New frontier, new power: the retail environment in Australia's dark

RESEARCH PAPER

New frontier, new power: the retail environment in

Australia’s dark market

S M Carter

...............................................................................................................................

.......................

Correspondence to:

Stacy M Carter, School of

Public Health, Room 128A

Building A27, University of

Sydney NSW 2006,

Australia;

[email protected].

edu.au

.......................

Tobacco Control 2003;12(Suppl III):iii95–iii101

Objective: To investigate the role of the retail environment in cigarette marketing in Australia, one of the

‘‘darkest’’ markets in the world.

Design: Analysis of 172 tobacco industry documents; and articles and advertisements found by hand

searching Australia’s three leading retail trade journals.

Results: As Australian cigarette marketing was increasingly restricted, the retail environment became the

primary communication vehicle for building cigarette brands. When retail marketing was restricted, the

industry conceded only incrementally and under duress, and at times continues to break the law. The

tobacco industry targets retailers via trade promotional expenditure, financial and practical assistance

with point of sale marketing, alliance building, brand advertising, and distribution. Cigarette brand

advertising in retail magazines are designed to build brand identities. Philip Morris and British American

Tobacco are now competing to control distribution of all products to retailers, placing themselves at the

heart of retail business.

Conclusions: Cigarette companies prize retail marketing in Australia’s dark market. Stringent point of sale

marketing restrictions should be included in any comprehensive tobacco control measures. Relationships

between retailers and the industry will be more difficult to regulate. Retail press advertising and trade

promotional expenditure could be banned. In-store marketing assistance, retail–tobacco industry alliance

building, and new electronic retail distribution systems may be less amenable to regulation. Alliances

between the health and retail sectors and financial support for a move away from retail dependence on

tobacco may be necessary to effect cultural change.

ustralia is a highly restricted marketing environment

for tobacco. Federal Australian law has made most

forms of tobacco marketing illegal, starting in 1976 and

reaching a watershed in the (Federal) Tobacco Advertising

Prohibition (TAP) Act 1992.

On a background of existing

television, radio, and cinema bans, the TAP Act prohibited

print advertising, domestic sponsorships, and billboard

advertising with some exceptions, including ‘‘internationally

significant’’ sponsorships and advertising in retail trade

publications.

The TAP Act permits in-store advertising,

although this is overridden if stronger State legislation exists.

Australia’s eight states and territories are inconsistent on

point of sale (POS) advertising and promotions.

This paper was stimulated by a desire to understand how

manufacturers approach the role of retailers in a restricted

market like Australia. Another paper in this supplement

explains the difference between above-the-line marketing

(mass media advertising) and below-the-line marketing

(which includes POS marketing). It also describes the general

trend across industries towards integrated marketing, the

tobacco industry’s increased investment in below-the-line

advertising to prepare consumers for impending restrictions

on above-the-line, and the non-retail marketing strategies

used to promote cigarettes in Australia.

Another relevant

paper in this supplement discusses the three brand categories

operating in Australia—premium, mainstream, and super-

value.

Some international research has considered the role of the

retailer in marketing. US research has shown that retailer

incentive payments (for POS agreements) are growing

;

retailers receive proportionally more incentives from tobacco

than other industries

; and 81% of industry marketing

expenditure is on these ‘‘promotional allowances’’, through

contracts which stipulate terms such as in-store placement

and reimburse retailers for selling at cheaper prices.

The US

industry’s retail marketing plans reflect the age, race, and

wealth of the retailer’s customers,

8–10

and POS promotions are

used more extensively in contexts where other industry

strategies are curbed by regulation.

Retail marketing and

relationship building with retailers in the UK has also been

described.

One small study of retailer compliance with new

marketing restrictions in Western Sydney showed a high

degree of compliance, and suggested that non-compliant

retailers had sometimes been misinformed by industry

representatives.

Other than this study, there has been little

exploration of the significance of retail marketing in

Australia in the literature.

METHODS

This paper draws on three sources: tobacco industry docu-

ments, reporting in Australian retail trade publications, and

cigarette advertising in Australian retail trade publications.

Tobacco industry documents came from sites on the world

wide web arising from litigation in the USA.

Documents

came from the primary sites of the manufacturers,

the

Council for Tobacco Research,

and the US Tobacco

Institute,

and the secondary sites of Tobacco Documents

Online (Bliley, BC, Health Canada and Guildford

Miscellaneous collections),

the Canadian Council for

Tobacco Control site,

the British Columbia Ministry of

Health Services site,

and the Center for Disease Control

Guildford site.

The search string (pagewood or moorabbin

................................................................

Abbreviations: BATA, British American Tobacco Australia; PML, Philip

Morris Australia Limited; POS, point of sale; TAP Act, Tobacco

Advertising Prohibition Act; TPE, trade promotional expenditure

iii95

www.tobaccocontrol.com

or granville or australia or sydney or melbourne or brisbane

or hobart or adelaide or perth or canberra or amatil or wills)

has been used throughout the project to gather documents

relating to the Australian market. Six hundred and ninety

two of these were relevant to cigarette branding in Australia,

and of these 172 dealt specifically with issues of transport-

ability of brands and the importance of retailers. This paper

presents only a subset of the evidence: all 172 documents are

available from http://tobacco.health.usyd.edu.au/site/gate-

way/docs/search.htm. An overview of our approach to

document searching and analysis is available elsewhere.

