Tobacco Research

The latest updates from the University of Bath's Tobacco Control Research Group

Tagged: marketing strategies

Supporting snus as a harm reduction tool: the need for caution

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📥  Harm reduction, Industry tactics, Public policy

There has been a long, polarising debate among public health experts in Europe about the potential benefits of tobacco harm reduction, and whether the wider availability of smokeless tobacco (particularly snus, a Swedish smokeless tobacco) and e-cigarette will lead to population level benefits or harms.  While no public health professionals would dispute that, for an individual smoker, a complete and permanent switch from cigarettes to snus or e-cigarettes will lead to health benefits, some have concerns that the wider availability of snus and e-cigarettes be detrimental to public health. Harm could occur if, for example, their use encouraged continued smoking rather than cessation, or snus and e-cigarette use acted as a gateway to smoking. While there is little evidence of the latter in Europe, some are specifically concerned that transnational tobacco companies (TTCs) (which make the vast majority of their current profits from cigarettes) will promote snus or e-cigarette use in a way that sustains and promotes, rather than reduces, smoking. Findings of our study, published today in PLOS Medicine and freely available here show that these concerns are not unfounded.

What we did

Our research centred on TTCs’ smokeless tobacco interest and investment in Europe, with a focus on British American Tobacco, and to a lesser degree Philip Morris. We qualitatively analysed a combination of historic internal tobacco industry documents dating from 1971 to 2009, available through the Legacy Tobacco Documents Library (http://legacy.library.ucsf.edu/), and more contemporary materials including tobacco company investor presentations dating from 2008 to 2012.

What we found

TTCs started investing in the snus from 2002, leaving an insignificant number of snus manufacturers fully independent of cigarettes interests. However BAT has been scoping other SLT opportunities as early as the 1970s, driven by the threat of increased regulation (e.g. smoke-free policies) and growing health concerns about smoking, both likely to result in less cigarette sales.  BAT considered SLT an opportunity to create a new form of tobacco use among a) smokers who were considering quitting, b) a new generation of ‘better educated’ consumers no longer interested  in taking up smoking,  and c) smokers in smokefree places. Young people were a key target.

When TTCs actually entered the Scandinavian snus market in 2002 (the only snus market in Europe), three issues converged: cigarette volumes started declining in Western Europe, discussions started at EU level about smokefree legislation, and crucially, unlike the 1970s, the public health community showed significant support for tobacco harm reduction. 

Despite these investments, we found little evidence in TTC’s corporate reporting that snus is or was a core part of their business strategy and recent snus test markets have failed. Since 2009, the focus of TTC’s investment in less harmful products has shifted to pure nicotine, and moved to e-cigarettes in 2012.

Why does it matter?

Although it is still early days to understand the TTCs motives behind their move away from tobacco into nicotine, a recent BAT investor presentation suggested that non-smokers rather than smokers could be the target of BAT’s reduced harm products. Our research on TTCs’ interest in SLT, shows that TTCs’ rhetoric about snus and harm reduction is inconsistent with historical and recent TTC documents and action, both of which suggest that TTCs may have little intention of promoting SLT use in a way envisioned by public health, as this would eat into their existing cigarette profits. TTCs’ snus investments have been defensive instead, turning snus from a threat (a product that may have competed with cigarettes) into a major opportunity (one that enables the TTCs to claim a joint agenda with public health and to rehabilitate their image via claims of wishing to reduce harm). By investing in snus, and perhaps more recently nicotine, cigarette companies are slowly eliminating competition between cigarettes and snus, thus helping maintain the current market balance in favour of highly profitable cigarettes while ensuring TTCs' long-term future should cigarette sales decline further and profit margins be eroded.

Importantly, what are the policy implications?

Currently snus sales are prohibited in all EU countries (except in Sweden) under legislation that regulates all tobacco products in Europe (Tobacco Products Directive 2001/37/EC). As the current legislation was adopted in 2001, the European Commission had proposed a revised text, which the European Parliament will vote on next month.  The proposal maintains the sales ban on snus. Similarly, our study suggest that legalising snus sales in Europe may have considerably less benefit than envisaged and could have a number of harmful consequences.

