Tobacco Brands Need To ‘Reinvent Branding To Ensure Long Term Growth’

Source from:  Packaging News 03/07/2018

The power of branding is limited as more countries are expected to adopt plain packaging legislation.

The company’s report ‘The Impact of Plain Packaging on Tobacco Products’ reveals that plain packaging may have some utility in getting regular smokers to quit, but is more effective at discouraging occasional smokers.

Australia was the first country in the world to adopt plain packaging in 2012. The Republic of Ireland, the UK and France followed in 2016. Canada, South Africa, Germany, Japan and a host of other countries are most likely to move towards or consider similar legislation.

Will Grimwade, consumer markets analyst at GlobalData, said plain packaging is expected to have some unintended negative side effects such as the emergence of illegal tobacco trade. When Australia introduced plain packaging, their illegal tobacco market rose by 13% in the first year, costing the government A$1bn in lost tax.

Plain packaging is also likely to affect brand loyalty as the brands can no longer rely on the impact of attractive packaging and the benefits associated with branding in packaging.

This could have a shakeup in the market as it could create a more even platform for smaller brands taking away market share from established bigger brands.

Grimwade concludes: “As pack design and branding no longer serve as competitive differentiators, tobacco brands need to differentiate beyond packaging. Tobacco companies are expanding their portfolios beyond just traditional smoking products. They are even forced to embrace reduced risk tobacco products as a way to ensure a long term future for the sector. Price cuts are likely to be necessary for premium brands. This strategy may allow them to cannibalize sales from value ones, as knowledgeable consumers may see that the price differential between the brands they once saw as too expensive and their own value brand is diminished.”  Enditem