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ANALYSIS: Big Tobacco hurt by legal and mindset changes

Big Tobacco is proving notoriously hard to stub out but legal changes, excise hikes and the illicit trade are hurting it, writes John Hearne

SMOKING in cars with children present is about to become illegal. It was announced last month that the legislation, driven by veteran anti- smoking campaigner Senator John Crowne, has been approved and is likely to be written into the statute books by the summer.

This latest legislative swipe against the tobacco industry keeps Ireland at the forefront of the war. Next month is the nine-year anniversary of the ban on smoking in public buildings and workplaces — the first of its kind in the world.

Everywhere you look, the legislative noose is tightening on the tobacco industry. New York State banned smoking around playgrounds last year, as did Edmonton in Canada. Ottawa went a step further, ousting smokers from bar and restaurant patios, and from city parks and beaches. Smoking in cars with children has already been outlawed in five US states, as well as in Australia, Canada, Cyprus, and the United Arab Emirates.

In November, a judge ruled that tobacco companies which lied about the dangers of cigarettes must cough up for a public campaign to advertise their deception. In one of the harshest rulings to emerge from a long-running Justice Department case against the industry, Big Tobacco will be required to run ads which contain one of five different statements.

One of them begins: "A federal court has ruled that the defendant tobacco companies deliberately deceived the American public by falsely selling and advertising low tar and light cigarettes as less harmful than regular cigarettes." Another says: "Smoking kills, on average, 1,200 Americans. Every day."

None of these, however, match Australian legislators’ strike against the industry. From December last, all cigarette packs sold down under look almost identical. Logos have been outlawed. The name of the brand appears in a generic font in a standard size on one side. On the other you get shocking images of the health effects of smoking; a child on a respirator, gums riddled with cancer. There’s a particularly gruesome one of an eyeball, surmounted by medical clamps, bulging from its socket. Above this particular image, it reads ‘Smoking causes blindness’.

The new packs are coloured what’s officially designated ‘drab dark brown’.

The whole process, called debranding, has become one of the most bitterly contested battlegrounds in the war between the industry and health authorities struggling to deal with the massive health costs associated with smoking. Governments around the world are watching the Australian experience with interest, while some, including Britain, are actively considering introducing plain packaging.

Big Tobacco’s rearguard action against this regulatory onslaught has tried to focus media attention on collateral damage; the family-run newsagents and tobacconists who suffer each time another smoker is hounded into quitting or another 10c is slapped on the price of a pack. Now, with its logos under threat of extinction, the tobacco backlash is becoming ever more visible.

"Plain packaging is an assault on UK business in the midst of a double-dip recession," said Jaine Chisholm Caunt, secretary general of the Tobacco Manufacturers’ Association in a statement last August. "Plain packs would be far easier to copy, and would therefore be a gift to the criminal gangs behind the illegal trade in tobacco and increase the £3.1bn-£8.5m (€3.5bn-€9.8m) per day that is currently lost to the UK Treasury as a result of this crime."

The counterfeit argument is continually deployed by the industry. Bootleg tobacco is a huge problem worldwide — of such proportions that in size terms it approximates the fifth largest tobacco seller on the planet.

Here, the Irish Tobacco Manufacturers’ Advisory Committee has been shrill in its condemnation of each fresh anti-smoking measure. "The illegal tobacco issue in Ireland is out of control at the moment," they said in a December statement.

"The State is losing €570m per year to the illegal tobacco trade and this is only set to increase as consumers will be easily able to avail of any outlawed products on the black market."

The group continually points out that a premium pack of 20, now costing more than €9 over the counter, can be had on the street outside for about €4.

The anti-smoking lobby hotly contends the black-market issue. Wally Young, public relations advisor to Action on Smoking and Health (ASH) Ireland, says that three years ago, the Government didn’t increase the price of tobacco in the budget.

"Some months later the tobacco industry increased the price, so they were contradicting their own advocacy." He claims that the two issues should not be confused. "One is a criminal issue; the other is a health issue," he says.

Big Tobacco is also recruiting support from unexpected quarters.

Meet ‘Forest’, or ‘Freedom Organisation for the Right to Enjoy Smoking Tobacco.’ It is the driving force behind the ‘Hands Off Our Packs’ campaign which opposes the anti-smoking lobby’s attempt to introduce the debranded pack in Britain. Bankrolled by the tobacco industry, Forest doesn’t talk about corner shops or the importance of the industry to the exchequer. Instead, it talks about personal freedom. It uses phrases like ‘pro-choice’ and ‘nanny state’.

In harnessing libertarian language and ideals, pro-smoking groups hope to tap into a more general disquiet at the incursion of government into our lives.

At, pro-smoking activists decry the public money spent by the anti- smoking lobby in pushing debranding legislation. ‘What next?’ They ask. ‘Alcohol? Sweets? Fizzy Drinks?’

Here in Ireland, John Mallon of FOREST Éireann is equally dismayed by the immanent arrival of the smoking in cars legislation.

"For most people their car is a private space so this is a worryingly illiberal step. What next? A ban on smoking in the home if children are present?

"We don’t condone adults who smoke in a car carrying children but legislation, and fines of €3,000, are disproportionate to the offence. Education is far better than legislation."

Just before Christmas, the European Commission co-opted a range of new anti-smoking measures into the Tobacco Products Directive. Flavoured tobaccos will be banned, while large, pictorial health warnings will become mandatory on packs.

The commissioner in charge of health and consumer policy, Tonio Borg issued a statement after the legislation had been updated: "We delivered! The European Commission had promised a proposal on tobacco products by the end of 2012, and that’s what I’m presenting today…"

Despite the bravura with which the message was delivered, the reality is that the EU was not willing to go as far as the Australians. We may get larger warnings on our packs, but Big Tobacco gets to keep its iconic branding.