The three main trade journals—Australian Retail Tobacconist,

Retail World, and Australian Service Station and Convenience Store

News (pre November 2001)/Australian Convenience Store News

(post November 2001)—were searched by hand from 1990 to

the present. All articles and corporate advertisements that

mentioned tobacco products or companies were copied.

Industry documents and articles from retail trade publica-

tions were collected and analysed in the same way. A

materialist, intersubjective position was assumed

23 24

; the aim

was to understand cigarette retailing from the industry and

the retailers’ point of view. All identified statements to

cigarette retailers or about cigarette retailing were annotated

verbatim, organised chronologically, and then grouped

iteratively into emergent themes.

In addition advertisements for ready made cigarettes in

retail trade publications were examined. All advertisements

placed by Philip Morris Australia Limited (PML), British

American Tobacco Australia (BATA), or Imperial Tobacco

Limited for ready made cigarettes from January 2001 to June

2003 were colour copied. One hundred instances of advertis-

ing, comprising 44 unique advertisements for only 13 brands

were identified from the 30 month period of study.

Advertisements were classified into the three brand cate-

gories defined by the Australian cigarette industry: premium

(quality, mostly international brand cigarettes), mainstream

(the ‘‘Aussie’’ brands Peter Jackson and Winfield), and

supervalue (budget cigarettes).

The author further classified each unique advertisement

according to five questions, which are defined in table 1.

A positioning statement is defined as ‘‘the part of the

brand identity and value proposition that is to be actively

communicated to the target audience… [to] demonstrate an

advantage over competitor brands’’.

25 26

Brand identity is

defined as ‘‘a set of associations the brand strategist seeks to

create or maintain… what the organisation wants the brand

to stand for’’ and the ‘‘value proposition’’ is a statement of

the benefits that the brand offers.

25 26

Examples of Australian

positioning statements are ‘‘Anyhow, have a Winfield’’,

‘‘Longbeach 40s: more to enjoy’’, ‘‘Fresh is Alpine’’,

‘‘Medium: when you want a flavourful mid tar cigarette’’,

and ‘‘West Ice cool taste’’.

RESULTS

The POS in Australian cigarette marketing

The Australian industry has always used the retail environ-

ment as a conduit for personal communication with

consumers. As early as 1955 Philip Morris promised retailers

‘‘free, top quality display material’’.

By the 1960s Australia

was ‘‘a lively active market with a great deal of aggressive

advertising and point of sale’’, and Philip Morris employed 44

‘‘salesmen’’. These salesmen serviced retailers and performed

consumer tradeups. In a ‘‘tradeup’’ the salesman exchanged

a packet of Philip Morris cigarettes for the cigarettes a

consumer was smoking, an activity they were expected to

perform opportunistically everywhere they went.

In the 1970s and 1980s manufacturers provided retailers

with everything from signs announcing opening hours, push/

pull door signs, menu boards and clocks, as well as in-store

premiums (gifts with purchase, often linked to branded

sports sponsorship), hostesses, competitions, and ‘‘switch

selling’’ programmes. ‘‘Switch selling’’ occurred when a

customer asked for a competitor brand of cigarettes in a

shop: the company sales representative would offer to buy

the customer a packet of their company’s brand instead.

29–32

The rise of retail as marketing was restricted

In 1992, a PML presentation argued: ‘‘new government

restrictions are rapidly increasing the importance of retail

marketing as a part of the overall marketing mix. With this

comes aggressive competition for in-store space and impor-

tantly, cut through* to the consumer…’’.

Previous to the

TAP Act, above-the-line had been the primary vehicle for

building brand image, and below-the-line strategies ‘‘pro-

vid[ed] important support for these established images’’.

The ‘‘net result’’ of the TAP Act, argued PML’s spokesperson,

was that ‘‘we must now extend below the line programs to

encompass the image building role… retail marketing is

therefore no longer the support mechanism, [but] the

primary communication vehicle’’.

In the early 1990s, before and after the TAP Act was

introduced, the industry poured resources into ‘‘big specials

which both reward and involve smokers’’,

including

gondola end spectaculars (large three dimensional displays

covering the entire end of a grocery aisle), competitions and

sweepstakes, window displays, promotions in unique retail

settings such as cafes and video stores, premiums, and more

frequent changes in imagery, all in search of the holy grail of

consumer attention and awareness.

34–36

To create ‘‘over-

powering’’ beach imagery in shops in the early days of

PML’s Longbeach brand, for example, old two dimensional

display units were replaced by ‘‘full 3D representations of the

beach environment’’, including ‘‘beach chairs… sand, sea-

gulls and even footprints on the floor’’, supported by beach

photographs incorporated into the pack, and themed

premiums such as beach bags.

