Australia's brand and packaging portfolios

Before the introduction of plain packaging, 12 leading cigarette brands supported 120 variants; an average of 10 variants per brand. More than 80% of these were available from two supermarket retailers that dominated the main cigarette distribution channel. Variants of the 12 leading brands were most commonly offered by these retailers in four or more packaging options. The total number of cigarette SKUs was similar to that of beer, but higher than several other product categories. Given the strict regulation of tobacco marketing, the scale of cigarette brand variant and SKU proliferation compared with other products was particularly significant.

The variant and SKU analyses showed that tobacco controls had not impeded manufacturers’ ability to introduce new brands and variants. Comparison of the manufacturer ingredient reports, for variants sold 1 March 2011–1 March 2012, and the 25–30 July 2012 retail audit revealed a new brand—Just Smokes—was introduced, as well as five new variants among the 12 leading brands in the intervening 5 months. This finding supported the observations of others6 that extending brand lines has been used as a strategy for overcoming restrictive marketing practices. When new products were introduced, the key initial challenges would have been building awareness, knowledge and stimulating trial. How tobacco companies achieved these marketing goals in such a highly regulated market warrants further investigation.

Market segmentation strategy and portfolio rationale

Analyses revealed that up to the introduction of plain packaging, tobacco regulation had also had little negative impact upon manufacturers’ ability to segment the Australian market. Such extensive variant and SKU portfolios have enabled tobacco companies to tailor their offerings to closely match the desires of many distinct consumer segments. These go well beyond simple, broad, value-based segments and, as illustrated by archives of tobacco industry market research reports, are defined by manufacturers in terms of consumer demographics (age, gender, race, income, social status), location (country, region, city, urban vs rural), psychographics (motivation, values, personality, self-concept) and behaviour (smoker vs non-smoker, brand preference, product preference, price, point of purchase, media consumed).17 The logic behind this highly targeted microsegmentation approach is simple: ‘Differentiated marketing typically creates more total sales than undifferentiated marketing’ (ref. 18, p. 244). Sales increase since brand managers champion the brand variants by maximising appeal and marketing effectiveness to each carefully targeted segment.

In Australia, the big three tobacco companies adopted a consistent brand strategy, whereby a collection of strong family brands promoted extensive variant ranges. A sizeable literature exists concerning family or umbrella branding, which is widely used in other product categories. Several reasons, in addition to facilitating differentiation and segmentation, explain why this approach is well suited to cigarettes:

• Family branding works best when products are sufficiently similar to one another to be placed under one brand name.19 In blind taste tests, consumers were frequently unable to discriminate between cigarette brands.20 Indeed, ingredient reports revealed no physical differences between some variants.

• Stretching brand lines enhances effectiveness of other marketing activities21 and is a ‘below-the-line’ technique for overcoming marketing restrictions.6

• Having brand names distinct from the company name means that negative corporate publicity is dissociated from the product. Similarly, if one brand receives bad press, then the company can concentrate on alternative brands.15

• A key benefit of family branding relates to new product development:

  • Economies of scale in production and marketing are achieved for new variants.

  • The family brand creates immediate awareness and recognition for new variants and imparts established brand associations.15 This reduces uncertainty among consumers, who are more likely to try something familiar.21

  • Brand extensions limit sales cannibalisation effects, with incremental sales from new variants being greater than any cannibalisation.22

• Brand and subbrand names can be used to evoke different types of information processing.23 When the individual brand component contains suggestive positioning information, the subbrand name improves evaluation. This helps appreciate the dominance of variant colour names. When the use of terms such as ‘light’ and ‘mild’ was banned, tobacco companies began using colours to convey product strength: lighter colours, particularly blue, are synonymous with ‘light’, while darker colours like red denote stronger, ‘less healthy’ variants.24

Colour—brand communication and pack design

For homogeneous products where physical differences between brands are small, the name and packaging provide the key tangible signifiers that consumers use to distinguish one brand from the next. The role played by the pack in cigarette marketing is even more significant in ‘darker’ markets where other elements of the marketing mix are restricted. Pack designs use far more than simple text to communicate the product. Design configurations rely upon colours, textures, materials, logos, as well as contrast between these variables to transfer both brand name and personality. In terms of tobacco control, the potential for plain packaging to reduce brand appeal is therefore unique.25

Analyses highlighted the extensive use of colour names in cigarette branding. In Australia, more than half (61) of the 120 variants of the 12 leading brands had names that included specific colours. Many others (26) had names with colour connotations. In cigarette pack design, colour hues correspond with the brand and variant name and, as mentioned previously, brand colour is perceived by consumers to be an indicator of cigarette strength.24 Pack colour therefore provided a simple yet familiar cue for consumers to visually differentiate between the enormous range of cigarette brands and variants on offer. Colour became the primary visual differentiator that consumers used to navigate the myriad product options, especially so for brands with the more extensive variant ranges. In this regard, colour was a key visual heuristic guiding the consumer decision-making process: all five of the new variant brand line extensions introduced between March and July 2012 had colour-based names.

Cigarettes are not unique in their use of colour, and colour names have proliferated in numerous other product categories.26 Labrecque et al27 reviewed the use of colour in marketing. They discussed the impact of colour upon consumer perceptions, emotions, cognition and buying behaviour, and how colour has been used in marketing to position and visually differentiate brands. The role of colour is significant in terms of its ability to influence awareness, recall, image perception, product choice and purchase intent.28 Miller and Kahn26 found that the colour name characteristics affected cognitive processing and its impact. When a consumer was exposed to a colour prior to exposure to the name, and where the name was an unexpected descriptive, then the associated level of satisfaction attributed to the brand increased. This may explain the appearance of unexpected descriptive cigarette variant colour names such as Holiday Sea Green and Marlboro Silver Fine Scent.

Plain packaging and the removal of colour, which had served as a key visual heuristic, will alter the way that consumers process decision-making information. Plain packaging is therefore likely to impact upon future cigarette brand variant portfolio strategy. However, given the inherent complexities associated with understanding colour psychology ‘scarce marketing research addresses this topic’ (ref. 27, p. 187). More investigation into the effects of colour on cigarette buying behaviour is therefore warranted.

A weakness of previous research supporting plain packaging has been its inability to provide anything other than experimental evidence, since packaging had yet to be implemented in any country.25 This research, conducted immediately prior to the introduction of plain packaging in Australia, can serve as a useful benchmark for gauging its subsequent impact on cigarette brand strategies. Such effects might be anticipated in terms of the variant and SKU portfolios, as well as changes in the incidence and nature of colour names. Any detrimental impact observed may then champion the cause for removing branding elements such as colour from cigarette packaging in other markets, including APAC countries that drive global tobacco industry growth. Such post-implementation research on plain packaging may therefore present a serious threat to big tobacco's global brand portfolios.

This research illustrates the value of ingredient reports for studying tobacco branding strategy. Policies similar to Australia's Voluntary Agreement for the Disclosure of the Ingredients of Cigarettes9 should therefore be encouraged in other markets. Future research must, however, remain wary of the challenges associated with using the various sources of cigarette brand portfolio information, which can result in underestimating both brand and variant numbers. Supplementing industry, self-reported data sources with up-to-date retail audit data seems an appropriate approach.