13.3 The price of tobacco products in Australia

Last updated: June 2022

Suggested citation: Scollo, M, and Bayly, M. 13.3 The price of tobacco products in Australia. In Greenhalgh, EM, Scollo, MM and Winstanley, MH [editors]. Tobacco in Australia: Facts and issues. Melbourne: Cancer Council Victoria; 2022. Available from  http://www.tobaccoinaustralia.org.au/chapter-13-taxation/13-3-the-price-of-tobacco-products-in-australia

As in other industries, the costs of raw materials, manufacturing, promotion and distribution of tobacco products are important in determining profits to tobacco growers, manufacturers, wholesalers and retailers. However, because tax is such a substantial component, the level and nature of tobacco duties, fees and taxes rather than production and marketing factors historically have been the main determinants of the final retail price of cigarettes over time in Australia as in most developed countries.

This section examines the extent to which increases in tobacco taxes have resulted in rises in the price of cigarettes and other tobacco products in Australia. It outlines efforts by manufacturers to reduce the impact of increases in taxes, both by minimising tax liability, by encouraging discounting at the retail level, through differential pricing of particular brands and by varying the pack size of cigarettes and other tobacco products to affect upfront purchase price and unit cost.

13.3.1 Recommended retail price of tobacco products

Beginning in 1940, the NSW Retail Tobacco Traders' Association has been printing and distributing to small retailers in all states and territories lists of the wholesale and recommended retail prices for cigarettes and roll-your-own tobacco produced by major international tobacco companies, and virtually all cigars and pipe tobacco, sold in Australia.1– 2 i Copies of the publication preserved at the National Library of Australia and several other libraries throughout the country provide recommended prices for tobacco products available for sale in any state or territory since that date.  The final edition was published in December 2021.

13.3.1.1 Changes over time in the recommended retail price of a standard pack

Recommended retail prices for Craven A Cork Tip 20s—a brand of cigarettes popular in the 1940s, '50s and '60s in Australia, and one of a handful of brands available in 1940 still available in 2015ii —are listed in Table 13.3.1. When examining the cost of tobacco products over time, it is useful to take into account the effects of inflation–the costs of buying all goods and services. Table 13.3.1 also indicates the price, adjusted to take into account changes in the Consumer Price Index (CPI). (The CPI uses 2012 as the base year, the year when the index is set to 100, so it is convenient to express prices in 2012 dollars.)  This table also shows the current and 2012 pack price for Winfield 25s, one of Australia’s leading brands between the late 1970s and 2020—refer Chapter 10, Section 10.6.

Table 13.3.1
Recommended retail price# of a packet of Craven A 20s, Australia, 1940–2015, and recommended retail price of a packet of Winfield 25s, 1980–2021, selected years

Sources: NSW Retail Traders’ Association. Price lists—Cigarettes. The Retail Tobacconist of NSW. 1940–2013: 9 to 87 (February editions); 2014–2015: 90 to 93 (March editions); 2019: 108 (Dec 2018 edition). 2021 118 Apr-Jun edition. 2020: CTC Eastern. National Price Lists. CTC Eastern. Available from: http://www.ctceastern.com/home/home_index.html. Accessed: 02/03/2020.

^ Equivalent prices in dollars converted from shillings and pence.

* Current dollars: the price in the applicable year; no adjustment has been made for inflation.

# Prices for the month of February for 1940-2013, then for the month of March for 2014 onwards. RRPs for products from major manufacturers were not listed for several editions of the Australian Retail Tobacconist in 2019 and 2020. December 2018 used for the March 2019 datapoint and does not include routine indexation that occurred on 1 March 2019. An alternative source of RRPs provided by tobacco manufacturers was obtained from a tobacconist’s website for the March 2020 datapoint.

† Craven A Cork Tip 20s available to February 2004, 20s pack equivalent price calculated from RRP of 25s for 2005 to 2015. Craven A RRPs not available after 2016 .

Figure 13.3.1 plots the price per stick of Craven A 20s and Winfield 25s in $2012 from 1940 to 2020.

Figure 13.3.1
Recommended retail price* per stick in $2012 of Craven A 20s# and Winfield 25s, Australia, 1940­–2020, selected years

Sources: NSW Retail Traders’ Association. Price lists—Cigarettes. The Retail Tobacconist of NSW. 1940–2013: 9 to 87 (February editions); 2014–2015: 90 to 93 (March editions); 2019: 108 (Dec 2018 edition). 2021 118 Apr-Jun edition. 2020: CTC Eastern. National Price Lists. CTC Eastern. Available from: http://www.ctceastern.com/home/home_index.html. Accessed: 02/03/2020. 

* Prices for the month of February for 1940-2013, then for the month of March for 2014 onwards. RRPs for products from major manufacturers were not listed for several editions of the Australian Retail Tobacconist in 2019 and 2020. December 2018 used for the March 2019 datapoint and does not include routine indexation that occurred on 1 March 2019. An alternative source of RRPs provided by tobacco manufacturers was obtained from a tobacconist’s website for the March 2020 datapoint.

# Craven A Cork Tip 20s available to February 2004, 20s pack equivalent price calculated from RRP of 25s for 2005 to 2015. Craven A RRPs not available after 2016.

Table 13.3.1 shows that the current price of a packet of Craven As increased 160-fold between 1940 and 2015. However, as is evident from Table 13.3.1 and Figure 13.3.1, adjusting for inflation, Craven As cost no more in the early 1990s than they did in real terms during and immediately after the Second World War. Prices then increased substantially from the early 1990s. In the ten years from 1990 to 2000, the real stick price of Craven As almost doubled, and increased by 4.5 times between 1990 and 2015. Between 1980 and 2015, the stick price of both Craven A and Winfield increased more than five-fold in real terms. Between 1980 and 2020 the price in Winfield increased 9-fold, and almost tripled between 2010 to 2020.

13.3.1.2 Major policies and industry innovations influencing cigarette price

Figure 13.3.2 plots in more detail the per stick price calculated from the recommended retail price of the leading brand of factory-made cigarettes of each year over time in 2012 dollars to account for inflation. The figure indicates some of the major changes in taxation arrangements between 1940 and 2020, and some of the major innovations with which the industry responded to those changes.

