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

André Bonfrer (), Pradeep Chintagunta, John H. Roberts () and David Corkindale ()
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André Bonfrer: Department of Marketing, Deakin Business School, Deakin University, Burwood, Victoria 3125, Australia
John H. Roberts: School of Marketing, University of New South Wales, Randwick, New South Wales 2052, Australia
David Corkindale: Ehrenberg-Bass Institute for Marketing Science, University of South Australia, Adelaide, South Australia 5000, Australia

Marketing Science, 2020, vol. 39, issue 1, 234–252

Abstract: 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.

Keywords: cigarette smoking; plain packaging; difference in differences; error correction models (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:39:y:2020:i:1:p:234-252

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