It looks like a cigarette, it's marketed like a cigarette, but Philip Morris NZ's new 'cigarillo' is about $3 cheaper for a pack – to the dismay of health experts
The Government has expressed "extreme concern" at a new cigarette brand that undercuts three years of excise hikes, by exploiting a tax loophole.
The world's biggest tobacco multinational has begun selling Philippines-made cigarettes in brown paper, seemingly representing tobacco leaf, that it imports into New Zealand as "cigarillos". Through a historic anomaly, these incur a lower excise duty – at least $5.24 less for a pack of 20 – enabling the company to sell them for 10 percent less than the next cheapest cigarette brand and pocket the difference.
Like other tobacco companies, Philip Morris NZ has been aggressively diversifying into non-combustible vaping products. Its website claims: "We are working towards a future without cigarettes: a future where adult smokers have access to smoke-free alternatives that are a far better choice than continued smoking."
But unlike the other companies, it's introduced a new smoking product this year. The Chesterfield Leaf packaging and branding is indistinguishable from other 20-packs of cigarettes, and retailers offer it to consumers seeking cheap cigarettes.
Newsroom purchased a pack yesterday at a Countdown supermarket in Auckland. Asked for the cheapest pack of 20 cigarettes, the customer services supervisor offered the Chesterfield Leaf. "That’s the new one," she said, showing the packet and pointing to the brand. “Chesterfield Leaf.”
“We believe this is yet another cynical attempt by tobacco companies to hook new users and encourage people to continue to smoke ... The Cancer Society condemns the underhand tactics that are used by the tobacco industry to increase their profits at the expense of people's suffering.” – Dr Rachel Nicholls, Cancer Society
Traditionally, cigarillos are high-end, high-priced products; they are usually halfway between cigarettes and cigars in size, with no filters. They were popularised by the likes of Whoopi Goldberg, Demi Moore and the late Luciano Pavarotti.
The harsh-tasting Chesterfield Leaf, however, is exactly the same size and shape as a cigarette and has a filter. A pack of 20 typically sells for $26.90 – which is less than the next cheapest cigarette, the Chesterfield Red or Chesterfield Blue at $29.90. Other cigarette brands range up to $40 a pack.
Associate Health Minister Dr Ayesha Verrall said cigarillos were not new in New Zealand, and were subject to many of the same strict conditions for sale as cigarettes.
But marketing them as cigarettes is new: "It’s extremely concerning to see cigarillo products being sold with the same brand name as a line of cigarettes, in indistinguishable packaging and at such a low price point," she said.
Philip Morris NZ's manager of external relations is David Broome, the former chief of staff for NZ First. He did not answer Newsroom questions about why the company was introducing new combustibles at the cheap end of the market.
Instead, he issued a statement on behalf of the company: "“Cigarillos are a well established tobacco category in a number of countries," the statement says.
"We are focused on providing better options for adult smokers who don’t quit, with around 30 percent of our global net revenues now coming from smoke free products. As we strive to reach 50 percent of net revenue from smoke free by 2025, we will however continue to compete in other tobacco product segments.”
“Unfortunately, I think we may have seen yet another example of how tobacco companies’ public statements do not match their corporate practices. Sadly, Philip Morris International's behaviour is not a surprise to most people working in public health.” – Prof Janet Hoek, University of Otago
Other New Zealand tobacco firms said they were not introducing any new smoking products, though British American Tobacco has taken over distribution of some mini-cigars and pipe tobaccos previously distributed by Scandinavian Tobacco Group. Brad Topp, market manager for Imperial Brands in New Zealand and the Pacific, said it had not introduced any new combustible products in the past year, and nor did it intend to.
Mark O’Toole, the manager of trade assurance at Customs, said duty on cigars and cigarillos was $1,372.92 per kilogram of tobacco content, but there was no additional duty based on the product's value.