On the eve of local sponsorship bans, PML wrote: ‘‘as of

1996, the primary point of communication between ourselves

and our consumers will be inside a retail outlet… In-store

POS material, discounted stock units, on-pack premium

offers, strategically located stock displays in-store (as well as

in windows and showcases), need to be dominated by PML...

In summary, the spend focus has shifted from media,

outdoor and consumer promotions to in-store [POS manage-

ment], contracting for display space, partnerships with

Table 1 Criteria for analysis of tobacco advertisements

from retail trade publications

Question Yes if:

Was something ‘‘new’’ formally

announced in the advertisement?

The adjective ‘‘new’’ was used to

describe a featured brand or variant

Did a cigarette pack appear? A picture of one or more cigarette

packs appeared

Was imagery (excepting a

cigarette pack or trademark)

used?

Non-text photographs or graphics

appeared portraying something other

than a cigarette pack or trademark

Was retailing information

provided?

The advertisement contained text

which actively addressed the retailer,

describing business benefits such as

profit margins, sales figures or brand

Was a positioning statement

used?

The advertisement contained a

positioning statement for the brand

................................................................

*‘‘Cut through’’ is marketing jargon for getting the consumer’s attention

above the ‘‘noise’’ of a crowded advertising environment.

iii96 Carter

www.tobaccocontrol.com

retailers to build business, and international sponsorships.’’

Accordingly, by 1995 PML already had ‘‘long term agree-

ments with retailers to ensure a dominant POS presence’’ in

preparation for restrictions.

Responses to retail marketing restrictions

Given the increased importance of retail in a restricted

marketing environment, it is not surprising that, as various

states limited POS promotions, the industry’s retail strategies

constricted only incrementally and under duress. Mass

displays of cartons were used to ‘‘paint a billboard’’, but

were soon noticed by regulators.

When regulation prevented

POS displays from including brand logos, brand colours were

used instead through balloons and streamers.

The same

occurred for premiums. Originally items selected for their

resonance with a brand’s identity were branded with trade-

marks and offered as gifts with purchase. When trademarks

on gifts were banned, the same gifts continued to be offered,

in the colours of the brand, minus the trademark. In 1995, for

example, smokers who bought two packs of Marlboro were

offered a red cap with an F1 car (rather than a Marlboro

logo) embroidered on it.

When premiums for cigarette

purchases were banned Wills gave retailers cricket bats to

raffle to consumers who bought ‘‘anything to the value of a

carton of Benson & Hedges’’.

Where possible, POS displays capitalised on the long-

standing international sports sponsorships of the cigarette

brands. This was seen by the manufacturers to provide

‘‘unquestionable legitimacy’’ at the POS: the familiarity of

the link between the sport and the product and the synergy

between the display and the sport, making consumers more

comfortable with the marketing.

Manufacturers remain

willing to test the law—for example, with a recently used

custom made silver bar-refrigerator holding Alpine cigarettes

for sale in shops, illegal in NSW

but tested by the

manufacturers anyway. PML believes that legislation for-

cing all cigarette products below the counter is probable

across Australia in the medium term.

The new power of retailers and the industry’s

response

Retailers are important to tobacco companies, as almost all

cigarettes are sold in retail shops. Conversely, tobacco

products are an extremely important category for many retail

businesses. Unfortunately the retail sector is complex and

availability and quality of data from public sources on retail

cigarette sales is inconsistent, and thus difficult to summar-

ise. The most comprehensive review available suggested that

the margin of sales from cigarettes and tobacco as a

proportion of gross margin was 71% for tobacconists, 20%

for petrol stations, 17% for convenience, 11% for grocery, and

8% for mixed businesses.

AC Nielsen creates an annual ‘‘Top

100 Brands’’ report on the grocery/supermarket sector based

on sales value, and tobacco brands reliably inhabit six out of

the top 10 places in this list, beaten only by Coca Cola. A

report on the convenience store sector based on data from

2000 showed that the ‘‘cigarette’’ category accounted for

34.68% of total sales, far exceeding the next largest

categories, beverages (12.7%), milk (8.03%), and confection-

ery (7.86%).

Although the data are difficult to pin down,

there is no doubt that tobacco is important to the Australian

retail sector.

Despite this apparent dependence on tobacco, a combina-

tion of the disappearance of above-the-line and concentration

of the grocery market in Australia

has put large retailers in

particular in a strong negotiating position, and their loyalty is

not guaranteed. Cigarette manufacturers maintain their

relationships with retailers through five channels:

trade promotional expenditure

in-store display hardware and assistance with POS

marketing

corporate advertising and alliance building

brand advertising direct to retailers

a new, innovative electronic distribution system.

Trade promotional expenditure

Trade promotional expenditure (TPE) consists of retailer

rewards, retailer loyalty programmes, rebates, and price

supports.

