Imperial Tobacco's new hockey (and other) promotions.

I have been intrigued at what I think is a recent development in tobacco advertising in Canada - colourful lifestyle-ish ads inside the tobacco package.

I first noticed these inside packages manufactured by British American Tobacco's Canadian subsidiary, Imperial Tobacco when I tripped  over -- almost literally -- a discarded package. Inside the slide pack were two ads: one for a version of the brand with a novelty filter which allows the smoker to rotate the filter overwrap and adjust the amount of ventilation.

On the other side of the package was a picture that seems close to the style of promotions which I had thought were no longer allowed. Canada's federal Tobacco Act does not permit lifestyle advertising for tobacco products, and defines it as "advertising that associates a product with, or evokes a positive or negative emotion about or image of, a way of life such as one that includes glamour, recreation, excitement, vitality, risk or daring."

Well, the always-brief Canadian summer is over now, and this ad no longer seems to be running in the packages. We may never know whether Health Canada's enforcement team took action, or whether it was rotated out with the turn of the seasons.


Today I similarly stumbled one of its replacements - an ad that links this cigarette brand with Canada's famous pastime, ice hockey.

"Taste is always on its game. Inside the Circle." is the line that runs across a picture of the goal light. (For the uninitiated, every time a goal is scored against the visiting team, the illuminated goal light is accompanied by a klaxon).

Underneath the image of the goal light is small text which invites smokers to "show us your game" and to send pictures to the company (care of comments@johnplayer.ca.). What they do with those pictures is another mystery ...

There was a time when the Player's logo was plastered across the scoreboards of many hockey arenas - (one from 1990 can be seen here). Now, it seems, the company has found another way to associate itself with Canada's national sport.

I came across another package advertisement on the sidewalk a block or two further down. This one associates the John Player Brand (JP) with chilling, and with popcorn and a screen in the background, evokes movie going.  (or is it evoking Netflix and chill?)

Getting the smoke out of cigarettes

While health departments have been gripped with the challenge of cannabis reform, another recreational-drug market has also become caught up in legal and market changes.

After years of turning a blind eye to illegal vape shops, the federal government has introduced legislation to legalize electronic cigarettes and other nicotine vaping devices. Bill S-5 (the proposed Tobacco and Vaping Products Act) was introduced in the Senate last November, and is now waiting for a decision by the House of Commons.

This law addresses only one of the new categories of nicotine delivery systems – those which use the nicotine which is derived from tobacco, but which do not use tobacco in its natural form. It does not respond to many of the new nicotine delivery systems which are under development, including the tobacco-heating mechanisms which have been launched by both British American Tobacco (i-glo) and Philip Morris International (IQOS) in the months since Bill S-5 was introduced.

Philip Morris International and its main competitor, British American Tobacco (BAT) recently had their new products analyzed by the same Canadian laboratory (Labstat) that developed the cigarette toxicity testing standards now written into Canada’s tobacco regulations. When tested for over 40 toxic chemicals, the heat-not-burn products still yielded dangerous amounts of carcinogens and other toxic substances, but at substantially lower levels than regular combustible cigarettes.

The head of Philip Morris International describes these products as “better choices” for smokers.  While it is a stretch to call them “better choices,” they are, for smokers, less bad choices than continuing to smoke. 

But for the moment these products lie in a kind of legal limbo – they are subject to the federal laws that apply to all tobacco products (like restrictions on advertising), but are not captured by the regulations which are more product-specific (like health warnings and bans on flavourings). They also reveal a vulnerability in Canada’s health laws. Unlike the United States, Australia, New Zealand and many other developed countries, there is no requirement for them to be approved by any government before they can be marketed in Canada.

The manufacturers of these new types of cigarettes are using private visits with policy-makers, news events and other means to encourage regulators that the health of Canadian smokers would benefit if S-5 were changed to set (less stringent) rules for marketing heated tobacco products.

We agree with the companies that Bill S-5 should be opened to respond to these new products. In return for the opportunity to sell e-cigarettes and heat-not-burn cigarettes, the Canadian government could and should oblige the tobacco industry to phase out its most harmful products.

If tobacco and nicotine companies are offering less bad choices, why should they continue to be allowed to market the worst choice – the combustible cigarettes that kill 125 Canadians a day? It’s time to stop exempting tobacco manufacturers from consumer protection laws that ensure products are no more dangerous than necessary.

We propose that no combustible or heated tobacco product should be sold unless it meets the emission standards of these new products. This could not be done overnight, but it could be done. We suggest tobacco manufacturers have five years to improve their products or remove them from the market.

