GREG Christopher Bishop from Philip Morris joins us now. If this goes ahead in New Zealand the way it's going ahead in Australia with plain packaging, can we expect a multibillion-dollar lawsuit here?
CHRISTOPHER BISHOP - Philip Morris Tobacco
Well, look, let's not put the cart before the horse. Where we're at at the moment is there's a consultation phase that the government's announced, and the government's said it wants to hear the views of the stakeholders - so industry and public-health experts - and we'll be submitting our views to the government about that.
GREG But if it happens?
MR BISHOP Well, look, I'm just not going to speculate on that. It's just far too early to tell. You know, the government wants to hear from us, and we'll be making our views known to the government.
GREG It's going ahead in Australia. That's taken as writ. It's hard to imagine what would be the difference between the scenario in New Zealand and Australia if plain packaging comes in. And for those who don't know, plain packaging just means they're going to be an olive green colour, they're going to have the nasty photos on and just your name in a plain font. That's it.
MR BISHOP Yeah, I guess the real question is whether or not the regulation will be effective. So, we acknowledge that tobacco is a harmful product. It's a very dangerous product, and it needs regulation. The key question is whether or not plain packaging will be effective at lowering smoking rates, and there aren't any studies to suggest that plain packaging will work at stopping people from taking up smoking or helping them to quit smoking. There's not one study that suggests that, and even the Australian health minister, which you previewed on the intro into the segment, has admitted that it's an experiment in Australia. So there's no evidence that it'll actually work.
GREG So what's your beef, then? If you're saying it won't help people give up smoking or stop them taking up smoking, what's your beef? What's this based on?
MR BISHOP Our big concern is our brands. Brands are important to any business, not just the tobacco industry, but if you think about the way in which commerce works, brands are important.
GREG But your brand's still on the packet. The name's still on the packet.
MR BISHOP Yeah, but the colours and the logos and the architecture of our brands are not there, and so our argument is it's a confiscation of our brands, and brands are important to any business in terms of product differentiation. So we use our brands to distinguish our products from other competitor products and try and encourage people who've made the decision to smoke to smoke our products.
GREG Do you not have a bit more faith in your customers, dying though they may be, that they're going to be loyal to the brand? They'll see it's whatever - Rothmans's, Pall Mall, Marlboro, whatever - and they'll be loyal to that brand. Don't you have a bit more faith in them?
MR BISHOP Well, I think that's precisely the point is that plain packaging won't reduce the number of people who smoke-
GREG So then why is it an issue?
MR BISHOP But it has an effect on competition, so brands are important in terms of promoting a particular type of image associated with a brand and encouraging people who've made the decision to smoke to switch to our products. So it's about product differentiation and distinguishing our products from our competitors'. That's what we're concerned about.
GREG So if they're that important, then, we can take it pretty much as writ you will sue if this goes ahead in New Zealand.
MR BISHOP Look, it's way too early to tell on that. We're in a consultation phase. We want to make our views known to the government, and we want to try and convince them that there's no evidence it'll work, but there is a lot of evidence that it will breach intellectual property treaties and trade treaties that New Zealand's subject to.
GREG What about hiding the cigarettes away? That happens next month. That's not an "if" thing. It's definitely going to happen. What sort of an impact do you think that's going to have on your trade?
MR BISHOP Again, not very much. A few countries have tried this, and there hasn't been very much impact on smoking rates - Iceland and Norway. It will have an anti-competitive effect, so hiding the packs away will again not allow companies to compete. And when you think about it, it actually does call into question whether or not plain packaging is necessary. So from 23 July, as you say, you won't be able to go into a dairy or a convenience store and see a cigarette pack behind the counter. So why do we need plain packaging? Everything's being removed. Why is plain packaging necessary?
GREG The thinking behind this, though, as you well know, is that it's to stop kids taking up smoking. The average age of the New Zealand smoker when they start is 14. If they see the bright colours, the packets there and they're up on display, they're far more likely to start smoking than if they're hidden away in a drab olive green.
MR BISHOP Well, there's been a lot of research done into why young kids take up smoking. And let me just say-
GREG Because smokes are there. That's why they're taking up smoking - because they're there and on display. If they weren't there, they wouldn't be taking up smoking. Simple as that.
MR BISHOP Let me just say from the outset, Philip Morris does not want young kids to take up smoking, and we support the prosecution of retailers who sell cigarettes to kids underage, but there's been a lot of evidence looking at why young people take up smoking, and the packaging and the branding is irrelevant. It is essentially irrelevant as to why kids take up smoking. So taking away the branding from our packs will not reduce smoking initiation and experimentation.
GREG OK, so why do they take up smoking? If you've done the research as to why don't they take up smoking, why do they take up smoking?