43–46

Price support and rebates direct to the retailer

have been important since at least the 1960s and are

increasingly so

46–49

; in the absence of above-the-line advertis-

ing, the industry sees such pricing strategies as an increas-

ingly important component of marketing.

Loyalty

programmes, in contrast, provide personal rewards to the

retailer. In 1995, for example, PML ran an incentives scheme

where retailers who placed Longbeach products prominently

received ‘‘Longbeach Dollars’’ that could be spent at special

auction nights.

Such rewards must be sufficient to stimulate

loyalty, as demonstrated by a failed 1994 Rothmans

programme in which the rewards were too low.

Display units and assistance with POS marketing

RJ Reynolds reported that ‘‘[Australian] retailers immedi-

ately realised they were sitting on a ‘‘gold mine’’ at retail

when print and OOH [out of hours] went away’’, and that as

a result ‘‘the cost of the real estate went through the roof for

Australia’’, forcing manufacturers to pay millions of

Australian dollars for entire massive sets of retail display

hardware to ensure ‘‘an advantaged position (the only piece

of 2000 cm advertising)’’.

Presumably this high cost was not

just for the physical manufacture and installation of the

units, but also a large fee for the right to use the only small

piece of advertising space still available. PML has also

acknowledged the importance of providing ‘‘innovative and

customised instore [display] hardware’’

and other mer-

chandising supports, shouldering the financial burden placed

on retailers as a result of regulatory changes to the display of

cigarettes. As RJ Reynolds noted: ‘‘[providing customised

hardware] could play a major role in the future on who is

perceived as the must-have companies. Retailers will be

looking for new and creative ways to sell and merchandise

cigarettes.’’

Personal relationships between company representatives

and retailers certainly appear to be valued in tobacco culture,

as evidenced by awards to staff who excel in developing these

‘‘invaluable’’ relationships,

and RJ Reynold’s concern that

after TAP ‘‘field people [were] totally confused about what

[was] important… morale was five times worse than their

expectations…[and] massive cultural/past behaviour change

issues…existed’’.

‘‘Field people’’ assist retailers with every-

thing from planograms or POGs—diagrams that show how

and where to display products in order to increase customer

purchases—to local area marketing—designing a stock

selection and display tailor made for the demographics of

the area in which the business is situated.

In 1998 a Wills marketing manager illustrated just how

serious the industry is about the minutiae of legal cigarette

displays in regulation sales units. ‘‘We’ve been pushing

retailers to put their cigarettes on the back wall, and we’ve

had some initiatives where we’ve block-stocked our products.

Instead of using a gravity-fed overhead dispenser, we’ve used

a cascade tray to build up a big brand image. That orients the

................................................................

A picture of this display unit can be viewed at http://www.ashaust.

org.au/lv4/Lv4resources_tobacco_ads.htm

Retail marketing in Australia iii97

www.tobaccocontrol.com

product towards the consumer rather than having it facing

the floor so you see more of the packet. The company has also

changed the packet colours on one of its major brands—

Horizon—so that it’s a uniform blue. The aim of the exercise

is instant recognition: along with Benson and Hedges, that’s

given us full gold and blue blocks on display and that helps

our brands stand out.’’

The maintenance of ‘‘POS dom-

inance’’, the strengthening of brand symbols and colours for

instant recognition (via pack design), and the extension of

these colours and the brands’ personalities into the POS are

continuing, carefully negotiated strategies,

which also offer

benefits to the retailer through highly organised and

professional support for their merchandising.

Alliance building

The manufacturers promote their corporate image direct to

retailers, and work to recruit retailers as political allies.

44 53 54

Retail trade publications contain both editorials consistent

with tobacco rhetoric and photographs of tobacco manufac-

turers’ constant presence at retail trade fairs, seminars, and

award nights.

All three manufacturers take out frequent corporate

advertising in retail trade journals, promising the retailer

better service and support and urging them to work with

company representatives to ‘‘maximize your profits’’.

51 55

Each promotes a slightly different corporate identity. BATA,

the serious industry leader, warns about the penalties for

selling ‘‘chop chop’’ (illegal loose tobacco), promises to

provide important information on its corporate website, and

occasionally promotes the benefits of its brands with dense

pages of text and graphs. PML’s corporate image is more

approachable, promising good service and support, brands

that young people like to smoke, and bigger profits. Imperial,

the new entrant, promises high tech ‘‘younique’’ service

unencumbered by age and tradition, pledging ‘‘at Imperial,

we take a more individual approach to your business. We

listen, we learn and we deliver’’. Tobacco is part of retail

culture.

Brand advertising in trade publications

Another important channel of communication between the

industry and retailers is brand advertising in retail trade

publications. A total of 44 such advertisements were

examined as previously described. The results are presented

in table 2.

The advertisements examined did not solely or even

primarily perform an information function. Only a minority

announced something new, such as changes in pack size,

pack style, or tar banding.