The figure shows the effects of early increases in state licence fees were mitigated by the introduction of larger and larger pack sizes providing cigarettes at a cheaper cost per stick than those available in smaller pack sizes—see Section 13.3.1.3 below for more detail. It was not until the very large increases in state fees and excise duty in the mid-1990s that cigarettes became significantly more expensive. Prices increased steadily until the large and immediate April 2010 tax increase, and then increased more sharply during the period of eight scheduled 12.5% increases to customs duty and excise that occurred annually since 2013. Relative to the real price (adjusting for inflation) of the leading brand in 1940, prices were 1.1 times higher in 1990, 2.3 times higher in 2000, 3.3 times higher in 2010 (before the 25% increase), 4 times higher in 2011 (after the 25% increase), and 8.5 times higher in 2021 (after the eight annual 12.5% excise increases). In the 21 years from 2010 to 2021, before the 25% tax increase of April 2010 and after the final scheduled 12.5% excise increase), the price of the leading brand increased by 160%.

 

Figure 13.3.2
Recommended retail price* in $2012 of the most popular cigarettes in Australia, 1940–2021

Sources: NSW Retail Traders’ Association. Price lists—Cigarettes. The Retail Tobacconist of NSW. 1940–2013: 9 to 87 (February editions); 2014–2015: 90 to 93 (March editions); 2019: 108 (Dec 2018 edition). 2021 118 Apr-Jun edition.

2020: CTC Eastern. National Price Lists. CTC Eastern. Available from: http://www.ctceastern.com/home/home_index.html. Accessed: 02/03/2020.; Victorian Office of Prices 1990

Victorian Office of Prices. Does Smoking Make Cents. Melbourne, Australia: Victorian Smoking and Health Program, 1990.

* Prices for the month of February for 1940-2013, then for the month of March for 2014 onwards. RRPs for products from major manufacturers were not listed for several editions of the Australian Retail Tobacconist in 2019 and 2020. December 2018 used for the March 2019 datapoint and does not include routine indexation that occurred on 1 March 2019. An alternative source of RRPs provided by tobacco manufacturers was obtained from a tobacconist’s website for the March 2020 datapoint.

13.3.1.3 The large pack: a peculiarly Australian phenomenon 

Cigarettes in the early part of the century were commonly sold in packets of 10 or 20 or in tins of 50. These were similar in size to the tins in which loose tobacco was commonly sold. With the advent of plastic wrapping, however, these tins disappeared and by 1960 the vast majority of cigarettes were sold in packets of 20. The increasing rate of state licence fees had a significant impact on the price of brands that were popular until the early 1970s. However the tobacco industry fought back to retain its customers and the introduction of Winfield 25s—'5 smokes ahead of the rest'—in 1976 marked the advent of the large pack size in Australia.

Until 1999, Australia was virtually the only country in the world that combined an excise based on weight and ad valorem fees based on wholesale value of sales. Until 1999, lighter cigarettes attracted less federal excise and customs duty than heavier cigarettes. This effect was amplified by the manner in which ad valorem fees were imposed and final retail price calculated, providing an incentive for lighter cigarettes and for packaging many cigarettes in the same packet. 3 The introduction of large pack sizes in Australia closely followed the introduction in 1975, and subsequent doubling in about 1987, of state franchise fees throughout Australian states. In most other countries in the world, cigarettes are virtually always sold in packets of 20. While Figure 13.3.2 showed that the price per stick of the most popular brand rose quite sharply as a result of a number of increases in duty and state licence fees on tobacco, Table 13.2.2 shows that the per stick prices of large packs of cheap brands remained substantially lower than the market-leading pack: more than 25% cheaper per stick until 1999, then about 15-20% cheaper in the years to 2020. Not surprisingly, large packs quickly became a dominant component of the market (see also Table 13.3.3). As outlined in Section 13.2.1, health groups argued for reform of tobacco taxes,3-6 and a new system was introduced between 1999 and 2001. 

Table 13.3.2 shows the pack price for Horizon and Holiday 50s rose above $30 in February 2013, and then both exceeded $40 in March 2016. In March 2017, a pack of Horizon 50s cost $20 more than a pack of Winfield 25s, and $27 more than a pack the leading brand, JPS in 25s pack,  from the super-value market segment. Over time, there has been a dramatic widening of the difference between the highest and lowest priced leading brands. For example, in 1992 a pack of Winfield 25s could be purchased for about three-quarters of the price of a pack of Horizon 50s, while in 2013 the purchase price of a pack of JPS 26s was 50% of a pack of Horizon 50s. As of March 2021, Horizon 50s were priced just under and Holiday 50s just over $90, almost $50 more, or more than double, than a pack of JPS 25s.

Table 13.3.2
Recommended retail prices# of leading brands, Australia, 1989 to 2021: prices per pack* and price differential between largest pack and leading brand

Sources: NSW Retail Traders’ Association. Price lists—Cigarettes. The Retail Tobacconist of NSW. 1940–2013: 9 to 87 (February editions); 2014–2015: 90 to 93 (March editions); 2019: 108 (Dec 2018 edition). 2021 118 Apr-Jun edition. 2020: CTC Eastern. National Price Lists. CTC Eastern. Available from: http://www.ctceastern.com/home/home_index.html. Accessed: 02/03/2020; and author calculations.

# Prices for the month of February for 1940-2013, then for the month of March for 2014 onwards. RRPs for products from major manufacturers were not listed for several editions of the Australian Retail Tobacconist in 2019 and 2020. December 2018 used for the March 2019 datapoint and does not include routine indexation that occurred on 1 March 2019. An alternative source of RRPs provided by tobacco manufacturers was obtained from a tobacconist’s website for the March 2020 datapoint.

* In current dollars: the price in the applicable year; no adjustment has been made for inflation.

~ No Holiday products listed in 2017.

