Global Tobacco: Will Legislation Kill the Industry?

Global Tobacco: Will Legislation Kill the Industry?

July 2009

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© Euromonitor International >Tobacco - Legislation

Introduction

Legislation: What Restrictions Are There?

Litigation: What Have Been the Impacts?

Regional Legislation: Analysis by Region

Manufacturer Strategies

Legislation Outlook: Where Next?

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A survey of the world's major tobacco markets shows an increasingly restricted smoking environment.

A phrase used by the French Ministry of Health whose stated aim is to "de-normalise the consumption of tobacco" epitomises the objectives of the legislative measures to which the industry is subject.

The de-normalisation is effected through public smoking bans, particularly bans on smoking in social environments. The aim is to prevent non- smokers being subjected to 'second-hand' smoke.

However, legislation also targets the way in which the product is marketed – by cutting off advertising in all media, such that it becomes difficult to find any positive attribute, image, media, location or sponsorship which is not proscribed or limited in some way.

Legislation also targets the product by using compulsory health warnings to separate tobacco products from other consumer goods and makes it more difficult for cigarette packs to be fashion items. The warnings are increasingly designed not merely to appraise the smoker of the health effects but to frighten him or her into giving up. The next stage in warnings is to use graphics to shock the smoker and these are already present in a number of countries.

There is also legislation concerning the minimum tar yield of cigarettes in many countries, though this is viewed as a Trojan Horse by some since creating a minimum may be taken to imply that a lower level of tar is safer than a higher level of tar, which is the concept behind billions of dollars worth of anti-tobacco litigation.

However, the key point regarding tobacco control legislation, particularly in developing countries is the extent to which it is observed by the population, which depends on the smoking culture and how far the government is prepared to go to enforce the legislation.

Introduction

Probably the Worst Operating Environment in the World

This report analyses the impact of tobacco control legislation on the industry: public smoking bans, advertising restrictions, health warnings, minimum age requirements and tar limits. The future legislative environment as tobacco control tightens its grip, the impact on the market and what the industry can do to mitigate the damage are also considered. Note: All tables and regional analysis based on the 80 largest tobacco markets analysed by Euromonitor International.

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© Euromonitor International >Tobacco - LegislationIntroduction

Tobacco Industry Restrictions

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© Euromonitor International >Tobacco - LegislationIntroduction

The Framework Convention for Tobacco Control

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The WHO's Framework Convention on Tobacco Control (FCTC) requires its signatories to adopt a number of measures to reduce tobacco consumption and growing in each country and its stated aims include measures such as: increasing tobacco taxes, adopting graphic health warnings, imposing bans on advertising and smoking in public as well as encouraging alternative crops to tobacco and combating illicit trade in tobacco.

Introduction

FCTC – Stated Aims

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To date, some 168 nations have signed and ratified the FCTC. Notably, the US has signed the FCTC but not ratified it though President Obama has already shown himself to be more supportive of tobacco control measures than his predecessor. Indonesia has not signed whilst Switzerland and the Czech Republic are the only European countries not to have ratified the FCTC, despite both having signed it.

Introduction

FCTC: Who's In and Who's Out?

Case study: IndonesiaIndonesia is the only country besides North Korea in East Asia to not sign the FCTC. The Indonesian government's stance is predicated on the premise that the country's tobacco industry is of greater benefit to the economy than tobacco control measures. Tobacco taxes in Indonesia are the lowest in Southeast Asia with few limits on the sale, consumption or advertising of tobacco products. Indonesia's estimated US$8 billion tobacco industry supports about close to seven million people and accounts for about 10% of the country's tax revenue.Indonesia's anti-smoking groups have been vocal in their criticism, indluding Yayasan Lembaga Menanggulangi Masalah Rokok (YLMMM), Yayasan Jantung Indonesia (YJI) and Yayasan Kanker Indonesia (YKI). In 2008, Majelis Ulama Indonesia (MUI) or the Board of Moslem Leaders in Indonesia, planned to declare smoking as haram, or strictly prohibited, for Moslem children and pregnant women as well as MUI members, in January 2009. Municipals around major cities have taken different approaches to tackling tobacco consumption. Jakarta issued an act in 2005 to ban smoking in public places which is being enforced loosely. The sale of cigarettes to minors under 18-years is also common by street vendors who sell their wares freely without identity checks.

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The strength of anti-smoking groups is a key factor in legislation. Strong, well-organised groups orchestrating high-profile campaigns can create an atmosphere of acceptance for anti-smoking legislation. The mobilisation of public anti-tobacco sentiment can be a strong influence on Governments, especially in democracies.

There are hundreds of anti-smoking organisations in the world. Many are charities with links to Cancer and other health charities. Action for Smoking and Health ASH in the UK receives funding from the British Heart Foundation and Cancer research UK.

There are a number of anti-smoking organisations in the US which have a strong voice in the media on smoking and health matters such as National Center for Tobacco Free Kids, Foundation for a Smokefree America and the American Cancer Society. Some organisations major on offering help to smokers wishing to stop, e.g. Stumppi in Finland and Stivoro in the Netherlands.

The most significant organisation is the World Health Organisation, partly through its instrument FCTC which countries and powerful regional organisations such as the EU can use as a platform and launch pad for national and regional legislation.

Introduction

National Anti-smoking Lobbies

Anti-smoking organisations are stronger in developed than developing countries. The development of Government-sanctioned anti-smoking campaigns in China is of particular importance to the future of global cigarette volumes. In April 2007, the biggest scale anti-tobacco project 'Stepping into No-Smoking China' was launched jointly by the China Disease Control Centre and China Medical and Health Ministry across 20 provinces, in an attempt to reduce smoking in public places in both urban and rural China. The projects have a concrete aim of reducing the population of second-hand smokers from 53% to 30%, according to the ministry. The question is whether the Governments in countries like China have the will to make such campaigns effective within a resolute smoking culture and in view of the importance of the tobacco industry to government revenues and employment?

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Introduction






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Smoking by children and young people and the marketing of tobacco products to this demographic is a central issue in tobacco control. Out of the 80 countries analysed, four have no age limit, three have an age limit of over 18, nine have an age limit of 16 and 64 have an age limit of 18.

As with all legislation, the key point is always whether the laws are observed by the smoking population and whether they are enforced at national and local level. Necessary for enforcement of age limits are controls on the retailing of tobacco products.

In a number of countries, even when supermarkets, tobacconists and c-stores attempt to limit sales to those above the minimum age, there exist street vendors who ignore the law.

Unpoliced vending machines are another means by which under-age persons acquire cigarettes. With some exceptions, enforcement of age limits is low in Asia, Middle East & Africa, Latin America and Eastern Europe. In Indonesia, research shows that one in 10 starts smoking below the age of 10; in Algeria a quarter of under 10s have smoked. In the United Arab Emirates the limit is 20 but this does not deter teenagers.

In Western Europe, rules tend to be better enforced, though under-age smokers still buy cigarettes from kiosks in Greece and from shops and vending machines in many other countries where ID is not demanded. Some countries such as Italy and Japan have introduced controls on vending machines.


Minimum Smoking Age

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© Euromonitor International >Tobacco - LegislationLegislation: What Restrictions Are There?

Minimum Smoking Age: Case Studies

The legal smoking age in Mexico is 18 years. Currently, no plans to raise this level exist. Retail outlets across the country must display a notice prohibiting the sale of tobacco products to under-age persons, and all cigarette packages have to contain the warning "VENTA PROHIBIDA A MENORES" ("Sale to minors is prohibited"). When in doubt, sales staff are asked to demand a photo ID. It is also prohibited to hire minors to sell tobacco products. These are the laws but local reports suggest that they are not being implemented. Around 70% of teens are estimated to smoke and freely buy cigarettes at most convenience stores or from street vendors selling cigarettes by the stick at Mx$2 or Mx$3 per unit despite single stick sales being against the law. Attitudes to teenage smoking are permissive : research shows that some 12% of teens smoke openly at home and 30% on the street.

In 2003, the Child Protection Act was introduced to ban smoking by persons under the age of 18 years. However, a study on 'Cigarette sales to women and children in urban Thailand by a researcher from Central Queensland University of Australia, published in 2003, revealed that approximately one third of the urban population did not even know the minimum legal age and approximately 50% of retailers sold cigarettes to persons younger than 18 years.

In Vietnam the minimum smoking age is 18, but by tradition and due to lack of Government enforcement many smokers start the habit at the age of 13-14 or younger because no fines or other legal sanctions of any kind are applied, with buyers or sellers ignoring the law.

Of the countries with a smoking age limit of 18 (within the 80 major

countries) Euromonitor International estimates that, in at least 25, it is easy

for under -18s to buy cigarettes and little or no effort is made to stop them.

Source: NHS UK

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33 countries out of the 80 analysed by Euromonitor International have no tar limits despite the fact that it is generally accepted that the proportion of carcinogens in a cigarette is based on the tar yield.

Tar caps vary significantly. Generally, the stricter the tobacco control regime the lower the minimum tar level. Euromonitor International divides tar levels as follows: high tar cigarettes = tar content of greater than 10mg; mid tar = 6-10mg; low tar = 4-6mg; ultra low tar = cigarettes with a tar content of less than 4mg. In most markets the long-term trend has been for the proportion of high tar cigarettes to fall.

Some view the imposition of a legal tar limit as being a tacit acceptance that one cigarette is safer than another, hence the banning of terms such as "light", "mild" and "low" in many markets.

However, smokers seem generally to accept the idea of low tar equating to lower risk and this is a trend which is forecast to continue.

In Western Europe most countries are subject to the EU product directive and observe the 10mg tar maximum (apart from Turkey where the maximum is 12mg).