Two kinds of imagery appeared in the advertisements:

packs or trademarks, and other imagery. Retailers selling

cigarette products need to be able to identify cigarette packs:

this enables them to make orders and provide customers with

the products they request. It is thus unsurprising that

advertising in retail trade publications frequently contained

pictures of packs. However, it is not necessary for a retailer to

be able to associate, for example, Alpine with deserted

beaches or Winfield with boxing matches. Despite this,

particularly in premium and mainstream advertising, ima-

gery in addition to the trademark or pack was also used to

Table 2 Content of brand advertising in retail trade publications*

Premium Mainstream Value Total

Number of unique advertisements 23 11 10 44

Number of brand families represented 8 2 3 13

New things announced 8 5 4 17

Cigarette pack appears 19 11 9 39

Imagery other than pack or trademark used 20 9 6 35

Text schools in retailing 6 9 8 23

Positioning statement used 15 6 7 28

*Number of unique advertisements January 2001 to June 2003 containing the listed content.

Figure 1 Mainstream advertisement,

featuring positioning statement and

imagery to build brand identity as well

as retail information regarding sales

volume.

iii98 Carter

www.tobaccocontrol.com

build these associations, attempting to create brand identities

in the retailers’ minds.

25 26

Imagery used included 1950s-style

photographs; carefree beach scenes; abstract compositions

based on electrical wires and computer chips; scenes of

fishing, playing billiards or doing woodwork; nightclub-style

lights; calm lakes; and tablecloths holding soothing cups of

coffee.

The function of text in the advertisements also differed

between the brand categories premium, mainstream, and

supervalue. Positioning statements for high profit premium

brands in particular were relatively abstract and focused on

building brand identity,

25 26

including ‘‘WHEN YOU’RE READY’’,

‘‘Fresh is Alpine’’,

‘‘LIVE&WIRED’’, ‘‘CONNECT&COMMIT’’, ‘‘The spirit

of Marlboro in a light cigarette’’, ‘‘

TEST IT’’, or ‘‘Passion for

Power’’. Positioning statements for mainstream (fig 1) and

supervalue brands more frequently emphasised the value

proposition for the brand, such as ‘‘Australia’s best value’’.

Text which explicitly schooled in retailing was proportionally

far less common for premium brands, consistent with the

strong brand identity building orientation in their advertis-

ing.

e-Distribution: placing tobacco companies at the

heart of retail business

A 1994 PML document observed: ‘‘the importance of the

distribution system is growing as more marketing restrictions

are placed on the industry.’’

Accordingly, both BATA and

PML have made globally unique efforts in the area of

distribution in recent years. Both now have associated

companies—e-Orders, established by PML in January 2001,

and Quatro Four, launched by BATA in December 2001—

which operate as major integrated distribution hubs for small

retailers (convenience, newsagents and petrol stations,) not

just for tobacco products, but for a range of fast moving

consumer goods including beverages, confectionery, ice

cream, phone cards, convenience foods, dairy products, and

automotive parts.

e-Orders has 650 retail customers, and

Quatro Four signed more than 2000 in its first nine months of

operation, including both national chains and small inde-

pendent retailers.

56 57

Although at present retailers can use both systems

simultaneously for different products, the trade thinks that

‘‘ultimately, there is only really room for one ordering system.

The two electronic ordering specialists—e-Orders and

Quatro—are scrambling for critical mass, for retailers and

suppliers’’.

e-Ordering has become a new frontier for

competition and control between the manufacturers. The

systems are currently advertised and editorialised about

extensively in the trade literature, promising increased

efficiency, tailoring, reduced supply chain costs to the

retailer, integration with POS technology to enable auto-

mated stock management, and upcoming financial manage-

ment services such as electronic invoicing and automatic

account payment. Quatro Four offers incentives such as a

years’ free internet access for joining up, and promises

convenience store owners that they will ‘‘help you compete

with the big guys’’ (large grocery supermarket chains) by

providing budget priced POS computer systems and other

technology.

It is important to note that these two initiatives are not

centralised systems rolled out to Australia from overseas—

they are local startup enterprises, and may in fact be

implemented in overseas markets by PMI and BAT if they

continue to be successful. Both systems contain tobacco

advertising, position tobacco at the heart of a retailer’s

business along with other more benign product categories,

and according to their spokespeople ‘‘will enable sales reps to

go back to being professional representatives for their

companies, helping retailers to build their sales, rather than

spending inordinate amounts of time as order takers’’.

remains to be seen whether the manufacturers value sales

representatives as they say they do, or whether an increase in

e-ordering will lead to their redundancy.

DISCUSSION

The POS, always an important marketing environment for

the Australian cigarette industry, has been transformed in

the last five decades. Originally retail marketing was a mere

support mechanism for above-the-line activities. When

above-the-line was banned, the retail environment became

the front line for brand building, absorbing massive resources

and being seen as the primary site for sustaining relation-

ships with the consumer. When retail was restricted by some

states, the industry conceded only incrementally and under

duress. The fact that the law is broken in retail marketing

suggests that the retail promotions, however modest, are still

highly prized in Australia’s dark market.

