World’s big four firms take fight against unbranded packs to high court as Australia moves to toughen anti-smoking laws.
They have been responsible for some of the most famous advertising and marketing campaigns in history, but this week the world’s big four tobacco companies found themselves on the back foot. In a global test case, they went to Australia’s highest court to try to block plans for cigarettes to be sold in unbranded packets.
From December, all cigarettes in Australia will have to be sold in olive-green packs with stark health warnings, graphic photos and no brand logos. Only company names will be permitted in a small, standard font.
British American Tobacco, Philip Morris, Imperial Tobacco and Japan Tobacco International argue that moves to force them to use unbranded packaging are unconstitutional because they allow the government in effect to acquire their property – the trademarks and logos – without compensation.
Acting for Japan Tobacco International – the owner of Camel and Silk Cut – Gavan Griffith QC said in court that the new legislation would appropriate 100% of the back of each cigarette packet and 70% of the front. The company’s rights to its trademark, including the Camel image, would be reduced to a “bare husk”. “We say our trademarks are extinguished,” he said.
The government claimed unbranded packaging did not extinguish trademarks, but instead regulated their use. The solicitor general, Stephen Gageler SC, said legislation had been restricting the way tobacco companies operated since the 1970s.
Australia already had some of the toughest anti-smoking laws in the world, which have helped reduce the smoking rate to 16%. Advertising and sponsorship deals are banned, and it is illegal to smoke in public places including bars, restaurants and entertainment venues. In some areas councils have banned smoking in parks and outdoor areas.
In 2010 British American Tobacco reported an increase in profits of 5% to £4.3bn. Philip Morris International, maker of Marlboro, the world’s biggest brand, reported a 15% rise in profits last year to £8.4bn, largely due to growth in Asia. The company’s total shareholder return was a whopping 39.8%.
But how much would unbranded packaging damage their brands?
“Once you start to remove any equity element from a brand, it hurts, whether that’s a distinctive colour, shape, graphic or name,” said Peter McDonald, lecturer in branding at Sydney University.
While it makes it more difficult for people who buy the product to consider the brand in the same terms as before, McDonald says it will not be the end of the road for the cigarette industry.
“The tobacco industry will need to target customers in other ways. It may brand the inside of the box or change the shape or appearance of cigarettes to differentiate brands and entice customers,” he said.
“Another option may be to produce a branded pull-on case for their cigarette packet that would act a bit like an iPhone case and would be instantly recognisable.”
The high court has reserved its judgment but is expect to rule before the unbranded packaging legislation comes into force in December.