Packaging: It Couldn’t Be Any Plainer

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Plain packaging continues to rear its head with the United Kingdom being is the latest country to introduce it. But does plain packaging have the deterring effect regulators claim? How does it affect manufacturers, retailers, and end customers? Tobacco Asia takes a critical look at a rather controversial measure.

By Thomas Schmid

Since May 20 this year, all cigarettes in the United Kingdom must be sold in what has been termed “plain packaging.” The country is only the third in the world to implement this rule. Australia pioneered plain cigarette packaging in December 2012 and France introduced it only in January 2017. And while other countries have adopted plain packaging laws; their active implementation is pending and only vague implementation deadlines have been announced (see table 1 below).

Many EU countries reject plain packaging

On the other hand, a significant number of European nations have made it clear (at least for the time being) that they have no intention to mandate plain packaging. Germany’s government in 2014 was unequivocal when it announced that “…the federal government does not want to introduce neutral standardized packs of cigarettes without brand logos.” This stance was echoed by Switzerland in the same year (and again in 2016) when the country’s parliament and government concluded that plain packaging “goes beyond what is necessary in terms of public health.”

Following a review of potential constitutional changes needed for the potential introduction of plain packaging, the Swedish Parliamentary Inquiry Committee in 2016 stated: “We have made the analysis that such an arrangement [of introducing plain packaging] would go against the principles of free competition and freedom of speech.” Denmark’s minister of public health last year said his government found current legislation that required 65 % of the front and back of cigarette packs to carry health warnings entirely adequate, and that plain packaging was not needed. The Czech Republic, Spain, Portugal, Greece, Slovakia, Bulgaria, Poland, and Romania all also have opposed plain packaging proposals, issuing detailed opinions (DOs) under the EU technical standards directive, saying the measure was not compatible with key principles of EU law.

Disenchantment elsewhere, too

Elsewhere in the world, a whole egg basket of countries voiced concern about the introduction of plain packaging. Among others, Indonesia, Dominican Republic, Honduras, Cuba, Malawi, Zimbabwe, Zambia, Nigeria, Guatemala, Colombia, Nicaragua, El Salvador, Mexico, Ukraine, and Jordan are all amongst World Trade Organization (WTO) member states that questioned Australia’s implementation of the measure and similar initiatives by Ireland, UK, and France. They argued that plain packaging was incompatible with WTO obligations, including the agreements on trade related aspects of intellectual property rights (TRIPS) and on technical barriers to trade (TBT).

FCTC recommendations not mandatory

Interestingly, WHO’s Framework Convention on Tobacco Control (FCTC), the main international treaty on which relevant countries based their decisions for introducing the measure, does not require plain packaging, nor does it make its implementation mandatory.

“[FCTC] is non-binding in this regard,” explained Nicholas Harris, public affairs director at JTI (Japan Tobacco International), headquartered in Geneva. “Indeed, the guidelines for implementation of Article 11 and Article 13 of the FCTC only state that parties ‘should consider’ plain packaging.” Emphasizing the clearly non-binding character of the instrument’s relevant articles, he said that despite that fact “…WHO and tobacco control advocates continue misinterpreting… FCTC guidelines to put pressure on parties to introduce excessive measures.” He added that this was why some countries may feel they are under an obligation to implement the suggested provisions, including plain packaging.

No evidence for effectiveness

Moreover, WHO frequently stated that FCTC guidelines were based on “evidence” and “existing best practice.” Harris rejected that notion. “It is simply not true. For example, the guidelines to Articles 11 and 13, which recommend plain packaging, were adopted in 2008, at a time when not one single country had yet implemented the measure and, therefore, no evidence could have existed.”

Simon Evans, a spokesperson for UK-based Imperial Tobacco shares Harris’ view. He said that tobacco companies, including Imperial, supported evidence-based and reasonable regulation of tobacco products. But he also cautioned that “after four and a half years of the failed experiment in Australia there remains no credible evidence that plain packaging is having any impact on tobacco consumption rates.”

