Fairfax media reports that Australian supermarkets – Coles, IGA, Foodworks – are selling cut-price smokes.
Not surprised. Supermarkets – including Coles and Woolworths – are among Australia’s largest tobacco retailers; they also offer discounts for alcohol in the co-located alcohol chains they own.
When I hear supermarket spin-doctors talking about their commitment to health, it reminds me of the commitment to vegetarianism shown by Bruce the shark in the film Finding Nemo.
It turns out that supermarkets are stocking a new variant of Peter Stuyvesant, a brand manufactured by Imperial Tobacco.
Actually, these days Imperial Tobacco goes by the name of Imperial Brands Plc. They even have a webpage on responsibility where you can read about how they are opposed to slavery and stuff.
Peter Stuyvesant Originals Blue, manufactured in the Ukraine, sells for between $3 and $6 per pack cheaper in Australian supermarkets than Peter Stuyvesant Classic Blue, which is manufactured in New Zealand.
Both brand variants were supplied by Metcash Ltd, a wholesale distributor.
So…is Imperial introducing a brand extension, and using price to differentiate between Originals Blue, and Classic Blue – neither of which are blue, following mandatory plain packaging.
Or is it just dumping cheaper-to-make ciggies from Eastern Europe onto the Australian market to shore up youth sales? – what the hell, we told you it would be a free-for-all on price if you introduced mandatory plain packaging?
Raising the price of tobacco is a powerful way of reducing tobacco consumption, particularly among young people.
But when a manufacturer introduces a cut-price brand variant, which is snapped up by your family friendly local supermarket, it has the opposite effect.
Which might explain why Sarah White, director of Quit Victoria, says “The cigarette companies are not doing this to make money, they’re doing this to keep people hooked”.
Out of the horse’s mouth
A few years ago, the CEO of a leading Australian tobacco manufacturer told me:
|We do quite a lot of work on trade marketing, which is getting the product into store fresh in the right place, in the right category, the right selection. So we work with people like Coles, Woolworths, independents, trying to make sure that we’ve got the right selection of product for the right consumers in the area. Pricing is the other tool that we’re allowed to use…it’s a free market, the ACCC are very, very strong on competition in this jurisdiction….I would say about, about 90% of our work and our dollars are spent on getting the right pricing definitions in the marketplace.|
So you have it from the horse’s mouth. Australian tobacco companies spend much of their time and money massaging their supply chains to achieve retail prices that will maximise sales of their brands within each geographic market and market segment.
The same thing happens overseas. Reliably late, the US Federal Trade Commission has just released their Cigarette Report for 2013.
It reveals that the tobacco industry spent US$8.95 billion on tobacco advertising in 2013. Over 85% of this spend (US$7.6 billion) was paid to cigarette retailers in the form of price discounts.
It’s time we discovered the facts about similar behaviour by Australian tobacco manufacturers and wholesalers.
In 2011, the National Preventative Health Taskforce called for a comprehensive national surveillance system that included wholesale and retail sales datasets for alcohol and tobacco.
Gartner, Chapman and colleagues have also made the case for mandatory reporting of tobacco sales data several years ago in the Medical Journal of Australia.
Sales data is critical to evaluating the effectiveness of tobacco controls, as well as the scale of price discounting by the industry itself.
Such data is available to the industry – which uses it to constantly finesse their marketing strategies, in order to maximise cigarette sales. However, it is not currently available to government.
Collecting such data would not mean that a company’s commercial in-confidence information was disclosed to competitors.
Tobacco is not an ordinary market. More tobacco sales ultimately means more death and disease, more misery for families, more health care costs.
When Australian cigarette manufacturers dump cut-price ciggies from Eastern Europe into Australian supermarkets, it’s time to impose mandatory reporting of sales data for all tobacco products supplied to retailers, disaggregated by local postcode or area.
Then government would have a clearer basis for responding definitively with policies to discourage youth sales by keeping prices high.