How plain packaging will affect the retail trade
With legislation recently being passed to bring in plain packaging of tobacco products here in Ireland, retailer and NFRN committee member Joe Sweeney went on a fact-finding mission to Australia to see how plain packaging has affected the retail trade there. Fionnuala Carolan reports
12 March 2015 | 0
Ireland has become the first European country to pass plain packaging laws for tobacco. The Public Health (Standardised Packaging of Tobacco) Bill 2014 will ban all forms of branding such as trademarks and logos on packs of cigarettes, tobacco and cigars and introduce 65% health warnings on the packs from May 2016.
The long running debate over the issue came to a swift conclusion on 3 March when Minister for Children James Reilly announced the news and said that the legislation will make Ireland leaders in the EU for legislating against tobacco advertising, as we did with the smoking ban a decade ago. He says it will protect children from the harmful effects of tobacco and deter them from taking up smoking at all.
Head of advocacy with the Irish Cancer Society Kathleen O’Meara believes that the introduction of plain packaging will significantly reduce smoking and rob the tobacco industry of its last great marketing tool.
“Because of bans on advertising and various other measures that have been taken, the cigarette pack has become far more important to the industry to attract new smokers and there’s evidence that it does actually encourage smoking, and it particularly encourages young people to start smoking,” says O’Meara.
However, The Irish Tobacco Manufacturing Advisory Committee (ITMAC) has said that this legislation will infringe on fundamental legal rights to property, freedom of expression and trade that are protected under Irish, EU and international law.
JTI, the owner of the Benson & Hedges and Silk Cut brands told ShelfLife last month that it would not hesitate in launching legal proceedings to protect its rights if the government continued with the legislation.
Igor Dzaja, general manager, JTI Ireland said: “We have informed the government that we stand ready to file legal proceedings should it continue pushing for a ‘cut and paste’ policy that has failed in Australia. ‘Plain’ packaging puts politics before evidence.”
A study by KPMG found the black market has grown by a massive 25% in Australia since the introduction of plain packaging, costing the Australian government an estimated €800 million in lost taxes in 2014.
After announcing the new legislation, Minister Reilly said the government was prepared for a legal challenge from the tobacco industry on the matter. “The Attorney General has her team together and we fully expect, once the legislation is enacted and commenced, that they will probably file a lawsuit. They will do it more in the hope than certainty. They do it more to intimidate us and to intimidate other countries who are prepared to follow suit,” he said.
NFRN Councillor and owner of the Newscentre at the Donaghmede Shopping Centre, Joe Sweeney met with a number of retailers and retail organisations in Sydney, Melbourne and Adelaide during his fact-finding mission last month. Sweeney found that retailers in Australia were very concerned with the growth in the black market since the introduction of plain packs. Instead of buying cigarettes from legitimate shop owners there are more people than ever buying smuggled cigarettes in Australia.
“Legal cigarettes cost $20 in Australia, but they can be bought on the black market from as little as $7 dollars a pack. Customers have started going into Australian shops asking for under the counter cigarettes or smuggled cigarettes. They no longer care what they smoke as long as it is cheap”, said Sweeney.
Pushed up costs
Plain packaging has also pushed up the day-to-day costs for businesses in Australia and many shop owners are now struggling to survive since the introduction of plain packaging.
“It has doubled the time it takes Australian retailers to place orders, receive deliveries, stock shelves, train staff and complete sales. All of this extra time adds up and it is a big cost for small businesses”, said Sweeney.
“One Sydney shop owner told me that he can’t afford to pay the rent or wages anymore, and one Adelaide retailer said he has been forced to close two stores since the introduction of plain packs.
“If the government are serious about reducing smoking rates they should first tackle the black market problem in Ireland before introducing more costly red tape for law abiding small businesses.
“Instead, the government should focus on education campaigns and other policies that have been proven to work, rather than pursuing a policy that has only succeeded in hurting businesses and fuelling the black market in Australia.”
Black market outgrowing legal market
Sweeney met with the Australian Retail Association (ARA) and shop owners in Sydney who have been combatting the growing black market since plain packaging was introduced two years ago.
They told him that plain packaging has had no impact on legitimate tobacco sales volumes, but has coincided with the worst black market in seven years. According to one Sydney shop owner, the illegal market has outgrown the legitimate market in some western suburbs.
Ireland already has one of the worst black market problems in Europe. Evidence from Australia shows that if plain packaging is introduced in Ireland it will have no impact on cigarette sales volumes, but will lead to an increase in the illegal tobacco trade.
“If the situation in Australia is replicated in Ireland it will be another damaging blow to legitimate Irish shop owners and will put more money into the hands of criminals”, said Sweeney.
“If the government are serious about reducing smoking rates they should first tackle the black market problem in Ireland before introducing more costly red tape for law abiding small businesses.”