MR BISHOP Well, James Heckman, who's a Nobel Prize-winning social psychologist, has looked at this a lot, and he describes it as a multi-causal relationship. There's lots of different things - they get it from their parents, they get it from their peers, it's rebellious in some circumstances. It depends on the country, but the point is there's very little evidence to suggest that it's the branding that makes a difference in why people take up smoking.
GREG OK, let's talk about your mission statement. It's something that's on your website. Your website says, "Our products, like all tobacco products, cause disease and are addictive." Pretty simple. It's not good for you, and you're still flogging it.
MR BISHOP Yes, it's not good for you, and we support the regulation of it. That's why it's important the regulation is comprehensive and it reduces the harm-
GREG Why regulation? Why not just stop it? OK, I want to do a scenario with you. This is something that's been brought up a bit this week about cigarettes versus junk food. If I decide I want to have junk food three nights a week, provided I eat OK the rest of the time and I exercise OK and I drink lots of water, I'm probably not going to die. I'll be OK. If I decide I'm going to have three packets of cigarettes a week - 60 cigarettes - what's the counter for that?
MR BISHOP We acknowledge it's a dangerous product, but you just mentioned getting rid of it altogether, which I know the associate minister has also talked about - Tariana Turia. You know, prohibition didn't work for alcohol in the 1920s. There will always be people who want to make the decision to smoke, and the critical question is do we want them to buy cigarettes in a legal market that's regulated where we can control who the cigarettes go to and they pay tax on the product they consume, or do we want them to buy cigarettes from organised criminals who sell indiscriminately to minors and don't pay any tax on the product? I think the answer is pretty obvious.
GREG I'm glad you put the criminal side of things up and the black market side of things up, because it goes very well into the point about prisons. Prisons have now had a smoking ban for just over a year. I think it was the 1st of June last year. They've reported people are not aggro. There's no big black market. Some of them are calling relatives who come in to visit them saying, "You know what? You should give up smoking as well." They've got more money for phone cards. As a microcosm of how this works, it's worked pretty damn well in prisons. Why would it not work the same when we've got law-abiding citizens who aren't in prisons?
MR BISHOP Well, I think prisons are a pretty closed environment compared to the rest of the country. I think, you know, the example of prohibition of alcohol in the United States in the '20s demonstrates that when there's a demand for a product - and I think we can all agree there's certainly a demand for tobacco products - where there's a demand, somebody will come in to meet the supply, and in New Zealand we know who it is who meets the supply of currently illegal products-
GREG But alcohol doesn't kill half the customers. If you have one or two drinks a week, you're fine. In fact, it'll probably do you some good. It doesn't kill half the people who drink alcohol.
MR BISHOP Tobacco and alcohol are different products, but the point I'm making-
GREG Yeah, but you're just saying that they're not that different.
MR BISHOP I'm making the point that where there's a demand for something- So, in the 1920s, there was a demand for alcohol in the United States. Organised criminals met it. In New Zealand, where there's a demand for tobacco, somebody will come in to meet that demand, and if you make it illegal, it will be organised criminals. Now, we already have a small but growing problem in terms of illicit tobacco in New Zealand. If you make tobacco illegal, somebody will fill that demand. They will sell to minors and they won't pay tax on the product, and that should be a concern for our company, but also for the government.
GREG That says to me a lot about your customer base - that basically people who smoke cigarettes are willing to kind of break the law, at least nudge it, to fix their habit. Pretty low of opinion of the people who smoke cigarettes, isn't it?
MR BISHOP Oh, I'm just looking at the economic evidence that demonstrates that-
GREG Well, there is no economic evidence, because it's not been done in this country. And the other difference is we're miles from anywhere. We're not Australia. We're not in the middle of the United States. We're a long way away. If people are going to try bringing this in in a black market scenario, we're a bit remote for that, aren't we?
MR BISHOP Well, that's a fair point, but we're not too far away from Australia, and illicit tobacco in Australia is 13% of the market and it's a $1 billion problem for the government over there. We know there are people in New Zealand who grow their own tobacco. We know that Customs makes busts of people who import tobacco. We know that people down in Motueka grow tobacco and sell it. So, look, is it a massive problem in New Zealand at the moment? No. Is it a small but growing one? Absolutely, and plain packaging or even prohibition will make that problem worse.
GREG Let's be really really blunt about this. You guys aren't worried about the tax take; you're not worried about the black market. You're worried about your customers disappearing. That's the bottom line, isn't it? This is how you make money.
MR BISHOP Well, we are worried about retailers. We are worried about the impact of plain packaging on intellectual property treaties that New Zealand is subject to, and global trade treaties. So, you know, you think about the World Trade Organization - New Zealand used the rules of the World Trade Organization to try and get apples into Australia. New Zealand, if it goes ahead with plain packaging, will be breaking the rules of the World Trade Organization by setting up a two-tier system for trademark rights.
