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Tobacco CEO Threatens to Flood Australia with Half-Price Cigarettes if Forced to Remove Branding from Packets

Landmark Australian anti-smoking legislation set to go into effect on July 1, 2012 that would remove all branding from cigarette packets has tobacco companies running scared. In their latest display of desperation, British American Tobacco CEO David Crow threatened to slash cigarette prices in half and demand billions of dollars in compensation when the measure takes effect.

Under the pioneering measure, the first of its kind in the entire world, branded cigarette packages will be replaced with plain covers adorned with only the brand name of the cigarette along with some very graphic health warnings.

But Crow says tobacco companies would have little choice but to drastically reduce cigarette prices, which currently stand around A$12.70 (US$13.51) for a 20-pack of British American’s popular Winfield brand. Crow says this is because of all the no-name and bootleg tobacco products, which cost as little as 1/3 the price of name brand smokes, that would flood the market.

“Could cigarettes halve over time? I think in the longer term potentially yes,” Crow told News.com. “When you look at the four Ps (product, price, place and promotion), pricing’s the big one and that’s the only one we have left. We will end up fighting on price.”

According to News.com.au, some 22,000,000,000 cigarettes are sold annually in Australia.

Crow, who says he wouldn’t let his two children, ages 11 and 13, smoke, showed more of his deadly industry’s desperation when he said that lower prices would lead to more kids smoking.

But if tobacco companies like British American do halve prices, the government has another heavy weapon it can utilize against them. Andrew Penman of the New South Wales Cancer Council points out that the government would react by raising the excise, which is currently 70% (levied on the amount of tobacco, not the price of the cigarettes). “Whatever they do, the price will not affect the excise or the amount the government gets,” Penman told News.com. “If the industry was to halve the price of cigarette it will be an invitation for the government to increase the excise by the same amount.”

Australian Health Minister Nicola Roxon is not surprised that tobacco companies would threaten to lower prices. “Big Tobacco are fighting to protect their profits, but we are fighting to save lives,” she told News.com. “I’ve always said that Big Tobacco will fight plain packaging tooth and nail. These baseless claims are just another sign of how desperate they are,” she added.

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