Tar Cap Legislation

In Canada and the US there are no tar restrictions. In the case of Canada this is because to state a maximum is regarded as giving tacit approval of cigarettes with lower tar content and this is regarded as the wrong message.

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Tar Caps: Case Studies

Although the EU has legislated a maximum limit which is significantly lower, the Australian government has not found it necessary to legislate lower levels. Descriptions such as "light" and "mild" on packs of cigarettes with lower tar levels have been phased out since 2005, when the Australian Competition and Consumer Commission ruled against the companies using these descriptors because they create the impression that the cigarettes are less harmful. However, descriptions like "smooth" and "fine" are still accepted and the colour coding of packaging differentiates brand variants according to tar level. This is an example of companies 'getting around' a restriction by creating a complicity with the consumer.

In New Zealand, where there is no maximum level, there is a view that imposing a cap would increase smoking volumes as smokers accustomed to high tar increase the number of units consumed in order to compensate. The failure, due to litigation fear, to be able to tie lower tar to a safer smoke is a key issue.

In Malaysia all cigarette packs are required to include information on tar and nicotine level, manufacturer's name and manufacturing date.

In Thailand research shows that smokers are unaware of the health risks associated with tar and are more concerned about the negative (addictive) effect of nicotine. Public Health Ministry data revealed that many lower-income smokers are poorly educated or even illiterate, and this would limit the effectiveness of a move towards limiting tar yields.

The intensity of a smoke is also relevant to the tar debate covering issues such as number of puffs and treatment of the filter tip by the smoker.

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Health Warning Legislation

Health warnings are present on tobacco products in all 80 countries analysed, in the vast majority of cases due to legislation. The main variation is in size of warnings in terms of percentage coverage and whether the warnings are on both sides of the pack. In the EU in all countries (plus official candidate countries Croatia and Macedonia) the warning must occupy at least 30% of the area on the pack front and 40% of the area on the rear.

The EU is also considering the idea of enlarging pack warnings and ordering mandatory pictorial warnings on both sides of packs. It is also considering replacing maximum tar, nicotine and carbon monoxide (TNCO) yield data with information on other substances in tobacco products or help lines.

It has been suggested that smokers quickly become accustomed to health warnings, and either ignore them or cover them up. However, some research indicates that pack health warnings may be more effective for juveniles, especially if backed by other measures such as high-profile anti-smoking campaigns.

Where cigarettes are sold in single sticks consumers do not see the pack warning. Similarly, in rural areas of developing countries where illiteracy is high, only graphic warnings are likely to have the desired deterrent effect.

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Health Warnings – Effective? Case Studies

Smokers pay little attention to health warnings on cigarettes packs in Vietnam. According to a survey conducted by the National Institute of Tuberculosis and Lung, more than half of the respondents were not aware of, or did not see, health warnings on cigarettes packs. A survey conducted by the Ministry of Trade showed that only 1% of consumers were able to read the health warning messages because the print was too small.

According to surveys conducted by the Ministry of Health in Italy, 'Il fumo uccide' (Smoking kills) is the health warning that makes the biggest impression on smokers. That said, health warnings in general are still not very effective in getting smokers to quit. Data from the ISS (Superior Institute of Health) and Lega Italiana Lotta ai Tumori (Italian Association against Cancer) suggested that just 10% of smokers had reduced their daily consumption of cigarettes as a result of pack health warnings. Moreover, only 8% of smokers aged 20 years old or younger altered their smoking habits (by cutting down or quitting completely) as a result of pack health warnings.

According to a recent Health Canada poll, 57% of smokers are unmoved by graphic warnings, up five percentage points over the last five years thus demonstrating effectiveness lowering with familiarity. Among smokers seriously thinking of stopping, the proportion who said the campaign was ineffective rose from 40% to 43%.

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Graphic Health Warning Legislation

There is a saying a picture is worth a thousand words and this is particularly the case where a proportion of the population is illiterate.

Canada was the first country to use images in 2001. Research a year later found 31% of ex-smokers said the images had motivated them to quit, while 27% said they had helped them to remain non-smokers. Surveys one year later showed that a third of smokers had been motivated to quit by the images.

However, other research, on behalf of Health Canada, showed that graphic health warnings need to cover almost the entire surface of the cigarette pack if they are to be really effective, and the general view is that any deterrent image needs to be regularly changed so that its impact is not dulled by familiarity.

Although, at the time of writing, there were only 12 countries with graphic health warnings on cigarette packs, in a further 11 countries including Spain, Denmark and the United Arab Emirates they are likely to be introduced in the near future.

Brazil Proposed UK plain packaging

Source: packagingnews.co.uk

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Graphic Health Warnings: Do They Work?

In Mexico, according to a research panel, clear graphic images of the health consequences of smoking influenced the decision to quit smoking in those consumers who were already trying to quit the habit or reduce consumption. Those images having the biggest impact were a close up of a lung cancer and a man with a noticeable larynx cancer.

The EC has set up a central EU library of colour photographs and other illustrations for

member states to chose from when health warnings on tobacco products become

obligatory.

Thailand was the fourth country in the world to adopt graphic warning pictures on cigarette packs, in 2005. According to surveys conducted by local news agencies, Thai smokers ask for the pack with the least scary picture. The data also showed that, in the first period of introducing this measure, volume sales declined though the impact was less amongst regular smokers, who quickly became accustomed to the pictures.

According to a study by the Central Agency for Public Mobilization and Statistics in Egypt, which was reported in October 2008, graphic health warnings were not affecting cigarette sales or prevalence.

A year after the introduction of graphic health warnings, smoking prevalence in New Zealand fell from 25% to 20%. Although the warnings are not regarded as the only factor they are regarded as significant and evidence that smokers are asking for packs with less disturbing warning pictures on them (as in Thailand) is taken as supporting this. The images are to be replaced by different ones to prevent people from becoming desensitised and the warnings losing their impact.

Source: European Commission

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Graphic Warning Alternatives

In Australia, the release of 'wallet packs' from BATA's Dunhill brand was viewed as a way of getting around the legislation demanding graphic warnings. These packs of 20 could be split into two packs - of 13 and seven, with the resulting smaller packs featuring the warning label only on one side of the pack. BATA was consequently promptly taken to court by the ACCC, and the cigarette packs were soon removed. It is likely, however, that these packs were introduced not so much to avoid the graphic health warnings, but to take advantage of the trend towards smaller packs, given that the lower limit for pack size in Australia is 20 cigarettes.

Since the implementation of graphic labels in Singapore, sales of metallic cigarette cases have been brisk, especially amongst the young adult smoking population. Smokers in Singapore have the habit of leaving their cigarettes on tables as they light up in social settings, and by using such cigarette cases, the 'offensive' graphic warnings are kept out of sight.

Sleeves to cover health warnings sold in Australia

Source: nzma.org

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Advertising Bans and Restrictions

The table above categorises tobacco product advertising restrictions with the rating in the right hand column based on the proportion of countries surveyed by Euromonitor International in which these aspects of advertising and promotion are restricted.

Advertising bans are rarely total: as the table shows there are many exceptions with POS (Point of Sale) advertising the most common. The FCTC encourages the banning of all tobacco product advertising but specific national legislation is required.

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Advertising Bans: Case Studies

When point-of-sale advertising is banned in Ireland, cigarette sales will be entirely dependent on maintaining existing brand loyalty rather than fostering interest among new smokers. This will have considerable impact on new product launches, potential brand share and overall cigarette volume sales over the forecast period. Following this ban in July 2009, the only avenue for tobacco companies' advertising expenditures will be in retail trade magazines – which are a form of B2B advertising directed at store owners. In a survey administered by the OTC in early 2008, 92% of shops visited had some form of tobacco advertisement on display. With such a high percentage of retail outlets advertising tobacco products, this new legislative change in July 2009 will drastically affect the industry.

Since the TV and print advertisement ban in Argentina in 2003, tobacco manufacturers have changed their strategies from main media advertising to direct marketing activity: promotions, contests and prize draws have become key marketing tools. Printed advertisements are only allowed in those magazines with at least 75% readership in the adult segment, in order to meet the regulation of the international agreement signed by tobacco manufacturers. Distribution of tobacco-branded gifts is currently unregulated in Argentina.

In Kazakhstan a number of companies sought to circumvent restrictions by using outdoor advertisements for their brands, which did not mention that these brands were tobacco products. As a result, the law was amended to restrict the advertising of entire brand families and not just individual tobacco products. For example, companies will no longer be permitted to place billboard advertisements for tobacco products near schools, universities or other places frequented by under-age consumers.

Source: blog.kievukraine

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Advertising Ban Strategies

In India the clampdown on tobacco advertising during the review period prompted some companies to develop more creative marketing strategies. GTC Industries, for example, launched Chancellor XP in 2005, a cigarette brand positioned as the choice of India's IT (Information technology) workers. While the 'XP' in the brand's name ostensibly refers to its 'extra premium' status, it is also intended as a subtle reference to the well-known Microsoft operating system Windows XP. To reinforce the association with India's IT professionals, the company added the tagline 'Luxury blend - for the finest minds in India'.

In Thailand, many tobacco manufacturers try to get round the advertising ban by promoting their products via advertisements in foreign magazines which are widely available in Thailand, or by sponsoring foreign sports events which are broadcast on satellite channels in the country. There is, however, a censorship board that strictly enforces the ban on tobacco advertising in all media channels. Tobacco logos and brand names are censored on television programmes, including international sporting events. Even films which feature scenes where logos or brands are displayed or mentioned are censored.

In Japan vending machines can be used for display advertising. Japan Tobacco also has a campaign, which uses humour, advertising smoking manners on TV and in a street campaign.