While the recommended retail prices of premium brands of cigarettes such as Marlboro, Dunhill, Benson and Hedges and Craven A—brands available in packs of 20s and 25s—rose steadily from the early 1980s, consumers concerned about price have always been able to purchase cigarettes that are substantially cheaper per stick.  Traditionally, larger packs have offered better value per stick than smaller packs, even after the reforms to Australian tobacco taxes that had previously preference lower-weight cigarettes in large packs.

Figure 13.3.3 shows that even into the 2010s, larger packs for 40s and 50s offered substantial per stick savings compared to leading brands of 25s. Winfield 25s were approximately 20% more expensive per stick than Holiday 50s in 2010. Large value packs remained the lowest-price packs per stick even after the introduction of super-value brands to the Australian market around 2013. At 2018, JPS 25s were almost 11% more expensive per stick than Holiday 50s. Prices of packs of 50s rapidly increased from 2019 to 2021 at a much more rapid rate than other popular products. JPS 25s were $0.07 cheaper, or 96% of the cost, of Horizon 50s in 2021. Longbeach 40s emerged as the cheapest per stick in 2020, priced below JPS 25s per stick, and at least $20 cheaper per pack than 50s packs.

Figure 13.3.3
Recommended retail price* per stick of six top selling brands of cigarettes, Australia, 2010 to 2021#
Sources: NSW Retail Traders’ Association. Price lists—Cigarettes. The Retail Tobacconist of NSW. 1910–2013: 75 to 87 (February editions); 2014–2015: 90 to 93 (March editions); 2019: 108 (Dec 2018 edition). 2021 118 Apr-Jun edition. 2020: CTC Eastern. National Price Lists. CTC Eastern. Available from: http://www.ctceastern.com/home/home_index.html. Accessed: 02/03/2020; and author calculations

*Prices for the month of February for 2010-2013, then for the month of March for 2014 onwards. RRPs were not published in the price lists in 2019 or early 2020, so December 2018 was used for the early 2019 RRP and does not include routine indexation that occurred on 1 March 2019. RRPs for products from major manufacturers were not listed for several editions of the Australian Retail Tobacconist in 2019 and 2020. An alternative source of RRPs provided by tobacco manufacturers was obtained from a tobacconist’s website for March 2020.

#In current dollars: the price in the applicable year; no adjustment has been made for inflation

Note: No Holiday products listed in 2017.

Over the period of 2001 to 2021, factory-made cigarette packs have been available in twelve different pack sizes. The traditional sizes of 20s, 25s, 30s, 35s, 40s, and 50s have been supplemented by a range of smaller unusual packs in 21s, 22, 23s, and 26s, and occasionally larger sizes such as 32s and 43siii . Unusual pack sizes are not limited to FM cigarettes: pouches of 27, 45 and 55 grams of RYO tobacco have also been available, in addition to traditional 30, 35, 40, and 50 gram pouches and newer pouches of 15, 20, and 25 grams.7 Offering a range of pack sizes, particularly unusual pack sizes, makes it difficult for consumers to compare the unit price of tobacco products.7 In most other countries in the world, cigarettes are virtually always sold in packets of 20.

Figure 13.3.4 shows the number of FMC brand offerings (including sub-brands) by pack size from 2001 to 2021. Note that variants are not included in this data: each brand and pack size combination is usually offered in several variant options (e.g. blue, red, menthol). The number of total brand-pack size offerings increased by 180% over this 21-year period. There was a small increase in the number of packs of 25s offered between 2006 and 2008, but otherwise market offerings remained consistent to 2011. Small, unusual pack sizes quickly emerged in the years after plain packaging implementation, beginning with 26s in 2012, although the number of these on offer reduced in 2020-21. These packs appeared to replace packs of 25s for a period, with the number of 25s increasing (as well as 20s) as these small unusual pack sizes declined in recent years. The number of packs of 30 and 40 cigarettes have also increased since 2013. At 2001, 30s and 40s comprised 16% of the total brand-size product offerings, compared to 31% in 2021.

Figure 13.3.4

Number of factory-made cigarette products* on the Australian market by pack size, 2001–2021#

Sources: NSW Retail Traders’ Association. Price lists—Cigarettes. The Retail Tobacconist of NSW. 2001–2013: 61 to 87 (February editions); 2014–2015: 90 to 93 (March editions); 2019: 108 (Dec 2018 edition). 2021 118 Apr-Jun edition. 2020: CTC Eastern. National Price Lists. CTC Eastern. Available from: http://www.ctceastern.com/home/home_index.html. Accessed: 02/03/2020; Victorian Office of Prices 1990

* Brand (and sub-brand) and pack size combinations only. Variants not included in this data.

# Product offerings for the month of February for 2001-2013, then for the month of March for 2014 onwards. As per RRP data used elsewhere, to fill data gaps, December 2018 used for March 2019 and an alternative source of RRPs provided by tobacco manufacturers was obtained from a tobacconist’s website for the March 2020 datapoint.

The proportion of cigarette sales that were of larger pack sizes (i.e. 30s and larger) in Australia are provided for years for which this is available in Table 13.3.3. Overall, large pack sizes substantially increased in popularity from 1985 to 2013, with a high of 57% in 2006. However, packs of 50s were half as popular in 2013 than they were in 1993 and packs of 30s and 35s also declined. Pack of 40 sticks increased in popularity from 2006 to 2013.

Table 13.3.3
Percentages of sales of each pack size of cigarettes in Australia 1981 to 1997 and 2006 to 2013  20s and 21s, 22s and 23s, 25 and 26s, 30s and 35s, and 40s and 50s (%)

Source: Nielsen data for sales in November and December, published irregularly in The Australian Retail Tobacconist: NSW Retail Tobacco Traders' Association. Price lists—cigarettes. The Australian Retail Tobacconist, 1980s to 1990s; 41 to 59(February editions). Retail World. Retail World Annual Report.  Market sizes and shares. Retail World, December: 1997, 2006 to 2013.

* 21s, 22s, 23s, and 26s pack sizes added in 2013

Use of packs of 30s and 35s has also declined among secondary school students—see Figure 13.3.5.

