A big focus of John Oliver’s piece on the tobacco industry was how huge tobacco companies are fighting small nations trying to impose plain packaging laws for cigarettes.
Oliver’s piece specifically talked about Australia, which won its court case against Big Tobacco, Uruguay and Togo. Here’s another country in a similar battle — Ireland.
Ireland has been threatened with litigation by Japan Tobacco International for a law requiring plain packaging on tobacco products.
From this article:
James Reilly, (minister for children and youth affairs) who introduced the bill as health minister last July but has since become minister for children and youth affairs (although he still has command over passing the bill through parliament), added: “The Irish government will put the health of its citizens first. It won’t be intimidated by external forces.”
Good for Ireland for standing tall. Togo was forced to cave in light of a billion-dollar lawsuit. Uruguay is another tiny country that doesn’t have much resources to fight Big Tobacco.
Weirdly enough, JTI is threatening to file its lawsuit before the law is even passed. It’s still winding its way through the Ireland Parliament, but JTI wants to sue to have the bill stopped by the Court of Justice of the European Union until a case is heard from England regarding tobacco trademarking.
Similar pushes for plain packaging are a no-go in the U.S. due to conflicts with the First Amendment.
In John Oliver’s recent epic rant about the tobacco industry, he touched on this issue (more on that in a subsequent post).
Yes, the tobacco industry has taken some big hits in the past 30 years. A sharply declining smoking rate, from over 50 percent in the 1960s to approximately 18 percent today; the massive $280 billion Master Settlement Agreement in 1998; the Engle judgements out of Florida; and higher taxes in most states over the past 15 years.
However, from the Business Cheat Sheet story.
Then came the good news. According to a Credit Suisse research report released last week, tobacco is America’s most successful industry. The report states that the average returns from a company listed on the stock exchange was about 10% per year from the period between 1900 and 2010. Tobacco stocks, however, produced annualized returns of 14.6% during the same period. In terms of hard cash, this means that a single dollar invested in tobacco stocks was worth $6.3 million by 2010, while a dollar invested in a stock market index would only be worth $38,255.
However, as Business Cheat Sheet points out, the tobacco industry has simply rolled with the changes. There’s a reason the average cost of cigarettes has gone from $1.50 a pack in 1990 to $5.50 a pack in 2015. All those added costs — taxes and settlements — have simply been passed on to cigarette consumers.
According to this article, the $280 billion MSA and other litigation raised the cost of cigarettes by 10.9 cents a pack in the late 1990s. However, the price of cigarettes increased by an average of 14 cents a pack. The industry simply kept the change. When your customers are addicted to nicotine, there’s nowhere else to go.
Business Cheat Sheet also points out that the tobacco industry is an oligopoly — a large industry basically controlled by a very small number of companies. In the U.S., there’s really only four major tobacco companies — Philip Morris, RJ Reynolds, Lorillard and British-American Tobacco. And when the merger of RJ Reynolds and Lorillard is complete, that number will be down to three (BAT, which is big internationally, has a tiny share of the market in the U.S.). In fact, get this, there has not been a new major tobacco company formed in 56 years.
Worldwide, a mere five major companies — Philip Morris, BAT, Japan Tobacco International, Reemsta and Altadis — control 45 percent of the market. A huge percentage of the rest of the world market is in state-controlled in China.
To quote from the article:
As a result, competition within the industry is rare and the incentive to innovate on products and prices is low.
To add to that, cigarettes have an inelastic demand curve. This means that demand stays constant, even in times of recession. Thus, the tobacco industry manages to make profits because product margins improve, even if the overall product volume sold decreases.
The tobacco industry is booming in developing nations.
The third reason the industry continues to thrive — burgeoning markets in the Asia and Africa.
The smoking rate has not only declined dramatically in the U.S., but through most of the Western World. This was historically where the tobacco industry made the bulk of its revenues. But, as John Oliver pointed out last week, the developing world is completely different, where there is not as much education about the dangers of smoking and frankly for a lot of people, living conditions are so poor, there’s a level of apathy toward the dangers of smoking even when they are known. U.S. tobacco companies simply drool over these huge markets in Brazil, Africa, India, Indonesia the Philippines. (They’d be going after China, too, but China won’t allow it).
