(Corrects to remove reference to Philippines in 32nd paragraph of story published Oct. 5.)
Oct. 5 (Bloomberg) -- Remember when a pack of smokes came with glitzy logos, rich foil sleeves, and romanticized language describing the pleasures within?
Well, the future of cigarette packs is on display in Australia, and it’s not that pretty: large, graphic images of gangrenous limbs and cancer victims, with brand names printed in a uniform font on a background legally defined as “drab dark brown.”
Tobacco products complying with the world’s first plain-packaging laws have started arriving in stores, as an Oct. 1 manufacturing ban on the country’s A$10 billion ($10 billion) tobacco industry comes into force, Bloomberg Businessweek reports in its Oct. 8 issue. While a U.S. court in August blocked the first change to that country’s tobacco health warnings in more than two decades, more stringent plain-packaging rules like Australia’s are already being examined in the U.K., New Zealand, Turkey, and the European Union.
“With so many countries lined up to ride on Australia’s coattails, what we hope to see is a domino effect for the good of public health,” Margaret Chan, the World Health Organization’s director-general, said in an August statement.
Government standards set out the images and health warnings that must cover 75 percent of the front of cigarette packets --a gangrenous foot, a tongue cancer, a toilet stained with bloody urine and a skeletal man named Bryan dying of lung cancer. Further warnings must appear on the sides and cover 90 percent of the back.
The High Court of Australia today released its reasons for dismissing in August a challenge from tobacco companies that claimed the government illegally seized their intellectual property without proper compensation.
The judges’ panel, led by Chief Justice Robert French, said in a 6-1 decision that because the government didn’t benefit from the removal of the trademarks, it didn’t have to compensate the companies and the law was valid.
By requiring so much of the packaging to dramatically show that smoking is neither glamorous nor safe, health officials are betting they can create a greater deterrent than the postage-stamp-sized, health-related images that previously graced Australian packs.
“The pictures are becoming bigger. You can’t ignore it,” said Ash Alhusban, fingering the butt end of a cigarette on a break from his job as co-manager of Opera Convenience, a small store 500 meters from the city’s opera house. “When I saw them I said, believe me, I will do my best to stop smoking.”
The first plain packages from Philip Morris International Inc.’s Marlboro Advance brand were delivered to the store on Sydney’s harbor foreshore Sept. 28. and are being kept, in accordance with a state law, out of sight in an undecorated white cabinet.
The legislation passed last December also bans “decorative ridges, embossing, bulges or other irregularities of shape or texture,” and mandates the form of packs’ corners, the way their lids open, the color of the glue that holds them together and the appearance of their foil liners.
No trademarks may appear, and all product names must be in an identical Lucida Sans font on a background of greenish-brown Pantone 448C hue.
“We will be policing plain packaging very closely,” the country’s health minister, Tanya Plibersek, said in a Sept. 12 interview with Channel 10 television. “Young people are the ones most affected by the packaging and by the advertising, and no parent wants their kid to start smoking.”
At Alexanders Cigars in Toorak, Melbourne’s most expensive suburb, owner Danny Maroudis said the packaging doesn’t look as bad as he feared, and is unlikely to affect sales anyway.
“People buy a cigar because they smoke that particular type; it’s not about the label,” he said. “At the end of the day, a smoker will smoke, and if they want to give up, they give up.”
While ordinary packs can still be sold in stores until Dec. 1, all manufacturing and packaging of the old-style cigarettes at British American Tobacco Plc’s factory near Sydney’s Botany Bay and Philip Morris’s facility in suburban Melbourne stopped Oct. 1, in accordance with the law.
As old product lines sell out, the new packaging is starting to be sent to retailers. Six out of the top 10 product lines sold by Australian supermarkets are cigarette brands, according to 2007 data from the Cancer Council, a health charity.
Plain packaged cigarettes under Imperial Tobacco Plc’s Peter Jackson brand and some BAT lines are already arriving at branches of Wesfarmers Ltd.-owned Coles, the country’s second-largest supermarket chain, Melbourne-based spokesman Jon Church said by e-mail.
Claire Kimball, a spokeswoman for supermarket leader Woolworths Ltd., didn’t respond to two phone messages and an e-mail seeking comment.
