Cigarette packaging as we know it is soon to go up in smoke, as the Department of Health (DoH) looks to tighten the anti-smoking laws to fall in line with the World Health Organisation (WHO) recommendations. But will this decision really lessen consumption and benefit us economically?
Under the leadership of Minister of Health Aaron Motsoaledi, the biggest change we are set to see is the ushering in of plain packaging for cigarette cartons. This, the department hopes, will drive down the number of smokers.
But in a new study into the South African government’s proposed introduction of plain tobacco packaging, a Stellenbosch University MBA student, Helvin Manuel, found that ‘this alone would not be enough to reduce the consumption of tobacco products and it would have a significant impact on law enforcement and taxes.’
Through the study, Manuel performed a simulation of 22 South African smokers, who each had to smoke their brand in plain white packs for a period of five days. He found that the longer consumers interacted with the plain tobacco packaging, the more familiar they became with the packs and that seemed to lessen the initial negative perceptions. Some even indicated that they might use cigarette holders as a substitute which could potentially offer some form of branding opportunities for tobacco manufacturers.
“Since all brand equity had been removed from the cigarette packaging and without product differentiation tobacco manufacturers cannot charge a premium for their various products. Some consumers indicated that they did not get the same value from their brands and felt that the prices of cigarettes should be standardised across the board. This could potentially increase the demand and usage of cigarettes mirroring what happened in the Australian market where the decline in prices resulted in an increase in consumption,” stated Manuel.
The study further found that those consumers that are more ‘value for money’ oriented were open to the idea and that at the end of the day, “the taste of the cigarettes and the price of the packs are more important than the image of the brand.”
Manuel added that although the DoH’s intentions were good, there are certain ‘unintended consequences’ that must be considered.
Possibly the most important consequence of them all is that this would make illicit cigarette trading that much easier, which would result in the government losing out on tax revenue.
“Plain tobacco packaging will make counterfeiting of original products easier and pose a challenge for law enforcement. This illicit trade could also lead to governments losing money from possible taxes that could have been received from the legal tobacco industry. A study conducted by KPMG in 2013 in Australia found that the increase in illicit products since the implementation of plain tobacco packaging has resulted in a loss of £560 million (R12 billion currently) in taxes,” Manuel explained.
It is however also worth noting that non-branded packs led to some consumer’s perception of the cigarette changing.
“Smokers are emotional in their behaviour and brand choices. Many took up smoking due to peer pressure, the perceived social acceptance and the status the brand equity of premium cigarettes portrayed,” added Manuel.
While unbranded packaging could potentially deter younger people from taking smoking up in the first place it is too soon yet to determine whether the government’s plan will work.
Handy tip: Quit smoking and save your money or pay off your debts. Remember, cigarettes are subject to more ‘sin taxes’ every year which means the cost of smoking goes up every year too.