quite so good at getting at.
BusinessThink: And have you looked at the impact of taxation – surely that will cause sales to decline?
Roberts: We were able to look at the level of excise and we were also able to look at the prices – we have data on prices and we have data on excise. And we were able to look at both of those and actually look at the effects of the plain packaging as distinct from the effects of excise.
And in fact, one of the reasonably cute things is that the data tends to suggest reasonably strongly [that] as plain packaging is introduced, taxation becomes more effective. And that’s perhaps not surprising because, given that my cigarettes don’t look as fun [and] glamorous, I don’t feel as good about doing it. Then actually I don’t want to pay as much anymore and I become more price-sensitive.
BusinessThink: Isn’t it odd that a professor of marketing looks at something where there is no marketing spend, because they can’t market their product.
Roberts: The objective of marketing is to get an alignment between what the company does and what the consumer wants. Now, sometimes marketing has negative, what we would call, externalities – negative side effects. It’s the job of the community to protect itself against the negative side effects. Smoking is one obvious example; pollution is another obvious example.
And so I passionately believe as a marketer, personally I want to do good for the society, and the way I do good for society is make sure if there are these externalities – people are dying as a result of what I’m doing, people are getting health problems because of asbestosis – to make sure that these externalities are actually measured so that we can incorporate them in the market system.