New cigarette law won’t stop smokers

A Master of Business Administration (MBA) graduate of the University of Stellenbosch Business School (USB) has studied the South African government’s proposed introduction of plain tobacco packaging.

Helvin Manuel found that this would not be enough to reduce the consumption of tobacco products and it would have a significant impact on law enforcement and taxes. As part of his MBA, Manuel studied the potential impact of non-branded packaging on the purchasing behaviour and product experience of cigarette consumers drawing on additional learning from Australia, the first in the world to implement such a strategy in 2011.

With the legal market size of the SA tobacco industry estimated to be more than 20 billion cigarette sticks, valued in excess of R30 billion, the possibility of this new legislation is a concern to the local tobacco industry as it could potentially have a direct impact on profit margins.

“Packaging has become an important part of marketing with significant investments to differentiate between brands in different segments, to increase brand equity and perceived quality and to serve as an advertising tool,” said Manuel.

Manuel’s simulation study of 22 South African smokers who each had to smoke their brand in plain white packs for a period of five days, 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.

“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. This could increase the demand and usage of cigarettes,” he said.

Manuel says that although governments have good intentions with the implementation of plain tobacco packaging, there are certain unintended consequences that have to be taken into account.

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.

Courtesy: DKC (De Kock Communications).

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