Argle Bargle

Dr Rosemary Hiscock, the study’s lead, said: “For many years, the tobacco industry had used packaging to signal the difference between premium and cheap cigarette brands, with smokers often willing to pay markedly more for premium brands.

“This allowed the tobacco industry to make enough profit on premium brands to subsidise its cheap brands, keeping them cheap enough for young people to afford to start smoking and to prevent price conscious smokers from being incentivised to quit.”

Eh?

40 thoughts on “Argle Bargle”

  1. The Meissen Bison

    Hiscock, eh? They get everywhere, don’t they?

    Here’s something else in the same article not to believe:

    But the decline in UK sales does not appear to have been offset by an increase in illicit tobacco, with HM Revenue & Customs reporting no increase over the period according to the TCRG [Tobacco Control Research Group] study, which was published on Monday in the British Medical Journal publication Tobacco Control.

    Why doesn’t the wretched journalist take the trouble of asking HMRC whether they can corroborate a claim that appears in a partisan report produced by one lot of extreme public health zealots and fascists and published by another lot?

  2. ‘ But the decline in UK sales does not appear to have been offset by an increase in illicit tobacco…’

    How could they know?

    Is there a reporting system for illicit activities? Do tobacco smugglers submit sales reports to HMRC? Do private individuals make declarations?

    Does it extend to illegal drugs too perhaps?

  3. @John B

    They’re actually included in GDP calculations these days, so officialdom certainly makes some attempts at estimating price and quantity.

  4. The Guardian and numbers. “..Monthly sales were almost 3.29bn individual cigarettes in May 2015, but fell to 3.16bn in April 2018.” That’s a reduction of 3.7m a month
    Headline says “Rate of decline equates to about 20m cigarettes a month since introduction of tougher policies”

  5. How in buggery can somebody so educated be so ignorant? The idea that tobacco companies are subsidising cheap brands from the expensive ones, while the chancellor pushes up prices via tobacco duty, is beyond imaginable ignorance. It can only be actively malicious.

    Well, she does have a livelihood to protect. You can’t work for the Tobacco Control Research Group if you don’t believe in Tobacco Control.

  6. Yeah, I do find the claim somewhat amusing. In the last dozen years I lived in the UK I went into a shop and bought a legitimate packet of cigarettes maybe once a month. Seeing the “fag-man” & stocking up was just part of everyday life. As it was for most of my mates. How much is a pack of fags in the UK, now? Twelve & half quid?!?! Why would anyone want to pay that when they’re less than a fiver here?

  7. Glad to hear that cunts like Hiscock are losing. If Johnson was worth shit a lot of cash could be saved on the wages/pensions of Marxist commissars like her.

  8. Is this not just market segmentation? Just like Tesco “subsiding” value beans through the sales of Finest(tm) beans?

  9. As a heavily-taxed smoker, I pay for this overpaid public-teat-sucking bint to berate me for subsidising her. She can fvck right off. Her group seems to have about 30-40 leeches in it.

  10. @BM

    Yes this was exactly my first thought. Classic market segmentation. Having said that I thought about it a bit longer and wondered if there might be something in it. I really don’t think Tesco treats value beans as “gateway” beans in the hopes of getting someone on the hook for a lifetime of finest beans later. That just wouldn’t make any sense at all. I also don’t think the main purpose of the cheap cigarettes is to produce a stream of addicts who will move on to the expensive stuff once they have the cash, imagine it’s more about reaching a different social segment… But bearing in mind they’re addictive, it isn’t so inherently crazy that I would rule it out.

    Someone I knew worked on a mobile telecoms project where the grand plan was to get people to start using phone data rather than just voice and texts. They even had free “starter” samples, cut-price low-volume packages they treated as “gateway” products, because they were pretty sure once people started using data services they would get addicted to it and plenty would work their way up the value chain. If the telecoms industry can think like this, I’m pretty sure the tobacco industry can.

  11. My local healthnazis banned tobacco sales at lockdown, a hundred days later they have yet to lift it; nevermind that it raises more in tax revenue than the govt spends on healthcare. A short drive through a poor area reveals scores of school deprived urchins selling cigarettes on behalf of prospering gangs. They’ve reimposed an alcohol sales ban including export sales of local wine, a sector which directly employs 300k people. I’m sure they sleep well in their taxpayer (and debt) funded beds, smug in their virtue.

  12. It would be interesting to see the margins on the 2 different types of cigarettes. I imagine that they might be fairly similar because to create and support a premium brand at a higher price must require some kind of marketing spend. The direct inputs must be almost identical – tobacco, paper, a bit of cork, an admixture of tar and other stuff. However, given the restrictions on tobacco marketing, it must be expensive and difficult to build a premium brand. Disclosure, I am not a smoker so have little or no knowledge of the subject-area. I am just putting this out there as a thought experiment

  13. I have often wondered how supermarket brands manage to undercut the regular brands by so much. It used to be that the supermarket brands were of inferior quality but that isn’t the case now. Is it the economy of scale or maybe the cost of advertising?