This would give the marketing edge that the companies claim they need to encourage smokers to switch to a less bad option. It is a much more prudent approach than granting their request to be able to use the tools of modern advertising and marketing to promote these brands– tools we know they would use to grow the number of people who use tobacco or other forms of nicotine.

It has been argued that forcing conventional cigarettes off the market will open the floodgates to contraband smokes. Contraband tobacco is a political and economic problem that has festered in the absence of political leadership. Phasing out combustible cigarettes could also be a springboard for the meaningful negotiation and effective enforcement necessary to wind down the contraband market.

Parliament has an opportunity in S-5 to ensure that nicotine, like gasoline and paint, is regulated so that most harmful products are phased out when better options become technically feasible.

OMG! BAT's plans for Next Generation Products

Last week British American Tobacco held an "investors day"  in London, U.K, and invited investors and analysts to learn more about its "next generation products". The 10 presentations made are now available on the BAT web-site and they are worth a very close look.*

There is much to ponder in these pages, as the company sketches out its interpretation the drivers of nicotine use, its plans to keep people using nicotine in cigarette or other forms, and the ways it intends to do.

BAT's operating framework for "Next Generation Products" like tobacco-heating and vaping products challenges the mindset of groups like our own which have for decades focused on reducing cigarette use. It goes beyond the 'harm reduction' proposals made by those within the health community who see these new technologies as an new tool to reduce the harms from nicotine addiction.

BAT's approach is the one we should expect from the manufacturers of 'fast moving consumer goods'. But it is one that was not anticipated when the Tobacco Act (or even S-5, the proposed amendments to that Act) was drafted. Indeed, their plans seem to transcend the protective measures which we have promoted and achieved through the federal Tobacco Act or the Framework Convention on Tobacco Control.

It's hard to know where to start:

What is the product?

Public health authorities continue to rely on clear distinctions between (bad) tobacco and (medicinal) nicotine. Our recent struggles on how to regulate e-cigarettes in this binary model have exposed the vulnerabilities of this approach.

BAT's risk continuum model exploits those vulnerabilities: its move towards product fragmentation works to further erase the line between the nicotine products we are prepared to accept and the tobacco products we are not.

BAT 2017 Investor day

Next_Generation_Products_v2

Next_Generation_Products_v2.pdf

Conversion instead of quitting

We already have a pretty good idea that the the difference between a former smoker and a relapsed smoker is often a question of months or weeks, and that successful quitting eludes too many smokers.

Rather than find a way to help people quit, BAT wants to block this process. Its goal is to "convert" dissonant smokers to other forms of nicotine use. It illustrates this in the slide below - conceptualizing that on the road to conversion the company must gain trust, and move people from thinking "Should I give up or cut back?" to "It's part of my life."

Next_Generation_Products_Science_&_Technology.

A new approach to marketing 

In its quest to "convert" would-be quitters, to establish "new behaviours" and to "acquire.. new consumers" BAT has designed a marketing approach that goes beyond the 4Ps (product, place, promotion, price) that served the industry well in recruiting 1 billion or so smokers world wide.

Now it says there is "a very different marketing 'job to be done''. It presents a series of "consumer engagements" that develop from "acquisition" (experimentation) to "conversion" and "loyalty" (addiction?).

Countries which have aligned their promotional restrictions with the FCTC article 13 guidelines on tobacco promotion will find themselves with little regulatory protection against the "social selling",  "automated hypercare" tactics that are foreshadowed here.

Consumers_&_Marketing.pdf

Consumers_&_Marketing.pdf

A cynical view of unfilled needs.
I will leave to the philosophers and economists to describe how BAT is approaching the utility or considerations that might influence a consumer to use the various products that the company has on offer. "Performance" seems to be their code-word for addiction, but the other factors it names -  affordability, social consideration, potential for reduced risk, exploration, self balance and connectedness speak to a much more granular view of attraction of smoking/using nicotine than is often presented.

This is not the first time that this industry has identified the human desire for autonomy, experience and social acceptance as needs to be filled with an addictive product. It's not often it is laid out quite so unabashedly!

Consumers_&_Marketing.pdf

Consumers_&_Marketing.pdf

There is much more insight into the plans of this company and the possible road ahead that can be mined from these presentations. What is not so clear is how -- and when -- those of us who are concerned with public health and have a responsibility to protect it will respond.

--------------

* You have to affirm before accessing them that you are an institutional investor or shareholder. With our forced investments in the company through the Canada Pension Plan Investment Board, Canadians workers certainly qualify.

Menthol cigarettes ban reaches across Canada

This week marks 6 months since the federal government published a regulation banning menthol in cigarettes, and the end of the 180-day coming-into-force period. After October 5, 2017, menthol cigarettes cannot be sold in Canada.