There is research to show that plain packaging has a significant contribution to make to smoking cessation. The World Health Organisation has said that a comprehensive ban on all tobacco advertising, promotion, and sponsorship could decrease tobacco consumption by about 7%.

So why then did Europe stop short? Was it because of an ideological squeamishness over tinkering with brands, or was it down to the kind of closed-door politicking that never makes press releases? Or was it simply a cost judgment? Fighting big tobacco is an expensive business.

Then there’s the lobbyists.

In December, ASH UK expressed alarm at the fact that Big Tobacco has employed two of the world’s most powerful PR firms to fight the war against plain packaging. Crosby Textor, a firm which worked with Big Tobacco in Australia has now been retained by the Conservative party in Britain to assist them in their re-election campaign. ASH is nervous about the company’s access to the prime minister at a time when Britain is contemplating the drab, brown pack.

At the same time, it’s emerged that another major lobbyist and PR firm, Luther Pendragon, whose clients include McDonalds and Exxon Mobile, has been retained by Philip Morris to fight plain packaging. The company has been contacting trading standards officers, warning against plain packs. Their rationale? The familiar cry that bland packs are easier for bootleggers to rip off.

Lobbying remains similarly vibrant in the US. According to the National Institute on Money in State Politics, during the 2012 election campaign cycle, the tobacco industry donated nearly $54m, with 87% coming from just four tobacco manufacturers: Philip Morris USA; Reynolds American Inc; US Smokeless Tobacco Company; and Altria. Of that, most — $47m — went to help defeat ballot measures that would have raised taxes on tobacco products.

Traditional tobacco markets are also being assailed from an unexpected quarter. Last December, TV viewers in the US got to see a commercial of a kind not seen there for nearly 40 years. To all intents and purposes, it looked like an ad for cigarettes. There was what looked like a pack of 20; what looked like a cigarette. You saw smoke, ash, and flame, or what looked like smoke, ash, and flame, together with what gaveevery appearance of being a happy, healthy, good-looking man puffing happily on the aforementioned fag. Not a bulging eyeball or festering pustule in sight. It wasn’t until the final seconds of the ad that we found out that what we were dealing with was an e-cigarette.

The smoke is vapour, the ash tip is plastic. The e-cigarette, which mimics the look and feel of a conventional ‘coffin-nail’, doesn’t use tobacco. It is a nicotine delivery mechanism, designed to provide the hit without all of the health risks associated with more traditional methods of consuming the drug.

E-cigarettes have been around since 2003 and while they account for less than 1% of the $80bn US cigarette market, projections from Swiss Bank UBS suggests that sales, doubling year on year, will reach $1bn this year.

Significantly however, not one of the big four tobacco companies make e-cigarettes.

Don Hedley, a tobacco analyst at market research firm Euromonitor International points out that nicotine, though addictive, does not in itself cause cancer. It is already available over the counter from pharmacies in the form of patches, gum and so on. It is the non-electronic cigarette, which brings its payload of carbon monoxide and various carcinogens along with the nicotine that makes it such a health no-no.

The question now becomes: does the e-cigarette, which mimics the sensory experience of the fag so closely, show us the future of tobacco?

"Well if it is the future," says Hedley, "why are none of the big tobacco companies making it? Why is it a plethora of small companies? I’m not sure of the answer to that. Maybe it’s because they just don’t see this as the way forward."

None of which is to suggest that big tobacco is turning its face from innovation. The second biggest of the four big players, British American Tobacco, has set up ‘Nicoventures’, an ‘arm’s-length’ subsidiary which is researching alternate routes towards a safer cigarette. According to an onsite press release, the company aims to ‘shake up the smoking cessation market by launching a non-tobacco nicotine delivery device’.

This new device, which will involve neither tobacco nor e-cigarettes, will use what we’re told is a ‘breakthrough technology in nicotine delivery, which results in pulmonary absorption of the nicotine following inhalation, meaning that an effect is felt within seconds’.

It will be called ‘Oxette’ and, assuming it gets regulatory approval, it will be on the market by next year.

So where does all this leave us?

Don Hedley at Euromonitor says that a combination of economic uncertainty, swingeing excise increases, and the continuing momentum of illicit trade will severely depress cigarette sales in Western Europe between 2011 and 2016, reducing retail sales by as much as 11%.

Longer-term research from the company suggests that the last smoker in the US will stub out his last cigarette in the year 2063, while the last smoker in Japan will do the same thing nine years later.

Lighting up

*There are 1bn smokers on the planet — 800m men and 200m women.

*An estimated 600,000 individuals die annually from secondhand smoke — 75% of these deaths are among women and children.

*Smokers consumed nearly 5.9 trillion cigarettes in 2009.

*Tobacco is grown in 124 countries, occupying 3.8m hectares of agricultural land.

*China grows 43% of the world’s tobacco, which is more tobacco than the other top nine tobacco-producing countries combined.

*Annual revenues from the global tobacco industry are approaching half a trillion dollars.

*If illicit trade were eliminated, governments worldwide would gain at least $31.3bn a year in tax revenue.

*Governments collect nearly $133bn in tobacco tax revenues each year, but spend less than $1bn on tobacco control.

*At least 86% of WHO member states imposed a tobacco excise tax and at least 14% use a portion of tobacco tax revenue for health purposes.

*The number of people protected by comprehensive smoke-free laws has doubled from 2008 to 2010.

Source: The Tobacco Atlas — World Lung Foundation