Today the government fired the starting gun on a controversial new policy and a significant market intervention – the introduction of standardised pack designs for tobacco products.
After the High Court yesterday ruled against a legal challenge brought forward by big tobacco companies, from today most tobacco products destined for the UK must be in standardised packs.
It may be a while before we actually see such packs on the market, but by 20 May 2017 all products must comply.
In short, all distinctive colours, designs and shapes that may signify a particular product will be removed. Only the product name and variant, both of which must be in a set font, size and colour, will help us tell products apart.
"Laudable and unarguable"
The purpose of the policy is laudable and unarguable – to discourage young people from taking up smoking, to encourage smokers to quit and to help those who have stopped to stay that way. But, will it work?
Brands are deeply personal, built and held in our mind and shaped by a lifetime’s experience, word-of-mouth, social media, product reviews and a host of other influences we come across in our daily lives. They continually evolve as new products arrive, fashions change and our preferences shift. We use them to identify, understand and differentiate between products and to steer our choices.
Companies invest significant sums to build strong brands, some £33bn annually according to best estimates, and that represents a benefit to the wider economy of around £16bn. That’s comparable to all investment in scientific research and development.
It is the strong connection between individuals and products – the brand – which underpins the financial performance of branded companies and that has positive implications for jobs, pay and growth.
Since 2006, an index of branded companies outperformed the S&P500 by over 80 per cent, illustrating the significance of brand-led growth.
Remove the distinguishing features – designs, shapes, images, colours – that help us identify our brands and products will all look the same. How long will it be before the belief sets in that they are essentially the same?
Our understanding of products and their differences can be expected to morph together and become less precise. We will have less information on which to base our choices.
That is not the only potential effect.
All products the same?
A market in which products are considered the same is a commodity market, distinguished by competition on the basis of price.
Were prices to fall as producers fight to be the cheapest, might people smoke more? If we come to believe that all products are essentially the same, might we question the sense in paying a 20 per cent or 30 per cent premium for a top-of-the range product?
So will this measure work? The only market to have tried is Australia where plain packs have been in place since December 2012.
Smoking rates there have continued to decline but that decline has not accelerated since the introduction of plain packs, something you would expect from such a significant market intervention.
As we see the colours, designs and images disappear from packs, we will lose the familiar signals that help us understand products and the differences between them.
There will be effects, in our attitudes and behaviour, the products available and how they are sold.
It is just that no-one knows what those effects will be or, more importantly and more worryingly, whether they will be what the policy intended.