Plain packaging led to price hike for branded tobacco

Small retailers sold fully-branded tobacco for higher prices while they were being phased out for standardised packaging, a study has found.

Research from the University of Stirling revealed that small retailers charged more than the recommended retail price (RRP) for fully-branded products as they became rarer – contrary to advice from the tobacco industry.

Experts say that the trend is yet another indicator of the persuasive nature of fully-branded tobacco packaging. They also believe that retailers may have used the product changes as an opportunity to increase profit from tobacco sales.

Dr Nathan Critchlow, of the Institute of Social Marketing (ISM) at Stirling, led the work, funded by the Cancer Policy Research Centre at Cancer Research UK and published in the journal Tobacco Control.

“The introduction of standardised packaging, fully implemented in May 2017, removed fully-branded packaging, prohibited price marking, restricted what brand names could be used, and increased the minimum pack size,” Dr Critchlow explained.

“Tobacco companies emphasised to retailers that they should sell at RRP or less as these changes were introduced to keep customers loyal. Our study explored whether retailers followed this advice.

“We found that, contrary to the advice, small retailers sold leading tobacco products higher than the RRPs. In particular, they increased prices above RRP for fully-branded packs as they were phased out – even those which had the prices marked on the packaging.”

He added: “Once the legislation became mandatory, small retailers continued to sell leading tobacco products above RRP. It is possible that they used product changes introduced under the policy, such as larger minimum pack size and removal of price marking, to opportunistically increase the profit from tobacco sales.”

Dr Nathan Critchlow led the research.

Dr Critchlow and the team monitored price data for 20 leading tobacco products – 15 factory-made cigarettes and five rolling tobacco products – and when they came in standardised packaging, sold by 500 small retailers in Scotland, England and Wales

The data was monitored for 18 months – from May 2016 to October 2017 – covering the period in which standardised packaging was introduced and fully-branded products phased out.

The average difference between RRP and sales price increased from 0.36 percent above RRP in May 2016, when only fully-branded packs were sold, to 1.37 percent in October 2017, when standardised packs were mandatory.

The study concludes: “Despite tobacco companies emphasising the importance of RRP, small retailers implemented small increases above RRP as standardised packaging was introduced. Consequently, any intended price changes by tobacco companies in response to the legislation (i.e. to increase affordability or brand positioning) may be confounded by retailer behaviour, and such deviation may increase consumer price sensitivity.”

Dr Critchlow was supported in the work by Martine Stead, Dr Crawford Moodie, Kathryn Angus, Douglas Eadie and Anne-Marie MacKintosh, all from the ISM and the Faculty of Health Sciences and Sport.