BAT is working with about 33,000 retailers around the country to ensure they can return unsold packs to avoid penalties of up to A$1.1 million that will apply for each pack sold after Dec. 1, Vesna Ciric, a Sydney-based spokeswoman said by e-mail.
BAT spokesman Scott McIntyre said in an e-mailed statement today the High Court reasons show that the tobacco industry had to prove the government gained a benefit from plain packaging, which he said is a “peculiar requirement” of the Australian Constitution which many countries don’t have.
Difficult to Implement
“Plain packaging will be very difficult for many countries to implement due to this reason,” McIntyre said.
Imports of plain-packaged cigarettes from Imperial Tobacco’s overseas factories had already begun, Sonia Stewart, a Sydney-based spokeswoman, said by e-mail. Philip Morris didn’t respond to an e-mail and phone message seeking comment.
Government inspectors will be closely scrutinizing the packets over the next two months, on the lookout for even small deviations from the rules, Simon Crittle, a spokesman for Plibersek, said by phone from Canberra.
Packets of Imperial Tobacco’s Peter Stuyvesant brand carrying semi-plain packaging with the slogan “It’s what’s on the inside that counts” were a “sick joke,” Plibersek said Sept. 12, and other packaging being rolled out ahead of the ban may not be clear enough to meet the regulation.
“The images that had appeared on some of the packs -- graphic health warnings, photos of people with gangrene -- weren’t as sharp as they could have been,” Crittle said. “The reds weren’t as red as they should be.”
The plain packaging laws form part of a suite of measures, including a 25 percent tax increase and a cut to duty-free allowances, intended to reduce the prevalence of smoking from the current 15 percent of the population to 10 percent by 2018.
About 15,000 Australians die from tobacco-related diseases every year, with social and economic costs of about A$32 billion a year, according to the government.
Appeals against the Australian plain-packaging law have also been lodged at the World Trade Organization by tobacco and cigarette-producing countries Honduras, Ukraine and the Dominican Republic, claiming it violates trademark rights and restricts trade.
Cigarette companies are right to fear that new regulations will catch on in other countries, according to David Hammond, an expert in tobacco control at the University of Waterloo in Canada.
“Once tobacco control measures are established in one country they spread to other markets,” he said by e-mail. “I would be very surprised if other countries didn’t follow the international precedent that’s being set by Australia.”
Mandatory picture warnings, first introduced in Canada in 2001, have now been rolled out in more than 40 countries worldwide, including Brazil, Turkey, and Ukraine, according to the Southeast Asia Tobacco Control Alliance, an anti-smoking group. All three countries are among the world’s top 10 cigarette markets, according to data from Tobacco Merchants Association.
While similar picture warnings have been passed in the U.S. under a 2009 law, implementation has been blocked by a decision in August in the Court of Appeals, citing violations of First Amendment protections on free speech.
The government will probably appeal the case to the Supreme Court, lawyers at Washington, D.C.-based Hyman, Phelps, & McNamara said in an Aug. 28 blog post.
Other countries with less stringent tobacco regulation may move straight to restrictions along the lines being pursued in Australia, attorney-general Nicola Roxon said in an Aug. 31 interview. India, Russia, the U.K., South Africa, Thailand, New Zealand and smaller states in the Caribbean and Pacific islands all expressed interest in plain packaging at a September 2011 U.N. summit, she said.
“It will be a big step if the U.K. decides to do it or India decides to go down this path as well,” she said.
At Bogart’s House of Fine Cigars and Tobacco, a small store built into the basement of the columned building that was the Commonwealth Bank of Australia’s head office until 2010, a permitted 3 square meters of cigars are still on display alongside a signed letter from Bill Clinton and framed photographs of visits to the shop by actors Sylvester Stallone and Billy Connolly.
Those shelves must be closed off by next July as existing laws are tightened, and the store’s two suppliers will visit over the next two months to replace the ornate bands, tubes and boxes in which Bogart’s stock is currently displayed, said co-manager Pauline Stein. That’ll take much of the appeal and romance out of higher-end cigars, many of which are mainly bought as gifts, she said.
“Are you going to spend A$110 on that?” she said, showing off the pokerwork wooden box in which El Credito, the store’s costliest cigar, is still individually packaged. “I don’t think so.”
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