Figure 13.3.5 
Pack size smoked among secondary-school students 12–17 years who smoked cigarettes in the last week*—1996, 1999, 2002, 2005, 2008, 2011, 2014, and 2017 (%)

Sources: White V, Williams T and Scully M personal communications, using data from surveys of secondary-school students reported in:
Hill D, White V, and Effendi Y. Changes in the use of tobacco among Australian secondary students: results of the 1999 prevalence study and comparisons with earlier years. Australian and New Zealand Journal of Public Health, 2002; 26(2):156–63. Available from: http://www.ncbi.nlm.nih.gov/pubmed/12054336b.

White V and Hayman J. Smoking behaviours of Australian secondary school students in 2002. National Drug Strategy monograph series no. 54, Canberra: Australian Government Department of Health and Ageing, 2004. Available from: http://www.nationaldrugstrategy.gov.au/internet/drugstrategy/publishing.nsf/content/mono54.

White V and Hayman J. Australian secondary school students’ use of alcohol in 2005.  Report prepared for Drug Strategy Branch, Australian Government Department of Health and Ageing. National Drug Strategy monograph series no. 58, Melbourne: Centre for Behavioural Research in Cancer, Cancer Control Research Institute, The Cancer Council Victoria, 2006. Available from: http://www.nationaldrugstrategy.gov.au/internet/drugstrategy/publishing.nsf/Content/mono58.

White V and Smith G. Australian secondary school students’ use of tobacco, alcohol, and over-the-counter and illicit substances in 2008. Canberra: Drug Strategy Branch Australian Government Department of Health and Ageing; 2009.  Available from: http://www.nationaldrugstrategy.gov.au/internet/drugstrategy/Publishing.nsf/content/school08.  

White V and Bariola E. Australian secondary school students’ use of tobacco, alcohol, and over-the-counter and illicit substances in 2011. Canberra: Drug Strategy Branch Australian Government Department of Health and Ageing; 2012.  Available from: http://www.nationaldrugstrategy.gov.au/internet/drugstrategy/Publishing.nsf/content/school11  

White V and Williams T. Australian secondary school students’ use of tobacco, alcohol, and over-the-counter and illicit substances in 2014. Melbourne, Australia: Centre for Behavioural Research in Cancer, Cancer Council Victoria, 2016. Available from: http://www.nationaldrugstrategy.gov.au/internet/drugstrategy/publishing.nsf/Content/australian-secondary-students-alcohol-drug-survey.

Guerin N and White V. ASSAD 2017 Statistics & Trends: Australian Secondary Students’ Use of Tobacco, Alcohol, Over-the-counter Drugs, and Illicit Substances in 2017. Second Edition. Cancer Council Victoria, 2020. Available from: https://www.health.gov.au/resources/publications/secondary-school-students-use-of-tobacco-alcohol-and-other-drugs-in-2017

# Included 22s and 26s in 2014 and 22s, 23s, and 26s in 2017.

 * Multiple responses allowed; totals may exceed 100% in each year

Note: In 2014, in addition to the usual response options of 20s, 25s, 30s, 35s, 40s, and 50s, a response option of “another pack size” was added. A total of 15.8% selected this option, including 6.2% who nominated a valid other pack size (22s or 26s). All other students who did not nominate a valid FMC size are not reported on.

Between 1999 and 2002, during the period of reform of the tax system, the percentages of secondary school students using large packs declined by about 18%, which included a 29% reduction in the percentage of teenage smokers preferring 40s, and a 32% reduction in the percentage preferring 50s.

The proportion of secondary students smoking from packs of 30s and 35s declined by two-thirds between 1996 and 2014. However, small increases in the proportion of smokers smoking from all large pack sizes (30s to 50s) in later years—particularly packs of 40s—meant that the proportion of teens smoking from large pack sizes was only 24% lower in 2017 than in 1996.

Between 2014 and 2017 the proportion of secondary school students smoking from packs of 20s increased by almost 20% to become by far the most popular pack size—more than twice as popular as 25s. These patterns may reflect two types of price minimising behaviours among students: seeking either best value per stick from larger packs or a low upfront purchase price from small packs.

13.3.1.4 Factory-made cigarette and roll-your-own tobacco relative pricing

It is also important to consider the pricing—and size availability—of popular alternative tobacco products when examining the price of cigarettes. In Australia, the most common factory-made (FM) cigarette alternative is roll-your-own (RYO) tobacco. RYO tobacco and FM cigarettes had long been essentially taxed at the same rate, so that the tax per 0.8 grams of roll-your-own tobacco was the same as the per stick rate for most FM cigarettes—see Section 13.2.1. However, because most RYO users roll less than 0.8 grams of tobacco per cigarette,8 using as little as 0.5 grams per cigarette, RYO tobacco provided a cheaper alternative to FM cigarettes. Further, as more budget brands and smaller pouch sizes have entered the RYO market in recent years (see also Figure 13.3.7 and Chapter 10, Section 10.9), the up-front cost and price per cigarette of RYO products have provided a reliably cheaper alternative to FM cigarettes.

As noted in Section 13.2, in its Budget of May 2017,9 the Australian Government determined that excise and customs duty on roll-your own tobacco would be harmonised over the following four years with that on factory-made cigarettes, so that the rate in September 2017 was reduced to the equivalent of 0.775 grams per cigarette, reducing to 0.75 in September 2018, 0.725 in 2019 and 0.7 grams in 2020.10,11 This measure was expected to take the price of a cigarette made with roll-your-own tobacco closer to the price of a factory-made cigarette, and the price of even the smallest roll-your-own pouches to be higher than that of most packs of cigarettes.12,13 The recommended retail prices of the lowest-priced available FM pack and RYO pouch, and cheapest available FM stick and RYO stick prices over time, using both 0.7 and 0.5 grams of tobacco per RYO cigarette from 2001 to 2021 are shown in Figure 13.3.5.