Advertising via vending in Japan

Source: quitguide.com Source: quitguide.com

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Point of Sale Legislation: Key Issues

One face per pack display

In 1991 the Singapore government pioneered global product display restrictions by limiting retailers to display only one pack face per brand per variant. Since 1993 retailers have been prohibited from selling tobacco products to teenagers aged under 18, and have to prominently display age restriction signs at points of sale. Price and bulk purchase discounts for tobacco products are also prohibited.

ID checks

In Australia, it is illegal for a retail outlet to sell cigarettes to any person under the age of 18 or to an adult on a minor's behalf. Retailers are also asked to do ID checks. Signs are also required to be displayed saying "We Don't Sell Tobacco To Under 18s", "No Proof Of Age, No Cigarettes" and "Selling Tobacco Products To Under 18s Can Incur a A$5,000 Penalty." Fines for selling to minors start at A$220 for an 'on-the-spot fine', and if prosecuted can go as high as A$5,400. Despite such disincentives, it is estimated that around half the tobacco retailers in Australia still sell cigarettes to minors.

UK point-of sale display

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Point of Sale (POS) Legislation: Display Ban the Next Big Step

As advertising bans have multiplied and become more wide ranging and severe, the emphasis for cigarette companies and legislators has shifted to point of sale (POS).

Just over half the countries analysed have no POS advertising restrictions and in most of the remaining countries there is still scope for tobacco product marketing, e.g. by poster (as in France) or special display cabinet.

Vending is a key issue because, in many countries, there is no restriction on access. In 2008, in order to prevent vending machine purchases by minors in Japan, only holders of taspo IC cards, issued free by the Tobacco Institute of Japan are to be able to buy cigarettes from automated vending devices. Japan and Germany have the largest per capita proportion of vending machines among the major countries and their availability to under-age smokers is a major issue.

Restrictions at POS may be mild, e.g. concerning the permitted distance of the outlet from a school, or banning single stick sales, as in Kenya.

The key future issue in POS is the complete display ban (i.e. putting cigarette packs under the counter) favoured by the WHO and by the EU.

There are, as yet, few display bans but the issue is increasingly important. A law proposed by Finland's ministry of social affairs and health, which is expected to be passed in 2010, would ban retail display of cigarette packs to discourage under-age smoking. The Northern Ireland Assembly has approved a ban on the display of tobacco products, which is planned to be implemented late in 2010, although some (DUP) politicians have recommended a delay until 2013. A similar ban is to be introduced in the Irish Republic in July 2009.

The UK Public Health Minister has proposed that cigarettes should be removed from display and hidden under shop counters with cigarette vending machines banned from hotels, bars and restaurants to further limit children's access to tobacco products.

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Retail Display Ban: Case Study – Ireland

In Ireland on 1 July 2009, the commencement of further provisions of the Public Health (Tobacco) Acts 2002 and 2004 will occur. These provisions include:A ban on all in-store/point-of-sale advertising of tobacco products (this includes signs, change mats, mouse pads, till covers, decals, etc).A ban on the display of tobacco products in retail premises (a menu board with one image of each tobacco product sold can be provided to a customer, but not put on display). The introduction of a closed container/dispenser provision (all tobacco products must be out of view and stored within a closed container/dispenser which is only available by the retailer). Tighter controls on location and operation of vending machines (these machines must be token activated, located within the view of a member of staff and are not permitted to show any tobacco advertising – rather a black and white only ticket will inform the customer of the tobacco products available).The introduction of a retail register (anyone who wishes to sell tobacco products must register with the Office of Tobacco Control, paying a fee of €50.In consequence, retailers will have to transform their point-of-sale units. Furthermore, it can be suggested that cigarette sales will be entirely dependent on maintaining existing brand loyalty rather than fostering interest among new smokers. This will have considerable impact on new product launches, potential brand share and overall cigarette volume sales.

The regulations which are about to be implemented in

Ireland, a country at the forefront of tobacco control

since its total public smoking ban in 2005, are detailed (right) as these could be a blueprint

for regulations in other countries. These regulations strike at the last bastion of

tobacco marketing – the point-of-sale environment.

Source: Cancer Society of New Zealand

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Media Advertising Restriction Strategies

Advertising restrictions cause sales to fall and the trend in recent years has been for manufacturers to try to compensate with point-of-sale and/or 'below-the-line' strategies, making use of the cash no longer needed for media advertising of tobacco products, Some examples are summarised below:

In the EU, JT's Gallaher in the UK has invested in point-of-sale facilities which display brands by price platform to help prevent consumers down-trading from premium to budget brand alternatives.

In the US, Philip Morris is well-known for its 'Retail Leaders' programme, in which retailers agree to devote a certain percentage of shelf space (usually around 50%, and always the most desirable 'eye-level' section) and signage to Philip Morris brands in exchange for increased promotional allowances.

In South Africa, BAT uses a two-tier approach – customers are engaged at point of sale by innovative displays but, in addition, the company uses one-on-one marketing to give out samples and explain the merits of new products such as snus in order to create customer advocates, i.e. 'brand champions' willing to carry the message to peers.

In Taiwan, cigarettes cannot be given as a prize or gift, and price discounting is not allowed for cigarettes. When giving-way branded gifts such as lighter when purchasing a cigarette product, the gift value must not exceed 25% of the retail cigarette price.

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Public smoking bans are a central element of the FCTC and integral to the WHO's intention to 'de-normalise' the practice of smoking. Thus there is a public smoking ban of sorts in most countries.

The key drivers of public smoking bans are separating children from smokers and preventing workers from inhaling second hand smoke, i.e. preventing passive smoking. Thus bans are most common around schools and hospitals. Enclosed places where bans are rare are the home and the car, i.e. where health meets individual freedom. Smoking bans 'in the open air' are also rare.

However, the acid test of any ban is whether it is enforced and whether it is observed, which has to do with the political will of the Government and the smoking culture of the country concerned.

A general public smoking ban is due to be implemented in Greece in July 2009 but, in a country where anti-smoking groups are marginal and where the smoking culture is strong, it is thought that cultural factors could well undermine the ban. The success of the 2009 public smoking ban in Turkey, which is seeking EU membership, will also be an important indicator.

Political will is a key element: President Vasquez of Uruguay imposed the first public smoking ban in Latin America by presidential decree, and the increase in excise tax in Venezuela from 50% to 70% was via a decree from President Chavez.


Public Smoking Bans

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Public Smoking Bans in Western Europe: Case Studies

In Ireland the immediate impact of the public smoking ban was a fall in consumption followed by a partial recovery as consumers became more used to the non-smoking environment. According to recent surveys administered by the OTC, 95% of all smokers who visited a pub within the previous fortnight either smoked outside or did not smoke at all, while more than one in five smokers chose not to smoke at all when out socialising. In metropolitan areas, investment in the provision of outdoor smoking areas and the development of continental-style street culture has been significant and a whole industry developed around providing comfortable outdoor accommodation for smokers. The use of gas burners for outdoor heating became a feature of many pubs attempting to cater to smokers during the winter though there have been calls for a ban in their use due to their contribution to global warming. The locations in which Irish consumers smoke have also changed, with many now smoking more in the home, as well as in their cars. Retailers, foodservice outlets and bars have sought to capture some lost sales from these consumers by offering new takeaway or off-licence services.

The smoking ban in Italy had an immediate impact on retail volume sales of tobacco products in 2005. According to statistics published in the British Medical Journal (BMJ 331, 2005, 1159), there was a strong decrease in tobacco consumption in the first year following the ban, which, according to the 'Newsletter Tobacco Observatory' published by REF (Research for Economics and Finance), was equal to a drop of 3.5 million kg in cigarette volume sales, depriving the treasury of around €400 million. According to the tobacco vendors' trade association, Assotabaccai, the Italian government lost €94.3 million in excise duties in the year following the ban. Reports suggest that the public smoking ban has proved fairly popular, partly due to the climate.

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Public Smoking Bans in Asia Pacific: Case Studies

In 2008, the enforcement of the Public Smoking Ban 45/2005/ND-CP in Vietnam was only rated 4/10 by a WHO expert, with the only visible smoke-free environment being the indoor office. Almost all indoor offices in the cities prohibit smoking, and have separate smoking places. Although there are some smoke-free restaurants in Ho Chi Minh city and Ha Noi, these are unusual and the level of acceptance of such restrictions by the smoking population is low.

Source: WHO report on the Global Tobacco Epidemic, Vietnam, 2008

In China, while the Chinese government has banned smoking in various public locations and on public transport, people have continued to smoke in many public places, including restaurants. Smoking remains rampant and unchecked in many public places such as restaurants, cinemas, offices and railway stations despite the widespread presence of "No Smoking" signs. In restaurants, for example, people continue to smoke owing to the belief that consumption of wine and cigarettes go hand in hand. Only airline companies have fully implemented a ban on smoking on all domestic and international flights.

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The key battleground for public smoking bans is social environments – bars, clubs and restaurants – and the number of countries whose public smoking bans extend to these locations is significant, as is the proportion of countries where bar/restaurant smoking bans include provision of designated areas for smokers.

More than half the 80 countries analysed have extended their public smoking bans into bars and restaurants, though, in only about a third of these, is there a total smoking ban.

The other two thirds offer bar and restaurant owners the option to create a designated smoking area. This is often dependent on the size of the outlet concerned. In some countries small bars/restaurants are exempt from the ban although frequently they are not allowed to serve food within an area where smoking is permitted.

Rules regarding designated smoking areas within non-smoking establishments also vary. These must frequently have separate air conditioning and be sealed off from the smoking area by means of a self-closing door.

These smoking bans have caused growth in patios and terraces, often heated and covered, where smokers may sit and smoke legally. There are examples of tobacco companies helping in the establishment of such outside areas.