  14. after plain packaging rules and tougher taxes were introduced

    But the rest of the article is about packaging and branding. Right, that’s what did it.

    I notice they mention Australia as the first to enact plain packaging. True, but we’re now also at the point where my bargain basement legal cigarettes (supermarket home brand) are about $A200 for a carton of 4×40 packs. About $A1.25 per stick. If I wanted Benson & Hedges that would jump up to more like $A1.50 per smoke if not more. That’s the real reason the rate has gone down.

    On the prevalence of smuggled tobacco – most people at the pub I drink at have a tobacconist they go to that has a code word (plus you have to be introduced) to get packs of South East Asian sourced packs. This is obvious enough that the packs are even labelled “Golden Dawn” or the like. When they claim the illicit trade has not gone up, I seriously doubt it.

  15. Gamecock said:
    “Is Beefeater really better than Gordons?”

    Neither is very good unless it’s Gordons Export, which is all you need in a G&T. Most of the premium white spirits sector is pretentious marketing-driven wankery.

  16. @Stonyground

    It isn’t so much about “cost of advertising” as needing to maintain a higher brand equity. Yes you may need to spend loads on advertising to build that brand value as @diogenes says, but you don’t want to take that brand too downmarket with cut pricing or having a big sale, because that limits your ability to maintain high prices in future. The reason you spend big on the advertising is because you want to give the image of being a premium brand in order to justify your higher prices. You might even then use the same food factory to produce some almost exactly equivalent tins of “value” range produce to reach the lower income market segments. It’s basically a form of price discrimination.

    You might be interested in:

    https://www.econlib.org/library/Enc/BrandNames.html

    https://insight.kellogg.northwestern.edu/article/discriminating_prices_for_the_discriminating_consumer

    https://www.economicshelp.org/microessays/pd/price-discrimination/

  17. Stonyground

    I have often wondered how supermarket brands manage to undercut the regular brands by so much.

    Sometimes depends on the way the tax works. Australian cigarette taxation is per stick (gone up to 0.94c per smoke since March this year) but it’s constant no matter what brand, which is tending to swamp out the difference between brands. If the top end brand without tax was 50% more expensive, following tax it’s now more like 10-20%. So the gap is narrowing.

    I don’t know how it works in the UK, but I wouldn’t be surprised if there was a similar effect.

  18. The Meissen Bison

    Chris Snowdon unsurprisingly is quick to debunk the report and the grauniad article.

    MBE
    What your mobile telephone story illustrates is not really consonant with the language of addiction and gateways. Rather, this is a classic promotion strategy for boosting the customer base for a new product and makes particular sense where there are costly start-up (or in this case infrastructure) costs. The obverse is where a premium price is charged to early adopters (such as the folk who absolutely must have the latest iPhone as soon as it’s released) prior to price reductions which open a broader market.

  19. Regardless of marketing strategies, etc, remember that tobacco is an agricultural product. Cigarettes should cost no more than okra.

    The BIG villain is government. Most of the cost of cigarettes is taxes. Wiki reports 82.2% of the UK price is taxes.

  20. @TMB

    It’s actually the language/thought process they were using, interestingly – the mobile data infrastructure was long established but they noticed customers weren’t willing to pay for it, and their thesis was that customers would get hooked on it once they started using it. So they tried to find ways to get the customers to take their first puff, so to speak. I’m aware there are other paradigms you could use to describe the same strategy but it was striking they saw it in these terms!

  21. @ gamecock and RichardT
    Beefeater was *definitely* worse than Gordon’s the first time I tried it. But that was before Guinness took over Distillers and also before I adopted a policy of drinking wine or cider rather than spirits as far as possible, so I cannot comment on the current comparison.

  22. @MBE
    I was a very early adopter of mobile data. Back in the cost a-fortune-days. There wasn’t really any argument for having it unless you needed e-mail on the move. Couldn’t do VOIP for internationals, because if they detected the data packages Skype produced they’d chop you off. Browsing the net was all right if you had unlimited time to browse the net. With the data rates they were providing a made-for-cable webpage could take minutes, if it loaded at all. To grow mobile data you needed mobile applications would use the data.

  23. I could never tell the difference between ‘cooking’ brands and more upmarket brands in a G&T. However I quite like the pink gins that are around, probably because I have a sweet tooth. Some of the products of the current gin wankery in the UK are truly revolting. Also, perhaps it’s moving on: Mrs TG mentioned something she had seen that said (I’m paraphrasing) “Is Rum the new Gin?”, so we’re seeing weird & wonderful(!) rum concoctions appearing.

