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The world today – tobacco giant defends ultra cheap cigarette brand 09/06/2014

British American Tobacco has defended its decision to cut the price of its cigarettes. The company says it is now selling the cheapest legal cigarettes in Australia, at a cost of $13 a packet. It says an increase to the tobacco excise is simply feeding the demand for cheaper products, rather than forcing people to quit smoking. The independent Senator Nick Xenophon is now pushing for a minimum floor price on tobacco.


ELEANOR HALL The independent Senator Nick Xenophon is pushing for a minimum floor price on tobacco, as British American Tobacco defends its decision to cut the price of its cigarettes.

It says the former federal government’s increase to the tobacco excise is simply feeding the demand for cheaper products.

But Senator Xenophon says this is a “deeply cynical and destructive” move by big tobacco, and he wants to prevent companies from flooding the market with more cheap cigarettes.

Thomas Oriti has our report.

THOMAS ORITI British American Tobacco is claiming to now be offering the cheapest cigarettes on the Australian market at $13 a pack, which is nearly half the cost of premium brands.

They also claim this price discounting is the result of the Government’s own attempts to drive the cost up in order to put people off the expensive and unhealthy habit.

BAT spokesman Scott McIntyre has told RN the company had to act to protect its market.

SCOTT MCINTYRE What’s been happening over the last five years in Australia is we’ve seen a 66 per cent growth in the low price segment.

Now, the low price segment is cigarettes which are sold for under $15, and that’s in direct effect of the excise system and plain packaging certainly murkies the waters a little bit there.

But excise has driven the top line of cigarettes up to around $25, but what smokers have done is they’ve gone, I’m not going paying that sort of money for it, I’m not going to quit, I’m going to look for cheaper brands.

So they’ve forced a whole lot of competition at the bottom.

THOMAS ORITI Last August, the former government announced plans to increase the excise rate on tobacco.

That resulted in a 12.5 per cent hike each year until 2016. The move is expected to raise billions of dollars, but it also pushed up the price of cigarettes.

Scott McIntyre says there’s no denying the health impacts of smoking, but he says with millions of smokers in Australia, British American Tobacco still needs to compete in a tough market.

SCOTT MCINTYRE We’re a legal business and we sell a legal product and our competitors are playing very strongly at this part of the market.

Smokers are walking into retail outlets and demanding the cheapest pack. Forty two per cent of all cigarettes sold in Australia at the moment are under $15.

THOMAS ORITI The independent Senator Nick Xenophon isn’t convinced.

NICK XENOPHON We’ve got to admire Scott McIntyre’s chutzpah. I mean, he’s absolutely shameless. He’s basically defending the indefensible. He is dealing with a product that causes untold death and destruction in the Australian community, there are thousands and thousands of Australians that die each year because of tobacco related disease, there are many thousands more who are left to pick up the pieces who have a loved one who is seriously or terminally ill or who has died, and it costs the Australian community $33 billion a year.

THOMAS ORITI He’s planning to introduce a resolution in the Senate next week condemning the sale of ultra cheap tobacco in a bid to introduce a minimum floor price for all cigarettes sold in Australia.

Senator Xenophon also wants more accessible therapies for people who want to quit, such as nicotine replacements, and he wants more investment in anti smoking campaigns.

The Health Minister, Peter Dutton, says the Government is keen to consider changes to the current system.

PETER DUTTON We’ll have a look at what evidence is available to us. We know that in the past taxation and pricing has worked, and we supported when we were in opposition an increase in the excise.

We know that in the past an increase in the price has worked and we will have a look at the impact of future excise increases that are already built into the system.

THOMAS ORITI Nick Xenophon says British American Tobacco is playing a shameful game.

NICK XENOPHON This is clearly payback on the part of big tobacco for having plain packaging legislation. It’s effectively cross subsidising their cheaper brands with their more expensive brands.

It is a deeply cynical and destructive move. We need to fight back with big tobacco. We can’t be half hearted about this. There are more and more kids taking up smoking because they’re induced to do so with these cheaper packs.

THOMAS ORITI But the tobacco company says the Government should concede the tax regime hasn’t worked.

Spokesman Scott McIntyre says for as long as smokers are demanding cheaper brands, the company won’t stop providing them.

SCOTT MCINTYRE We’re going to have to keep doing it as long as smokers are walking into shops asking for the cheapest packs on the shelves, as long as retailers are telling us that’s what people want.

ELEANOR HALL That’s British American Tobacco’s Scott McIntyre, ending that report from Thomas Oriti.