Smoking Bans in Restaurants and Bars

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Of all the tobacco control measures employed by governments, the measure that has the most immediate impact on sales, apart from price, is a public smoking ban, though the degree of impact varies based on factors such as coverage, enforcement, weather, drinking culture etc. For example, the year of Italy's ban saw an exceptionally warm summer and so people continued to smoke whilst socialising outdoors, whilst England's wet weather had the reverse effect. Nevertheless, every country witnesses an immediate impact on volume as the opportunity to smoke is reduced, though the industry argues that the effect is temporary.

The impact is felt not only by cigarettes – in the UK, for example, cigar sales slumped by over 11% in the year of the smoking ban. Cigar sales are particularly vulnerable to smoking bans due to the social nature of cigar smoking, and, in the case of larger cigars, the time it takes to finish one.

The effect of bans can be mitigated. Tobacco manufacturers have innovated to accommodate smokers in smoking ban countries, producing shorter cigarettes with higher nicotine levels, as well as investing in cigarette alternatives such as smokeless tobacco. Ireland, for example, swung back to growth on the back of a large migrant population from Eastern Europe that was young and more likely to smoke. Italy's decline was not as high as it could have been, owing to a particularly hot summer in the year of the ban.

The table illustrates the immediate impact of smoking bans in selected European countries. The key element of workplace bans is whether these apply to bars and restaurants and whether, if the ban does apply to these establishments, there are exceptions – such as those based on area.


The Impact of Restaurant/Bar Smoking Bans on Sales

Selected European Countries: Immediate Impact of Smoking BansCountry Year Impact Coverage

Ireland (Rep) March 2004 -14% Total workplace ban including pubs and restaurants

Norway June 2004 -3% Total workplace ban

Italy Jan 2005 -3% Total workplace ban (but designated smoking rooms)

Spain January 2006 -6% Total workplace ban (but only in places larger than 100 sq m )

France February 2007 -8% Total workplace ban. Cafés, nightclubs & restaurants included in 2008

England July 2007 -8% Total workplace ban including pubs and restaurants

Note: The above 'impact' column refers to volume sales in the year immediately following the ban

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Restaurant/Bar Smoking Ban Impact: Ireland/UK Case Studies

A Cigarette volumes fell in Ireland following the public smoking ban in 2004 but then recovered as smokers became accustomed to having to smoke outside and making use of external smoking facilities.

B and C. In the UK , public smoking bans in Scotland and Wales were followed by a ban in England in July 2007 and then by a ban in Northern Ireland. The view is that the bans accelerated the existing falling trend in cigarette volumes due to high prices and high levels of illicit trade.

The general view is that public smoking bans, when these include restaurants and bars, create lifestyle changes which reduce the incidence of smoking severely until adjustments are made but then some of the losses in volumes are recovered whereas changes due to price are more permanent.

A

BC

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Restaurant and Bars Smoking Ban Alternatives

Disputed effect of public smoking bans

In Mexico the non-smoking directive established a 70% area for non-smokers, a 30% open space area (or at most 20 sq m) properly separated for smokers and a ventilation and air conditioning system in the largest section. In the open space for smokers the serving of any kind of beverage or food is not allowed.

By the end of 2008, the Chamber of Restaurant and Bar Owners (CANIRAC – Camara Nacional de la Industria Restaurantera y Alimentos Condimentados) announced that the drop in sales for the year 2008 was 17% with a 15% fall in industry employment.

This was disputed by the anti-tobacco lobby on the grounds that:

consumer foodservice had been impacted by economic crisis.

the anti-smoking law at bars and restaurants had not been rigorously enforced,with very few prosecuted despite widespread contravention.

Smoking bans in Western Australia, Queensland New South Wales and South Australia, Victoria and the Northern Territory have led to an increase in the popularity of 'beer gardens'. In fact there are many cases where the construction of 'beer gardens' and 'balconies' has been subsidised by tobacco companies in return for exclusive sales rights. Melbourne in particular has witnessed the sudden and phenomenal growth of 'rooftop' bars.

Beer gardens have been targeted by government campaigns to reduce litter caused by smoking (particularly cigarette butts), with slogans such as "Don't be a tosser" used in a campaign in Victoria (see right). Source: Victorian Litter

Action Alliance

33


The table, which is not an exhaustive list, demonstrates the accelerating pace of smoking ban legislation.

Not only are bans proliferating, they are becoming more precise and targeted.

Where public smoking bans have been introduced which cover restaurants and bars, e.g. in Ireland, fears were expressed that this would increase smoking in the home and the car thus making children more vulnerable to second hand smoke.

Thus the trend towards car smoking bans and also to bans in dwelling and public parks in the US, particularly California.


Public Smoking Bans Update 2009

34


The legislation which has the most immediate and lasting effect on tobacco product consumption is tax increases which cause prices to rise. The EU's minimum tax requirements have caused profound changes in a number of European markets and particularly new member countries such as Poland currently being called upon to implement minimum rates of duty and levels of price to agreed time scales.

Taxes on tobacco products are broadly of three types: ad valorem, where tax is a proportion of price; sales taxes such as VAT; and specific taxes unique to tobacco products. Governments not only increase revenues by raising tax rates and imposing new taxes, they may also insist on manufacturers raising prices which means more revenue to the Treasury, provided that the taxes are ad valorem. Governments may also stipulate the extent to which a decision to increase prices will impact margins.

The chart opposite (bottom right) illustrates the trend towards rising cigarette taxes (see also slide 35) and also the occasional need of governments, as in the case of Turkey (and once in Canada), to reduce taxation in order to avoid market distortion and consequent loss of net revenues. Tobacco taxes are a political issue for governments, but, for tobacco companies, their importance is the impact on price and the effect on markets. Price rather than volume thus became the primary driver of the global tobacco market.

The next slide demonstrates how different tax regimes have widened regional average price differences.


Tax, Cigarette Prices and the Consumer

35


Average Cigarette Prices by Region 2008 (US$ Per 20 Pack)

1.3

Western EuropeNorth

America

Latin America

Australasia

Note: Prices are average paid by smokers based on dividing market value (US$ current prices) by number of packs sold. Red signifies cigarette volumes falling, blue signifies volumes rising.

Eastern Europe

1.0 Asia Pacific

Middle East and Africa

Different regional pricing environments are partly due to differing tax regimes

5.6

4.5 1.0

2.2

4.3

36


The table demonstrates the trend towards tax-driven price rises in keeping with FCTC exhortations and revenue needs. Also noticeable (not included in the chart) have been a number of countries either deciding not to raise taxes or, as in the case of Poland and Hungary, opposing the EU Directive to raise prices on the grounds of damaging the market and encouraging illicit trade.


The Tax Environment: Recent Changes

37


European Union Taxation Latest The Economic Affairs Committee in the European Parliament recently (March 2009) backed a gradual

increase in the minimum tax rates on cigarettes – up to at least €1.50 per pack throughout the EU by 2014. The legislation aims to foster tax convergence and avoid market distortions caused by variations between countries.

The committee has proposed that the minimum tax on cigarettes should be set at €64 per 1,000 cigarettes from January 2012 onwards, rising to €75 (€1.50 per pack of 20) on January 2014.

The final decision on the proposed minimum tax will be taken by the Council of Ministers and will require a unanimous vote.

78%

Taxation as a Proportion of Total Pack Price (Mid-price)

UK Germany France Spain Czech RepNote: The proportion of the pack price accounted for by taxation does not equate to price level when comparing countries

77%

90%

79%74%

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Tax legislation can increase cross-border discrepancies thus attracting illicit trade and also make consumers more inclined to buy non-duty paid (NDP) products. About 7% of the global market or some 400 billion cigarettes is classified as illicit trade. This may be contraband, entering the country illegally in container ships or in the back of bootleggers' vans, or it may be counterfeit, illegally manufactured imitations.

Cross-border illicit trade thrives when there are price differences between countries. Countries where prices are high, or have risen quickly, tend to have high proportions of NDP. The trend towards higher prices as a result of tobacco control measures tends to increase illicit trade.


Illicit Trade and Legislation

Illicit concerns

In Vietnam the rise of special consumption tax in 2008 caused cigarette prices to rise by 10-12% in 2008 causing an increase in illicit trade. The volume of illicit trade increased from 12,600 million sticks in 2007 to 14,000 million sticks in 2008, a rise of 35%.

According to media reports, the Irish government recently decided against a tax rise, which would have increased the cost of cigarettes by €2 a pack, to avoid the risk of a major increase in illicit trade.

In the Philippines, according to the National Tobacco Administration (NTA), proposals to increase cigarette excise taxes could result in an actual loss to the Philippine government of some Ps60 billion in revenues. The NTA warns that a second cigarette tax increase in the year (excise tax on alcohol and cigarettes were increased on 1 January 2009) could displace two million people in the tobacco industry and encourage smuggling and counterfeit cigarettes.

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'Low or reduced ignition propensity' cigarettes, also known as 'fire-safe' cigarettes, are a major trend in the US and there are plans for their introduction in the EU. These cigarettes use bands of less porous paper at regular intervals that provides 'speed bumps'. If left unattended, the cigarette will burn until the speed bump and extinguish itself. While this will not completely eliminate cigarette-induced fires, data from the state of New York (which in 2004 became the first US state to exclusively sell fire-safe cigarettes) shows dramatic decreases in the number of fires attributable to cigarettes.

At the start of 2008, nine US states had a fire-safe mandate (1 January 2008, the states of Illinois, Maine and Massachusetts became fully compliant). By 2010, it is expected that a total of 35 states will have fully implemented legislation requiring that all cigarettes sold within state lines be fire-safe. There have been calls for fire-safe cigarettes in Australia following the recent bush fires, some of which were attributed to cigarettes.


Other Legislation: Fire-safe Cigarettes

In 2009 South Korea Gyeonggi Province announced plans to sue KT&G for losses from fires started by cigarettes. The amount to be demanded is KRW 79 billion (€43.7 million) based on the company's market share. According to the province, the company has been exporting fire-safe cigarettes to the US since 2005.