Figure 13.3.6

Recommended retail price# of the lowest-priced cigarette pack and RYO pouch, and cheapest available FM cigarette stick and RYO cigarette stick (calculated at 0.7 and 0.5 grams per stick), Australia, 2001–2021*

Sources: NSW Retail Traders’ Association. Price lists—Cigarettes. The Retail Tobacconist of NSW. 1940–2013: 9 to 87 (February editions); 2014–2015: 90 to 93 (March editions); 2019: 108 (Dec 2018 edition). 2021 118 Apr-Jun edition. 2020: CTC Eastern. National Price Lists. CTC Eastern. Available from: http://www.ctceastern.com/home/home_index.html. Accessed: 02/03/2020; and author calculations

# Prices for the month of February for 1940-2013, then for the month of March for 2014 onwards. RRPs were not published in the price lists in 2019 or early 2020, so December 2018 used for the early 2019 RRP and does not include routine indexation that occurred on 1 March 2019. RRPs for products from major manufacturers were not listed for several editions of the Australian Retail Tobacconist in 2019 and 2020. An alternative source of RRPs provided by tobacco manufacturers was obtained from a tobacconist’s website for March 2020.

*In current dollars: the price in the applicable year; no adjustment has been made for inflation. Includes brands from major manufacturers only for which RRPs are consistently available .

Figure 13.3.6 shows that prices for all items have increased over time, particularly since 2010. However, the rate of increase for FM packs and sticks is greater than that of RYO products. The effect of this is two-fold. First, the gap between the price of the cheapest available RYO pouch and the cheapest FM cigarette pack (i.e. those with the lowest up-front purchase price) has shrunk substantially. In 2018, a newly-introduced 15 gram pouch became the cheapest available RYO product, replacing the previous cheapest product of 20 grams. At March 2021, a 15-gram pouch of RYO tobacco cost only $0.50 more than the lowest-priced pack of 20 cigarettes, but would yield around 1.5 more cigarettes if rolled at 0.7 grams per stick, or 10 more cigarettes if rolled at 0.5 grams per stick. In contrast, in 2001, the cheapest pouch of RYO tobacco cost almost double the price of the cheapest FM cigarettes. While the cheapest RYO pouch in 2001—a 30-gram pouch—would have yielded many more cigarettes than the pack of 20 cigarettes, the upfront cost to the consumer was substantially more. The introduction of pouches of RYO tobacco in 20 grams in 2016 and then 15 grams in 2018 has further slowed the rate of increase of the cheapest RYO pouch prices in later years, but remains just above the cost of the lowest-priced FM pack. Figure 13.3.7 shows the change in the pouch size composition of the Australian RYO product market from 2010 to 2021.

Second, Figure 13.3.6 also shows that the gap between the cheapest FM cigarette stick and cheapest RYO cigarette stick (at 0.7 grams) progressively widened between 2001 and 2017, particularly around 2016-2018. The per stick price represents the best value for the consumer, that is, the most economical option available. The cheapest FM cigarettes were only $0.05 more expensive than the cheapest RYO 0.7 gram-cigarettes in 2001. This can also be expressed as a ratio of 1.2, meaning a smoker could purchase 1.2 RYO cigarettes for the same price as a FM cigarette. In 2017, the price difference between the cheapest RYO and FM cigarettes was six times higher. A smoker could afford 1.5 0.7 gram-RYO cigarettes for the price of the cheapest FM cigarette, or 2.1 0.5-gram RYO cigarettes. At 2021 this gap had almost been eliminated, and the ratio of cheapest 0.7 grams RYO cigarettes to cheapest FM was 1.04. However, a smoker rolling very light 0.5-gram cigarettes would yield 1.5 cigarettes for the same price as the cheapest FMC cigarette on the market.

The pouch size of roll-your-own tobacco products on the Australian market has shrunk considerably since 2001.14 Figure 13.3.7 shows that this trend has continued with the introduction of increasingly small pouches with a low up-front purchase price. Until 2010, the RYO market was comprised entirely of pouches of 30 grams or more. Smaller pouches of 25 grams were introduced over the next 5 years—largely replacing 30 and 35-gram pouches—followed by 20-gram pouches, and then 15-gram pouches in 2018. These smaller products have largely been introduced as new products rather than replacement products, so that the total number of RYO brand-size combinations on the market has increased from 28 to 48 from 2010 to 2021.

As a proportion of all brand-size combinations on the market, almost two-thirds (64%) of all RYO products were 40 grams or larger in 2010, dropping to 50% in 2015, and then 29% in 2021. In 2021, 19% were 15 grams, 8% were 20 grams, 40% were 25 grams, 12% were 30 to 45 grams and 21% were 50 gram pouches.

Figure 13.3.7
Number of roll-your-own tobacco products on the Australian market by pack size*, 2009–2021

Sources: NSW Retail Traders’ Association. Price lists—Cigarettes. The Retail Tobacconist of NSW. 2009–2013: 69 to 87 (February editions); 2014–2020: 90 to 113 (March editions), 2021 118 Apr-Jun edition.

*Count of number of pack sizes per brand. Total does not include the number of variants (e.g. blue, gold, menthol) that may be offered within each brand.

 # Product offerings for the month of February for 2009-2013, then for the month of March for 2014 onwards. As per RRP data used elsewhere, to fill data gaps, December 2018 used for March 2019 and an alternative source of RRPs provided by tobacco manufacturers was obtained from a tobacconist’s website for the March 2020 datapoint.  

13.3.2 Prices at which tobacco products are sold/purchased

Working out the price of cigarettes and other tobacco products is by no means a straight-forward matter. The prices at which cigarettes are offered for sale may differ significantly from those recommended by manufacturers. Many different brands (and sub-brands) of cigarettes are sold–61 FM cigarette and 29 RYO tobacco brands in Australia as of May 2021 (see Chapter 10.7) –from many different outlets; there were more than 35,000 outlets in Australia in 2004.15,16  Some types of outlets are more likely to sell at discounted prices, but not all brands are discounted to the same extent within the same periods of time. Obtaining a representative sample of sale prices for even a single brand over time would be a costly exercise. Obtaining a representative sample of prices for a large number of brands is simply not feasible.iv Many researchers attempt to address this difficulty by using prices of just the brand of cigarettes most popular in the population they are studying, but this may not give a picture representative of the entire cigarette market due to consumers seeking to minimise costs by shifting to cheaper brands or pack sizes, bulk purchasing, or shopping at lower-cost outlets.

