Why Packaging Is Commercially Vital for Tobacco Corporations

The Literature on Tobacco Product Packaging

Previous studies have clearly established the importance of packaging as a brand communication device which has been the subject of considerable research and development on the part of tobacco corporations.

Wakefield et al ⁴ investigated how packs featured in tobacco industry documents dating from the 1950s to the mid-1990s held in the Guilford Depository. They found that tobacco corporations had spent substantial sums to research smokers’ perceptions of packs and that packaging was integral to the promotion of new brands. They quoted a senior BAT executive who as long ago as 1980, had noted the increasing prohibitions on tobacco advertising and concluded that in future “the product may have to sell itself through the pack”. Pack design and the use of colors were also found to be part of efforts to deceive smokers that particular brands were “milder” or “low tar,” while slim, long, and pastel colors were employed to appeal to females. These authors also observed that innovative packaging is likely to appeal younger people who are attracted by novelty. ⁴

More than a decade later, Kotnowsi and Hammond ⁵ reviewed material in the Legacy Tobacco Documents Library for the period 1973-2002. They found that industry research reported that innovations in pack shape evoked modern imagery as well as perceptions among consumers of added value and product quality. In addition, such research found that smaller packs were attractive to young adults while “slim” packs were favored by females. Several industry documents credited novel packaging design as the reason for increased sales. ⁵

The examination by Barraclough and Yong ⁶ of cigarette packaging in Malaysia following the prohibition of tobacco advertising described the pack as a “vital microcosm” that allowed for the use of logos, colors, and images, as well as other promotional mechanisms, including telephone numbers for product enquiries. The use of hinged “wallet packs” substantially increased the pack’s surface area for promotional purposes. ⁶

In their exploration of the role of packaging in tobacco marketing, Ford et al ⁷ stressed the marketing function of packaging at both the point-of-purchase and postpurchase. Their review of the literature on generic packaging strategies identified a range of devices employed to promote brands and increase sales. These include “innovation packaging” (using new technologies and designs), “special edition packaging” (issued for a limited period of time), value packaging (communicating value for money), and “green packing” (signaling environmental responsibility). These authors ⁷ also related the importance of color, shape, and packaging size in marketing and cited a tobacco industry document that identified younger smokers as “packaging and design literate.”

In their discussion of tobacco product packaging as promotion, Scollo and Freeman ⁸ emphasized that, since advertising tobacco has been “increasingly banned in more and more forms throughout the world, the pack has become the most important vehicle for reaching potential and current smokers.”

A number of studies have specifically explored the perceptions of packaging by young people. A 2003 qualitative study of 21 young adult Norwegian smokers concluded that packs were “an accessory of identity” for young smokers. ⁹ An online survey of the perceptions of young people aged 10 to 17 years in the United Kingdom about packaging concluded that “the look of packaging does appeal to youth and indeed influences young people’s choices of cigarettes.” ¹⁰ In another study, some 1025 never-smokers aged 11 to 16 years from the United Kingdom were surveyed for their responses to novelty, regular, and plain packaged cigarettes. The authors concluded that cigarette pack design is linked to susceptibility to smoke. ⁷

While the growing literature on packs has established their importance for brand identity and communication, no examination has been made to date of how tobacco corporations have sought to communicate their significance, especially their commercial value, to their shareholders. Our study seeks to do this in the case of 4 Asian subsidiaries of a major global tobacco group, British American Tobacco. The operational affairs of tobacco corporations are usually not transparent and are subject to “commercial-in-confidence” policies. There is, however, a valuable source of information that is publicly available since public companies (ie, those listed on stock exchanges) are required by local laws to report annually to their shareholders. Such reports often include explanations of initiatives taken by the boards of management to add value to products and hence increase profitability for shareholders. The ways in which corporations describe the significance of packaging provide insights not only into its commercial value but also into its use as a marketing device.

In the case of BAT group we were able to investigate what the management of 4 Asian subsidiaries, as well as of the London-based parent company, told shareholders about the use of packaging in the promotion of its brands.

Packaging Identified as Significant for Profitability

A recurring theme in the annual reports was that packaging was instrumental in maintaining or increasing sales and was therefore vital for the profitability of the company.

The parent company reported in 2009 ¹¹ that “the Reloc resealable pack was launched in most core markets, driving gains in market share” while “[c]onsumer perception of Pall Mall has strengthened globally as a result of improvements to the brand’s king size packaging and communications.” ¹¹

A subsequent report on global operations ¹² explained that “our growth in 2010 has been driven by pack and product innovations . . .” Reporting on Kent in 2011 ³ BAT noted that “[p]ackaging improvements implemented across our core range strengthened the brand and results in share gains . . .”

At the individual country level, packaging was seen as contributing to brand growth. In Sri Lanka “premium world class packaging” enabled Dunhill Switch to be “positioned at the apex of the premium range.” ¹³ In Malaysia “Peter Stuyvesant delivered exceptional growth performance [. . .] by introducing new packs that featured the Peter Stuyvesant freshness seal.” ¹⁴

Tactile Qualities, Shape, and Color

The “feel” of the pack, as well as its shape and colors were enthusiastically commented on in reporting on marketing to shareholders.