In 2009 a new state law was passed in Minnesota requiring all cigarettes sold in the state to be self-extinguishing if left unattended. Minnesota joins New York, Vermont, California, Illinois, New Hampshire, Massachusetts, Indiana and Michigan in passing 'fire-safe' laws.

The European Commission is likely to ban traditional (non fire-safe) cigarettes, possibly by 2010. According to evidence submitted by 17 of the 27 EU member states, some 2,000 people across Europe die every year in house fires caused by cigarettes and a further 7,500 are injured, while, in the US, 700-900 people die each year due to cigarette-ignited fires.

Source: The Coalition for Fire-Safe Cigarettes

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LIP Regulation: US Case Study

41


LIP Service: US Reaction

42


Introduction






43

© Euromonitor International >Tobacco - LegislationLitigation: What Have Been the Impacts?

Tobacco Litigation Today

USA

South Korea

Russia

Nigeria

Saudi Arabia

US tobacco industry remains the key legal battle ground with

product liability cases mainly based around claims concerning

the "light" descriptions of cigarettes.

Litigation regarding "light" descriptions in Russia

Govt suing multinationals for

targeting of juvenile smokers in Nigeria.

Compensation for medical expenses in Saudi Arabia

Litigation regarding fire

damage

The main impact to the global market of litigation remains the MSA in the US …

…but major lawsuits are moving outside the US.

Germany Court bans'organic' description

44

© Euromonitor International >Tobacco - LegislationLitigation: What Have Been the Impacts?

Litigation: Signposts to the Future

45


Subsequent to the MSA, the US market fell by 3-4% per annum but, because average prices paid for cigarettes rose, the value of the US cigarettes market was able to increase.

Due to the rise in cigarette prices between 2000 and 2007, cigarette sales declined 18%, from 21.1 billion packs to 17.4 billion packs. However, over the same period, sales of other tobacco products increased by the equivalent of 1.1 billion packs of cigarettes, comprised of 714 million (cigarette pack equivalents) moist snuff, 256 million RYO tobacco and 130 million small cigars.

Cost is a key factor in the upsurge in the use of non-cigarette tobacco products. The weekly cost for a typical user of a premium moist snuff brand is 55% less than for a typical cigarette smoker.

The growth potential of the smokeless category is clear by the explosion of interest from major companies.

Could this be a blueprint for the future of the global tobacco products market? The major companies are certainly covering the possibility, with Reynolds and PM USA acquiring the major smokeless companies Conwood and UST, respectively.


Case Study: How the MSA Impacted the US Market

The MSA (Master Settlement Agreement) was signed in 1998

by the four major tobacco companies and subsequently by a further 40 US tobacco companies. The agreement

was also signed by every US state. Under the agreement the companies agreed to pay some US$365 billion to

meet projected health costs. The companies' need to pay for the MSA changed the US price environment and accelerated the downward trend in cigarette volumes

46


Introduction






47


A survey of the world's major tobacco markets shows an increasingly restricted smoking environment.

Legislation targets the way in which the product is marketed – by cutting off advertising in all media, such that it becomes difficult to find any positive attribute, image, media, location or sponsorship which is not proscribed or limited in some way. Even more significantly, legislation is reducing the number of places where tobacco products can be smoked.

Legislation also targets the product by using compulsory health warnings to separate tobacco products from other consumer goods and makes it more difficult for cigarette packs to be fashion items. The warnings are increasingly designed not merely to appraise the smoker of the health effects but to terrify him or her into giving up.


Overview of Legislation: Major Markets

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In the less developed regions, which dominate global cigarette volumes, the two most populous countries are signatories to the FCTC and operate restrictions on advertising and partial public smoking bans, though these are less well observed than in most European countries and North America.

Smoking bans, particularly in developed countries, have benefited from a level of public acceptance and approval. Where this is not forthcoming, however, Governments proceed more carefully.

The Hong Kong government will recommend in a report to legislators whether or not to allow smoking rooms to be created in some bars. A total public smoking ban came into force in January 2007 but a two-and-a-half year period of grace was granted to some bars and nightclubs. The Delhi High Court has just reversed a ban on smoking scenes in films and newspapers displaying cigarettes and other tobacco products as being beyond the competency of the powers conferred by the Anti-Smoking Act.


Asia Pacific: Legislative Overview

Asia Pacific: Latest Legislation January 2008-April 2009

Indonesia

Indonesia's highest Islamic authority, the Indonesian Ulema Council, has issued a fatwa partially banning smoking. Fatwas are not legally binding but can influence government policy.

Taiwan

Taiwan's new Tobacco Hazard Prevention Act came into force on 11 January 2009, banning smoking in public areas, including train station platforms, indoor areas such as bowling alleys, but smoking rooms with separate air conditioning may be installed by hotels, restaurants and malls.

China

State Tobacco Monopoly Administration warnings decreed in Fujian Province. The warnings must be on both sides occupying at least 30%, front in Chinese, back in English.

India

India has banned smoking in public places including all offices and restaurants. The ban includes schools and colleges, pubs and discotheques, hospitals and bus stops. Offenders will be fined Rs200 (US$4). India's top cigarette maker, ITC Ltd has challenged the ban in court.

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© Euromonitor International >Tobacco - LegislationRegional Legislation: Analysis by Region

Asia Pacific Legislation: Summary Table

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In Azerbaijan production and sale of cigarettes must be licensed but underage sales from street vendors, often of single sticks continues. Similarly, there is an advertising ban but polythene bags with tobacco company logos are sold.

In China there are clearly efforts being made to impose and implement tobacco control legislation in accordance with the FCTC but there remains a gap between intention and achievement. Starting in April 2007, the biggest scale anti-tobacco project 'Stepping into No-Smoking China' was launched jointly by the China Disease Control Centre and China Medical and Health Ministry across 20 provinces, in an attempt to reduce smoking in public places in both urban and rural China. The projects have a concrete aim of reducing the population of second-hand smokers from 53% to 30%, according to the ministry.

In Hong Kong, however, bans are being extended into previously exempt areas such as bars and restaurants and graphic warnings are compulsory. Graphic warnings are expected to be introduced in India along with other new guidelines to enforce previously ignored public smoking bans.

Indonesia is the only country besides North Korea not to sign the World Health Organisation's Framework Convention on Tobacco Control (FCTC) in 2003. The Indonesian government's non-interventionism is because policy thinking is inclining to the view that the tobacco industry is of greater benefit to the economy than tobacco control measures.

In Malaysia manufacturers are required to print all six of a set of warning graphics including pictures of neck, mouth and lung cancers as well as gangrene and miscarriages. By 1 June 2009, all cigarette packs must include the health warnings.

Culture and infrastructure are key elements of tobacco control. In Pakistan, although there is no tar limit most people smoke mid-tar but generally restrictions are not enforced. On the other hand, Singapore is one of the strongest tobacco control regimes because rules are enforced; in January 2008, four retailers had their tobacco retail licences suspended for six months after the employees were found to have repeatedly sold tobacco products to under-age customers.


Asia Pacific Legislation: Analysis by Country (Part 1)

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The Philippines, despite being an early signatory, does not tend to impose the regulations. Here, the legal smoking age is 18 but cigarettes continue to be available to minors through sari-sari stores and street vendors. Similarly, in Kazakhstan, public smoking bans have low acceptance: in many educational institutions and offices, for example, people simply smoke in the toilets.

In South Korea the anti-smoking TV advertising campaign that highlights the risk of second-hand smoking and the rights of non-smokers through a "Say no" song greatly contributed to establishing social resistance to smoking in public places, and permitted smoking areas will disappear if the proposals of the Health Ministry are approved in the national assembly.

In Taiwan graphics including pictures of a cancerous lung covered over 35% of the pack on both sides were introduced from December 2008. In response, some brands offered cigarette cases as gifts at the store checkout in order to cover those pictures.

In February 2008, Thailand banned smoking in all bars and nightclubs. Even popular open-air eateries and markets must have dedicated smoking sections. This recent regulation is an extension of 2006 regulations that turned most public places into smoke-free zones, but did not cover night entertainment venues.

Thailand was the fourth country in the world to adopt graphic warning pictures on cigarette packs, in 2005. The first series comprises six pictures showing the problems to which smoking can contribute. These include premature wrinkles, dental problems and the impact of second-hand smoke on children, bronchitis, lung cancer and death. According to surveys smokers always ask for the pack with the least scary picture. In 2008, the government announced graphics extended to smoking tobacco and cigars packaging.

In Vietnam cigarettes are designated "discouraging-consumed products", which means that no new investment is allowed in the tobacco market. However, smoking is accepted and there are no anti-smoking groups in the country and few governmental campaigns to encourage people to stop smoking.


Asia Pacific Legislation: Analysis by Country (Part 2)

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Japan lags behind Western countries in terms of legislation on smoking in public places. The central government has not taken much action in this area and people can still smoke in many public places. The central government has been slow to ban smoking in public places, despite the example of the Chiyoda Ward in Tokyo in 2002 which was the first prefecture to enforce the 'living and environment ordinance' which primarily deals with smoking in public and associated littering offences. In Chiyoda a fine of ¥2,000 is imposed on any person found to be in violation and by August in its first year, fines on some 14,000 illegal smokers were reported. Following the example set by Chiyoda ward others have followed including Shinagawa ward (also in Tokyo). as well as the Hiroshima and Fukuoka municipalities.

Bans on smoking in public places are usually initiated by local government authorities, individual organisations or private companies. However, the most common initiative is not a complete ban on smoking but 'segregation from smoking'. For example, in government offices and railway stations, people can still smoke in designated areas. Most establishments that serve drinks, including izayaka (Japanese-style pub) and bars, allow smoking and usually there are no restrictions.

