Australia will become the first nation to ban branding on cigarette packages and will raise tobacco taxes by 25 percent, taking on British American Tobacco Plc and Philip Morris International Inc. in a renewed effort to combat smoking.
The cost of a packet of 30 cigarettes will rise to about A$16.70 ($15.40) at midnight from about A$14.50, and laws to mandate plain packaging will be introduced within 18 months, Prime Minister Kevin Rudd said in Sydney today.
Rudd, 52, is intensifying a four-decade long campaign to convince Australians of the risks associated with smoking, the biggest preventable cause of disease and premature death. About 15,000 people die each year from tobacco-related diseases in Australia, where sales of tobacco products totaled A$10.9 billion in 2009, according government statistics.
“The big tobacco companies are going to go out there and whinge, whine, complain, consider every kind of legal action known to man — that’s par for the course,” Rudd told reporters in comments broadcast on Sky News. “We, the government, will not be intimidated by any big tobacco company.”
London-based British American Tobacco, or BAT, had 46 percent of the retail market for cigarettes in 2006, according to a 2008 report on Tobacco in Australia by Cancer Council Victoria. Philip Morris, based in New York, had a 34 percent share and Imperial Tobacco Group Plc, of Bristol, England, had 18 percent.
Imperial Tobacco Australia is preparing a legal challenge, Cathie Keogh, a company spokeswoman told Australian Broadcasting Corp. radio today.
“Introducing plain packaging just takes away the ability of a consumer to identify our brand from another brand,” she said. “It really affects the value of our business as a commercial enterprise and we will fight to support protecting our international property rights.”
BAT “opposes plain packaging of tobacco products and believes any such proposals would not hold up to close scrutiny,” its local unit said in a statement today.
Packets will display only health warnings and basic product information. Rudd said the excise increase would provide A$5 billion over four years and the government plans to spend A$85 million on anti-smoking advertising in the next four years.
Smoking-related illnesses cost the nation’s economy as much as A$5.7 billion a year in lost productivity, the Australian Medical Association in Sydney said in a statement.
“The plain packaging will probably be a more effective deterrent for new and prospective smokers than established smokers,” said Andrew Pesce, the association’s president. “It should help prevent children and young people from taking up smoking in the first place by decreasing the attractiveness of the packaging.”
Australia began limiting cigarette ads on radio and television in 1972 and banned them four years later, curbing lung tumors, the country’s biggest cancer-killer.
The number of Australians who smoke has more than halved in the past 20 years, the Organization for Economic Cooperation and Development said in a report in December. Australia has the third-lowest rate of smokers in the developed world, behind Sweden and the U.S., according to the report.
New cases of lung cancer fell to 60.6 per 100,000 men in 2006 from 80.6 per 100,000 two decades earlier, according to the Australian Institute of Health and Welfare in Canberra. The incidence in women jumped 46 percent to 30.3 per 100,000 over the same period.
“Cutting smoking will save lives, take pressure off hospitals and deliver significant economic benefits,” Rudd said in a statement.
The government excise is currently set at 26.22 Australian cents per cigarette and rises twice per year based on inflation rate increases. Australia’s taxes on tobacco are 62 percent of the total cost, compared with 80 percent in France, Rudd said.
Cigarette labels represented six of the top seven grocery brands in Australia in 2007, according to data from market researcher AC Nielsen and industry publication AdNews. Winfield, a BAT product, is top-selling brand with sales of more than A$750 million, outranking Coca-Cola, according to Nielsen.
New Zealand yesterday introduced laws to increase tobacco taxes by 33 percent by January 2012.
Tobacco companies were banned in the U.S. from marketing to people younger than 18 years in the Food and Drug Administration’s first moves in a decade to regulate the $80 billion industry. The restrictions, announced last month, prohibit cigarette makers from distributing branded merchandise such as T-shirts.
The FDA has said it will appeal a U.S. court ruling that overturned part of the law. In January, a federal judge in Kentucky ruled that some provisions violated advertisers’ free- speech rights by barring tobacco companies from using color and graphics to market their products.
By Gemma Daley and Marion Rae
Businessweek, April 29, 2010