It can seem a daunting task fighting an industry that continues to thrive despite losing so many regulatory, legal and PR battles. Killing the industry won’t happen tomorrow and won’t happen next year or in the next decade. It’s definitely a process of chipping away at it.
Preview for “Run One Night” — being shown on television
This blew me away.
A new movie is coming out in March called “Run All Night.” It looks like yet another cookie-cutter Liam Neeson “I have a particular set of skills” hitman violent thriller (Seriously, are these the only movies Liam Neeson is going to make from now on?).
It’s rated R, has plenty of gunplay, I’m sure plenty of violence and bad language, so I really don’t care if there’s smoking in the movie. But, in the trailer for the movie, being shown regularly right now, it has Liam Neeson prominently featured with a cigarette in his mouth.
What the eff, Warner Brothers? Seriously? It seems like it could have been pretty easy to exclude the “hey, smoking makes you a tough guy bad ass” cigarette commercial from the preview showing repeatedly on regular television … when lots of kids will see how cool Liam Neeson looks with a gun and a cigarette.
I get that it’s an R-rated movie (gratuitous smoking is only supposed to be allowed in R-rated movies now), but regular television programming is not R-rated. When they took the smoking out of PG and PG-13 movies, they also need to make sure to take the smoking out of the previews being shown on TV.
I know it may seem petty to some people, but this really ticked me off. It was a long, bruising and at times exasperating battle to get smoking out of Hollywood movies marketed to kids, and apparently we’re still fighting this battle. You’re not going to show the F-bombs and blood splatters on television previews — cut out the cigarettes, too.
This is really brilliant. John Oliver on HBO dedicated an 18-minute segment to ripping into the tobacco companies for attacking small nations trying to implement anti-tobacco laws.
Oliver makes some good points, some I knew about, others I didn’t. We all know the tobacco industry is in full-fledged decline in the West because frankly people are tired of watching their loved ones die of COPD and lung cancer … and governments are tired of the billions of dollars of medical costs draining their economies. The smoking rate in the West is less than one-half of what it was 50 years ago.
Well, the tobacco industry has responded by aggressively marketing its products overseas, especially in Africa and Asia. These poorer nations as a rule don’t have strong regulations regarding tobacco and smoking rates are exceedingly high in some of these countries (According to Oliver, Indonesia’s smoking rate is 67 percent among men.).
Oliver’s takedown begins with Australia, which has been one of the most aggressive nations in the world in combating tobacco. Australia passed a law requiring plain packaging, which Philip Morris International, obviously a subsidiary of Philip Morris, took to court. The case went all the way to the Australian Supreme Court, which ruled in favour of the government.
PMI then filed a trademark lawsuit against Australia to the World Court, saying Australia’s refusal to allow tobacco branding violated a trade agreement with Hong Kong, where PMI is headquartered.
Oliver also brings up lawsuits filed by tobacco companies against tiny countries like Uruguay, Togo and the Solomon Islands for attempting to restrict tobacco branding.
Actual Last Week with John Oliver “Jeff the Diseased Lung” billboard in Uruguay,
Oliver’s show, Last Week with John Oliver, then came up with a brilliant idea. Create a tobacco brand for these poor countries trying to limit tobacco branding. And they came up with Jeff the Diseased Lung.
Last Week with John Oliver then took out billboard ads in Uruguay and sent t-shirts to Togo with the Jeff the Diseased Lung logo, telling the tobacco companies, ‘it’s all yours. The brand is there, you can use it, our lawyers won’t sue you.”
Very subversive and very funny. (Hopefully YouTube doesn’t take this down after a week.)
