AACS responds to claims that plain packaging works

Jeff Rogut
CEO AACS
It was with keen interest and, frankly, a sense of some disbelief that I read the piece by former Australian Minister for Health Nicola Roxon in the ‘Irish Times’ recently, claiming that plain packaging works. What was openly peddled as a “long term solution” has, according to the former Minister responsible for its introduction, appeared to have had success.

The claim is unfortunately totally unproven. Actual sales figures reported by members of the Australasian Association of Convenience Stores (AACS) for the 2013 calendar year – the first full year of operating with plain packaging in place – provide some irrefutable and inconvenient truths.
The AACS represents the interests of over 6,000 stores in Australia. While member stores retail legal tobacco products, the AACS is not an arm of, or lobby group for the tobacco industry.
As a product category, tobacco accounts for 35.5% of sales in convenience stores on average. Tobacco sales in stores increased 5.4% in Australia in 2013, representing an extra $120 million over the previous year; when plain packaging was merely a good bet for a headline for a soon-to-be-ousted Government.
Those in the retail sector were always best positioned to understand the implications of plain packaging. Legislation introduced with no evidential basis, driven by emotion for the purposes of politics always has consequences.
Regrettably, too often it is retailers – those at the coal face – who bear the brunt of political decisions. Despite the increase in tobacco sales, the significant cost burden of plain packaging has hit retailers hard, small businesses in particular, with no demonstrable outcomes for community health.
Indeed retailers have seen a dramatic shift to cheaper tobacco products as brands are devalued. In 2013, there was a dramatic 58% increase in the ‘sub value’ segment. These are actual sales to consumers, not wholesale sales to retailers.
The extra financial costs for retailers as a direct result of plain packaging are associated with additional staff training, labour, product handling errors, increased inventory management procedures and increased customer frustration. These have been absorbed entirely at retailers’ expense.
Compounding this burden is the explosion of the illegal tobacco market.
Awareness of illicit tobacco products is very high among small retailers, and both the perceived impact on business and the actual incidence of customers enquiring about purchasing illicit tobacco are a dangerous bi-product of plain packaging.
There is no other way to look at it: Australia has become a highly lucrative international market for illegal tobacco traffickers. Numerous recent high profile police busts prove the point.
KPMG research found that in calendar 2013, the level of illicit tobacco consumption increased to 13.9% of total consumption. This is the highest level ever recorded and an increase from 11.8% in 2012. If all of this tobacco had been consumed in the legal market, it would have represented $1.1 billion in tax revenue collected by the Government.
The truth is, no-one knows whether over the long term plain packaging will have any impact on the incidence of smoking or not. It is likely it will never be known given the natural decrease that has been occurring in smoking rates.
Should Governments focus their efforts on educating younger people not to smoke, in an unemotional and factual way, positive health outcomes may materialise. We do not dispute the science behind the harm that smoking may cause.
Doubtless those who campaigned for plain packaging will be eager to claim responsibility for any success. However, more than 18 months after the introduction of plain packaging, more and more people are realising the whole exercise was little more than politicking.
The debate still rages. For retailers, those who have borne the financial and operational brunt, the most disappointing aspect has been the failure of plain packaging to have any positive impact on health outcomes. Indeed, price is now the main driver of tobacco sales.
Ireland has the opportunity to learn from the previous Australian Government’s mistake, to not rush the process and support its retailers in any process of change.