Evidence of cushioning of tobacco tax increases in large retailers in Australia

Abstract

BackgroundTobacco companies may attempt to minimise the impact of tobacco tax increases on consumers by gradually passing on the price rise over several months. This study examined whether there was evidence of large Australian tobacco retailers engaging in this practice (known as cushioning) over a period including both routine indexation and large annual tobacco excise increases.MethodsAdvertised prices of nine factory-made cigarette (FMC) and nine roll-your-own tobacco (RYO) products were recorded from two stores monthly from December 2016 to December 2019. Per cent change in price from the previous month was analysed for FMC and RYO products, controlling for year, month, tobacco company and supermarket chain.ResultsSignificant main effects of month were observed for FMC and RYO products (both p<0.001). Large, significant average increases in per cent change in price were observed in September for FMC (6.51%) and RYO (11.45%) products, the month of the annual excise increase and prices also significantly increased in October (FMC: 3.01%; RYO: 1.91%). Significant increases were also observed in the months after the March annual routine indexation: by 1.10% in May for FMC products and by 1.09% in April for RYO products.ConclusionThis study has demonstrated evidence of cushioning of tax increases of FMC and RYO products in large Australian supermarkets. The monthly per cent change in price significantly increased several months after routine excise indexation and in the 2 months following a large annual excise increase. Further research with a larger sample of products and stores is needed to confirm these findings.

Evaluating tobacco industry ‘transformation’: a proposed rubric and analysis

“…Companies continue to impede and oppose evidence-based tobacco control policies in multiple countries (see online supplemental table). 59–76 PMI’s recent actions suggest it has maintained the stance outlined in 2014 well beyond announcing its smoke-free vision in 2016 6 60…”

“…Companies continue to impede and oppose evidence-based tobacco control policies in multiple countries (see online supplemental table). [59][60][61][62][63][64][65][66][67][68][69][70][71][72][73][74][75][76] PMI's recent actions suggest it has maintained the stance outlined in 2014 well beyond announcing its smoke-free vision in 2016. 6 60 The New Zealand government recently released a draft action plan for its Smokefree 2025 goal that proposes a comprehensive range of tobacco control policy interventions.…”

Where to next for countries with high tobacco taxes? The potential for greater control of tobacco pricing through licensing regulation

“…Strategic timing of implementation of price increases, which cushion consumers from the full effects of tax increases by spreading them out over several months. 21…”

Going ‘Super Value’ in New Zealand: cigarette pricing strategies during a period of sustained annual excise tax increases

“…26 More recent work found tobacco companies protected the new value partition they had created by cushioning tobacco tax increases and passing these on incrementally over several months. 24 Because NZ now has among the highest tobacco prices of any country, tobacco companies have a strong incentive to undermine tobacco excise taxes (the 2021 price of a pack of 20 Marlboro cigarettes was NZ$36.90 (~US$25)). NZ requires tobacco companies to furnish annual data on the number of cigarettes released for each brand, variant and pack size, and RRPs.…”

“…A post-implementation study in Australia, the first country to introduce plain packaging, found that prices displayed on price boards did not decrease post-plain packaging 22. Analyses of RRPs post-plain packaging also found these were higher in real terms (ie, increased beyond inflation) and continued to rise after plain packaging 23 24…”