Here is a Website I stumbled upon that looks really interesting, called Tobacco Tactics. I hope the people behind it keep it active. I’ll definitely be checking it out over the next few days. The group also has a Facebook page with links to other anti-tobacco resources. It’s based out of the UK (seems to be part of the University of Bath), so it has a bit of an emphasis on the UK and expends a lot of energy on the battle over plain packaging of cigarette packs (that’s strictly a non-U.S. issue, plain packaging was thrown out in the U.S. over First Amendment issues).
This site focuses on the tobacco industry’s deceptive marketing tactics and misinformation campaign. Man, they have some really extensive stuff in there about astroturfing and Internet trolls. I’ve always wondered if “Confederate1978” (the most active pro-smoking troll I’ve ever seen) was some kind of paid tobacco operative (probably not, but you never know.).
As an aside, on virtually every e-cigarette article I find online that has comments, there always seem to be people wildly endorsing e-cigarettes and how they are harmless and how they helped them quit smoking. I have seriously wondered at times if these posters are genuine or if some of them are literally employees of e-cigarette companies.
Anyway, this site is an awesome source of information on the industry’s incredibly sordid history of lies, cover-ups and dishonest tactics that go on to this day. It will take me forever to plow through all this. There’s a chapter on “pro-smoking blogs” that I think I could add some names to!
Magazines are split on taking tobacco advertising; quite a few refuse while others continue to take it. Very few newspapers will take tobacco advertising (believe it or not, while tobacco advertising is banned on television, there is no law against ads in newspapers; newspapers just don’t take national tobacco ads.).
The Campaign for Tobacco-Free Kids specifically targeted SI because it’s a magazine read by a lot of kids and teens. SI’s latest Swimsuit Issue contained two cigarette ads, three smokeless tobacco ads and two ads for e-cigarettes. (I can attest to the e-cig ads because it my head exploded when I saw a Blu e-cig advertisement in SI featuring its brand on a woman’s bikini bottom.)
According to Tobacco-Free Kids, SI has more than 1.6 million teen readers.
From the group’s website:
As young readers browse through the magazine, they’ll get messages that cigarettes are fun, chewing tobacco makes you a real man and e-cigarettes are the cool new thing. Most of all, these ads mask the reality of deadly and addictive tobacco products by associating them with sex, glamour and sports, as the tobacco companies have long done.
Unfortunately, Sports Illustrated gives tobacco companies access to its youth readers on a weekly basis.
The magazine’s Sportsman of the Year issue in December was another major offender, with five tobacco ads (two for smokeless tobacco, two for e-cigarettes and one for Newport cigarettes). Featuring World Series pitching hero Madison Bumgarner on the cover, it provided tobacco companies another opportunity to link smokeless tobacco with baseball.
Tobacco-Free Kids also points out the irony of featuring smokeless tobacco ads in the Madison Bumgarner edition as in the past year, one baseball legend, Tony Gwynn, died of salivary gland cancer after a lifetime of chewing and another famous ballplayer, Curt Schilling, battled oral cancer after a lifetime of chewing.
I hope SI dumps the tobacco (and e-cig) ads eventually, but I won’t hold my breath .. and here’s why. SI just got read of its entire photography department and will only use freelancers from now on in order to cut costs. The publishing industry as a whole is hurting, partly because of the cost of paper, partly because it’s never recovered from the recession of 2008, but mostly because more and more people are going to the Internet to get their news.
As an aside, one of my biggest triumphs in my personal anti-tobacco campaign was I helped get tobacco advertising removed from Discover magazine. Years ago, I used to subscribe to it, and I was fairly pissed off when i saw a full-page ad in Discover for American Spirit cigarettes. While SI is read by a lot of teens, Discover is a magazine popular with both teens and preteens. I pointed this out to Discover. I got a free subscription out of it and an apology and a promise that they were pulling all the tobacco ads from now on (I’m sure many more people than me complained about the cigarette ad in the magazine.).
When CVS Pharmacies cut out tobacco sales, everyone fully expected the company’s revenues to drop, including CVS. Instead, the opposite has happened.
In the fourth quarter of 2014, the first full financial quarter after CVS banned tobacco sales, the company’s revenues didn’t go down, they went up 12.9 percent to a record $37.1 billion.