In the 2003 study by Ross and Chaloupka17 discussed in Section 13.1.5, the average cost of cigarettes in a particular state (as calculated by industry sales records) correlated only weakly with the cost (in their local store) of the brand of cigarettes preferred by secondary school students. The study found that consumption fell much more dramatically in response to changes in prices reported by teenagers than to changes in state-average cigarette prices. The choice of indicator for price may critically affect the outcome of research on price effects, and, as demonstrated in Section 13.3.1.2, the pricing policies adopted by companies may undermine the effectiveness of tax policy as a means of discouraging tobacco consumption.

13.3.2.1 The Cigarettes and Tobacco Sub-group of the Consumer Price Index

The longest-running indicator available of the actual price of cigarettes for sale in Australian shops is provided by the component of the Tobacco and Alcohol Sub-Index of the CPI that covers tobacco products.iv The CPI and its sub-indexes are constructed each quarter by the Australian Bureau of Statistics using in-shop surveys monitoring a 'basket' of goods that might be purchased by a typical Australian household.18   Figure 13.3.7 plots the average index figure for the Cigarettes and Tobacco Sub-group of the Tobacco and Alcohol Sub-index of the CPI against the overall index for each year since the tobacco index was first published in 1973.

Figure 13.3.8
The Consumer Price Index, 1973–2021 (annual average index figure of all quarters): Cigarettes and Tobacco Sub-group of the Tobacco and Alcohol Sub-index of the CPI compared with overall index

Source: Australian Bureau of Statistics. 6401.0 Consumer Price Index, Australia, June 2021. 

Note: CPI and Cigarettes and Tobacco Sub-group averaged for each financial year to 2021.

Australian Bureau of Statistics. 6401.7 Consumer Price Index, Australia, Table 9, CPI: Group, Sub-group and Expenditure Class, Weighted Average of Eight Capital Cities, June 2021. Canberra: ABS, 2021. Last update: 28 Jul 2021; Viewed 9/08/2021. Available from: https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release.

It is evident from Figure 13.3.7 that tobacco prices, as determined in the Australian Bureau of Statistics price survey, have risen significantly over time, with notable rises in the mid-1990s, early 2000s, and from 2010 onward. Tobacco prices rose even between 2001 and 2009, during which time the excise and customs duty on tobacco products was increased only in line with the CPI, indicating increased margins to manufacturers and retailers (and also to state governments in GST revenue). The last steep increase in Tobacco CPI corresponds to the implementation of annual 12.5% excise and customs duty increases implemented on 1 December 2013, then each 1st September from 2014 to 2020.

13.3.2.2 Discounting in the tobacco market

While small retailers such as proprietors of local corner stores sell cigarettes at the recommended prices, the majority of cigarettes in Australia are sold at considerably lower prices. As well as selling single packets of cigarettes at well below the recommended prices, most supermarkets and tobacconists also sell cigarettes inmulti-pack bundles such as twin packs and cartons at a discounted rate. In its 1994 report on the cigarette industry, the Prices Surveillance Authority noted various common forms of discounting, including lower prices for stock bought in high volumes, and the phenomenon of 'specialling' where manufacturers encourage high-volume retailers (especially tobacconists and supermarkets) to discount one or two of that company's brands for a week or longer periods.19

An in-shop study undertaken through the period May 1997 to February 2001 by the Centre for Behavioural Research in Cancer (CBRC)20   indicated significant discounting of cigarettes over that period. The study surveyed the pack and carton prices of the five most popular brands of cigarettes in each state in a selection of all the major types of stores in a sample of suburbs in each major urban centre throughout Australia. On average, cigarettes in Australia were sold at 5.8% lower per stick than the recommended retail price, with considerable variation between brands and outlet types. Average discounting ranged from 4.4% for Benson and Hedges 25s to 6.8% for Horizon 50s. Petrol stations tended to sell cigarettes at slightly higher than the recommended retail price (about 0.3% higher across the study period) but discounting was common in supermarkets and tobacconists (with an average discount of 9.3% and 10.9% respectively). Per stick prices of cigarettes sold in cartons were about 14% lower than those sold in single packs. A similar study across major cities in Australia in 2012–13 found significantly lower average per stick prices for FM cigarettes in supermarkets compared to other retailers. 21 That study also found substantial and consistent price differences in factory-made cigarette products from the value, mainstream, and premium market segments. (See Section 10.9.2 for more detail on market segmentation). Particularly since the announcement of plain packaging, a fourth ‘super-value’ market segment has emerged in the Australian factory-made cigarette market. These brands are even more discounted than traditional value brands and have become among the most popular brands in Australia (see Section 10.7). Market segmentation provides another ‘layer’ of price differentiation in addition to pack size and bundling, and retail discounting. Table 13.3.4 compares the recommended retail price and advertised sale price in supermarkets for single packs and bundles for leading brands within each factory-made cigarette market segment and widely available RYO brands that are available in multiple pack sizes.

Table 13.3.4 shows that, in 2019, most cigarette brands were sold at the same price or slightly below their RRP, although some mid-priced brands were discounted 12–16%. Conversely, those brands that were not discounted relative to RRP offered substantial discounts for large single packs compared to small single packs. There were consistently small discounted sale prices for cartons of both small and large single packs relative to their respective single pack stick prices. Further, a clear gradient of per stick pricing can be seen within each price configuration, with the average RRPs of super-value brands ($1.29) well below that of mainstream ($1.43), and premium brands highest ($1.51).

In contrast, very little discounting of RYO tobacco products relative to RRP or by pouch size were observed. Price segmenting with RYO tobacco has not been established elsewhere, however, the FMC brand Rothmans is considered a super-value brand and had the lowest per gram sale prices.

