THR Blog   /   April 20, 2015

Up in Smoke—Plain Packaging and Brand Identity

Leann Davis Alspaugh

( Vintage Camel cigarettes ad featuring prominent athletes such as Mickey Mantle.)

As plain packaging regulations for cigarettes ramp up in the European Union, opinions on the effectiveness of this strategy remain mixed, even contradictory. Plain packaging refers to the stark warning labels and gruesome photography that have become part of public health campaigns against smoking in Europe and Australia. Using black-and-white graphics designed for maximum readability, the warnings are simple and direct: “Smoking kills” or “Smoking causes blindness.” If you won’t help yourself, then they ask you to consider the well-being of others: “Smoking seriously harms you and others around you” or “Protect children: Don’t make them breathe your smoke.” Generic packaging requirements go even further: Packs of cigarettes must have no logos or identifiable branding devices and must use color photographs of diseased body parts or vulnerable children.

But plain packaging is not an unqualified success. In Australia, where these laws were first introduced, one report last summer noted that there had been a rise in tobacco sales, in spite of the regulations and a concomitant rise in tobacco taxes. The increase in sales volume—more people returning more often to buy the cheapest cigarettes—has also, according the report, led to an increase in smoking rates rather than the uniform decline predicted by plain-packaging advocates.

Around the same time, Financial Times reported that Australia has had a significant decrease in smoking rates since plain-packaging regulations were put into place in 2012. According to the 2013 National Drugs Strategy Household Survey quoted at ft.com, people are starting smoking later and overall consumption has gone down. The reporting of the effect of plain-packaging laws clearly depends to some extent on whether one is an anti-tobacco campaigner or a pro-tobacco spokesperson.

Statistics aside, plain-packaging laws have had notable unintended economic consequences. Typically, anti-tobacco regulation includes an increase in taxes and prices. When faced with rising prices, consumers seek out the cheapest cigarettes. As noted above, the proliferation of cheaper cigarettes has led to more people smoking more cigarettes. At the same time, because tobacco manufacturers are unable to enhance their brands through marketing or new package design, they may save money by investing less in advertising or upgrading factory equipment.

In addition, tobacco companies may further benefit by being able to lock in market share, since they are unable to take advantage of differentiating their brands through advertising. Further, as price-per-pack rises, profit margins increase because total tax as a percentage of price falls. The freeing up of cash goes toward shareholder dividends, where, in the past, it might have been plowed back into product development. Counterfeiting and black market smuggling have also picked up, putting cigarettes—usually without warning labels—into the hands of smokers all over the world who are willing to break the law for cheaper, tax-free smokes.

But there’s more to plain packaging than mere economics. Back in the bad old days, advertising linked smoking to lifestyles and aspirations. Tobacco companies groomed brands to cultivate the mystique of the smoker as liberated woman, urban hipster, rugged cowboy, or the cosmopolitan athlete (as in the Camel ad above). Consumers became conditioned to recognize their preferred brand among others on the store shelf by its skillful packaging design, a complex interplay of color, shapes, and typefaces.

Then came the 1964 US Surgeon General’s report on the public health hazards of smoking. One year later, Congress introduced the Federal Cigarette Labeling and Advertising Act of 1965 and the Public Health Cigarette Smoking Act of 1969. This legislation banned all smoking advertising in print and broadcast media and introduced the cigarette pack warning label. By the 1990s, New Zealand, Australia, and Canada led the way in adopting plain packaging with the European Union and the United Kingdom following over the next decade. Plain packaging seems poised to invade the Asian tobacco market in the near future.

For now, American tobacco sellers have been able to sidestep plain packaging. In 2011, Reynolds American and Lorillard won a suit against the FDA, arguing that labels requiring graphic images of cancerous lungs would have violated these companies' free speech rights. These same tobacco giants are back in the news, challenging the FDA over its requirement that the agency be notified whenever a manufacturer wants to modify product labels. The companies contend that having to submit even minor color changes to the FDA's notice-and-comment rulemaking process impedes and restricts commerce and free speech. Unlike their European counterparts, American tobacco companies can still prevail on matters of brand identity as long as they do so under the First Amendment protections.

Back across the Atlantic, one UK tobacco executive also invoked rights, saying "We have a fundamental right to differentiate our brands from those of the competitors.” The rights referred to in this case are upheld by law, specifically the World Trade Organization's Article 20 of the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) which states, “The use of a trademark in the course of trade shall not be unjustifiably encumbered by special requirements, such as use with another trademark, use in a special form or use in a manner detrimental to its capability to distinguish the goods or services of one undertaking from those of other undertakings.” By this standard, plain packaging encumbers trade by imposing restrictions that change not the product itself but how the product is perceived in the consumer's mind. Plain packaging tears down the intangibles of brand identify, that is, the decades of impressions that brand has accumulated.

Brand differentiation is a vital part of every business that sells consumer goods. Being neither durable goods nor endlessly renewable, cigarettes must be positioned by marketers to be distinctive in other, more transient, ways, namely in the marketplace of consumer perceptions or aspirations. These properties can only be endowed by branding.

One EU economist noted that intellectual property protections have been set aside in the past in cases of national security or public morals, but that plain packaging opens up the possibility of new interpretations and an expansion of government jurisdiction. “This is going to set a precedent,” said Fredrik Erixon, director of the European Centre for International Political Economy. “What we’re talking about here is the extent to which a government actually can deny a company the right to communicate its own trademark, to distinguish its own goods from other goods.”

The property of a product to be distinguished by consumers—its capacity for brand recognition—is something that companies zealously cultivate and protect. Branding works through its own idiom: colors, shapes, typefaces, slogans, all of which work together to create a statement about the product and its capacity to speak to and for the consumer. Of course, we should probably not allow this discussion to take a Mandevillean turn, extolling the private vice of smoking in the service of the public benefits of well-crafted, free expression. Still, the rise of plain packaging laws probes that tender spot between public health and private action—and where the government fits in.