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Irish Marketing Journal, August 2003

Selling Tobacco

In an increasingly regulated market, everyone in business should be concerned about the way the government introduced the Public Health (Tobacco) Act 2002, says Phil Mason, MD of PJ Carroll & Co.

As a seller of cigarettes and pipe tobacco, Mason operates in the most regulated Irish market of all. His overall marketing budget was capped by legislation in the 1970s and since then is overall marketing spend has been decreased by five per cent each year. Since 1971, he has been banned from advertising on radio; banned from radio advertising in 1976; and banned from all billboards and virtually all print media (international and trade press are the exceptions) since June 2000. Mason can't use sponsorship either to build brand awareness, as that was also completely banned three years ago.

Before the print ban, the tobacco industry was one of the biggest print media spenders, and a question many hungry advertising and marketing consultants ask is: where did that spend go.

'The simple answer is that it has gone straight to our bottom line,' says Mason, the only Irish tobacco company executive to make himself available for interview with IMJ.

'The restrictions I face are probably the strictest in the world,' he says. 'They say what we can do: if it's not mentioned in the regulations, which were drawn up in the 1970s, then it is illegal. Because we didn't have the Internet or much direct marketing 30 years ago, they are automatically prohibited. Similarly, innovations like buzz marketing or product placement are not allowed, because they are not listed. Basically, we are restricted to advertising at the point of sale in shops and pubs and to the cigarette carton itself, which under legislation is classed as an advertisement."

In France where all cigarette advertising is similarly restricted to the vending point, its common to find cigarette branding plastered on the ceilings and floors of tabac outlets, but Mason says he is not inclined to go down that promotions route. "I like more classic marketing over-head panels and cash mats," he says. "I don't want people walking all over my brands."

Under the Public Health (Tobacco) Act 2002, all advertisements, including those at POS would have been outlawed. "The Act has an extraordinary requirement that tobacco products would have to be stored in closed boxes out of sight of the public and advertising would also be completely banned. These measures mean that it would not be possible for consumers to know which tobacco products are available for purchase. These restrictions would limit our ability to compete, acquire market share, or to introduce new products into the Irish market place

"Adults who choose to smoke and who are fully aware of the risks, should have the right to basic consumer information about the tobacco products available on the market. The Act is an unconstitutional inhibition of our right of freedom of expression and our right to communicate information to consumers. It also severely restricts the rights of people to receive such information."

Carrolls, together with Gallaher and John Player and Sons mounted a legal challenge to the act, but most of the contentious elements were withdrawn by the government because it had failed to notify its EU partners about the measures. However, a Department of Health and Children spokesman confirmed that all of the sections withdrawn will be re-enacted.

This includes the section which prohibiting the sale and supply of non-tobacco products that bear the name of a tobacco manufacturer or brand. The move has serious implications for the Dunhill range of luxury goods, the Marlboro Classics and Camel Active clothing ranges and brands like Davidoff aftershaves and perfumes. While cigarette companies still hold, or have sold, the licensing rights to these brand names, the companies producing the clothing, perfumes and luxury goods have 'no affiliation' with the tobacco industry, says Mason, who mused: "I wonder do the people at Carroll's Hams know that their brand was about to become illegal. The way the act was worded, they were in trouble. This is what you get when you don't talk to people.

"The major problem with the act was that there was no consultation that has to be of concern to anyone in business. If you don't discuss things with people, you have problems that is why we took our legal action and we will have to take legal action again if the new bill is similarly worded."

While official government policy may be that of moving towards 'a tobacco free society', Mason doesn't see PJ Carroll's or its new parent, British American Tobacco, going out of business any time soon.

He said: "Domestic consumption of tobacco remained pretty solid between the 1970s and the late-1990s. Carroll's No. 1 has 100 per cent brand recognition among smokers. I am sure there will continue to be a market for tobacco, but what size and shape it is remains to be seen. The biggest threat is pricing, we have the highest tax rate in the world after the UK and they already have a huge problem with tobacco smuggling. It's in nobody's interest to have a flourishing illegal trade here."