As the tobacco trade faces up to yet another battle, this time it’s different, says JTI boss Martin Southgate
As the Department of Health’s consultation on plain tobacco packaging came to a close this week, Japan Tobacco International UK MD Martin Southgate was not pulling any punches.
“Plain packaging is commercial vandalism,” he argues. “We have a right to develop and market products. The proposals unjustifiably strip a legitimate industry of its ability to compete for market share amongst adults who choose to smoke brands that are manufactured and distributed in a highly regulated environment.”
The problem for Southgate, and the trade as a whole, is that based on previous experience, the government has rarely heeded the arguments put forward. For years successive administrations have brought in legislation aimed at tackling smoking in the UK. First advertising was ruled out. Then came the ban on smoking in public places. Pictorial health warnings were slapped on packs. And, this April, the phased introduction of a display ban began in larger stores (with small stores to follow suit in 2015).
Against all these proposals, the tobacco industry has put forward arguments of varying intensity and credibility. And every time, it has lost. Yet frustratingly, for the government, the industry’s arguments have turned out to be right: the number of adult smokers has remained largely unchanged for the last decade. Figures from anti-smoking group ASH show that the number of adult smokers has fallen by just 0.4% per annum since 2000. No wonder it keeps plugging away with ever more radical solutions.
Southgate is every bit as frustrated. With the price of tobacco rising well above inflation - yet another government measure to eradicate smoking - smokers are either migrating to cheaper brands (sales of JTI’s value cigarette brand Sterling are flying for example as smokers downtrade from premium brands such as its Benson & Hedges brand), or being driven into the hands of the illicit trade to buy cigarettes that will, at best, deny the Exchequer and the trade vital revenue and, at worst, represents a significant (albeit additional) danger to health.
Martin Southage snapshot
Status: Married to Cheryl, with one son and one grandson.
Career: Joined Rothmans in 1975, and stayed until its acquisition by British American Tobacco in 1999.
After a two-year spell at an internet startup, he returned to run JTI’s Switzerland business in 2001, before moving to Romania and the Republic of Ireland. He took over the UK business at the end of 2010.
Hobbies: Golf, keeping fit at his home gym.
The proposed introduction of ‘standardised packaging’ would provide increased opportunities “to dupe smokers into buying unregulated fakes,” he argues. “It doesn’t take a rocket scientist to copy a plain pack. Combined with the display ban, plain packaging would drive the supply of tobacco further underground.”
Southgate has evidence to support his case. Figures on illicit trade compiled by JTI in February - which looked at both cigarettes and rolling tobacco together for the first time - revealed that up to 27% of all tobacco smoked in the UK was non-UK duty paid.
And a poll of 500 serving police officers, carried out by Populus found 86% of officers feared plain packs would play into the hands of criminals, and 60% said it would be counterproductive and actually encourage teenagers to turn to the black market.
Southgate also argues that the move is a premature response given the current staggered implementation of the display ban across the UK. “The display ban will be in place in all shops by 2015 and yet the government is not even giving these existing regulatory measures a chance to be implemented let alone any time to see if they actually work,” he says. “Implementing standardised packaging on a product that is now already hidden in many larger stores goes far beyond common sense.”
So what would Southgate do? And what does he feel the industry should do? He argues that more work needs to be done to stop tobacco getting into the hands of young people, by making proxy purchasing of tobacco a criminal offence across the UK. In Scotland, it is currently illegal for an adult to buy tobacco on behalf of someone under the age of 18. But not in England and Wales.
“We seem to have regulation on top of regulation,” he says. “The government says it is trying to make it simpler for businesses to operate in the UK, but in reality its behaviour is very different.”
And if the industry was hoping to persuade on the basis of reason, once again, the noises coming out of Westminster are anything but encouraging. Just before announcing the launch of the consultation, health secretary Andrew Lansley nailed his colours firmly to the mast saying: “We don’t work in partnership with tobacco companies because we are trying to arrive at a point where they have no business in this country.”
Lansley’s abrasive tone clearly annoyed Southgate. “Despite repeated reassurances that the DH is ‘open minded’ about plain packaging, such comments call into question whether this can be regarded as a genuine consultation exercise.”
Indeed, lobbying aside - involving government departments including HMRC, business and justice - Southgate admits JTI has had no direct dialogue with the DH for seven years. And that’s disappointing, he says, because he believes greater co-operation between industry and government could deliver real positives. “Apart from fundamentally different positions, I’m convinced there is some common ground to be found over illicit trade and education,” he says.
As a tobacco industry veteran, Southgate has seen huge changes in the sector since he joined Rothmans as a salesman in 1975. At one stage, he left to help launch an internet start-up. But tobacco is clearly in his blood. After joining JTI in 2001, he spent five years in Switzerland before moving to Romania. But it was in heading up the Irish business just as the display ban was being introduced that Southgate came face to face with the implications of ill-considered legislation.
Not long after the ban was introduced, Southgate was smoking a cigarette outside a Dublin restaurant when he was approached by man with a bag full of contraband tobacco products. It brought home to Southgate the scale of the problem facing the trade.
Amidst the confusion following what was a blanket ban in 2009, figures compiled by the Irish government revealed the proliferation of non-duty paid tobacco cost the exchequer €385m in 2010, and many believe the problem is getting worse.
Now, having moved to the UK in late 2010, Southgate is in a favourable position to argue the industry’s corner from a position of first-hand experience. The challenge, as ever, is how to get an audience.
However Southgate remains hopeful that the government will listen this time round. Earlier this month JTI launched an advertising campaign in UK newspapers to ensure its voice was heard and to get the debate moving. “There is a debate shaping up around plain packaging and we are an important part of it,” he argues.
“We are seriously concerned about the way the consultation has been managed from the start.” But plain packaging is a concern that goes far beyond tobacco, he says. “If we succeed in propelling intelligent arguments to the surface - from us or others - we will all benefit from it. Hopefully the Department of Health will re-think its approach and common sense will prevail.”
And if it doesn’t? “As there is no evidence to suggest plain packaging will work, and given the serious negative impacts plain packaging will have, JTI will question, and where necessary challenge, regulation that is flawed, unreasonable, disproportionate or without evidence or foundation.”