Why Are Tobacco Controllers Really Interested In Packaging?

Carl V. Phillips | Contributor

Vapers and smokers do not really care all that much about packaging, but tobacco controllers are obsessed with it. As was recently reported, FDA’s latest crackdown on vapor products focuses on packaging that supposedly attracts children. The ostensible concern is e-liquid packaging that might be mistaken for food items and accidentally consumed by young children. But only three or four of the targeted packages actually fit that description and only one (which looks like a juice box) really seems to pose a particularly high risk. The rest were merely festive. The claims about the packages seamlessly morphed from accidental poisoning to FDA’s favorite claim, that this is marketing directed at children (never mind that the packages in question might theoretically appeal to a 7-year-old but the “children” who might conceivably be the target of marketing are 17). But children of whatever age are ultimately just another layer of excuse for a general war on branding. The ultimate goal is, “plain packaging,” of the sort imposed in the UK last year.

The first new UK smoking statistics since that rule was implemented have just been published, and they suggest a slight uptick in consumption. This has been the pattern across the few countries who have implemented such rules. The term “plain packaging” is an intentional deception: rather than being plain, the packages are festooned with mandatory gory pictures and text boxes that supposedly warn about (but actually usually misrepresent) the risks of using the product. What it really means is that every possible bit of brand recognition must be removed, down to not using distinctive fonts for product names.

Obviously this has nothing to do with targeting children, who do not really care what font “Marlboro” appears in. Then again, neither do adults, even though these policies are touted by tobacco controllers as a way to dramatically increase smoking cessation.

The consistent upticks in smoking following plain packaging implementation could just be statistical blips. There is always random sampling error, as well as other errors in these estimates, so small changes are to be expected. Comparisons between the latest two estimates are usually meaningless. Have you ever wondered why, over the course of your lifetime, you have heard so many reports of how smoking prevalence recently dropped that it seems like it should have dropped to zero by now? It is because every time the most recent two estimates show a downtick, usually because of random error, tobacco controllers get it into the news, taking credit for having caused it with their latest ineffective campaign. But when the next estimate comes out with an random uptick that cancels that out, it is quietly ignored.

Still, the upticks after plain packaging implementation do mean that the promised big drop in smoking is not happening. Moreover, there are reasons to believe that plain packaging and related marketing restrictions will actually increase smoking. When premium brands can no longer distinguish themselves with packaging or brand recognition messages, consumers will tend to drift toward lower-priced brands and tax-evading illicit markets which are cheaper still. People do not smoke or use other tobacco products because of the packaging, but they do prefer premium brands in part because of the branding. The resulting lower average price will tend to increase consumption. Moreover, the resulting expansion of illicit markets makes it easier for minors to buy the product.

If plain packaging seems to increase smoking, and there was never any chance it would decrease it to any measurable degree, why does tobacco control like the policy so much? It is because they are much more interested in hurting companies than they are in reducing smoking or even total product use.

The reason the policy accomplishes this can be found in the explanation for why de-branding causes switching to lower-priced brands. Why do manufacturers promote brands and create attractive packages? It is not to recruit new consumers to the category; it is mainly to increase their per-unit net revenue on a given sales volume. Now this is probably is not what an e-liquid manufacturer is thinking when it puts clever pictures of unicorns on their packages. They are thinking, “This will get our product noticed on the shelves or webpages, and a few people who would have bought another product will buy ours instead, just because they noticed it or perhaps because they really like the artwork.” But the most reliable way to get that sales increase is to lower the price. The problem with that is it lowers the per-unit revenue. So to get the additional sales and also keep per-unit revenue up, they try artwork. In effect they are getting the sales volume they would from a lower price, but at the higher price point. Thus, branding or artwork can be seen in terms of an increase in per-unit revenue.

If cigarettes or e-liquid becomes an unbranded near-commodity, most competition will be about price. Higher quality products and those with lingering name recognition will still command a bit of a premium, but not nearly as much. Most products will be priced as commodities, at the lowest possible price that keeps the manufacturer in business. Total industry profits plummet even though total sales volume will probably increase. Tobacco controllers talk about consumption but really care more about industry profits, so this just what they want.

A full-on plain packaging law, or any de-branding beyond what currently exists for cigarettes, is unlikely to withstand a Constitutional challenge in the US. A regulation requiring those gory pictures that are mandated on UK “plain” packages and in many other countries has already been struck down. But the urge to attack the profits in any sector of the industry is still there. Thus we can expect continuing attacks on vapor product artwork, product names, flavor descriptors, and perhaps even flavors themselves. More lists will be generated of products that supposedly appeal to 7-year-olds, followed by making lists of what supposedly appeals to 16-year-olds and even 20-year-olds. There will be protests that older adults like the banned features as much or more than kids, but they will be ignored because the kid-appeal claim is just an excuse. The real goal is to make the product a bit less appealing so that manufacturers have to charge a few pennies less for it.

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