Given that the industry explicitly defines retail as the new

frontier in a dark market, effective tobacco control regulation

should include stringent control of the retail environment.

Given the industry’s creativity and risk taking, the only way

of preventing promotion of products at retail would be to

require all products to be placed under the counter.

Consumers could make purchases from product listings,

and the law could define and standardise the format of these

listings, allowing only product names and differentiating

information such as pack size. The industry expects tobacco

products to be forced under the counter, and their expecta-

tions should be fulfilled.

Another measure of the importance of the retail environ-

ment is the energy and resources expended by the industry

on their relationships with retailers, demonstrated through

trade promotional expenditure, in-store marketing assis-

tance, alliance building, brand advertising in the trade press,

and the new electronic retail distribution system. Regulating

some of these aspects of the retail environment will be much

more difficult than regulating the display of products.

Elements potentially more amenable to change are

branded advertising in the retail press and TPE. Given that

TPE impacts on price and thus can reduce the effectiveness of

taxation strategies, the possibility of regulating it on

economic as well as marketing grounds could be considered.

Branded product advertising to retailers could potentially be

banned in the upcoming review of the TAP Act. Brand

identities are built in these advertisements by associating

brands with distinctive imagery and by the use of brand

positioning statements. In premium cigarette advertising in

particular, brand identity building is more prominent than

retailing information. It is hard to imagine why the tobacco

industry would continue investing in such brand building

activity if they did not think it was beneficial to the business

of selling more cigarettes. Retailers’ brand recognition

requirements could be fulfilled by simple text lists and

thumbnail package illustrations, a format already used for

presenting information on brand share in some publications.

Retailing information, such as market share and profit

margins, could readily be provided without being associated

with brand identity building imagery.

The tradition of the industry paying for in-store display

hardware provides an opportunity. This precedent means that

regulatory changes in retail displays could in future be

defined as the industry’s financial responsibility, reducing

the burden on individual retailers. In contrast, the industry’s

traditional role in supporting and informing retailers as to the

display of cigarettes should ideally be absorbed by health

authorities, moving the emphasis from maximising sales to

compliance with regulation. If the rise of e-distribution does

Retail marketing in Australia iii99

www.tobaccocontrol.com

undermine the role of the sales representative it may provide

a window of opportunity to effect this change.

The major threats to tobacco control in the retail sector

appear to be the strong political alliances between tobacco

and retail, profits that tobacco products offer to retailers, and

the new developments in e-distribution. These will all be

difficult to disrupt. It may be necessary for health groups to

begin traditional alliance building activities with the retail

sector, as has been done to an extent with the sporting sector

in the advent of local sponsorship bans. It may also be

necessary, as occurred in sport and the farming sector, to

commit some proportion of public monies to support the

movement of small businesses away from dependence on

tobacco and into other categories. Given the tobacco tax

windfall that the federal government collects and does not

hypothecate, this seems a reasonable means by which to

acknowledge the genuine financial dependence of some

small businesses on tobacco.

If these regulatory challenges can be met, and other forms

of below the line marketing are also regulated, Australia may,

finally, become a truly dark market for tobacco.

ACKNOWLEDGEMENTS

Thanks to Simon Chapman and reviewers for helpful comments and

Fiona Byrne for indispensable information management. The

research reported in this paper was supported by grants from the

National Health and Medical Research Council (2001–2003

#153857) and the US National Institutes of Health (2001–2005 #

R01 CA87110–01A1).

REFERENCES

1 Commonwealth of Australia. Tobacco Advertising Prohibition Act.

Commonwealth Consolidated Acts, 1992. http://www.austlii.edu.au/au/

legis/cth/consol_act/tapa1992314/index.html (Accessed 14 Jul 2003)

2 National tobacco legislation analysis: summary of existing legislation.

2003. http://tobacco.health.usyd.edu.au/site/supersite/resources/pdfs/

aus_tobacco_legislation.pdf (Accessed 2 Sep 2003)

3 Carter SM. Going below the line: creating transportable brands for Australia’s

dark market. Tobacco Control 2003;12(suppl III):iii87–94.

4 Carter SM. The Australian cigarette brand as product, person, and symbol.

Tobacco Control 2003;12(suppl III):iii79–86.

5 US Federal Trade Commission. Tobacco information page. US Federal Trade

Commission, 2003. Accessed 14 Jul 2003. http://www.ftc.gov/bcp/menu-

tobac.htm.

6 Feighery EC, Ribisl KM, Achabal DD, et al. Retail trade incentives: how

tobacco industry practices compare with those of other industries. Am J Public

Health 1999;89:1564–6.

7 Feighery E, Ribisl K, Clark PI, et al. How tobacco companies ensure prime

placement of their advertising and products in stores: interviews with retailers

about tobacco company incentive programmes. Tobacco Control

2003;12:184–8.

8 Muggli ME, Pollay RW, Lew R, et al. Targeting of Asian Americans and Pacific

Islanders by the tobacco industry: results from the Minnesota Tobacco

Document Depository. Tobacco Control 2002;11:201–9.

