CHICAGO -- If asked, “What’s your favorite burger?” someone may say “Whopper,” “Big Mac” or “In-N-Out Burger.” The last answer you would expect: “hamburger.”
Yet, if the kinds of tobacco-packaging restrictions that led to generic labeling of cigarettes in other countries happens in the United States, that’s exactly the situation that may arise, according to one tobacco manufacturer.
“The consumer will pay a premium for brand names like Rolls-Royce, Coca-Cola or Pepsi,” said Bryan Jones, vice president of corporate development for the Americas region for JTI, Geneva, in an education session at the 2017 NACS Show on brand threats. “Yet we’ve seen taxation, health warnings and bans [on tobacco products], with the end of the slippery slope being plain packaging.”
Regulatory threats to brand names and the practice of branding products resonates beyond tobacco, Jones said. Not only have plain-packaging laws in Australia and France proven detrimental to tobacco brands, but they also set legislative precedent—a playbook, so to speak—for similar actions against alcohol, soda and candy brands.
“There is evidence that it is happening to other industries,” Jones said. “There’s an organized effort to use the tobacco blueprint.”
In a direct example, a national health organization in Canada is calling for graphic, pictorial warnings on fatty foods and sugary drinks. The “slippery slope” of plain packaging for nontobacco goods starts with taxation, Jones believes. To that end, he cited more than a dozen places, including U.S. cities such as Chicago and Philadelphia, where taxes on alcohol and sugary foods and drinks are playing out.
Jones and JTI USA’s parent company, JTI, which has global distribution rights to some of the tobacco category’s biggest brands—Camel, Winston, Benson & Hedges and Natural American Spirit—have taken their message beyond words. While other tobacco manufacturers at the 2017 NACS Show featured popular products, JTI’s booth aimed to illustrate the bizarre effects of tobacco-type bans on other consumer packaged goods (CPGs). In addition to plain-packaging laws, which would restrict manufacturers to using a certain font, font size and packaging color, tobacco regulations in Australia, France and the United Kingdom also mandate graphic photos of the negative health effects of such products. To that end, JTI displayed faux products such as soda bottles featuring an obese stomach and chocolate bars with rotted teeth.
Tobacco has been ground zero in the fight to regulate or outright ban legal products, Jones said in the NACS education session. Across the globe, this category has faced a wide range of regulation, from advertising restrictions to printed health warnings on cigarette packs and physically concealing product from view in the store. In Jones’ opinion, they all point to the nullification of brands.
But plain-packaging strategies can miss their intended health goals, Jones said. Australia has had its plain-packaging law since December 2012. Since then, illicit trade has gone up 21%, while the traditional downward trend in smoking of 1%-2% remained the same, he said. Even a simultaneous tax increase on tobacco failed to accelerate Australia’s decline in smoking.
Moreover, commonly accepted language within global health entities offers a pathway to extending brand-infringing regulations on other categories, he said. The Geneva-based World Health Organization (WHO), for example, cites the leading factors for “noncommunicable diseases” as being “tobacco use, unhealthy diet, physical inactivity and harmful use of alcohol.”
The research for WHO’s determination that these “diseases are preventable through effective interventions” is shared among several well-established health bodies internationally and within individual countries, states and municipalities.
When asked if he believed manufacturers and retailers selling products within categories outside tobacco are showing concern, Jones said not to any significant degree. Taxes on sugary drinks appear to be an initial wake-up call for other categories, but he’s not satisfied that the industry response across other CPGs has been sufficient, especially as it relates to packaging regulation and brand threats.
Jones may be right. Lauren Kane, senior director of communications for the American Beverage Association, Washington, D.C., says she hasn’t seen the issue raised to a high degree among her membership, although some moves have been successfully struck down. Kane told CSP that a recent federal court ruling struck down an attempt by San Francisco to mandate that ads for beverages with sugar carry a warning label. The court found that the warning was deceptive.
Still, Jones of JTI believes manufacturers and retailers should stay vigilant. “The reason we built our NACS booth was to educate other brand holders that anti-tobacco, anti-Big Food and anti-sugary-drink lobbies are well-organized, taxpayer-funded efforts to take away brands and intellectual property,” Jones said. There’s a sense among many industry players “that it won’t happen to us.”
Unfortunately, the consequences of losing the battle over brand are numerous, Jones said. One of the reasons companies spend millions to build brand loyalty is trust, which can be founded in quality, value or whatever the “brand promise” is. “We live in an era of trust,” Jones said. “How do you [gain] trust without brand?”
Also, with fonts and colors being controlled in plain-packaging scenarios, counterfeiters can easily re-create products, leaving consumers no outward indication as to the product quality or makeup, Jones pointed out. Whether the product is counterfeit or not, increasing regulation, taxation and outright bans will only fan the growth of black markets, he said.
What suffers, Jones said, is the responsible retail of legal products: “Retailers lose.”
Understanding the Value of Branding
Beyond battling labeling regulations, companies can fortify their brand in other ways. Scott Willy, co-founder of the Three Sixty Group, Indianapolis, said at a NACS Show session on brand development that companies need to spend money on researching, designing and establishing their brand, and also on being “a cheerleader for your brand. … Dedicate a percent annually to keep that going.”
For many of the country’s top brands, a significant portion of their market value is that invisible element of brand.
“Spend the money to protect it; own it and make it your own,” Willy said. He cited Bonham, Texas-based chain Kwik Chek as an example, which he says actively protects its “krave the kwik” tagline.
More important, if brands were to become more generic, customers would find it more difficult to find their favorite products. “It would be cumbersome if everything had to fit into a mold,” Willy said. “It wouldn’t be very convenient.”
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