Perhaps more concerning are the recent TTC investments in pure nicotine. Should such investments continue, competition between cigarettes and clean nicotine products will be reduced, and with it the potential for harm reduction to benefit public health.  Also, it may enable TTCs to present themselves as purveyors of nicotine rather than tobacco products, and use this to undermine Article 5.3 of the Framework Convention on Tobacco Control which aims to protect public health policy from commercial and other vested interests of the tobacco industry.

For more detail, check out our paper Transnational tobacco company interests in smokeless tobacco in Europe: analysis of internal industry documents and contemporary industry materials

 

How does the tobacco industry still thrive?

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📥  Industry tactics

In order to plan effective tobacco control policies we must first understand how the tobacco industry thrives and this blog illustrates just how this can be done.

Using freely available material, we explored how the global tobacco market has changed in the past 20 years, how transnational tobacco companies (TTCs) are responding and what the implications are for global tobacco control.

The information was obtained from:

  • investor relations’ materials
  • press coverage
  • company annual reports
  • financial analyst and market research reports
  • TTCs private documents made public as a result of US litigation in the late 1990s.

What did we find?

  • Despite declining sales in developed markets, industry profits continue to rise with the value of global cigarette sales rising by 84 per cent in the past decade.
  •  TTCs use two methods of growth:
  1.  A new market approach whereby TTCs enter new markets, and market heavily, selling large volumes cigarettes very cheaply to push up consumption with little concern about profit
  2. A value-maximising approach typical of more established markets where marketing is used to encourage consumers to pay a premium for their cigarettes thereby allowing TTCs to increase their profit margins on each pack of cigarettes sold and to compensate for declining sales via increased profitability per pack.
  •  Given the existing marketing restrictions in place in many markets, product and packaging innovation which is still largely unrestricted, is now key to the industry’s value-maximising approach. This involves products such as superslim cigarettes marketed towards women and capsule filters which allow the smoker to change their smoking experience with ‘bursts’ of menthol or other flavours. Packaging innovations involving limited edition packs, new opening mechanisms (glide packs) and structural design variations (such as rounded edge packs) are also used. In 2010 British American Tobacco claimed that over 10% of sales came from product innovation.
  • Increased profits from the value-maximising approach help subsidise the TTCs entry into new (often low-income) markets to increase volumes.
  • In addition to increasing industry profits, innovations may convey a misleading message of reduced risk to consumers. This is of particular concern because young people are the most likely to be attracted by innovative products.
  • Due to gradually increasing global regulation and the fact that, following the industry’s already successful global expansion, opportunities for volume growth in new markets are now limited, the future of TTCs is now largely dependent on pushing up value rather than volume. Product and pack innovation will therefore, until regulated, continue to play a large role.
  • Despite the industry’s emphasis being on premium brand sales, at the other end of the market, low price segments are also important. These appear to play a key role in preventing price sensitive smokers from quitting. This also provides a route into smoking given the price sensitivity of children.

What could be done?

  • In emerging markets, the prevention of marketing and implementation of appropriate tobacco excise policies to prevent the sale of cheap cigarettes would decrease the marketing power of the industry and thereby the number of people who take up the habit.
  • Prohibiting the introduction of new tobacco products or brand variants would close the industry’s main marketing tactic in countries where tobacco advertising is otherwise restricted.
  • A price cap for industry profits whereby profits beyond a certain value are deferred to the government.
  • Large intermittent tax increases which make it difficult for TTCs to put up prices on premium brands behind predictable tax increases.
  • Getting corporate social responsibility recognised as a political activity rather than an altruistic practice.
  • Getting the public health community to engage with retailers in the same way at the tobacco industry does so that they are more informed of both sides of the argument.

 

In summary, much can be gleaned about the activity of large company’s by analysing their internal documents and investor documents. This information can be used to understand how an industry operates in order to inform the most effective public health policies. Most of these materials are available for any industry and a similar examination can help people better understand other public health policy areas such as alcohol or food policy.

 

References

This research was published in the anniversary edition of Tobacco Control in early 2012 .

Gilmore, A. B. (2012) Understanding the vector in order to plan effective tobacco control policies: An analysis of contemporary tobacco industry materials. Tobacco Control, 21, 119-126.

http://bmj-tobacco.highwire.org/content/21/2/119.full.pdf+html