On the other hand, many restaurants, fast food outlets and kissaten (tea/coffee houses) provide designated smoking areas. The number of restaurants, fast food outlets and kissaten that have banned smoking is small although there are groups such as SmokeFreeTokyo which provide a resource for those who wish to find a smoke-free venue for socialising.


Asia Pacific Operating Environment: Case Study - Japan

Anti-smoking sign, on a sidewalk in Tokyo

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Australia has the most rigorous anti-smoking environment in Asia Pacific, with health warning graphics which include gangrenous feet and diseased lungs. However, there are exceptions to public smoking bans. In retail display space, restrictions have been imposed with cigars hit hardest as, when space is prioritised, manufacturers choose to display cigarettes.

As indicated in the table, car smoking bans, display bans at point of sale, and, inevitably, calls for fire-safe/low-ignition cigarettes following the disastrous Victoria fires in which cigarettes were implicated, became a key issue recently.

Graphic warning on packs are regarded as having an impact, since reports suggest that smokers are asking for packs with less disturbing warning pictures on them.


Australasia: Legislative Overview

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Australia is a strong supporter of the FCTC. The responsibility for anti-smoking legislation is shared between the federal government and the states. Legislation has been progressively more restrictive for the tobacco industry, and manufacturers have used indirect marketing methods such as music festivals, dance parties, nightclubs, fashion retail outlets and on-line, via YouTube.

In New Zealand, the anti-smoking lobby has significant impact on tobacco regulation. Here, anti-smoking policy is based on higher tobacco prices, effective education, a well-funded quit smoking support system and graphic health warnings. The leading anti-smoking lobby groups are Cancer Society's Action on Smoking and Health (Ash), Smokefree Coalition and Te Reo Marama (the Maori Smokefree Coalition).

Australia and New Zealand have strong public smoking bans. The Mosman suburb of Sydney may have been the first completely smoke-free area. Advertising bans often do not include point-of-sale advertising but this is specifically banned in Australia and New Zealand, and Tasmania plans a complete display ban by 2011.

Graphic warnings are mandatory in both Australia and New Zealand. The New Zealand graphics include gangrenous toes, rotting teeth and gums, diseased lungs and smoking-damaged hearts. Cigarette packets also must carry the Quitline logo, a free-phone number and other information about quitting smoking.

New Zealand was the third country in the world to make all indoor workplaces including bars and restaurants smoke-free, following Ireland and Norway.


Australasia Legislation: Summary Table

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Russia, the largest cigarettes market in Europe, ratified the FCTC relatively recently, in 2008, but does have tar caps – at 14mg for filter cigarettes and 16mg for non-filter. Health warnings take up only some 4% of pack area making them not only easy to ignore but also difficult to read. As the table indicates, more legislation is on the way in Russia.

Unlike Russia, Poland has joined the EU and, as a member, has imposed the 10mg maximum tar limit (1mg nicotine and 10mg carbon monoxide). There is a public smoking ban in Poland with plans to add bars and restaurants though with designated areas for smokers. A total ban has been proposed but not imposed and, as with many countries, the enforcement record is not good.

Bulgaria has one of the highest levels of smoking prevalence in Europe – at 39% close to Greece at 42% (of the adult population) – so the planned public smoking ban represents a real attempt to change the smoking culture.


Eastern Europe: Legislative Overview

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Eastern Europe Legislation: Summary Table

57


Advertising bans are rarely total: In Bulgaria TV advertisements are banned, but there are billboards. In Bosnia and Herzegovina there is no cigarette advertising, but there is some corporate advertising of cigarette companies, and in Estonia tobacco brands are used for other products.

There is generally scope to advertise at point of sale. In Belarus point-of-sale restrictions only extend to no self service of cigarettes though advertising restrictions extend to free samples and sponsorship.

Levels of enforcement are always important. In Bosnia and Herzegovina the FCTC has not been ratified and there are no strong anti-smoking lobbies, meaning that strict anti-tobacco regulations are not enforced. The Czech Republic is the only EU country not to have ratified the FCTC, though its own regulations – on tar caps, size of pack warnings etc are similar to those in other EU countries.

In May 2009 a smoking ban in all public places including restaurants, cafés and bars takes effect in Croatia: after a 6-month transitory period smoking at bars will only be allowed on terraces, while restaurants can allocate a separate room for smokers where no food is served.

Although the legal minimum age for smoking is 18 in all the countries above it is easy for teenagers to buy cigarettes, often from street stalls. The adoption of FCTC principles by Hungary provoked the first anti-smoking campaign since 1996 and the end of being able to buy cigarettes on the street. In Lithuania retail outlets selling cigarettes are not allowed within 50m of a school.

FCTC ratification tends to provoke national tobacco control legislation: the 'Law on Tobacco Control' in Georgia brought in stricter regulations restricting advertising. In Macedonia the recent high tar ban has meant major product switching by consumers.

There is no complete public smoking ban applying to restaurants in any of the countries discussed above. However, there could be a full ban in Macedonia in 2010 and one is also likely in Poland where there are active and highly visible anti-smoking lobbies. In Poland there is legislation on cigarette websites, requiring that they can be used only by registered adults.


Eastern Europe Legislation: Analysis by Country

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In Russia and Ukraine, the two biggest cigarettes markets in Eastern Europe, cigarettes with higher tar ratings than are legal in the EU are still smoked including untipped. This is despite the fact that both countries have ratified the FCTC, though Russia was one of the most recent countries to do so. In both countries lower tar caps are on the way with Ukraine, where there is a strong anti-tobacco lobby, introducing a 12mg cap on imported cigarettes.

Advertising is less restricted in Russia and Ukraine than in most European countries: advertising is allowed in magazines in Russia and on billboards and in some magazines in Ukraine. In Ukraine there is a tradition of 'babuski' (old women) selling cigarettes on the streets, including singles, though this practice has been much reduced. The introduction of graphic health warnings is also under discussion in Ukraine.


Eastern Europe Legislation: Russia and Ukraine Case Studies

Duty-free store at Moscow Sheremetyevo Airport Terminal (Russia)

Tobacco legislation in Russia remains favourable for cigarettes manufacturers in comparison with Western European countries though things are changing. In 2007, Russia's State Duma adopted a new law to increase taxation in 2008-2010 and to ban outdoor tobacco advertising, though this remains on the underground and in points of sale. 2008 saw Russia ratify the FCTC which could bring more advertising restrictions, higher prices and public smoking bans. Legislation has also been passed by the Duma lower house to lower tar and nicotine content in cigarettes, to place larger health warnings on packs but also to allow manufacturers to continue to identify their cigarettes as "low tar" or "light".

Cigarette smoking has doubled in Russia over the past decade and per capita tobacco consumption in this country has reached 2,800 cigarettes, with 63% of men and 27% of women regular smokers.

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This region is catching up with the rest of the world in terms of legislation.

From 1 August 2009, graphic warnings will be required on cigarette packs in Egypt, the largest of the markets. Images will include a coughing child, a limp cigarette symbolising impotence and a dying man in an oxygen mask. Other anti-smoking measures include smoking bans in airports and on Cairo's metro.


Middle East and Africa: Legislative Overview

Dubai driving and smoking ban sign

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Middle East and Africa Legislation: Summary Table

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In developing countries in particular there is a dichotomy between perceived health risks and revenue needs, the economy and employment. This is why in some countries, which have ratified the FCTC, tobacco control legislation is slow to be implemented and enforced. In Algeria and Egypt public smoking bans are not observed while, in Kenya, a smoking ban was overturned in October 2008 although it is likely to be restored.

The minimum age at which smoking is permitted is generally 18, but in many developing countries, younger teenagers can easily buy cigarettes. In Kenya 13% of under 15s smoke, according to research.

Tar caps are far less frequent in developing countries and even, as is the case in Egypt, there is a cap, it is circumvented by use of sheesha which has a far higher tar delivery. However, in Iran and Israel, more stringent efforts have been made to impose tobacco control. In Iran smoking has been banned in coffee shops and all enclosed public areas and also when driving. In Israel, the sale or use of water pipes by under 18s has been banned – research shows 30% of Israeli youth smoke water pipes.

Single stick sales are a key issue in developing countries and have been banned in Kenya. In Cameroon, however, a high proportion of sales are single stick, which means that health warnings on packs become ineffective.

Morocco and Tunisia are the only North African markets in the list above not to have ratified the FCTC, though both countries are signatories and in neither country is there a minimum smoking age law.

In the countries which have ratified the FCTC there is more evidence of moving towards stricter tobacco control. In Nigeria there is clear evidence of strengthening anti-tobacco feeling in the National Tobacco Control Bill 2009 which could change the market by imposing tar caps and minimum age. The public smoking ban in Abuja in May 2008, which included restaurants, bars and some open areas, also demonstrates this.

There is also Government focus on reducing smoking in Saudi Arabia with its campaigns. A public smoking ban includes shopping malls, but a law passed to shut down shisha establishments was reversed.

More evidence of the tightening environment resides in The Tobacco Products Control Amendment Act in South Africa, which could raise the smoking age limit and impose pack warning graphics.

The UAE has raised the smoking age to 20, while Dubai became the first UAE city to impose a public smoking ban. Graphic warnings were approved for Dubai in 2008.


Middle East and Africa Legislation: Analysis by Country

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Recent changes show certain Governments increasing the severity of the operating environment with graphic warnings and display bans and others willing to make exceptions to public smoking bans.

Bavaria's smoking ban was previously the strictest in Germany which led to fierce protests and special smoking clubs to get round the ban. Bavaria's health minister said the new legislation would restore 'social peace' as the previous ban had been impossible to impose.