A shaky house of cards

But isn’t that exactly what it’s supposed to be all about? Isn’t that exactly what plain packaging proponents, anti-tobacco lobbyists, and WHO bureaucrats alike have been trumpeting ever since Australia implemented the measure back in 2012? Namely that the objectives of plain packaging were to help more smokers quit, discourage people from picking up the habit, and overall bring down public health expenditures related to tobacco-induced illnesses.

“But tobacco packaging has never been identified as a reason why people start or continue to smoke,” said Evans. “There have been several studies over many years which have looked at the reasons why people take up smoking – and packaging isn’t one of them.”

And JTI’s Harris chimed in: “Some of the ‘objectives’ stated for plain packaging by governments are not actually legitimate public policy objectives that can justify the introduction of this measure. They are insufficiently articulated and evidenced, insufficiently capable of changing smoker behavior, and unnecessarily duplicative of existing regulations.”

Evans added that his company also was not aware of any credible study that would attest to the efficacy of plain packaging in achieving its supposed goals. “On the other hand, studies do exist which actually contradict the alleged effectiveness of plain packaging. For instance, an analyst note published in October 2016 by UBS and titled ‘Plain Pack Risks - More Smoke than Fire?’ contended that based on a survey of 2,665 UK smokers the primary drivers of brand selection are taste, quality, and availability, rather than packaging,” Evans pointed out.

A plainly contrived outcome?

Imperial Tobacco’s Australian outfit in a February 2016 press release voiced suspicion that a long-delayed official post-implementation review of the country’s plain packaging measure might eventually offer nothing more than a “plainly contrived outcome.” Imperial’s head of corporate and legal affairs, Andrew Gregson, was quoted in the press release as saying that the lengthy delay in publishing the results of the review – which was originally commissioned in early 2015 - was “in itself cause for suspicion.” “We know that plain packaging has simply not impacted long-term smoking rate trends. There has been no acceleration in decline brought about by the policy. Simply put, the very same result in terms of smoking rates would have been achieved by doing nothing,” Gregson said.

And talking to journalists last May 3, Imperial Brands’ chief executive officer Alison Cooper said in response to a question on plain packaging, “The reality is, so far, we don’t think plain packaging has had that significant an impact on the [Australian] market. Things like excise [tax hikes] are far more significant in terms of impacts on markets than the introduction of plain packaging. Clearly, we have gleaned many learnings from Australia. We’ve been phenomenally successful in that market – our share, profits, and revenues have grown. Commercially, we’re very capable in terms of operating in plain packaging markets.”

In any case, following recent legal challenges brought by the Dominican Republic, Honduras, Cuba, and Indonesia, WTO is currently examining whether Australia’s plain packaging legislation is permissible under international trade rules. “If the WTO dispute settlement panel finds a breach of Australia’s obligations under WTO agreements, Australia will need to amend its legislation or face possible sanctions,” explained Harris. “But this dispute settlement process, including the decision of a WTO appellate body, is unlikely to be completed until 2018.”

Correction: This table (above) was originally posted with inaccurate information. Dates applying to different countries were reversed. The table has been corrected and replaced. Thank you to reader Beatrice Bussolari of G.D. S.p.A. in Bologna, Italy, for pointing out this error to us. Tobacco Asia apologizes to our readers and subscribers for any confusion.

No domino effect expected

After France and the United Kingdom implemented their own plain packaging legislation, at least six other countries are slated to introduce similar measures between 2018 and 2020. While to-date a total of nine nations will go for plain cigarette packaging, both JTI and Imperial Tobacco do not expect a domino effect that might spiral out of proportion.

“There are two further implementations in progress currently, one being the UK and the other France,” said Cooper of Imperial. “It is not an area [in which] we expect to witness a particularly significant domino effect, but clearly those two countries have been looking at plain packaging legislation for some time.