Health Canada is to be congratulated for this move -- and thanked also for making available some very interesting data on the sales of these products in recent years.  

Tobacco manufacturers are required by law to report to Health Canada how many cigarettes of each brand they ship to each Canadian province. While the brand-name shipments have not been made public in recent years, aggregate data on categories of products is sometimes revealed.

The figures we were given for sale of menthol cigarettes in 2016 were quite surprising -- the volume had grown in 2016 to 5.4% of all cigarettes sold in Canada, up from 4.5% in 2015.

The reason this information was surprising was that menthol cigarettes had been banned in several provinces, beginning with Alberta and Nova Scotia in 2015. By the end of 2016, as shown below 5 provinces had bans in place.

Nova Scotia: May, 2015
Alberta: September 2015
New Brunswick: January, 2016
Prince Edward Island: July 2015
Quebec: November 2016
Ontario: January, 2017
Newfoundland and Labrador: July 2017
 
In the provinces that had not banned menthol, these products were growing in popularity, as made clear by the year-over-year trend data and the provincial market share data also provided by the Tobacco Control Directorate at Health Canada. Menthol cigarette sales had grown to about 10% of the markets in B.C., Manitoba, Saskatchewan which had not moved to introduce marketing restrictions on this youth-friendly flavouring. (If provincial market share data has been made public for previous years, I am not aware of it.)

Although click-menthol and other novelty flavoured products were introduced in many parts of the world a decade or so ago, they were only recently introduced in Canada -- curiously after the bans had been legislated in the more populous provinces.

The power of these products to draw customers is reflected perhaps in the large increase in those provinces where bans were not coming into effect. British Columbia saw a doubling of the menthol market to about 1 in 8 cigarettes sold in that province.

In finalizing its regulatory decision, Health Canada provided a summary of the estimated costs and benefits of the measure, as well as reporting on the feedback they received from health organizations, the industry and others. These suggest that the campaign for a menthol ban is not yet over, and that pressure will remain for the federal government to ban the substance from all tobacco products, as most of the provinces have done.

And now a word from our sponsor....

Part of the responsibility of civil society organizations like ours is to bear witness to important events, no matter how early in the day they take place or how luxurious the chair from which you have to bear witness.

With this duty in mind, I arrived early this morning at the posh Rideau Club in downtown Ottawa to watch iPolitics Live provide the president of Imperial Tobacco, Mr. Jorge Araya, with the opportunity to make a short speech and to be interviewed by the publisher, Mr. James Baxter.

Mr. Araya is the newish-highest ranking officer at ITL, British American Tobacco's Canadian subsidiary. He has been making the rounds at such comfortable events, including at Vancouver's Canadian Club last June and the Empire Club in Toronto next week.

This space for rent

My guess is that all of these appearances have been arranged following an exchange of money. Although there is no mention of commercial considerations in Vancouver, Toronto's do is openly billed as sponsored by Osler - the very same law firm which represents Imperial Tobacco across Canada.

A commercial basis for this morning's event was strongly hinted at half way through the hour-long webcast. Mr. Baxter prefaced his interview by announcing that the "net proceeds" of today's event would go to a program run by Carleton University's journalism program. Since the tickets were free and the use of the Rideau Club most certainly was not, it seems logical to conclude that the presence of "net proceeds" means that this was a sponsored program for which iPolitics received payment.**

This is not the first time that iPolitics has provided a forum for Imperial Tobacco to promote a liberalized-market for nicotine products.  In early 2017, ITL's regulatory spokesperson, Eric Gagnon, participated on an iPolitics Live panel, although on that last occasion other voices -- some of which disagreed with Mr. Gagnon -- were also invited to participate.

Dancing with the one that brung ya!

Today's event was clearly different. iPolitics President, Andrew Beattie, opened the event by saying how "very proud" he was that it was taking place, and how grateful for the "unique opportunity granted" by Mr. Araya's participation. It's not every broadcaster who acknowledges pride at providing airtime to a tobacco official, mind you, but it did help set the tone.

Indeed, the format of the event could not have been more favourably crafted to meet the needs of  Canada's largest tobacco company if it had been designed by Hill and Knowlton, Torchia or any of the other PR firms used by Imperial Tobacco over the years to influence health policy. 

Mr. Araya had 15 minutes of uninterrupted airtime to make his case (with slides!) after which Mr. Baxter was to interview him. The questions for the interview would be provided first by Mr. Baxter and then from a social media feed, as ranked by the Rideau Club audience among whom I sat.

