What will the tobacco market look like in five years? Retail World asked key suppliers to discuss the biggest factors driving change and how the industry should prepare.
Butt out: why raising the legal smoking age won’t work
By Imperial Tobacco Australia Limited Communications Executive Michelle Park.
In late September, mining billionaire Andrew Forrest put forward a proposal for the government to raise the legal smoking age in Australia to 21. This proposal represents an ideological objective to restrict the free choice of adults – it is unnecessary, impractical and potentially even counterproductive. Raising the legal smoking age won’t necessarily mean fewer people smoking. It will just mean fewer people buying tobacco products through legitimate retail channels.
The central tenet of this proposal is that supply will be restricted, and that this will – contrary to the fundamental principles of economics – result in contraction in supply. The idea that curtailing supply automatically cancels demand is both logically and factually absurd. Prohibition of alcohol in the US famously didn’t work. If prohibition in the modern era were successful, there would be no marijuana use, no heroin, no methamphetamines and, more obviously, no underage use of alcohol.
Demand for tobacco will not be reduced by increasing the legal smoking age. These adults will instead search either for a new method of supply or, more likely, avail themselves of an existing alternative, such as the black market. Illicit tobacco is readily available nationwide. Criminals selling illegal tobacco will sell to anyone of any age. The demand for tobacco products is better met by well-governed, tax-paying and responsible businesses that will work in partnership with stakeholders, rather than criminals who operate in the illicit market.
This proposal carries a far greater consequence – it seeks to undermine a standardised age of majority. Are we to change the definition of an adult?
Once 18 years old, adults are considered sufficiently responsible to vote, consume alcohol, gamble, get married, or go to war. Yet this proposal suggests that adults are not sufficiently responsible to consume tobacco, a legal product.
Perhaps the most frustrating point is that the proposal to raise the legal smoking age has been put forward under the guise that it will discourage young people from taking up smoking. In fact, all that it does is create a bigger gap, thereby pushing more people under the legal age, which is counterproductive and does not address the issue of youth smoking in any way.
Imperial Tobacco Australia discourages any approach that is based more on regulation than on education. With such an approach, rather than educate people about the health risks associated with smoking, there is a fundamental assumption that more intensive regulation will drive behavioural change. There is also an assumption that people can be driven to quit smoking through increasing regulation – to force behavioural change.
Australian governments at all levels have singled out tobacco for a vast plethora of regulation so specifically designed to place limits on the free choice of adult consumers as to approximate illegality.
They are urged on by zealous anti-tobacco activists, more often than not publicly funded in a curiously juxtaposed merry-go-round of financial collection and expenditure. There are many who have come to view excessive tobacco regulation as reasonable and legitimate.
The legion of regulators – who would dictate to Australian adults what they can consume, how and where they can consume it and, indeed, where and how they can obtain a legal product – generally justify their actions on the basis of ‘protecting’ individuals.
Yet, curiously, tobacco has been targeted to a far greater extent than other lifestyle choices – with no evidence to suggest that the regulation has been any more effective in curbing choices compared with, say, alcohol or gambling.
Abraham Lincoln said: “Prohibition … goes beyond the bounds of reason in that it attempts to control a man’s appetite by legislation and makes a crime out of things that are not crimes.”
Australia considers itself a liberal, democratic nation that prides itself on freedom of the individual. Yet the very
basic freedom – the freedom to makes one’s own choices in the full knowledge of consequences – is dramatically undermined by absurdly excessive regulation on tobacco.
The future is electric
By Philip Morris Limited (Australia, New Zealand & Pacific Islands).
The e-cigarette category in Australia is projected to be worth nearly $60 million by the end of 2018*. As the regulatory landscape stands in Australia, retailers are missing out due to consumers seeking these alternative solutions to smoking through unregulated channels.
Around the globe, ‘like-minded’ countries such as the UK, Canada and New Zealand have already legalised, or are in the process of legalising, nicotine-containing e-cigarettes and vaporisers. With these examples, and the growing demand from Australian smokers for access to these alternative products, we would expect to see the Australian government move to follow suit.
What would the legalisation of nicotine- containing e-cigarettes and vaporisers mean for the Australian retail landscape? To allow local retailers to have their fair share of the e-cigarette pie, there needs to be support to regulate these products in a manner that creates an even playing field and the ability to compete with a large online market.
There is growing scientific agreement that e-cigarettes are less harmful than conventional cigarettes, and that they should therefore be regulated accordingly to allow adult smokers the greatest opportunity to gain awareness and switch. Overinflated taxation, plain packaging and unreasonable communication restrictions would not be conducive to adult smokers making the switch – but instead continue to drive the unregulated market and contraband products, creating potential safety issues for consumers and risking the reputation and legitimacy of the category.
The legalisation of nicotine-containing e-cigarettes and vaporisers in Australia, with sensible regulation, would not only provide an even playing field for the category, but also the opportunity for retailers to open up another revenue stream that doesn’t exist at present.
*Kaiser Associates, Jan 2016. ‘Understanding the Competitive Landscape for E-cigarettes in Australia’.