  24. @BIS

    Yes, makes sense, I wasn’t a very early user but approximately first quartile, and for me it was email and transport information on the go. The example I gave was for a national context where the infrastructure already existed, the apps existed, most people even owned smartphones, but compared to similar low-middle income countries, very few people were using mobile data. So they were pretty confident there was something to hook people on!

    And judging by the phone-zombies you see on public transport in England, it does seem to have an addictive quality, though I’m not sure what the particular “killer app” actually has been in that transition, or even if there ever was one, rather than a whole ecosystem of digital content and connectivity. I know several British mobile operators made a big play when 3G came for the “you can watch the football highlights clips as soon as the goals go in!” crowd, but I’ve only ever seen a handful of people actually do that… Whereas Netflix, iPlayer, Facebook, WhatsApp, Instagram, web browsing, shopping, various games all seem to get played with on a typical train carriage.

  25. Wasn’t the addiction moment for mobile data the time that the networks got fast enough so that you could take a snap on the beach and send it to mum, or a picture of your wonderful prawns, or you getting legless in Torremolinos, or getting off with a fit bird on Ibiza…Facebook, Instagram?

  26. Before those days, the real users of data were various seedy gay dating bulletin boards that didn’t require high speed networks. I know that because we wondered which sites were getting the most hits and took a peek…

  27. Dennis, Pointing Out The Obvious

    Dr. Hiscock has a Bachelors degree in Psychology, a Masters in Sociology and a PhD in “Health Inequalities”… whatever that is.

    So what we know about Dr. Hiscock from her vitae is that she isn’t an actual scientist.

  28. I pissed off a booster for WAP at our place by telling him ‘WAP is crap’, which it was as I, with only a cursory knowledge of the technology, could see. For some reason, if I get an update on my phone, it wants me to set up the network’s data URL again. That still starts with wap…

  29. @TG
    Strictly, it’s the network’s Access Point Name, or “APN”, not a URL.
    And because of the difficulty in changing the config in zillions of customers’ legacy phones, most mobile networks use aliases, so you can use the WAP.YODA(etc) or more modern simpler ones like INTERNET.
    Time was such clever APN usage bypassed nasty things like VoIP blockers….but that’s all long gone and justifiably so.
    Have a Google to see what alternatives exist for your provider.

  30. @Stonyground
    A few supermarket own brands are ‘as good as’ big Brands, most though are not. However, they are ‘good enough’ for some – that applies to value, standard and ‘best’

    Cost of ingredients used and quality control are a large part of higher prices be it crisps, chips or beans. Try a pack of Heck Sausages

    A lot too is down to personal taste

    imo:
    no own brands are as good as McVities, Mars, Cadbury, Nestle….

    Hovis have launched Cheese Muffins, bought a 90% off pack last week. Much better than own brand, but twice the price (£1 vs £0.50). For me own brand is good enough. Although if both were 90% off, I’d pay 10p for Hovis rather than 5p for own

    Anecdote: when I left home in 80s read a taste test in Sun Times. It said Safeway ‘weetabix’ and Gateway wholemeal bread were better than Weetabix and Hovis. Tried and true for me

  31. Bloke in North Dorset

    MBE,

    Pre 3G I spent a lot of time working alongside some very expensive management consultants who were desperately trying to figure out the “killer app” and, more importantly, how they were going to charge for data. This was mid ‘90s in South Korea where they were planning to build the world’s 1st 3G network for the a World Cup they were hosting, but it played out in a number of countries over the next couple of years. As you surmised the “killer app’ turned out to be the Internet but not one of them figured out it would be a flat charge.

    As to entry level packages, the marginal cost of 1 bit from a low data user on a 4G and 5G network is £0. The cost comes when they start streaming TV etc. On 3G networks it’s even a benefit if using data leads to a reduction in voice use, which was seen to happen.

    WAP was never designed for fast data usage and Cellnet’s “surf the web” adverts did the industry no favours.

  32. @ Pcar
    Heck Sausages are quite good but limiting the grain binder and herbs to be <3% between them means that they don't taste as good as the ones that my local butcher's mother-in-law makes for him. OK personal taste again! [I do have a slight problem with washing up the pan as they are much lower fat than the typical commercial sausage, so they can stick if I'm not watching all the time] If he went out of business the downgrade from his sausages to Hecks would be almost the least of my worries]

  33. Strange coincidence, I was just now relocating a bunch of ancient code and had to move around a WAP stack I got paid to write back then. WML, WBXML, WSP, WTP, WTLS, the whole steaming pile.

    Never actually used the service: didn’t see any point.

  34. Back in the very early noughties, I was doing some consultancy at Belgacom, who had just launched their WAP service. The problem was nobody was using it (WAP capable phones being relatively rare beasts). So they stealth-launched a daily Kama Sutra position – not very graphic, given the 7110’s 96×65 screen resolution – but which still drove traffic rather impressively.

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