The questions, it was soon revealed, were mostly being fed into the twitter feed by a member of iPolitics' staff, whose thumbs moved constantly over the screen of her mobile phone as she sat a table away from me. Very few other audience members seemed to be using their phones to rank questions, meaning that it took only a few "thumbs up" for a question to be ranked highly and then asked of Mr. Araya -- the greatest endorsement of any question was "5 thumbs up."

If it only takes 5 people to push a question to the top of a list, then the iPolitics Live audience engagement is a very easy system to game. With more than half the tables "reserved" for late-arriving guests who sat together and most of the questions submitted by iPolitics personnel, it most certainly looked like it was being gamed in Mr. Araya's favour.

ITL's pitch

Mr. Araya's message can be boiled down to something like: 'we have a new product that we want to sell, and we want government to let us be in charge of how it is marketed and priced'. This, of course, is not a new message for this industry - nor was there much that was surprising or new in what Mr. Araya said this morning.

More than a decade has now elapsed since the company's core messages shifted from denying that cigarettes are harmful to promising that they would manufacture less harmful nicotine products. The rest of his message today was older than that, fitting within the narrow message framing promoted by the industry over my lifetime:
* the tobacco industry contributes to the economy and enriches government coffers;
* any restrictions on the right to market tobacco is a step down the slippery slope that leads to a curtailment of normal corporate rights; 
* upcoming regulations (in this case plain packaging) don't work and have negative unintended consequences; 
* the real villains are those who sell illegal cigarettes.

With respect to the supposed focus of the event -- reduced risk products -- Mr. Araya gave little new insight into what his company is planning, other than to announce that they would be extending i-Glo sales to provinces outside B.C. in the coming months, and were poised to enter the vaping market once S-5 was passed.

The only comment that made my eyes pop was when Mr. Araya used Justin Trudeau to validate his position against high taxes on cigarettes. My scribbled notes record him attributing the following quote to the prime minister: "there is no black market for beer or for alcohol, but there is a black market for cigarettes and that is because of high taxes."

I don't know how I had missed that important declaration, and can only hope that the PMO has by now clarified that (a) high taxes are not the trigger for contraband tobacco and (b) the illegal alcohol market is about the same size as the illegal tobacco market, based on household expenditure.

Followed by a round of Pat-a-cake

The last half of the hour was spent in a gentle conversation between Mr. Araya and journalist James Baxter. I would expect that ITL's corporate communications team is very pleased with the result.

Mr. Baxter opened by acknowledging his family's relationship with the alcohol industry and the acknowledging that alcohol has a dark side: "Booze has killed a lot of people and ruined a lot of lives." But he neither pushed for nor seemed to expect any similar concession or acknowledgement from Mr. Araya with respect to the liability or responsibility of his company to those whose lives have been shortened or made more difficult as a result of using their products.

Only in his opening questions did Mr. Baxter, haltingly, try to set a firm tone, focusing on the challenge that Mr. Araya faces in being seen as a credible force in reducing harm to smokers. Either he is a good actor, or Mr. Baxter truly was oblivious to the irony that his interview and the iPolitics broadcast was one of the steps Mr. Araya is taking to meet that challenge.

After a short round of his own questions, Mr. Baxter soon moved to those that were provided by the ranked Twitter process. By the end of the hour, Mr. Araya had been given a platform to express his views on questions on a range of soft questions, such as:
* whether illegal cigarettes were more harmful than his own company's brands,
* whether the company was the source of the illegal cigarettes sold today,
* whether diabetes was a greater burden on the healthcare system than smoking
* what exactly was wrong with plain packaging
* whether the federal government should fund groups that lobby against smoking
* what their policy priorities were.

Could it possibly be that bad, you wonder? Don't take my word for it! I would expect this advertorial will soon be available for viewing. Watch for yourself.

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** iPolitics Live declines to make public its process for deciding what stories are carried: "editorial decisions for speakers and how stories are presented remain with iPolitics". It is more open about its interest in running sponsored events: "iPoliticsLive relies on a variety of revenue streams including sponsorships to help tell the stories we present".

Trying to put a glow on i-Glo.

The Vancouver Sun reported this week on - yet another! - trip to Vancouver by Jorge Araya, the  head of British American Tobacco's Canadian subsidiary, Imperial Tobacco.  Mr. Jorge Araya is a relative newcomer to Canada (he arrived in January 2015), but he is clearly a seasoned tobacco pro.

De-coding Mr. Araya

The occasion for this visit was a speech before "a small group gathered for a Canadian Club of Vancouver luncheon." The text of his comments has not been made public, just as his speech at a bespoke Vancouver a month earlier were not released.

