A CUT-PRICE $13 packet of 25 cigarettes is being introduced in an act of defiance that has inflamed the health lobby and held the Federal Government’s tough anti-smoking stand in contempt.
Cigarette giant British American Tobacco Australia has begun distributing the Rothmans brand in what is being called a “cheap trick” to get youth and low-income earners smoking. The $13 is barely dearer than an average black-market smokes pack.
With rising prices seen as one of the major motivators for people to quit, health campaigners are further alarmed after the company flagged the possibility of dropping prices even further to cater for what it claims is a surge in demand for cheap cigarettes.
The move is the latest salvo in what the industry itself is describing as “a race to the bottom” as cigarette suppliers scramble to retain market share amid efforts by the Government to reduce smoking rates by rising taxes and plain packaging.
The trend has triggered calls from anti-smoking campaigners for the Federal government to crack down harder, with a minimum price for cigarettes and subsidised nicotine patches.
It comes as a South Australian Health and Medical Research Institute study has found SA smoking rate jumped from 16.7 per cent in 2012 to 19.4 per cent last year while fewer people said they were intending to quit smoking.
The study, published in April, found a 4 per cent rise in male smokers, a 5 per cent spike among 45 to 59 year olds and significant increases in the number of country residents and people with mentall illness taking up smoking.
More people were smoking cheaper roll-your-own cigarettes, the report found.
The State Government has announced it will ban all smoking in outdoor dining areas by 2016 in an attempt to reverse the smoking trend.
Under the Federal Government’s cigarette tax regime implemented in December last year, a 12.5 per cent tobacco excise will apply each year over four years, ending September 2016, raising more than $5 billion for the Government while lifting the price of an average packet of cigarettes to between $20 and $25.
The Government has argued the excise, together with plain packaging laws, are aimed at cutting smoking rates.
However, BATA claims it has had the opposite effect with rising prices driving demand for lower priced cigarettes.
BATA claims the cheap cigarette sector has grown by more than 66 per cent in the past five years as price sensitive smokers down trade to cheaper brands., with more than 42 per cent of the total legal cigarette market now priced under $15 per pack.
When combined with the illegal market, BATA claims more than 60 per cent of all cigarettes sold are priced between $8 and $15.
BATA spokesman Scott McIntyre said the figures showed the excise had failed to curb smoking, especially among 18 to 30 year olds., who were driving the cheap cigarette market.
The demand for cheap cigarettes had forced tobacco companies to price brands accordingly in order to compete for business, particularly among young adults who were driving the demand, he said.
The excise had also coincided with increasing demand for illegal cigarettes, with almost 14 per cent of tobacco sources from the black market — a trend that had forced the industry to go head to head with organised criminals, he said.
“Since the last 12.5 per cent excise increase on 1 December 2013, the low price segment has grown almost five per cent — that’s more smokers, smoking cheaper cigarettes in the last six months,” Mr McIntyre said.
“Although high excise rates have pushed the most expensive pack of 25 cigarettes to around $25, the cheapest legal pack is only $13. We have been forced by the government’s excise policy to price our brand accordingly.
“”We’d prefer not to sell cigarettes at $13 a pack but we are a legal business and we need to compete with other tobacco companies and their cheaper products.”Smokers are driving the market down by seeking cheaper brands and the industry has catered for them.”
He said prices could “potentially” drop further as the industry continued to battle for market share.
Cancer Council SA general manager for cancer control Dr Marion Eckert said cheap cigarettes were a concern becauseprice was a key factor behind smoking rates.
“We know price increases help drive down smoking rates, which in addition to saving lives will ease the burden on our health system,” she said.
“The volume of incoming calls to the Quitline also increases when previous price hikes have been implemented.”
“The financial burden of smoking has a particular impact in disadvantaged communities, where smoking prevalence is much higher than the general population.”
“Increases in the cost of smoking have proven effective in encouraging these groups – people with a mental illness, those on a low income and Aboriginal and Torres Strait Islander communities – to kick the habit.”