9 Laws MB, Whitman J, Bowser DM, et al. Tobacco availability and point of sale

marketing in demographically contrasting districts of Massachusetts. Tobacco

Control 2002;11(suppl II):ii71–3.

10 Anon. Point-of-purchase tobacco environments and variation by store type—

United States, 1999. MMWR Morb Mortal Wkly Rep 2002;51:184–7.

11 Slater S, Chaloupka FJ, Wakefield M. State variation in retail promotions and

advertising for Marlboro cigarettes. Tobacco Control 2001;10:337–9.

12 Anderson S, Hastings G, MacFadyen L. Strategic marketing in the UK tobacco

industry. Lancet Oncol 2002;3:481–6.

13 Goldthorpe I, Jorm L. Compliance with the Tobacco Advertising Prohibition

Act 1991 in Western Sydney. Sydney: Western Sector Public Health Unit,

1994.

14 Malone RE, Balbach ED. Tobacco industry documents: treasure trove or

quagmire? Tobacco Control 2000;9:334–8.

15 Tobacco manufacturers’ document websites. http://www.pmdocs.com-bin/

rsasearch.asp; http://www.bw.aalatg.com/public.asp; http://

www.lorillarddocs.com/cgi-bin/rsasearch.asp; http://www.rjrtdocs.com/

rjrtdocs/index.wmt?tab = home

16 Council for Tobacco Research document website. http://www.ctr-usa.org/

ctr/index.wmt?tab = home.

17 Tobacco Institute document website. http://www.tobaccoinstitute.com/cgi-

bin/Rsasearch.asp

18 Tobacco Documents Online. Smokescreen Corporation. http://

tobaccodocuments.org/

19 Canadian Council for Tobacco Control tobacco documents site. http://

www.ncth.ca/Guildford.nsf

20 British Columbia Ministry of Health Services tobacco documents site. http://

www.moh.hnet.bc.ca/cgi-bin/guildford_search.cgi

21 Center for Disease Control and Prevention Guildford tobacco documents

site. http://www.cdc.gov/tobacco/industrydocs/index.htm

22 Chapman S, Bryne F, Carter SM. ‘‘Australia is one of the darkest markets in

the world’’: the global importance of Australian tobacco control. Tobacco

Control 2003;12(suppl III):iii1–3.

23 Potter W. An analysis of thinking research about qualitative methods, 1st ed.

Mahwah New Jersey: Lawrence Erlbaum Associates Publishers, 1996.

24 Silverman D. Doing qualitative research: a practical handbook. 1st ed.

London: SAGE publications, 2000.

25 Aaker D, Joachimsthaler E. Brand leadership, 1st ed. London: Free Press

Business/Simon & Schuster, 2000.

26 Aaker D. Building strong brands, 1st ed. New York: The Free Press/Simon &

Schuster, 1996.

27 Retail Tobacco Traders Association. The Australian Tobacco annual, 1956.

Dec 1955. Philip Morris. Bates No. 2504085100/5166. http://

legacy.library.ucsf.edu/tid/fnd71f00

28 Weissman G. Australia. 23 Mar 1964. Philip Morris. Bates No.

2012580062/0070. http://legacy.library.ucsf.edu/tid/wkb66e00

29 Smith P. WD & HO Wills (Australia) Limited. [Memo to John J. Howley of

Brown & Williamson International Tobacco]. 29 Dec 1978. Brown &

Williamson. Bates No. 661076840/6844. http://legacy.library.ucsf.edu/

tid/bpe70f00

30 Smith P. WD & HO Wills (Australia) Limited. Kent merchandising. 29 Jun

1979. Brown & Williamson. Bates No. 661076740/6742. http://

legacy.library.ucsf.edu/tid/ape70f00

31 License Agreement—Philip Morris, Australia. 20 Oct 1983. American

Tobacco Company. Bates No. 968122490/2496. http://

legacy.library.ucsf.edu/tid/otq11a00

32 Batten K. PMA weekly highlights. 9 Mar 1984. Philip Morris. Bates No.

2023265803/5806. http://legacy.library.ucsf.edu/tid/bxr98e00

33 Philip Morris. [Presentation notes—slides 1–73 Australian retail market: notes

for a NY Marketing Meeting]. 1992. Philip Morris. Bates No. 2504107172A/

7192. http://legacy.library.ucsf.edu/tid/dii29e00

34 Philip Morris. 1991 original budget: Marketing Presentation. 3 Oct 1990. Oct

1990. Philip Morris. Bates No. 2504107139A/7171. http://

legacy.library.ucsf.edu/tid/aii29e00

35 Goldberg H. 1994 second revised forecast presentation, June 1994, New

York. May 1994. Philip Morris. Bates No. 2504204001/4063. http://

legacy.library.ucsf.edu/tid/ygn32e00

36 Zufic D. [Forms part of a fax from Denis Zufic to Robert Sarmento on the topic

of government restrictions that impede the Australian Tobacco Industry].16

Aug 1995. Philip Morris. Bates No. 2071284487/4490. http://

legacy.library.ucsf.edu/tid/nkq08d00

37 Stockdale B. Australia trip: topline learning (highly restricted market). 12 Feb

1997. RJ Reynolds. Bates No. 518093846/3852. http://

legacy.library.ucsf.edu/tid/ads90d00

38 Turner P. Consumer promotions. 21 May 1993. British American Tobacco.

Bates No. 301742098/2099. http://tobaccodocuments.org/

health_canada/30174209.pdf (Accessed 24 Jun 2003)