Fortunately, an interview between Mr. Araya and Derrick Penner of the Vancouver Sun is available on that newspaper's website. It suggests that Imperial Tobacco's messaging (and strategy) are not all that much changed over the past decades.

• A product-based solution
  As in earlier decades (think filters or "light"cigarettes), BAT is asking governments to hitch their hopes for a healthier future to their wagon of new-styled tobacco products.
  
  In the present instance, the product is called iGLO - a new device by which nicotine and byproducts are inhaled as a result of tobacco being heated with an electric element instead of being burned by fire. The iGlo electric heater, shown below, is purchased separately. The cigarette-resembling sticks are sold in multi-packs of 60 and are branded the same as the company's leading aspirational brand, du Maurier.
  
  iGlo is very similar to iQOS, which is manufactured by BAT's global rival, Philip Morris International, and which was launched in parts of Canada at the beginning of the year. 

• An alignment claimed with health authorities and the law
  Mr. Araya claimed that by marketing this new product, his company was acting inline with the science and opinion of health leaders. He evoked the World Health Organization and "to a certain extent" Health Canada. "They are acknowledging that these next generation products, or reduced risk products, are the way forward and the only solution to reduce smoking rates in Canada and in the world."
  
  Because society and consumers want these products, Mr. Araya said, "we have a duty of care to offer them."

• A liberal market as the best option for health
  To Mr. Penner's question about what the company wanted from government, Mr. Araya quickly rhymed off three requests that are essentially the same as the industry has pushed for since the early 1960s: for governments to carry responsibility for health outcomes, for the right to advertise and for low taxes.
  
  "Consumer are scared of the quality of these vaping products... we need very clear product standards so that people trust these products."
  "We need to be allowed to tell consumers that these products are 90% safer than other products."
  " [We are asking for] reasonable taxation. These things are expensive. We need to make money out of it and consumers need to be able to afford these products."

What Mr. Araya did not say.

• Taxes for iGLO are more than reasonable:
  Mr. Araya did not mention that heat-not-burn cigarettes are already taxed at a much lower rate than regular cigarettes. Each combustible cigarette in B.C. is taxed at about 35 cents, but the new products are taxed on a weight basis set for oral tobacco. If my estimation of the weight of each stick is .3g, the tax per stick would be about 11 cents - or about two-thirds lower than cigarettes.

iGLO flagship boutique,
Vancouver

• B.C. is one of only 3 provinces where BAT can sell iGLO.
  Mr. Araya said the reason iGLO was launched in Vancouver was the consumer interest there and its culture of being "early adopters in new trends." Not mentioned was the fact that the product is not legal for sale in most other provinces, because it is made with menthol and citrus-flavoured tobacco. Only British Columbia, Saskatchewan and Manitoba have not banned flavoured tobacco. The federal ban on menthol, slated for implementation in October, does not apply to products which are not specified in the regulations, and will not therefore affect the sale of iGLO in B.C.
• BAT's iGLO warnings fall short of international standards.
  Unlike PMI, BAT has opted to not use one of the health warnings developed by the federal government. Instead they are using one of their own invention and occupying only a small portion of the package. (The hole in federal regulation which this reveals has been the subject of a recent letter to the Minister of Health).

In the absence of any meaningful or transparent government consultation on the future of combustible products and the usefulness (or not) of vaping and heated tobacco products to replace them, it is only when business puts its head above the ramparts that the public is made aware of the content of their regulatory proposals.

A counterpoint can be found in the United States, where the FDA announced only last week that it was looking at a way to connect approval of sale of next generation products with regulatory changes aimed at reducing (or ending) the use of combustible cigarettes.

BAT predicts 53 million vapers outside the USA within 3 years

A week or so ago, British American Tobacco presented to investors assembled under the auspices of the Deutsche Bank. A key message -- one that has been repeated by this company and its global rivals -- is that the cigarette business has now been transformed into the nicotine business.

This presentation makes a contribution to the growing data on who is using vaping products and why, and helps answer questions whether these products are aimed at switching existing smokers from conventional tobacco use, or recruiting former smokers back into nicotine use, or giving smokers something to use in addition to cigarettes. The answer, it would appear, is all of the above.

Only one-quarter of the vapers in the 12 markets they survey are people who have stopped smoking. This is roughly the same as the combined number of people who started using nicotine in this way after having quit smoking (10%) or those who had never been smokers before (12%).

BAT is predicting that by 2020 this market will pull GBP 10 billion a year (CAD 16.8 billion) out of the pockets of 56 million users who live outside the United States. If the profile of the market is maintained that would suggest that within three years 6.7 million never smokers will expose themselves to the risk of nicotine addiction by vaping, and 5.6 million former smokers will return to nicotine use. There would be 12.8 million smokers shifting to vaping and 30 million smokers using both cigarettes and vaping products.