Apparently, one of the reasons for the increase in revenues was the Affordable Care Act.
From this Forbes article:
CVS, which stopped selling cigarettes and related products in September, previously generated an estimated $2 billion in annual tobacco sales. But sales in the pharmacy segment alone in the fourth quarter jumped 21.7 percent to $24 billion buoyed by an early flu season with an ineffective vaccine that caused flu victims to search CVS for other treatment options. CVS also saw increased paying customers under the Affordable Care Act.
The newly insured Obamacare customers and increased drug sales helped overcome a dip in revenue from the front-end of the store where customers used to buy cigarettes and other tobacco products.
Also from the Forbes article:
The end of tobacco sales has improved the company’s image and helps in discussions attracting employers to its pharmacy networks and its prescription management business. In the fourth quarter, pharmacy benefit management sales were up 21.7 percent to nearly $24 billion.
The CVS decision has also put pressure on other retailers like Walgreens Boots Alliance (WBA) and Wal-Mart (WMT). “It’s opening up some doors to some unique opportunities,” CVS CWO Larry Merlo told analysts.
I had many an argument back in the day with Smoker’s Club weasels: that the death toll from smoking (440,000 a year in the U.S.) has been exaggerated by anti-smoking fanatics and the government. Well, according to a new study released this week in the New England Journal of Medicine, that death toll figure is actually too low.
This new report includes an estimated another 50,000 to 60,000 deaths a year caused by smoking (over half a million a year when you add it to the existing numbers). Over the past 20 years, research has shown that smoking is a huge risk factor for a variety of diseases beyond lung cancer and COPD — this research in particular points to diabetes and especially arthritis as diseases that appear to have ties to cigarette smoking.
One of the reasons cigarette smoking seems to cause so many diseases is that it restricts blood flow to various organs in the body. According to this report, diseases now linked to smoking include kidney disease and intestinal diseases, and heart and lung diseases not previously associated with smoking — again, due to the lack of blood flow caused by smoking.
The diseases that had previously been established by the surgeon general as caused by smoking were cancers of the esophagus, stomach, colon, liver, pancreas, larynx, lung, bladder, kidney, cervix, lip and oral cavity; acute myeloid leukemia; diabetes; heart disease; stroke; atherosclerosis; aorticaneurysm; other artery diseases; chronic lung disease; pneumonia;influenza; and tuberculosis.
(This list forgot to mention arthritis, which is a sore spot for me watching what my Mom is going through.)
Raley’s, a fairly major supermarket chain in California, announced this week that it will no longer sell any tobacco products in its stores.
Raley’s is the second large store chain to refuse to sell tobacco products. The first was CVS Pharmacies, which made its decision last year.
A press release from the company states:
“This is not a decision that we’ve taken lightly. There is a very strong correlation between tobacco use and many serious health issues … At this time, the evidence against tobacco usage is simply too strong to ignore.”
Hopefully, more chains will join in. It seems to be a trend. Raley’s owns 128 supermarkets in Northern California and Nevada.
In Obama’s proposed 2016 budget, one thing quietly included is a raise in the federal cigarette tax.
In 2009, the feds raised the cigarette tax from $0.39 a pack to $1.01 a pack. Obama is proposing in his 2016 budget raising that tax again to $1.95 a pack. The money would go toward CHIP and preschool programs and would raise $95 billion a year annually.
(For someone that smokes a pack a day, this would raise the cost of their habit by $343 a year or $28.60 a month.)
It’s actually kind of difficult to find news about this, one of the places I found it was on a website for convenience store owners, who are understandably interested in the proposal.
I’m all for it. I think you can overtax cigarettes to the point at which you’re encouraging smokers to drive out to the nearest Indian Reservation or buy bootleg cigarettes, but 94 cents a pack, seven years after the last raise (from a ridiculously low 39 cents a pack), does not strike me as being onerous.
Of course, there’s no telling if this proposal is dead-on-arrival with a Republican Congress. Republicans not only tend to be anti-tax, they tend to be recipients of a lot of Big Tobacco campaign dollars.
