Mandatory plain packaging for tobacco products

Business /

An issue that has grabbed my attention on the news recently is the tobacco industry’s unrelenting struggle against the new mandatory plain packaging laws. Australia is the first nation to introduce these laws and the tobacco companies consider that allowing these laws to pass in Australia will encourage other nations to legislate similar laws. Considering that overt advertising is band in many countries packaging is one of the few factors that can be used to control the products (and brands) image. After all how will the consumer differentiate between the products when the all look the same?

What I find interesting from a strategic point of view is the tobacco industry as a whole is united against the increasing laws regulating the industry. Why? Well simply because it seems as if they haven’t taken a step backwards and looked at the changing external and industry environment since they were first established. A quick external analysis finds that since the hazards of smoking were discovered it has become a political issue with increasing regulation including taxes and bans on advertising. Economically smoking increases the cost of public health funding as smokers are vulnerable to a variety of health concerns; health insurance companies even charge a higher premium for smokers. Society has an increased awareness of the hazards of smoking and statistics show that there is a declining number of smokers. A brief industry analysis also finds that competition is dominated by five big players with a direct supply chain to retailers. While customers are declining there is still a relatively inelastic demand considering its addictive nature.

Now where does this all lead us? Superficially it looks like the tobacco industry is inevitably going to die. While tobacco companies change headquarters to avoid legal issues and start increasing their positions in developing countries they disregard the fact that the nature of the product puts an unnecessarily strain on society. It shows that the older the company the harder it is to change industry even if it could potentially cause the end of the company.