Opinion

With plain packaging on the horizon, tobacco brands will need to innovate to keep up with Marlboro

3 min read

23 March 2015

High tax rates, government regulation and growing awareness of the health impacts of smoking have all led to the declining popularity of tobacco products. This likely means that tobacco brands will start trying to find more innovative ways of competing.

To make matters worse for the industry, MPs have voted on a national scheme set to standardise tobacco products. This, according to Marlboro-owner Phil Morris, would lead to the industry being compensated £9bn to £11bn for branding. Of course, it was suggested that such a claim was “ludicrous and unjustified”.

This left tobacco firms targeting developed economies. Rising income levels recorded in countries such as China, Russia and Indonisia, has helped overall global tobacco sales.

According to Brand Finance research: “The problem facing tobacco brands today is that the high profits originating in developed nations are on the decline, creating more emphasis on growing brand purchase in emerging markets. At the same time tobacco brands are having to adapt to changing consumer behaviour and further government regulation.”

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The government’s plan for plain packaging is still a long way off and will undoubtedly see numerous court battles along the way. But with more countries reviewing the legislation and increasing evidence and support in favour of plain packing, it appears to be only a matter of time.

Brand Finance suggested that when the market starts feeling the impact, Marlboro and Camel will be the brands best placed to attract new customers.

Marlboro is one of the 86th most valuable brands, not to mention the most valuable tobacco brand, with a value of $13.1bn. Essentially, the company dwarfs its closest rival, Japan Tobacco’s Winston brand, which achieved a 2015 value of $3.1bn, a 21 per cent reduction on 2014.

With developed economies hopping on the tobacco trend, companies such as Indonesian Gudang Garam and Indian Gold Flake are well positioned to take on the competition.

“Competitor brands will need to learn to become more innovative in the way they deliver nicotine to their customers,” the report said. “The rise of electronic cigarettes is a good example of this innovation within the market.”

This is something the numerous brands are now investing. Among them are Japan Tobacco International and Lorillard, which have been investing heavily into e-cigarettes, which “permits liberal advertising in most countries”.

“There’s a difference of consumer behaviour across different markets and the impact this is having on the brands operating predominantly in one region,” suggested the report. “The need to replicate Marlboro’s global presence will almost certainly put an emphasis on expansive marketing strategies and more M&A activity wutin the tobacco sector over the coming years.”

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