What drives vaping, the report suggests is "social consideration and hygiene" and "flavour experiences".

The other main category of next generation products (NGP) sold by BAT is heated tobacco products. BAT's main product in this category is the GLO cigarette, which they launched in Vancouver last month.

This investor presentation showed some of the marketing around that product launch: a clubbing event, special retailing and some hipster presence. These promotions show that there is plenty of room left in the federal Tobacco Act for tobacco products to be presented with some marketing sizzle!

Not exactly swords to ploughshares. Marijuana plant opens in former tobacco factory

Earlier this month, WeedMD rang the bell at the Toronto Stock Exchange, heralding yet another investment opportunity for those who want to make money by selling smokes. In this case the investment is for (yet) another licensed producer of medical marijuana. The starting gate for the full commercialization of this drug is beginning to get a little crowded.

A footnote on on the news story was that WeedMD is operating out of the Imperial Tobacco processing plant in Aylmer, Ontario. It's been 10 years since Imperial Tobacco closed this 21 acre facility. That's potential for one very big grow-op!

Shell games with tobacco taxes

Tobacco manufacturers' profits surtax eliminated

Last Wednesday (March 22), Canada's finance Minister, the Hon. Bill Morneau, presented his second budget. Buried within it, on page 207, was an announcement that the federal government was backing out of one of the world's few special taxes on tobacco companies. He replaced the tobacco manufacturers' profits surtax with a small increase in tobacco excise tax  This tobacco tax shell game shifted the last bit of tobacco tax burden from the shoulders of corporate shareholders to the shoulders of smokers. Now, smokers bear all of the tobacco tax burden and the tobacco companies bear none.

We started with noble intentions
The government's intentions to link this tax with health programming were clear when was launched in 1994 (on the same day that the federal government announced that it would slash excise taxes in an attempt to combat contraband). In announcing the tax on February 8, 1994, Prime Minister Jean Chrétien told Parliament:

We are imposing a three-year health promotion surtax on tobacco manufacturing profits. This surtax will increase the federal tax rate on manufacturing and processing tobacco products from 21 per cent to 30 per cent. Companies will pay 40 percent more federal tax on manufacturing profits than they have in the past and the federal government will receive up to $200 million in extra revenue over the three years. The money generated by this surtax will fund the largest anti-smoking campaign this country has ever seen.

Chipping away at noble intentions

Over the years, those clear and noble intentions of 1994 were gradually chipped away. The revenue was collected for the first decade, but the spending on tobacco control soon plummeted. From $60 million a year in 1994 to $10 million  a year two years later. (Surveying the Damage, page. 49).

The Department of Finance continued to collect the money.  In 2001, the tax was made permanent, references to 'health promotion' were dropped, and the surtax rate was increased from 40% to 50%, but none of that money was earmarked for tobacco control. This information can be found buried in Footnote 26 to Table 2 of the 2005 document Tax expenditures and evaluations, produced by the Department of Finance.

Then the tobacco companies set about finding ways to avoid paying the tax.  In 2006, Imperial Tobacco moved its manufacturing operations to Mexico, thereby becoming an "importer" and avoiding the tax altogether..  Tobacco companies also use intercorporate transactions with newly-created shell companies  and intercorporate transactions with sister companies in other countries to avoid paying corporate income taxes. In 2007 and again in 2012, the government reduced the base rate of corporate tax.  This had the effect of also lowering the tax yield from the surtax. The net effect of all these tax-avoidance and tax-lowering schemes has been to whittle the tax yield from the surtax down to very little.

All of of this has been monitored by the Canadian Coalition for Action on Tobacco (CCAT), of which Physicians for  a Smoke-Free Canada is a member.  Our 2016 Brief to House of Commons Committee on Finance called for the surtax to be restored to effectiveness by making it apply to importers as well as manufacturers and by defeating various corporate tax avoidance strategies.

Clearly, our recommendation was ignored.  However, the central problem remains.  The tobacco industry avoids all financial responsibility for contributing to mitigation of  the epidemic that they have caused while government and community programs to control tobacco remain woefully underfunded.

Make Big Tobacco pay

What the Department of Finance was unwilling to do by one means can be done by another.  Experience has shown that manfacturers' profits can be manipulated and taxes on them can be also be manipulated, one way or another.  In addition, government can lower the rate of corporate profit tax, thereby lowering the yield a profits surtax.  So let's forget all that and start charging the tobacco companies a flat fee to pay for fixing the problem they created.

