Plain packaging: This time it's serious

In the Mad Men days of the 1960s advertising agencies persuaded cigarette companies they needed branding to entice customers. Photo / Supplied

The global tobacco industry - which barely flinched when New Zealand banned smoking in pubs and hiked cigarette prices - is fighting back furiously against plain packaging. Geoff Cumming examines why.

It's just a small box, fits neatly in the palm of a hand. With ugly images of cancer victims and health warnings taking up much of the packet, we might think the rest isn't worth scrapping over. But New Zealand is about to become the front line in one of the biggest battles yet fought between public health campaigners and the tobacco industry - over what goes on the packet.

Hard on the heels of retail display bans, campaigners are wheeling out plain packaging as they seek a decisive blow in their push towards "endgame" - the point where smoking rates are so low that tobacco ceases to be a dominant public health issue.

The industry has endured so many hits in recent years - smokefree bars and restaurants, the graphic warnings, price hikes and now retail display bans - that we might be forgiven for thinking it was gasping for breath. But global cigarette sales continue to soar and addiction rates here remain stubbornly high.

Researchers are focused on the Government target of a (largely) smokefree New Zealand by 2025 and have yet more weapons in their sights: axing duty free sales, licensing retailers, banning sales within a kilometre of schools ...

But the box - the only avenue left for companies to promote their brand - looms as something of a trophy.

As if to vindicate the campaigners' fixation, the industry - which mustered only token public resistance against tax increases and the display ban - is making a real stand against plain packaging, summoning-up its legendary influence and strategic cunning.

The companies are behind a volley of legal moves to try to head-off Australia's introduction of plain packs on December 1, after failing to deter politicians with a "hearts and minds" publicity campaign waged on radio, television and the internet. While Australia's High Court has rejected a challenge brought on constitutional grounds, plain packaging faces a series of tougher hurdles before the World Trade Organisation and investor-state dispute tribunals. New Zealand has obtained third party (observer) status for the hearings.

Tobacco firms portray their stance as principled: defending their rights to use branding to distinguish and promote their legal products.

"Branding and intellectual property are an integral part of a lawful and free market economy," says Imperial Tobacco, whose NZ brands include Horizon, Peter Stuyvesant and Superkings.

"Plain packaging would fundamentally weaken the robust system of domestic and international intellectual property protection on which New Zealand businesses rely," says one of two websites launched here to fight the move. British America Tobacco NZ last week launched a print, TV and radio advertising campaign while the companies are also lobbying politicians and opinion leaders. Recent public comments by Winston Peters, Ron Mark and Rodney Hide are strikingly similar to concerns expressed on one website that alcohol and obesity are as big a threat to Maori and Pacific communities as smoking.

More worrying for decision-makers are the thinly veiled threats about what New Zealand risks if it follows Australia's lead. Plain packaging would violate trademark rights protected by international law by effectively eliminating the use of trademarks for tobacco products, says Imperial Tobacco.

On BAT's agreedisagree website and in media statements, the industry claims plain packaging would weaken our ability to protect our exports from similar labelling and brand expropriation policies - even suggesting our wine and dairy exports could be forced into plain packages.

We could be shooting ourselves in the foot: New Zealand relies on WTO free trade protections, as we did in forcing Australia to accept our apples. And how hypocritical to demand plain packaging for cigarettes when we're planning to use the WTO to oppose plain packaging on alcohol in Thailand ...

Even the US Chamber of Commerce has waved its finger, warning that - with the Trans Pacific Partnership negotiations under way - it is "most troubling" that the Government would consider destroying an industry's "legitimate trademark protection and branding rights long protected under law and international treaties". The subtext: see you in court.

To health campaigners, this shows the industry is running scared and fears Australia's legislation could have a domino effect.

"I've been in some extremely entrenched campaigns such as the ban on smoking in pubs and sponsorship in sport but I've never seen anything as big as their opposition to this," says Simon Chapman, professor of public health at Sydney University. "The only conclusion is that they have a complete understanding of how this will affect their bottom line."

Australia's initiative has attracted global interest, with Britain, India and South Africa among countries interested in following suit. Health authorities in the European Union have called a conference in Turkey next month to discuss the measure.

But New Zealand is next cab off the rank. The Government agreed in principle to plain packaging in April and consultation is under way on a Ministry of Health proposal modelled on the Australian approach. There, cigarettes will be sold in olive packs with graphic health warnings covering 75 per cent of the front of the pack. Warnings on the back will continue to cover 90 per cent. New Zealand's proposals are similar, with logos and embossing banned. Only the brand name and variety would be printed on the front in regulated size, font, colour and position.

Australia faces WTO challenges from Ukraine, the Dominion Republic and Honduras - their claims presumably financed by the tobacco industry.

None has significant tobacco trade with Australia but claim they would like to have, says Professor Jane Kelsey, an international trade expert at the Auckland University law school.

The claimed violations of WTO rules protecting intellectual property have been widely condemned - including by our Trade Minister Tim Groser.

"It's an outrageous thing for these companies to be using the WTO as a backdoor attack on Australia," Groser said last month.

But legal commentators caution that WTO outcomes are difficult to predict and Kelsey believes claimants might gain traction with their claims that plain packaging constitutes a "technical barrier to trade". Labelling rules covered by this agreement mean countries cannot impose measures without scientific proof that the policy will achieve its objective. Countries are required to adopt the least onerous measures to achieve their objectives.

The industry has been quick to seize on the lack of direct evidence that plain packaging will prompt smokers to quit and deter youngsters from starting.

"Tobacco packaging has never been identified as a reason why people start to smoke or continue to smoke," Imperial Tobacco claimed earlier this year.