Table 13.3.4
Recommended retail price and advertised sale prices of single pack and cartons of leading cigarette and rolling tobacco brands in Australia, 2019

Sources: NSW Retail Tobacco Traders' Association. Price lists—Cigarettes. The Australian Retail Tobacconist, 2018; 108(Oct-Dec): 5-6; and CBRC checks of online supermarket websites (Melbourne stores), January 2019.   

13.3.2.3 Prices paid as reported by smokers

An alternative approach to calculating prices of tobacco products is to ask smokers what they paid for their last packet of cigarettes or smoking tobacco. While not suitable for all research purposes, such data do provide very accurate information about price as actually experienced by consumers.

Studies based on interviews with US tobacco users have indicated significant recent increases in the percentages of smokers turning not just to cheaper brands, but also to cheaper forms of tobacco (roll-your-own and chewing tobacco); cartons in preference to packets; discount outlets; and, where this is convenient, duty-free and illicit tobacco products.22 

 In Australia, following the abolition of state business franchise fees on tobacco, there was a similar shift to roll-your-own including illicit 'chop-chop' ( see Section 13.7 ), and to cartons and to discount outlets.23 

Changes to tobacco taxes in Australia in 1999 made it much less attractive for smokers to turn to larger pack sizes and budget brands as a means of cushioning themselves from tax increases, and as intended, following introduction of reforms, smokers shifted back to smaller pack sizes with a lower up-front purchase price. 24 

Technical Appendix 13.3.1 sets out data on recommended retail prices (RRP) and reported prices paid for the most popular pack size of the ten most popular brands of cigarettes, reported by Australian smokers interviewed as part the International Tobacco Control Policy Evaluation Study for the years 2002–14.25 Figure 13.3.9 plots the average reported prices paid for the top ten brands against their RRP (weighted by brand share), and the percentage difference between the reported prices and RRP in each year.



Figure 13.3.9 
Recommended retail prices per cigarette of leading brands in 2002–2018 (selected years) versus reported prices paid by consumers, and percent difference in prices

Sources: International Tobacco Control Policy Evaluation Study, unpublished data provided by Partos T, 2012; Yong H, 2016; Le Grande M, 2019.

Recommended retail prices: NSW Retail Traders’ Association. Price lists—Cigarettes. The Retail Tobacconist of NSW. 2002–2018: 62 to 107 (August editions).

* Brands most commonly nominated as smokers' regular brands in the Australian arm of the International Tobacco Control Policy Evaluation Study; Marlboro and JPS equal tenth most popular in 2010.

Note: In current dollars, no adjustment has been made for inflation. Data not available for 2012, 2015 and 2017.

In all years, the prices consumers reported paying for factory-made cigarettes was lower than those recommended by retail trade associations. Over time, the degree of difference between recommended and reported prices grew, such that by 2014, the weighted average price paid was almost 12% lower than the weighted average recommended retail price. In 2016 and 2018 this gap reduced somewhat, although reported prices paid remained about 8% lower than the recommended prices in 2018.

While it is possible that consumers misremember and round prices up or down—particularly around the time of the introduction of large tax increases—clearly the recommended retail prices are overestimates of the actual prices paid by consumers. Indexes such as the CPI based on price monitoring surveys may also significantly overestimate prices experienced by consumers unless sampling is adjusted to take account of changing sales patterns, in particular those reflecting consumer efforts to seek lower prices.

Figure 13.3.10 shows the market segment composition of the most popular factory-made cigarettes brands over time. The most popular brands changed little between 2002 and 2009, where mainstream cigarettes accounted for more than half of the most popular cigarette brands. The popularity of mainstream products steadily declined thereafter, as did premium brands. Collectively, mainstream and premium brands accounted for more than 80% of the top-selling products in 2002, compared to 34% in 2018. A steady increase in the popularity of value brands occurred between 2002 and 2013, however, in 2013 the popularity of super-value brands began to rapidly increase, so that by 2018 more than half of the top-selling cigarettes were super-value brands. The represented a 370% increase from 2013 to 2018 in use of budget cigarette brands.

Figure 13.3.10
Market segment composition of the top ten cigarette brands as reported by smokers, 2002–2018 (selected years)

Sources: International Tobacco Control Policy Evaluation Study, unpublished data provided by Partos T, 2012; Yong H, 2016; Le Grande M, 2019.

Note: Data not available for 2012, 2015 and 2017.

Use of RYO tobacco has also increased substantially among Australian smokers, with any use among those 15–24 years of age more than doubling between 2007 and 2019.26 There was a significant increase in the proportion of smokers using RYO tobacco from 2016 to 2019 for all age groups other than 35–44 years. 

Figure 13.3.11
Proportion of Australian smokers 15+ smoking any RYO tobacco, 2001–2019

Source: Australian Institute of Health and Welfare. Data tables: National Drug Strategy Household Survey 2019 – Table 2.16, 2. Tobacco smoking chapter, Supplementary data tables. Canberra: AIHW, 2020. Available from: https://www.aihw.gov.au/reports/illicit-use-of-drugs/national-drug-strategy-household-survey-2019/data

Exclusive use of RYO has increased 7-fold among Australian smokers aged 15–24 years, and 4-fold among those aged 25–34 years.26 

13.3.3 International comparisons of the price of tobacco products

To accurately assess the pricesv  of Australian cigarettes compared with those sold in other countries, it is important to use consistent methods for collecting price data. Estimated prices for a single country will vary widely depending on the brand and pack size selected selected and the sorts of retail outlets from which data are collected.

Every two years, the World Health Organization collects information from its member states on the tax structure and pricing of cigarettes (and other tobacco products) as part of its MPOWER monitoring activities—'R’ in the MPOWER acronym refers to Raise taxes on tobacco.27 Figure 13.3.11 shows the price in international dollars of a 20-pack of the most sold brand in Australia and selected English speaking countries, and countries that featured in the 2021 most expensive cities in the world.28

In 2020, neither Australia nor New Zealand featured in the top ten most expensive cities but had the highest-priced popular cigarettes. The most-sold brand in Australia cost more than double in international dollars than the most-sold brand in Israel, the country of the most expensive city in 2021 (Tel Aviv). The price of the most-sold brand from Australia and New Zealand almost tripled in both countries from 2008 to 2020. In all other countries shown in Figure 13.3.11, except Singapore, prices increased by 1.7 to 2.1 times over the same period. (The price of the most-sold brand in Singapore increased by 1.2 times.)