In 1994, Prime Minister Jean Chrétien set the cost of tobacco control at $200 million for three years.  To make up for lost time and the effects of inflation, let us set the fee at $200 million, but payable every year,  The fee could be apportioned among manufacturers and importers, according to their market share and adjusted periodically to account for inflation.  The money would go directly to tobacco control programming and could not be spent for any other purpose.

It is time to make Big Tobacco pay. And to apply that payment to health.

1.45 million smokers are still missing

2015 smoking data  from the Canadian Community Health Survey are now available

On March 22, Statistics Canada published new smoking data from the Canadian Community Health Survey (CCHS2) for the year 2015. This is the second federal government survey to provide estimates of smoking -- a little over 4 months ago, the 2015 results of the Canadian Tobacco, Alcohol and Drugs Survey (CTADS) were made public.

As we reported in a blog post last November, the gap between these two surveys keeps growing. The (larger) CCHS survey produces an estimate of the number of Canadian smokers which is 38% bigger than that of CTADS -- some 1.45 missing smokers.

Does this matter? Perhaps not at an operational level. Either number justifies the need for effective and sustained interventions on the part of government, communities, families and individuals.

But in evaluating success, the surveys leave very somewhat different impressions. According to CTUMS/CTADS, there was a 23% reduction in the number of smokers between 2005 and 2015, and a 31% reduction in smoking prevalence. The CCHS data* show a 10% drop in the number of smokers an 18% drop in prevalence. Progress by either count -- but much less so by one than the other.

	CTUMS/CTADS		CCHS		Difference
	Smokers #	%	Smokers	%	Smokers	%
1999	6,121,992	25
2000	6,007,562	24
2001	5,411,822	22	6,677,856	26	1,266,034	123%
2002	5,414,335	21
2003	5,332,326	21	6,080,504	23	748,178	114%
2004	5,116,200	20
2005	4,966,600	19	5,874,689	22	908,089	118%
2006	4,934,022	19
2007	5,176,302	19	6,112,442	22	936,140	119%
2008	4,880,488	18	6,009,311	21	1,128,823	123%
2009	4,851,274	18	5,730,321	20	879,047	118%
2010	4,701,868	17	5,967,259	21	1,265,391	127%
2011	4,910,520	17	5,764,843	20	854,323	117%
2012	4,629,987	16	5,933,095	20	1,303,108	128%
2013	4,233,300	14.6	5,722,635	19	1,489,335	135%
2014			5,400,000	18
2015	3,846,800	13	5,300,000	17.7	1,453,200	138%

* The 2001 and 2015 CCHS survey used somewhat different methods, and Statistics Canada does not compare them with results from 2003 to 2014. Another complexity in the search for estimates. 

Tobacco retailing in France

Big Tobacco hides behind tobacco retailers

In France, for much of the 20th century the entire tobacco industry – manufacturing, wholesaling and retailing – was contained in a state monopoly, SEITA (Société d’exploitation industrielle des tabacs et des allumettes). Like many other state tobacco monopolies, SEITA was broken up and passed into private hands at the end of the 20th century. Only a vestige of the former SEITA remains in the hands of the state – tobacco retailing. While the individual retailers are nominally independent business persons, their very existence as tobacco retailers relies on the authorization of the French government and their numbers are strictly limited. Currently there are about 25,500 tobacco retailers in France.

Those retailers have a trade association, the Confédération des buralistes. The French tobacco control organization, the Comité national contre le tabagisme (CNCT), has documented how this trade organization gets money from the tobacco industry and serves as its mouthpiece. The Confédération maintains a veneer of financial independence from the tobacco industry. But like all veneers, it is only a thin layer. The tobacco industry overpays the Confédération for various goods and services like advertising in trade magazines and newsletters, producing pamphlets and participation in conferences.

Canadian readers will recognize a similar pattern, where tobacco retailers are also beholden to the tobacco industry and where tobacco manufacturers have a lot of influence over retailers. Tobacco companies fund provincial and national convenience store associations and then use them as fronts to lobby against tobacco control measures.  The strategy has been largely successful. According to a previously secret internal tobacco company document, the lobbying strategy yielded no new tax increases and no new anti-tobacco regulations.

Publicly controlled tobacco retailing in France is in trouble

While the former SEITA was mostly privatized in the 1990s, the French state, through the Ministry of the Economy and Finance, maintained monopoly control over tobacco retailing and continues to hold that monopoly control to this day. From a public health point of view, the state-controlled monopoly system has a fatal flaw. The government control of the retail system is in the hands of the Ministry of the Economy and Finance, not the Ministry of Health and the former rarely or never consults the latter about how to govern tobacco retailing. The governance provided by the Ministry of the Economy and Finance has been examined, and found woefully wanting.