Berlin also relaxed its public smoking ban by allowing smoking in one-room premises of less than 75 sq m, provided the serving of food and admittance to persons under 18 are prohibited.


Western Europe: Legislative Overview

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Western Europe Legislation: Summary Table

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The EU countries in the previous table obey similar precepts in terms of maximum tar yield and presence and minimum size of pack warnings due to EU legislation based to a large extent on the FCTC, though there are variations in minimum smoking age and in terms of local bans and restrictions.

Belgium and the UK are the only countries in the previous table to have introduced graphic warnings. There are variations also in terms of public smoking bans. All the countries have bans but none (other than the UK) have bans on smoking in restaurants and bars without some exceptions. In Austria outlets bigger than 80 sq m must have separate areas for smokers should they allow smoking. Outlets smaller than 50 sq m can decide themselves, while for outlets of 50-80 sq m, local authorities decide. In Belgium, Finland, France and Germany smoking must be in a separate room, while in Denmark small bars are exempted from the smoking ban.

Belgium and Finland have banned packs smaller than 19 and 20 sticks respectively.

Norway is the only one of the countries in the table which is not an EU member and also the one with the world's highest cigarette prices. It is also the only country apart from Sweden where snus is legal. In Norway the smoking ban boosted snus sales by 20% in 2008.

Greece has perhaps the strongest smoking culture in the EU and this has slowed implementation of anti-smoking measures: new legislation is due to be implemented in July 2009 banning advertising including points of sale and smoking in public buildings with the exception of designated areas in bars and restaurants.

Italy is also regarded as a country with a strong smoking culture, but the public smoking ban has been generally well received and observed. Ireland is a test bed for smoking ban effects being the first country in the world to implement a total public smoking ban. Recent research shows one consequence has been a higher incidence of smoking in the home and in cars.


Western Europe Legislation: Analysis by Country (Part 1)

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Spain has the lowest average cigarette prices in the EU, the UK has the highest. The EU has suggested that Spain toughens its anti-smoking measures. The relatively benign regime in the country may be regarded as the reason for the market's comparative buoyancy. There have been moves to sell cigarettes only through vending machines to control under-age smoking.

Sweden is the only EU country where the smokeless snus is legal and this partly the reason for the country having the lowest smoking prevalence.

Switzerland has not ratified the FCTC and its comparatively liberal attitude to smoking is the reason for PMI, JT and BAT all having operational centres in the country. Legislation varies from Canton to Canton in Switzerland, but a stricter public smoking ban is imminent.

Turkey is looking to join the EU and there is pressure to increase tobacco control : graphic pack warnings are possible and TV and radio companies are being ordered to make 90 minutes per month of anti-smoking programmes.

The UK's public smoking ban which includes all pubs and restaurants with no exceptions may be followed by a total retail display ban, i.e. the cigarette packs kept concealed which has already been agreed for Scotland.


Western Europe Legislation: Analysis by Country (Part 2)

In February 2008 the European Commission took Ireland to the European Court of Justice (Europe's highest court) over its policy of setting a minimum price on tobacco products. The Commission states that: "Such minimum prices infringe community law, distort competition and benefit only manufacturers, by safeguarding their profit margins".

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There has been less new tobacco legislation in Latin America over the past year than in other regions, though there is evidence that the FCTC is having an effect.

Like the US, Argentina has not ratified the FCTC and has no regulations governing tar levels though there are advertising and public smoking restrictions. On 1 October 2006, smoking in public and private places i.e. privately owned bars and restaurants was banned in Buenos Aires, though with smoking zones allowed. There is, however, a bill in draft form making public smoking bans more general.

Brazil, which has ratified the FCTC, is a less amenable operating environment: the public smoking ban is to be made comprehensive and without exceptions by 2009-2010, while warnings occupy 50% of packs and there are shock/horror graphics. In addition, terms such as "light" and "ultra-light" are prohibited.

In Mexico, despite ratification of the FCTC, billboards and street advertisements are permitted, there are no tar regulations and over 70% of cigarettes smoked are high tar. Public smoking bans extend little beyond preventing smoking on flights of less than 90 minutes duration.


Latin America: Legislative Overview

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Latin America Legislation: Summary Table

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The two main Latin American markets present a contrast in terms of tobacco legislation with Brazil attempting to be a far more restricted environment, e.g. Brazil is the only Latin American country where graphic warnings have been introduced. The state of São Paulo banned smoking in closed public places in April 2009 (enforced August 2009). Argentina has not ratified the FCTC, though the passage of a new tobacco bill could mean a tar cap and stronger pack warnings. Buenos Aires City banned smoking in public and private places, and only allowed smoking zones in bar and restaurants up to 30% of the seating area. However, enforcement has been weak and it is common to see consumers smoking in non-smoking zones.

Bolivia is still an important market for unfiltered cigarettes. There is no official public smoking ban in restaurants and bars, but some restaurants have non-smoking areas. In Chile bars and restaurants of less than 100 sq m can choose whether or not to allow smoking and in Santiago 80% of these have opted to allow smoking. Chilean senate banned smoking in closed public places in April 2008, forcing restaurant to split smokers and non-smokers with "physical barriers that completely divide them" (enforced June 2009).

In Colombia there are few official tobacco control regulations, but the companies have put warnings on packs and also launched initiatives to improve ventilation in bars and restaurants where smoking is allowed. New legislation bans smoking in all closed public areas including bars and restaurants, but enforcement is uncertain.

In Central American and Caribbean countries, the FCTC has not generally been the catalyst for tobacco control measures. Advertising bans exist, but there are more exceptions than bans and marketing of tobacco products is relatively easy. In Guatemala, for example, manufacturers are prohibited from advertising on television during children's programmes and prime-time viewing, while billboards advertising tobacco products must not be located within 500m of educational establishments, hospitals, stadiums and recreational areas.

In the above countries pack warnings are present, but their size is often decided by the manufacturer: in Costa Rica BAT and PMI have large health warnings on their packs, which are not required by law.

Most of the public smoking bans tend to be imposed by the locations rather than by laws. In the Dominican Republic there is no public smoking ban law, but there are many non-smoking areas in locations such as supermarkets and airports.


Latin America Legislation: Analysis by Country (Part 1)

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In Guatemala, where there is no culture of anti-smoking lobbies, the only operators of total smoking bans are to be found in outlets of the Pizza Hut, McDonald's and San Martin fast food chains.

In Ecuador the Ministry of Health launched a new plan in July 2008 based on five strategic points; 1. reduce tobacco prevalence in pregnant women and vulnerable groups like teenagers, 2. Provide integral support for smokers, 3. Protect non smokers by smoking prohibition in public places, 4. Legal and institutional strengthening for control of consumption, 5. Research applied for tobacco prevalence.

Ratification of the FCTC is often the catalyst for national legislation and major change in markets. Following ratification in Peru illicit trade rose by 20%.Uruguay and Venezuela both have anti-smoking regimes which have been toughened by strong presidential influence. A 2006 decree from President Vasquez in Uruguay produced the first strong public smoking ban in Latin America. A Presidential decree in Venezuela increased tax on tobacco products from 50% to 70%. Uruguay and Venezuela have both introduced graphic health warnings: in Venezuela this covers 100% of the rear side of the pack.

In Mexico some large operators have obtained "amparos" or shelters to avoid converting their restaurants into a 70% smoke-free area and a 30% open space for smokers. These "amparos" are special permits that permit the particular holder of the shelter to legally avoid the enforcement of the law.

Advertising bans in Latin America are rarely total. In Mexico advertising is allowed in the trade press where readership is 75% adult. The ban is partial in Peru where the stipulation is that advertising must include the health warning. In Uruguay point-of-sale advertising is allowed on the same terms. In Venezuela advertising stands for tobacco products are allowed where newspapers are sold. However, advertising campaigns against under-age smoking have been conducted and vending machines have been banned from containing cigarettes to prevent under-age access.

In Uruguay in February 2009, a decree imposed one brand, one package, one type of cigarette. This included the ban on the use of words like "light", "suave", "mild" and colours on the packs from which a consumer could infer that the product was "light". This is the end of using display of umbrella brands to advertise at point of sale.


Latin America Legislation: Analysis by Country (Part 2)

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Canada has one of the world's most unfriendly operating environments for tobacco product manufacturers and makes use of particularly severe graphics on packs, while some 80% of Canadians live in an area where smoking is banned in bars and restaurants.

Although the US has not ratified the FCTC, at a state (as opposed to a federal) level, there are strong restrictions on public smoking, with restrictions in indoor areas (to some degree) in all 50 states while health warnings on packs are ascribed to the Surgeon General to drive home the idea of smoking as a designated health problem.

The Master Settlement Agreement of 1999 also had an advertising dimension to it: participating manufacturers agreed to end all "youth oriented" marketing including the use of cartoon characters such as Joe Camel.

This also involved accepting major restrictions on outdoor advertising and event sponsorship, including an end to all stadium and arena advertising.


North America: Legislative Overview

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Tobacco regulation varies widely in individual US states. No state permits anyone under the age of 18 years to purchase tobacco products, while in Alaska, Alabama, New Jersey and Utah the minimum age is 19 years. There is a strong tobacco-farming lobby in many southern states, such as Virginia and North Carolina, leading to fewer restrictions on tobacco use and the lowest state excise taxes.

Most restrictions on smoking in public places are imposed at the state or local level, and these also tend to vary widely. Currently 23 states and Washington DC have state-wide public smoking bans in indoor places such as bars and restaurants. More states are continuing to talk about adding this legislation.

As evidenced by the signing of the SCHIP Bill into law and increasing federal taxes on tobacco products, President Obama is showing signs of continuing his support for anti-tobacco measures despite having been a smoker himself (though currently trying to quit) from a young age.

