British American Tobacoo Starts Australian Discount Brand

British American Tobacco Plc’s (BATS) Australian unit, maker of the country’s most popular cigarette brand Winfield, introduced its first discount label to compete with illegal tobacco products.

A pack of 25 cigarettes under the “Just Smokes” brand sells for A$11.50 ($11.40) at retailers, including the Coles supermarket chain, Scott McIntyre, a spokesman at British American Tobacco in Sydney, said in a telephone interview today. Winfield sells for A$15.75 at Coles and can cost as much as A$20 for a package of 25 at independent convenience stores.

British American Tobacco is fighting the Australian government in court over its plan to be the first country to implement a law requiring cigarettes to be sold in plain packages. Australia’s discount tobacco market, measured by the number of cigarettes sold, has grown 63 percent since the government increased excise tax by 25 percent in 2010, according to the London-based company’s estimates.

“We’ve never had a product in this segment before,” McIntyre said. “A few years ago, the market didn’t exist.”

The counterfeit tobacco market in Australia, including cigarettes sold in fake branded packages, tripled in 2011 from a year earlier to an estimated 407,000 kilograms (897,000 pounds), based on a report by Deloitte & Touche LLP.

The contraband market, such as cigarettes smuggled in to avoid duties, has also more than tripled in the same period to an estimated 430,000 kilograms, according to the report, which was commissioned by British American Tobacco, Philip Morris International Inc. (PM) and Imperial Tobacco Group Plc. (IMT)

“While counterfeit and contraband cigarettes do exist in Australia, tobacco companies overstate their availability as an excuse to push their own products harder,” Health Minister Tanya Plibersek said in an e-mailed statement today. “It is always disappointing to see efforts by tobacco companies to keep Australians smoking.”

To contact the reporter on this story: Joe Schneider in Sydney at jschneider5@bloomberg.net

To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net

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