Paper Assessing the Sales Impact of Plain Packaging Regulation for Cigarettes: Evidence from Australia

We assess the impact of legislation mandating the plain packaging of cigarettes in 2012 in Australia on both primary and secondary demand. We first examine the causal impact of the legislation at the cigarette category level by comparing the changes in sales before and after legislation with the corresponding changes in sales in a comparable market, New Zealand, where the plain packaging mandate (PPM) was not imposed. Our results suggest a decline in sales due to the PPM of around 67 million units (sticks) per month, representing around 7.5% of the market. Our results on the mechanism using brand-level sales data from Australia suggest reduced differentiation after the PPM, with higher price sensitivity. Premium and mainstream brands’ price sensitivities are most affected after the PPM, but we also find channel-specific differences, with grocery (convenience) channels showing an increase (a decline) in post-PPM short-term price sensitivity. Because the government has some control over price through excise taxes, understanding changes in price sensitivities provides guidance to health authorities on the relative impacts of price- and non-price-related policy on cigarettes sales. We also explore other public policy implications of our results, such as the expected reduction in sales per month we might see in New Zealand due to their instituting a PPM.

Published in: Marketing Science

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• Authored by Pradeep K. Chintagunta André Bonfrer John Roberts David Corkindale
• 2019
• Healthcare