Tobacco retailing slammed by the Cour des comptes

Canadian readers will be familiar with the reports of the Canadian Auditor General that document government waste and misspending. The Cour des comptes serves a similar function in France. In its Annual Report,issued in February 2017, the Cour des comptes was particularly scathing in its criticism of the governance of tobacco retailing in France. As of 2015, the Ministry of the Economy and Finance had issued 25,492 contracts to individual tobacco retailers, and only those retailers are allowed to sell tobacco in France. In addition, there are eight programs that offer a variety of government subsidies to tobacco retailers. These subsidies are meant to help cover the costs of increasing store security, to help with diversification of services offered by the retailer, and to serve as supplementary retirement income, among other purposes. All were found to be poorly targeted and poorly controlled. There was evidence of fraud and there was little evidence that any public purpose was being served.

One activity that the Finance Minister requires of the tobacco retailers seems laudable. By a regulation renewed on January 16, 2017, tobacco retailers are required to undertake both initial training and in-service government-sponsored training on how to run their businesses. On both occasions, the training include modules on “public health issues concerning tobacco, tobacco’s place in society and the health hazards of tobacco use. ” But the Cour des comptes found fault with its past implementation. No information is collected on the quality of the supposedly obligatory training in public health issues. There is no proof available to the Cour des comptes that the training even occurs with the required regularity. (2017 report of the Cour des comptes, footnote 272).

The Cour des comptes found the whole system so out of touch with public policy that it called for nothing less than wholesale reform of the entire system:

“With regard to tobacco retailing, the central objective of current public policy favours public health. Recent policy decisions seek to reduce tobacco consumption. At the same time, various programs of support for tobacco retailers are being developed and implemented by the Customs Authority or the Ministry of the Economy and Finance, in close collaboration with the tobacco retailers’ association (Confédération des buralistes) that co-manages some of the programs. The Ministry of Health is absent from these processes.

“This lack of cohesion in public policy results in inappropriate support to the tobacco retailing profession. The system needs to be completely rebuilt. ” (author’s translation)

Advice to France:  Do not throw the baby out with the bathwater

In the face of such a damning assessment by the Cour des comptes, one might be tempted to give up on public administration of tobacco retailing and privatize the whole sector. We would urge France to reject this option. Canadian experience, where tobacco retailing has always been in private hands, shows that, as bad as the problems might be in France, they could be worse. In Canada, Big Tobacco has gained near complete control over tobacco retailing by eliminating distributors and putting retailers under direct contract. In addition to using tobacco retailers’ associations as lobbyists, Big Tobacco controls the prices that retailers can charge for cigarettes. The Quebec Coalition for Tobacco Control (Coalition québécoise contre le tabagisme– CQCT) has documented how retailers are forced to sell some brands at high prices and others at low, discount prices. The discount brands are prices so low that the intended deterrent effect of tax increases has been completely subverted. Under Canada’s private-sector distribution system, retailers, both individually and collectively, have become foot soldiers in Big Tobacco’s war on tobacco control measures. As it considers how to reform tobacco retailing, France should not consider privatization as a viable option.

More advice to France:  Reform tobacco retailing and give it a public health purpose

There can be no doubt that the system of tobacco retailing in France is badly in need of reform. But, at the very least, France has a system, and it can be reformed. The Cour des comptes has pointed the way towards constructive reform of tobacco retailing. Here are some suggestions for reform, largely inspired its recent report:

• Maintain government control of tobacco retailing, but align the operation of tobacco retailing with the government’s public health goal of reducing tobacco consumption.
• Include the Minister of Health as one of the Ministers responsible for the administration of tobacco retailing.
• Ensure conformity with all public health and tobacco control laws and regulations by every tobacco retailer.
• In conformity with Article 5. 3 of the Framework Convention on Tobacco Control (FCTC), prohibit retailers, either individually or collectively through their trade associations, from receiving any direct or indirect payments or any other form of in-kind consideration from the tobacco industry or its representatives. (As agents of the state, retailers should be considered part of the government’s tobacco control system and therefore subject to the FCTC requirement for non-interference of the tobacco industry.).
• Require tobacco retailers and their employees to undertake training in how to give brief, effective advice on smoking cessation and how to refer smokers to community smoking cessation resources. Monitor the effectiveness of their smoking cessation work and develop a system of incentive payments for notable success in their work on providing smoking cessation advice and referral.
• Encourage diversity in the goods and services offered by tobacco retailers.
• End all subsidies described as ineffective by the Cour des comptes. Partially replace such subsidies with new ones that will contribute to the government’s goal of reducing tobacco consumption.