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Brands on the brink of collapse

Roy Manalili, General Manager of JT International Cambodia

What is a brand? Why does it matter?

Brands convey not only the source, quality and authenticity of products but also creativity, innovation, and optimism. Strong brands restore consumer confidence and contribute to economic strength. In fact, studies show that brands are remarkably important in time of crisis because they provide consumers with trust and clarity.

What is the threat facing brands against the backdrop of brand deprivation?

Brand value contributes to overall business and economic growth because a brand can differentiate itself from others in the market. Unfortunately, a number of extreme regulations – such as health warnings and branding bans which are increasingly being imposed on tobacco products – take away this advantage. The erosion of brands and of their inherent value is the main threat for these products. 

For example, branding bans for tobacco products – stringent regulations that remove brands or all branded features from these products’ packaging – not only cause legitimate tobacco brands to lose their identity and uniqueness, but also lead to these brands losing market share to cheaper and in some cases illegal alternatives, thereby undermining legitimate businesses, tobacco tax revenue and Governments’ public health policies related to tobacco. Case in point, following the implementation of a branding ban for tobacco products in Australia in 2012, available data indicate that the presence of illicit tobacco products grew from 11.5% of the Australian tobacco market in 2012 to 20.7% in 2019, a very significant increase.

Hawker stand selling illicit cigarettes in Cambodia. Photo: Kantar Cambodia

It should also be noted that branding bans harm legal rights that are protected by the Constitution (e.g. freedom of expression and the right to property) 

What is the current situation in the Cambodian market?

Since the Tobacco Control Law of Cambodia was adopted, all tobacco products must carry pictorial health warnings on 55% of their packaging and branding is allowed to cover 45% of packs. The current regulations are sufficient, but the market is overrun by products that are smuggled into the country by unscrupulous traders. These products avoid taxes. Their packs are non-compliant and do not carry the mandatory health warnings. This is challenging for legitimate tobacco businesses in Cambodia.

Do you see any major ramifications for other industries?

Yes, we do. We’re seeing more regulations of other products such as alcohol and food. These products are subjected to similar measures in multiple countries as regulations are introduced more frequently and more restrictively. If such a trend continues, which is unfortunately very likely, some of the World’s most recognizable brands will very shortly be subjected to restrictions similar to the ones currently impacting tobacco products and face the same challenges in terms of brand and value erosion.

Branding bans harm legal rights that are protected by the Constitution 

What are your projections on the future of the tobacco industry?

We foresee that the Government will vigorously enforce laws against illegally traded products. Illegal trade and non-compliant products cannot be dealt with in isolation, so we contribute to efforts by governments, regulators, police and customs to contain illegal trade by sharing information and developing specific programs. We do this to protect our  business, brands and consumers.

JTI’s detailed views on the regulation of tobacco products

While tobacco products are harmful and should be regulated, an effective regulation must be proportionate to the public health benefits it aims to achieve and based on reliable evidence. 

In this regard, JTI supports regulatory measures that contribute to legitimate public policy objectives and meet Better Regulation principles – as defined by the Organization for Economic Co-operation and Development and endorsed by reputable organizations such as the International Chamber of Commerce, the World Bank and the Asia Pacific Economic Cooperation.

These principles uphold openness, participation, accountability, effectiveness, coherence and proportionality and refer to certain practical requirements that regulators should consider. We believe that these Better Regulation principles benefit everybody including governments, businesses and communities. 

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