JTI’s Harris likewise doubted that any significant number of countries other than those who have already opted for plain packaging anyway will suddenly jump on the bandwagon head over heels, especially not since feedback from Australia and even France is not exactly encouraging nor does it show the measure to have the claimed effects.

“The Australian plain packaging experiment has failed and its replication elsewhere is questionable at best,” Harris said. “And according to the figures recently confirmed by the French Customs, the 2017 first-quarter cigarette deliveries to tobacconists were 1.4 % higher compared to the first three months of 2016 [when plain packaging had not yet been introduced].”

A nuisance, nothing more

If anything, plain packaging appears to be little more than an utterly unnecessary nuisance to retailers and end consumers.

“We get our engagement with retailers right because for retailers this is a huge issue and it’s very important that we help them through that process,” said Cooper. “That approach has been very successful for us in Australia and it’s very much supporting our market share in France and UK as it is implemented [there], too. Retailers have a business to run and we are partners with them in that business, so we help educate them on plain packaging, help them through the transition. It’s very much a partnership we look for with retailers.”

As for end consumers, Evans said that plain packaging has a very negligible impact on them other than “generating initial confusion around the loss of on-pack branding in retail outlets.” He also added that the biggest inconvenience for retailers was stock management “owing to having to merchandise hundreds of near-identical looking packs coupled with increased serving times.” And although manufacturers had to pour some additional investments into upgrading, adjusting, or re-calibrating their package printing machinery to accommodate the new requirements, they could take that in stride.

But the real issue brought on – or rather, exacerbated - by plain packaging is perhaps found in illicit tobacco.

“One of our greatest concerns around the adoption of plain packaging is the impact on the trade in illicit tobacco,” said Evans. He cited the 2016 annual KPMG report, which stated that illicit tobacco trading had seen a marked increase in Australia since the country’s introduction of standardized packaging.

While it is still much too early to anticipate how the United Kingdom might fare with its only very recently implemented plain packaging legislation, the results in Australia are known and not particularly uplifting. And as Nicholas Harris already noted, even France didn’t get off to a fantastically good start. By and large, plain packaging thus seems to be a “flawed policy with only negative aspects,” he said. “It does nothing to improve public health. It does not stop adults or minors from smoking. It, however, distorts competition, impedes investments, and fuels the illegal trade in tobacco products. It infringes fundamental legal rights regarding trademarks, property, freedom of expression, and freedom of trade that are protected by national and international laws,” he said.

Couldn’t be plainer than that.

A Plain Misnomer

Plain cigarette packaging is not plain. This revelation does not surprise anyone who is even vaguely familiar with the subject.

“Plain packaging is anything but plain,” confirmed JTI’s Nicholas Harris. “It is in effect a ban on branding, which mandates that trademarks, logos, non-prescribed colors, and graphics are removed and the use of a brand name is only permitted in a standard font and size.” So there we have it. The term was probably cooked up by a vocabulary-challenged bureaucrat without lending much thought to what the adjective “plain” insinuates. Even under “plain packaging” rules the surfaces of cigarette packs are still almost entirely covered with printed elements – primarily graphic health warnings, including images of conditions that may be caused by tobacco consumption.

While the particular specifications how this “plain packaging” must appear are determined by every country individually, the standard elements as implemented in Australia, France, and the United Kingdom are in fact quite similar and feature only minor variations. But the specifications introduced in the UK – which like elsewhere come on top of the TBD2 requirements, by the way - are:

• All traditional branding elements are forbidden;

• The dominating base color of a pack must be Pantone 448C, also known as “opaque couché,” a hue which several years ago was determined through consumer surveys to be “the ugliest color in the world,” as it supposedly is the most unpleasing to the human eye;

• Text and pictorial health warnings must cover 65% of the front and back of a pack and must be approved by the relevant authorities;

• Text health warnings cover 50% of both sides of a pack;

• No references to taste or flavor are permitted;

• The brand name must be printed in black Helvetica font only, and in the prescribed font size.