CALGARY – Jeff Rogut, CEO of the Australasian Association of Convenience Stores (AACS), has advice for Canada regarding plain packaging of cigarette products: Learn from the previous Australian government’s mistake and support small businesses.
For nearly four years, tobacco products in Australia have been sold in plain packaging. “It comes as no surprise to retailers that the impacts of the policy over this time are vastly different to the legislation’s initial intentions,” Rogut opines in the Calgary Sun. “It’s a preposterous position we find ourselves in, in Australia, and one other countries should avoid at all costs.”
The regulatory environment for tobacco in Australia makes it impossible to accurately judge the impact of plain packaging solely on its merits, Rogut writes, noting that the exorbitant excise tax rate has made the country one of the world’s most lucrative markets for illegal tobacco.
“The explosive growth of the illicit market coincides directly with the introduction of plain packaging. However, no one could have foreseen just how serious the issue would become, and how much criminals would profit. Nor did the government—presumably—have any notion just how much it would lose in revenue,” he writes.
Rogut cites the latest KPMG Illicit Tobacco in Australia Report, which shows the share of illicit tobacco has now grown to approximately 14% of the total tobacco market in Australia, costing an estimated $1.49 billion in unpaid excise.
“This is up from 11.5% of the total tobacco market in 2012. One in seven cigarettes are now sold illegally. The KPMG report found that more branded illegal cigarette packs are being smuggled into Australia than ever before. Contraband cigarettes are now the largest component of the black market and contraband cigarette consumption—imported to Australia without excise paid—is growing,” he wrote.
Crime in convenience stores are also up, Rogut notes, saying that the amount of robberies that have occurred in convenience stores in Australia targeting tobacco products has spiked as plain packaging and price increases have taken effect.
“The uncomfortable truth is, since the introduction of plain packaging, the amount of tobacco sold in Australia has remained stable, though the landscape for responsible retailers has changed dramatically,” says Rogut, noting that tobacco continues to play a key role in driving c-store industry performance. “Despite slowing growth—as the illicit market grows and the incidence of smoking naturally declines—tobacco still accounts for approximately 37% of a typical Australian convenience store’s sales.”
Meanwhile, champions of plain packaging have since gone silent in claiming the policy has had any positive impacts on health, suggests Rogut. “From the government’s perspective, it’s much simpler: Tobacco regulation is about filling the budget black hole; health isn’t even a consideration any longer.”
“As the only country to directly experience plain packaging—knowing what it means for small businesses—it is unsettling to witness other countries including Canada debate its merits. Those in the retail sector were always best positioned to understand the implications of plain packaging. Legislation introduced with no evidential basis, driven by emotion for the purposes of politics, always has consequences,” Rogut said.