A separate legal move shows the tobacco industry has lost none of its dexterity, captured in movies The Insider and Thankyou for Smoking. More than a year after Australia's plain packaging legislation was mooted, Hong Kong-based Philip Morris Asia bought out Philip Morris Australia. This has allowed the company to seek arbitration under the Hong Kong-Australia Bilateral Investment Treaty, claiming plain packaging would breach the treaty's intellectual property protections.

The blatant manipulation has been savaged by Australian commentators and few expect the case to go the distance. But it will take time and money to have it thrown out.

New Zealand has a free trade agreement with Hong Kong which contains an exception to allow legislation for public health purposes - but it is not watertight, warns Kelsey. The Ministry of Foreign Affairs and Trade's regulatory impact assessment on plain packaging says there is a "reasonably high risk" that New Zealand could face a WTO complaint like Australia.

"The real worry is the chilling effect these [trade and investor law disputes] could have on government decision-making."

As for the claimed lack of evidence that plain packaging will succeed, this is seen as another clever piece of industry spin - how can there be evidence when it has yet to be tried anywhere? But volumes of research suggest plain packaging will put young people off starting to smoke, campaigners claim.

That research may be crucial, if Kelsey is correct that WTO rules covering technical barriers to trade loom as a significant test for the measure.

Another worry for campaigners is Prime Minister John Key's lukewarm support for plain packaging (in contrast to the bullishness of Australian political leaders). Key told Fairfax Media in July: "I don't see it as critically important as raising the price - I think that's more likely to have an impact ... Yes, it's important but I wouldn't die in a ditch over it.

"Plain packaging is one more step in the desire to see fewer New Zealanders smoke but it's probably going to be less effective than some of the other things we've done anyway."

Kelsey says such statements will be seized on by the industry to use in trade cases, to sow doubt that the measure is justified under the narrow exemptions for public health measures. Others wonder how genuine is the Government's commitment to the "aspirational" goal of making New Zealand smokefree by 2025, given the billion dollars it collects from the industry each year, rising with every excise tax increase.

But Simon Chapman expects the Australian measure will survive the WTO. "We've got very tough gun laws in Australia - you don't see Smith & Wesson and Glock taking Australia to the WTO because we have tough gun laws."

It's many years since the cigarette packet was a blank canvas for the imaginations of advertising and marketing men - as captured in the TV series Madmen - who persuaded tobacco companies that branding and the images conveyed were as important to sales as the label on a champagne bottle. With the truth about the product's lethal impact hidden in a haze of denial and obfuscation, box design helped to convey the allure of the product - none more successfully than the Marlboro man, a rugged cowboy used to counter the feminine image of filtered cigarettes. Names like Virginia Slims were introduced to cater for women while brand variants like "menthol", "low tar" and "mild" created a myth that some cigarettes were safer than others. As recently as the 1980s, Camel used a cartoon figure to appeal to children.

Health researchers claim that even with graphic warnings, consumers and especially children remain vulnerable to subliminal advertising.

The industry maintains it does nothing to entice children and young adults to smoke. But researchers say "they would say that, wouldn't they?"

"Packaging is incredibly important to tobacco companies," says Professor Janet Hoek, of Otago University's marketing department.

"Cigarette packets are what's known as a badge product. We know from research that younger smokers are very influenced by branding.

"The companies are in a really invidious position - they kill half their customers so they have to keep recruiting young people."

The ability to vary the packaging to distinguish product is also vital to the industry. Chapman says companies have increasingly looked to premium brands for profits as smoking numbers have dropped in developed markets - even though blind tests suggest the products are virtually indistinguishable.

"They know that if all packs look the same, that smokers are going to say 'hang on, why am I going to fork out an extra $3 or $4 for something that tastes the same'?"

Philip Morris NZ corporate affairs manager Christopher Bishop says cigarette blends can be very different in the quality and type of tobacco used.

If branding is as crucial - and the industry as worried - as health campaigners maintain, could plain packaging be the tipping point which pushes smoking rates towards "endgame"? Evidence suggests shareholders should not be deserting Big Tobacco just yet.

Despite two decades of apparently decisive blows, the industry's global profits have continued to soar. Philip Morris International alone has more than doubled global cigarette sales, from 400 billion sticks in 1992 to almost 900 billion in 2010.

The industry's growth has come in developing countries where public health campaigns are less well-funded, particularly China, India, Indonesia - the three today account for more than half of global tobacco consumption - and Brazil. The Asia/Pacific region is now the world's biggest tobacco market, the Sydney Morning Herald reported, with 6 million new smokers recruited in 2009 and a further 30 million expected to be added by 2014. Companies eye a bright future in Egypt, predicted to become the fifth biggest tobacco market in the next 40 years.

Researchers say firms have also countered declining smoking trends in "enlightened" countries by introducing so-called premium products. In New Zealand, Imperial Tobacco boosted sales in 2010/11 to $345 million (up nearly $50 million on the previous year) and expects production at its recently-expanded Petone plant (which manufactures for the Australian market) to treble from 1.1 billion cigarettes in 2010/11 to 3.5 billion this financial year.

Though falling slowly, the overall adult smoking rate (23.6 per cent in 2009) masks significant distortions, says Professor Richard Edwards, head of public health at Otago University's Wellington campus. In 2009, 44 per cent of Maori (more women than men); 35 per cent of Pacific men and 30 per cent of 20-24 year olds smoked.

"It's been 50 or 60 years since it was clearly shown tobacco causes cancer," says Edwards, who also heads the Aspire 2025 research project. "But we still have these significant rates among young adults and Maori and Pacific people. So we need a suite of strategies. Plain packaging is a big step but far from sufficient.

"We need to increase the price, we need to do everything. This is a public health emergency which has been continuing for the last 60 to 70 years."