GREG Yeah, but apples don't kill 5000 people a year, like they do in New Zealand.
MR BISHOP I'm not saying that apples are comparable to tobacco. What I'm saying is that-
GREG Nothing's comparable to tobacco. To be fair, nothing is comparable to tobacco. Nothing that's legally for sale at the moment is comparable to tobacco. It's in a class of its own.
MR BISHOP Well, perhaps that's right, but I'm making the point about the rules of the World Trade Organization. New Zealand used those rules in terms of apples, and now we're turning around and we're breaking the rules. I'll give you another example - New Zealand's arguing at the WTO at the moment that health warnings on alcohol labels are a breach of international trade rules, and that there's no evidence that it will work in terms of reducing the number of people who drink alcohol. So Thailand is introducing health warnings on alcohol bottles, and New Zealand is arguing against that, saying it's a breach of the rules. But in the next breath, New Zealand is turning around at the same organisation and saying that plain packaging of cigarettes, which does exactly the same thing - it takes away the trademarks of the tobacco industry - is acceptable. There's a double standard there.
GREG Yeah, but a glass or two of wine a week is not going to damage you. Again, I see where you're going with this, but you just can't compare anything to cigarettes. There's no good in cigarettes. There's no good that comes of it, and we're trying to get rid of it. Talking about the alcohol industry as well, in the last few years, it's adapted, it's changed, and, let's face it, it's trying to get a younger market. It's had RTDs, it's changed the packaging of alco-pops, things like that. What's the cigarette industry done?
MR BISHOP Well, the cigarette industry has continued to be regulated and-
GREG No, no, no, to adapt to this. It's the most regulated, squeezed industry in the whole wide world. What has it done to adapt?
MR BISHOP Well, you know, not a huge amount in terms of adapting. What we do is we work with the regulations. Where the regulations have an excessive impact on us, we try and persuade governments to not go down the regulatory route. That's certainly what we're doing with plain packaging. That's certainly what we're doing in terms of point-of-sale display bans. But we accept a lot of regulation. In a number of countries, Philip Morris goes above and beyond the country's regulations in terms of health warnings. So in a lot of countries, we're not required to put health warnings on our cigarette packs. We do so as a matter of our marketing code, because we think that consumers should be informed about the health risks of smoking.
GREG One of the other regulatory things that's being spoken about by Tariana Turia, I believe, is banning the flavours that go into them - things like chocolate and cinnamon to make it taste nice, because apparently just old tobacco tastes like smoked foot. Would that realistically be happening somewhere down the line that those ingredients can get slowly taken out?
MR BISHOP Well, some countries have looked at that, but again there's not any evidence that removing ingredients from cigarettes makes any difference in terms of smoking uptake rates. There's two different types of cigarettes. There's, you know, the sort of pure Virginia Blend cigarettes, and American Blend cigarettes, which do have small ingredients added to them. And, you know, America smokes a lot of America Blend cigarettes, for example. But Commonwealth countries like New Zealand and Australia prefer the Virginia Blend. But smoking rates between the two markets are pretty much comparable, so there's not any evidence that removing ingredients works to reduce the number of people who smoke.
GREG Best-case scenario from your guys' point of view is 2025, there's not going to be any cigarettes in New Zealand at all. How realistic is that?
MR BISHOP Well, I don't think it's very realistic. 20% of New Zealanders smoke today. 2025 is 13 years away. Is it really realistic for the government to expect that no one in New Zealand will smoke at that time? And again, given that people will continue to want to smoke in New Zealand, do we want them to smoke through a regulated market where we can control access to minors and where people pay tax on the product, or do we want them to purchase from organised crime?
GREG Do you smoke?
MR BISHOP I enjoy and occasional cigarette, yeah.
GREG Do you accept all the bad stuff that goes with it, though?
MR BISHOP Yes, absolutely. It's a dangerous product that's harmful to your health.
GREG Having said that, there's a quote here I want to read to you. American tobacco executive quoted in the New York Times saying... This is about a guy on an advert who was doing the ad for them and there was a whole bunch of cigarettes lying around and he asked if could have some. Asked the executive, "Do you smoke?" And he said, "No, we reserve that for the poor, the young, the black and the stupid." Is this a prevalent sort of attitude in cigarette companies and tobacco companies?
MR BISHOP Well, I haven't seen that quote before, but I can certainly tell you it's not a prevalent attitude amongst Philip Morris. We have great respect for our customers, and we have great respect for the people who make the decision to smoke.
GREG Alright, Christopher Bishop, thank you very much for your time.
MR BISHOP Thanks, Greg.