Pall Mall Round Corner Packs were launched in Malaysia in 2004:

Consumer feedback indicated that the brand is perceived as more international and modern compared to competitor brand offers. With a premium look-and-feel, Pall Mall distinguishes itself from key competitor brands. ¹⁵

In 2010, BATM launched 2 new blends of Pall Mall: Red and Blue. Color was an essential part of pack design to communicate the brand. ¹⁶

Modernization and Rejuvenation

A common explanation for pack redesign was that it would modernize or rejuvenate the brand, although what was meant by these concepts was never explained. In Sri Lanka, The Ceylon Tobacco Company reported in 2011 that

a pack designed under the theme “Discover Passion” was released to the marketplace. The pack was the first for the Sri Lankan market and was designed to add modernity to the brand. ¹⁷

In Malaysia, “the metallic packs with rounded corners injected Pall Mall with a more modern and stylish look.” ¹⁸ In 2010, the Bentoel Group in Indonesia launched new packs for Pall Mall, Dunhill, Xmild, Joged and Rawit, and Star Mild. ¹⁹

In Sri Lanka, pack design was credited with reversing the decline of a major brand:

Despite its long-standing history in the market, JPGL [John Player Gold Leaf] had experienced a decline over the past five years. However, in 2010 our investments in the brand—which included an image makeover and a pack upgrade—helped stem this decline and return growth to the brand. ²⁰

The key marketing project undertaken during the year was the introduction of the new modern pack for JPGL: “. . . This rejuvenation of the offer has placed a strong foundation for future growth for JPGL.” ²⁰

Yet another “rejuvenation” exercise was deemed necessary just 4 years later:

Driven by the need to rejuvenate the brand—in the context of 9 percent year on year decline evident between 2013 and 2014—a pack upgrade was carried out to add excitement around JPGL. ²¹

Since “rejuvenation” means making someone or something youthful again, it is reasonable to infer that such a process is intended to appeal to younger people. Indeed, the parent company conceded this in their comments on the use of packaging to promote one of its leading international brands:

BAT in marketing Lucky Strike concentrates on “adult smokers” under 30 years of age by delivering packaging options and taste experiences they value.” ¹¹

Heritage

BAT has used “heritage” as a marketing tool. Ironically, in several of the countries examined in the present study this heritage has colonial overtones since many brands were introduced during colonial rule and celebrated a distant, exotic link with Britain.

In Malaysia, Dunhill, one of BAT’s major international brands, redolent of its origins in an exclusive London tobacconist established in 1907 on Gentleman’s Row, was repackaged a number of times to celebrate its heritage. In 2005 “the Dunhill Limited Edition Pack . . . [was] developed to embody the Dunhill brand essence recognised by Malaysians for its rich heritage, prestige and exclusivity. ²² Six years later, BATM reported that

. . . as a strategic direction to further establish Dunhill’s presence as an international brand amongst consumers Dunhill launched three limited edition packs with designs referencing its proud heritage . . . ¹⁴

In Sri Lanka in 2012, the Ceylon Tobacco Company’s major brand John Player Gold Leaf, which features a 19th-century British sailor as its trade mark, was issued in a limited edition pack “to celebrate its 135 year old legacy.” ²³

Innovation

As identified in the literature, “innovation packaging” was frequently featured in annual reports. In Sri Lanka, “further innovation of the brand by way of a limited edition pack aided the growth momentum.” ¹⁷ In Pakistan:

marketing initiatives to strengthen CbPMO [Capstan by Pall Mall Original] included a brand building campaign and an innovative limited edition side opening pack. ²⁴

In Malaysia, various innovative packs were introduced. BATM “kick-started 2005 by introducing its new rounded corner packs. The packs helped to enhance, project and communicate Pall Mall’s modernity and internationalism . . .” ²²

In the same year, the Dunhill Limited Edition Wallet Pack was described in the following terms:

Not only is it stylish, it is a groundbreaker in terms of innovation. Which points to Dunhill’s commitment to deliver more value and product differentiation to offer the best to its customers.” ²²

In addition to innovations in design such as the “click pack” with a hinged lid, the pack was also used to promote new technologies in the manufacture of cigarettes. For example, in 2009, BATM explained that new variants of the Kent brand offering Mintek (green thread technology with a cool flavor) and 3Tek (triple charcoal filter technology) were launched with new limited edition packs. ²⁵ . In 2014, Peter Stuyvesant had its pack “reinforced” with “a Freshness Seal to further improve awareness of that feature among consumers.” ²⁶

Value for Money

“Value packing” also featured in various annual reports. The Director of the Pakistan Tobacco Company told shareholders that the new pack for Gold Flake had been

well executed in the market and the brand is looking good to give us a steady volume base by cashing into the improved pack appeal cues in the low medium segment. ²⁷

In Sri Lanka, by way of a “value proposition,” the Company ²⁰ introduced a “twelves” pack during 2010. Ceylon Tobacco Company subsequently reported that

During 2014 we further strengthened the brand image of JPGL by the launch of its improved pack design. The new design is a key milestone in the long history of JPGL in Sri Lanka and is in full alignment of (sic) our value infusion strategy aimed at creating excitement around the brand in an increasingly price sensitive market environment.” ²¹