By contrast, cigarettes incurred a specific duty rate of $1,098.37 per 1,000 cigarettes, and also a duty calculated at 5 percent of their value. "This would mean that if the cigarillo contained 0.6g of tobacco content per stick, the duty charged on a 20 pack of cigarillos is circa $16.72, whereas the duty rate for a packet of 20 cigarettes is $21.96, plus any ad valorem duty," he said.
The Cancer Society expressed dismay at the introduction of a new smoking product targeted at low-income smokers who struggle to quit smoking.
Dr Rachel Nicholls, the national advisor for health promotion and policy, said the new products were just as addictive and harmful as regular cigarettes, but sold at a lower price. "We believe this is yet another cynical attempt by tobacco companies to hook new users and encourage people to continue to smoke," she said.
"It is no surprise that it flies directly in the face of Philip Morris's so-called intent to achieve a smoke-free future. The Cancer Society condemns the underhand tactics that are used by the tobacco industry to increase their profits at the expense of people's suffering."
“It seems as if the industry is both looking to minimise tax liabilities to give it pricing freedom and also bypass various regulations designed to enhance public health.” – Dr Rob Branston, University of Bath
Such tactics highlighted the crucial need for Parliament to pass the new Smokefree Environments and Regulated Products (Smoked Tobacco) Amendment Bill, she argued. The bill would limit the number of retailers able to sell smoked tobacco products, and prohibit the sale of smoked tobacco products to anyone born after January 2009.
This is not the first country in which tobacco firms have tried avoiding excise and marketing restrictions by calling their cigarettes "cigarillos".
In the UK and Europe, cut-priced cigarillos have been increasing their share of the cigarette market.
Researchers from the Tobacco Control Research Group, at the University of Bath, published a paper in 2020 warning of the introduction and marketing of cigarillo products that mimic cigarette brands, are as dangerous to health, yet are not subject to the same public health measures or taxation.
Lead author Dr Rob Branston told Newsroom this week that the products were aimed at cigarette smokers, using the same brand names – essentially cigarettes that are wrapped in leaf to satisfy the definition of a cigarillo. "It seems as if the industry is both looking to minimise tax liabilities to give it pricing freedom and also bypass various regulations designed to enhance public health."
He said the so-called cigarillos were gaining market share in the UK, and were also being reported as becoming an issue in a number of EU countries too. "It seems like the New Zealand tobacco company is looking to do something similar in your market.
"I find it interesting that Philip Morris International has launched such a product as it would seem to be a tactic to help develop the market for smoked tobacco products and try to minimise the decline of it by undermining tobacco taxation. I certainly don’t think it's something that aligns with their claims of developing a smoke-free future."
The University of Bath has been working closely with tobacco control researchers in New Zealand, such as Dr Lindsay Robertson who has worked in both countries' teams.
Robertson and Otago University Professor Janet Hoek, the co-director of tobacco control research partnership Aspire2025, published a paper last month highlighting the differences between the words and actions of Philip Morris and other tobacco companies.
Hoek said she hadn't heard of the so-called cigarillos being sold in New Zealand, but the product launch just underlined her concerns.
Tobacco companies such as Philip Morris had been trying to convince the public health community they should be part of the solution, she said. "It is hard to see how introducing new combusted products likely to appeal to price-sensitive people will help achieve the goal of a smoke-free world to which they have stated they are committed.
"Many people trying to quit smoking cite the cost of tobacco as a key reason why they make a quit attempt. Offering a lower cost smoked tobacco product reduces the incentive to quit and thus is likely to decrease the number of people trying to quit."
The Smokefree 2025 goal aims to reduce smoking prevalence to five percent or below (and as close to zero percent as possible) among all population groups. "It is hard to see this product launch as anything other than a deeply cynical attempt to undermine the Government’s goal," she added.
"Unfortunately, I think we may have seen yet another example of how tobacco companies’ public statements do not match their corporate practices. Sadly, Philip Morris International's behaviour is not a surprise to most people working in public health."