39 New South Wales Parliament. Public health (tobacco) regulation 1999. New

South Wales Consolidated Regulations 1999. http://www.austlii.edu.au/au/

legis/nsw/consol_reg/phr1999269/ (Accessed 2 Sep 2003)

40 Philip Morris (Australia) Limited. Anti smoking agenda. 1998. Philip Morris.

Bates No. 2072523055/3075. http://legacy.library.ucsf.edu/tid/lab06c00

41 PricewaterhouseCoopers Economic Studies and Strategies Unit. The

significance of cigarettes and tobacco products to retailers. Canberra:

Tobacco Institute of Australia, 1999.

42 C-Store Industry Report Part II. Retail World 2001;Aug 20–31: Report

page 1.

What this paper adds

A small number of studies have investigated point of sale

(POS) and relationships with retailers in international

contexts, showing that the tobacco industry control the

pricing and merchandising of their product by making

substantial payments to retailers, that the industry match

retail marketing to the stores’ clientele, and that retail

marketing increases when other forms of marketing are

restricted.

Industry documents show that the POS, retailers and

distribution became increasingly important as Australia’s

marketing environment became more restricted. Retailers’

power increased, and as a result manufacturers now use

their representatives, incentives, merchandising support, and

retail publications to maintain retailer loyalty and build brand

identities despite bans. Cigarette manufacturers now control

distribution of tobacco and non-tobacco products to small

retailers in Australia, placing themselves at the heart of retail

business.

iii100 Carter

www.tobaccocontrol.com

43 Philip Morris International. Philip Morris Asia/Pacific three year plan, 1992–

1994. Dec 1991. Philip Morris. Bates No. 2500064000/4226. http://

legacy.library.ucsf.edu/tid/wwi19e00

44 Philip Morris (Australia) Limited. 3 year plan, 1996–1998. 1996. Philip

Morris. Bates No. 2047041415/1432. http://legacy.library.ucsf.edu/tid/

xzw06c00

45 Goldberg H. Australian highlights for the week ending 10 January 1996 and

the month of December 1995. 11 Jan 1996. Philip Morris. Bates No.

2046386064B/6068. http://legacy.library.ucsf.edu/tid/lwu87d00

46 Philip Morris International—Australia. 1997. Philip Morris. Bates No.

2062389181. http://legacy.library.ucsf.edu/tid/ijk93c00

47 Philip Morris (Australia) Limited. Philip Morris Limited minutes of Directors’

Meeting held at the company’s registered office, corner Chesterville and

Cochranes Roads, Moorabbin, on Friday, 1st August 1969, at 12 Noon. 1

Aug 1969. Philip Morris. Bates No. 2015047961/7962. http://

legacy.library.ucsf.edu/tid/tnq34e00

48 Philip Morris (Australia) Limited. Superlights 30’s. 18 Nov 1987. Philip Morris.

Bates No. 2500113068/3074. http://legacy.library.ucsf.edu/tid/jll19e00

49 Goldberg H. Australian highlights for the week ending 22 January, 1997. 23

Jan 1997. Philip Morris. Bates No. 2074162304B/2305. http://

legacy.library.ucsf.edu/tid/pvd52c00

50 Philip Morris. Ring Award introductions at the PMI/KFI dinner Friday,

October 18, 1996. Australia: 18 Oct 1996. Philip Morris.

Bates No. 2073765218/5239. http://legacy.library.

ucsf.edu/tid/ndw85c00

51 British American Tobacco Australasia. [Advertisement]. Retail World

2002;(15–26 April).

52 Swanton L. Tighter laws drive cigarette company creativity.

Australian Service Station and Convenience Store News

1998;(May/Jun):38–39.

53 Gee L. Philip Morris retail focus. Jun 1998. Philip Morris. Bates No.

2063552738/2749. http://legacy.library.ucsf.edu/tid/sna42d00.

54 British American Tobacco Australasia. [Advertisement]. Retail World

2001;(Jul 23–Aug 3):14.

55 No author. Tobacco category review. Retail World 2001;54(Nov 26–Dec

7):11–13.

56 Anon. e-Fast and e-Easy ordering. Australian Convenience Store News

2003;(Jan/Feb):18–19.

57 Anon. Shell trials Quatro Four. Australian Convenience Store News

2002;(Nov/Dec):36.

58 Anon. New entrant pledges to automate the industry. Australian Convenience

Store News 2001;(Nov/Dec):34–35.

Retail marketing in Australia iii101