Australia tobacco sales edge up despite plain packaging

LONDON (REUTERS) - Deliveries of tobacco to retailers in Australia rose slightly last year for the first time in at least five years, even after the introduction of plain packaging aimed at deterring smokers, according to industry sales figures to be released on Monday.

Australia, which in December 2012 became the first country to ban branded cigarette packs, is being closely watched for signs of success as other nations including Ireland, New Zealand and the United Kingdom explore similar measures.

Britain last year appointed a respected paediatrician to examine whether plain packaging would reduce the health costs of smoking. The doctor's report is expected this week.

In 2013, the first full year of plain packaging, tobacco companies sold the equivalent of 21.074 billion cigarettes in Australia, according to industry data provided by Marlboro maker Philip Morris International.

That marks a 0.3 per cent increase from 2012, and reverses four straight years of declines.

The exact reason for the upturn was unclear. Some tobacco companies argue that higher shipments of loose tobacco and a decline in cigarettes suggest smokers may be trading down to cheaper products and can therefore afford to buy more of them.

"When you commoditise a product, people go after the price,"said Eoin Dardis, director of corporate affairs for Philip Morris in Britain.

"If people are buying cheaper stuff, maybe they're smoking more of it, I don't know ... It's definitely a point of interest and that's something that absolutely needs to be explored because that's the counter of what this policy was seeking to achieve."

Australia's law requires standardised packaging on all tobacco products, forcing companies to replace their logos and branding with graphic images of smoking-related diseases on a drab background.

The law is aimed at reducing the number of children who may be drawn to smoking by attractive, brightly coloured packs.

There has been evidence suggesting that the plain packaging is having some effect on smokers, including a study published in the British Medical Journal in July.

This study, commissioned by the Cancer Society of Victoria, found that among 500 Australian smokers, most believed their cigarettes were less satisfying and of lower quality than a year ago, with most also thinking more about quitting.

The industry figures showed that for the whole year, Australian sales of factory-made cigarettes declined just 0.1 per cent to 18.75 billion cigarettes. Loose tobacco volume rose 3.4 per cent to the equivalent of 2.32 billion cigarettes.

The figures represent the amount of tobacco shipped to retailers in Australia by companies including Philip Morris, British American Tobacco and Imperial Tobacco Group . They do not reflect retail sales to consumers or actual consumption.

Additionally, a study funded by Philip Morris on the possible impact of plain packaging on the prevalence of smoking in minors in Australia found no evidence for an effect. The study will be published this week in the Working Paper Series of the University of Zurich's Department of Economics.

Tobacco firms argue that plain packaging laws violate their trademark rights and may restrict free trade. Australia is facing challenges at the World Trade Organisation over complaints the laws create illegal obstacles to commerce.

They also say the standardised packaging has led to a jump in sales of illicit tobacco, partly since the packs are easier to counterfeit.

In the year to June 2013, accounting firm KPMG estimates that illicit tobacco, whether smuggled, counterfeit or illegal, jumped from 11.8 per cent of the Australian tobacco market to 13.3 per cent.

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