A proposed Tobacco Bill currently awaiting approval granting the FDA authority to regulate tobacco products included mandates that would change the current labelling of cigarettes. Given the President's previous support of FDA tobacco regulation as well as for the FCTC, this legislation could well be approved in the near future.

With airwaves off limits and print advertising lessening or even being self-restricted by the tobacco manufacturers themselves, in-store promotions, customer databases and internet websites remain the main channels through which tobacco products are marketed in the US.


US Legislation: Summary Table and Analysis

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Canada is a global tobacco control leader: the federal government has established the Federal Tobacco Control Strategy in an attempt to outline and attain future goals and initiatives by 2011. The main areas of attention include reducing the number of smokers in Canada, as well as decreasing sales of cigarettes by 30%, increasing the compliance rate of retailers with the tobacco laws to 80% and reducing the number of people exposed to second-hand smoke in public places.

Future legislative developments will include a focus on taxation and broadening the government legislation that oversees tobacco-related issues, especially more stringent bans on smoking in public. As pollution becomes more of a concern in major Canadian cities, particularly Toronto, which sees constant smog warnings, especially in the summer months, there could be associated legislation passed that could include overall pollutants, whether it comes from the industrial sector, transportation or, indirectly, from tobacco manufacturers.

The provinces of Quebec, Ontario, Saskatchewan, Manitoba, New Brunswick, Newfoundland, Prince Edward Island (except for certain hospitality rooms) and Nova Scotia have all passed legislation making public places entirely smoke-free. Yukon is the only place in Canada where there are no territory-wide smoking bans in place, although in the capital city, Whitehorse, smoking has been banned in most public places.

Ontario, Quebec and Alberta joined the tobacco display ban in 2008, with retail display and advertising ban gradually rolling out across various provinces. In 2009 New Brunswick and Yukon Territory will be implementing a retail display ban.


Canada Legislation: Summary Table and Analysis

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Introduction






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The global operating environment presents tobacco companies with at least five major problems. The first is falling volumes in the developed markets where margins are highest. Volumes are falling due to tobacco control measures.

Public smoking bans are the most 'de-normalising' of many legislative attacks on the industry because they progressively divorce smoking from work and social activities. Advertising restrictions prevent the creation of any positive tobacco product image, while pack warnings are increasingly designed not merely to appraise the smoker of the health effects but to frighten him or her into giving up.

The industry is endeavouring to find solutions. Falls in cigarette sales in contracting markets may be mitigated by expanding into new markets and new product areas. Higher prices threatening premium brand sales can be held robust by product innovation. Smokeless products can offer an alternative to smokers driven to quit by smoking bans.

The almost universal consumer familiarity with global brand names is a shield against advertising restrictions. Reduced-risk products can limit the damage caused by pack warnings.


Legislative Environment: Problems and Solutions

Problem Solution

Cigarette volumes falling in developed markets Expand into developing markets

Expand into OTP

Higher taxes drive up pricesProduct innovation to improve perceived quality of premium brandsOffer alternatives in lower price bands

Smoking bans Develop smokeless brand extensionsProduct innovation

Advertising restrictions Concentrate on international brands with global familiarity

Acquire popular national brands

Health warnings increase in severity Develop reduced-risk products

Develop smokeless tobacco business

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© Euromonitor International >Tobacco - LegislationManufacturer Strategies

Manufacturer Strategies and 2009 Forecasts

Forecasts for Tobacco Market 2009

1Polarisation between strong price and weak price markets

2Intensified competition for new consumers in developing markets

3Intensified competition for acquisition of state companies

4Intensified competition for the smokeless consumer dollar

5 Increased emphasis on product innovation

6More price wars as companies fight to keep premium brand market share

Legislation Effects and Industry Counter-strategies

Legislation Counter-strategies

Growing influence of tobacco control

Work with regulatory authorities to reduce youth smoking

Public smoking bans de-normalise smoking

Encourage development of external smoking environments

Low tar legislationDevelop low tar offers stressing low-risk appeal where possible

Pack warnings Pack redesigns

Media advertising restrictions

Work with indirect advertising and sponsorship and 'buzz' marketing if allowed and/or concentrate on POS marketing

The bottom line forecast is for intensified competition among the companies: for new consumers in developing markets, for ownership of any privatising state companies, for innovatory brand extensions in areas such as menthol, reduced-risk products and additive-free tobaccos, for smoking ban products such as Marlboro Wides, for cigarette alternatives such as smokeless tobacco and for pricing power.

Price wars are likely to be a key feature of 2009 whilst the problem of illicit trade is expected to be exacerbated as consumers seek cheaper alternatives, including also (legitimate) cross-border sales.

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Introduction






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Health warnings on packaging are likely to be reinforced. In December 2007, the European Commission announced that it was planning to introduce generic (black & white) standardised packaging for all tobacco products, in a further attempt to reduce demand.

Since 1999, New South Wales, Australia, has recognised that any imagery on the pack also constituted advertising and limited the space of on-pack advertising to carton-sized packets and smaller.

Plain packaging

In Uruguay in February 2009, a decree imposed one brand, one package, one type of cigarette. This included the ban to use words like "light", "suave", "mild" and colours in the packs from which a consumer could infer that the product was "light". This is the end of umbrella brands display.

Since the demonstration that one brand is more popular than another brand is likely to make this brand appear 'cooler', regulations were also introduced stating that only one pack in each 'product line' could be displayed. Several states, such as South Australia and Australian Capital Territory, also prohibit the display of cartons.

One pack per product line

Since the 'graphic health warnings' were introduced in 2004, Australia has experienced a period of intensified activities in anti-smoking laws, including total bans on public smoking in some local government areas and on prescribed days in Adelaide CBD in South Australia.

Following the successful implementation of the ban on smoking in public places and in cars where young children are present, anti-smoking groups are lobbying for smoke-free homes where there are children under the age of 16 years old.

The Federal Health Minister also suggested that a regulation whereby smoker's require permits might be considered as a method of reducing smoking prevalence and under-age smoking.

Private smoking bans


Pushing Back the Envelope - Insight into Future Legislation

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Recent public smoking bans show two kinds of directional movement: towards bans in developing countries such as Gambia, and bans which push back the envelope of restriction in developed countries – into 'private' spaces: the car and the home dwelling, and into external public places – stadia, parks, urban streets, building and venue entrances.


From Public Smoking Bans to Private Smoking Bans?

Product development responses to bans have included cigarettes for a short, 'intense' smoke such as Marlboro Wides, but possibly the main impetus in the future will be towards smokeless products in countries where there are total bar and restaurant smoking bans.

The new interest in snus by the major manufacturers, and particularly the acquisition by Altria of UST in the US and the joint venture between PMI and Swedish Match for the global marketing of snus may be seen partly as a public smoking ban beating strategy.

Snus brands – likely beneficiaries of smoking bans?

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© Euromonitor International >Tobacco - LegislationLegislation Outlook: Where Next?

Total Moratorium on Marketing?

A key future issue is a complete display ban (i.e. putting cigarette packs under the counter). This is favoured by the WHO and by the EU. A law proposed by Finland's ministry of social affairs and health, which is expected to be passed in 2010, would ban retail display of cigarette packs to discourage under-age smoking.

The Northern Ireland Assembly has approved a ban on the display of tobacco products in shops in Northern Ireland, which is planned to be implemented late in 2010. A similar ban is to be introduced in the Irish Republic in July 2009.

The UK Public Health Minister has proposed that cigarettes should be removed from display and hidden under shop counters with cigarette vending machines banned from hotels, bars and restaurants to further limit children's access to tobacco products.

Non-branded and buzz marketing bans

In Victoria, Australia, the banning of non-branded and buzz marketing for cigarettes was imposed in 2006. This ban included displays of smoking imagery and smoking paraphernalia that would facilitate a positive perception of smoking and marketing techniques such as under-age parties, the use of attractive women to sell cigarettes in nightclubs and the holding of fashion shows. Such bans are likely to appear elsewhere in the short to medium term.

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The tobacco industry has evolved strategies which have turned restrictions into marketing, and this ingenious beating of swords into ploughshares will continue. Low tar is the best example of the phenomenon and continues to drive consumer choice despite the words describing the product (low, ultra low, mild etc) being increasingly, banned.


The Future of Tobacco Product Marketing

Low tar as an appeal has morphed into another marketing platform – that of the low-risk, reduced-harm tobacco product, which is a new battleground. Snus is regarded by some as a reduced-risk product, and Sweden is attempting to get the ban within the EU (excluding Sweden) lifted.

The industry is accustomed to circumventing marketing restrictions. The companies are international and thus, when new restrictive legislation is imposed in one country there is already a strategy in place in another country where the same restriction was imposed in the past. When media advertising is severely restricted one-to-one strategies may be used such as the 'brand champions' strategy which has been used in South Africa and elsewhere. Here young, attractive, company operatives demonstrate the technology of a new smoking product – perhaps with a superior filter tip – and the other advantages of the brand in order to create an advocate of the brand capable of motivating peers.

Low risk

Brand champions

Pack covers

Mental maps

Have colour coding

Where the appearance of a brand carrying a large health warning renders it less attractive, the use of pack covers and/or metallic cigarette cases may be promoted

The subtle advertising of cigarette brands using the connections in a consumer's 'mental map' such as the linking of a brand with another product for which the advertising is restricted is a technique which tobacco product (and other consumer product) manufacturers have practiced for years.

Such techniques plus sampling, promotions, prize draws etc can be identified and eliminated by legislation until only point-of-sale display remains, where positioning, colour coding, use of armies of brand extensions represent the final marketing channel following which, according to the industry, brand launches become very difficult and major changes in brand share are consigned to history to the benefit of existing brand leaders.

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Global Tobacco: Will Legislation Kill the Industry?

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