Figure 13.3.12

Price in international dollars for a pack of 20 cigarettes of the most sold brand, Australia compared other English-speaking and other selected countries, 2008-2020

Sources: World Health Organization. WHO report on the global tobacco epidemic 2021: addressing new and emerging products, Web Annex VI: Global Tobacco Control Policy Data, 9.1 Taxes and retail price for a pack of 20 cigarettes most sold brand. Geneva: WHO, 2021 3 Aug.

World Health Organization. WHO report on the global tobacco epidemic 2021: addressing new and emerging products, Web Annex VI: Global Tobacco Control Policy Data, 9.2 Retail price for a pack of 20 cigarettes premium brand and cheapest brand. Geneva: WHO, 2021 3 Aug.

Note: Prices are expressed in international dollars (Purchasing Power Parity) to account for differences in the purchasing power across countries. Due to a large and dynamic tobacco market, the prices for tobacco products in China were weighted average retail prices.

National average estimates were also calculated for the United States and Canada, as tax rates and prices differ across states and provinces within these countries.

The WHO also reports on additional cigarette prices for the most recent year. Figure 13.3.13 presents the price in international dollars of a pack of 20 cigarettes of the most-sold brand, the cheapest brand available, and for Marlboro or another premium brand in 2020. The same countries are reported as per Figure 13.3.12, except that data for the cheapest and premium brand were not reported for the United States.

The price in international dollars of the cheapest brand in Australia was higher than the top-selling brand in all other countries shown other than Singapore, Ireland and New Zealand. It was higher than even the premium brand in China, Japan, Switzerland, Denmark, Israel, Canada, and France. However, the differential between the premium and cheapest packs was intermediate in Australia compared to the selected countries. Price dispersion represents the   price of the cheapest brand as a proportion of the price of a premium brand; a large gap between the two (indicated by a small proportion) creates opportunities for smokers to shift down to cheaper products when faced with a price increase. Price dispersion as reported by the WHO in Australia was 71%, compared to 90% in France and 82% in Japan and Ireland.    

Note, however, that the WHO measures the price of Marlboro or another premium brand. It does not record the most expensive product available, as it does the cheapest. It can be seen in Figure 13.3.13 that the premium brand is often very similarly priced to the most-sold brand. In Japan, Switzerland, Denmark, Singapore and France these are identical, suggesting that Marlboro is the most-sold brand and may not be priced as a premium product. Further, in markets such as Australia where numerous pack size options exist, pack size—particularly large packs with large up-front costs but cheaper per stick prices—complicates the selection of the cheapest and most expensive products. The price dispersion measures therefore would underestimate the full extent of price dispersion in many countries.

 

Figure 13.3.13

Price in international dollars for a pack of 20 cigarettes of the most sold, cheapest and premium brands, Australia compared other English-speaking and other selected countries, 2020

Source: World Health Organization. WHO report on the global tobacco epidemic 2021: addressing new and emerging products, Web Annex VI: Global Tobacco Control Policy Data, 9.1 Taxes and retail price for a pack of 20 cigarettes most sold brand. Geneva: WHO, 2021 3 Aug.

i A small number of brands (such as Deal) are sold only from supermarket chain Coles, produced under special arrangement with a manufacturer in Germany.

ii Other brands available over the entire period include Camel and Dunhill. Craven A Cork Tip 20s were discontinued in 2004, thereafter the equivalent price of a pack of 20s was inferred at 80% of the recommended retail price of a pack of Craven A 25s. Craven A products have not been included in price lists since late 2016.

iii 43s were briefly available in a supermarket-only brand and are not reflected in national recommended retail price lists.

iv In the US, tobacco companies publish detailed information on the average price of each brand based on sales data.

v Cost-of-living surveys published at various times have tracked the price of a single brand of cigarettes, but none of these has been regular and long-running.

vi T his section concentrates on  prices  only. For a full understanding of the costliness of cigarettes in Australia compared to cigarettes in other countries, see also Section 13.4.3. This assesses the relative  affordability  of cigarettes in different countries, examining prices relative to the cost of other goods and to income-earning capacity.

 

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References

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2. NSW Retail Tobacco Traders' Association. Price lists-cigarettes. The Australian Retail Tobacconist, 2018; 105(Jan- Feb - Mar):5-6.

3. Scollo M. Closing the Loophole--The Need for Action in 1997. Melbourne, Australia: Anti-Cancer Council of Victoria, 1996.

4. Australian Council on Smoking and Health, Australian Cancer Society, National Heart Foundation of Australia, Anti-Cancer Council of Victoria, and et al. Proposal to increase excise on tobacco. A submission to the Australian Federal Government. Perth: ACOSH, 1990.

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23. Blecher E. A mountain or a molehill: is the illicit trade in cigarettes undermining tobacco control policy in South Africa? Trends in Organized Crime 2010; 13(4):299–315. Available from: https://link.springer.com/article/10.1007/s12117-010-9092-y

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25. Li Q. Prices of Australian cigarettes from Waves 2 to 4 of the International Tobacco Control Policy Evaluation Study, Michelle Scollo of The Cancer Council Victoria, Editor 2006, Roswell Park Cancer Institute: Buffalo, NY.

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Technical appendix 13.3.1 Recommended retail price per stick of leading brands in Australia compared with reported prices paid—Australia 2002 to 2014

Table TA13.3.1

Recommended retail price per stick ($) of the ten most popular* Australian cigarette brands, 2002 to 2014 (selected years)

Source:   Recommended retail prices: NSW Retail Traders’ Association. Price lists—Cigarettes. The Retail Tobacconist of NSW. 2002–2018: 62 to 107 (August editions).

Note: In current dollars, no adjustment has been made for inflation. Data not available for 2012, 2015 and 2017.

* Brands most commonly nominated as smokers' regular brand in the Australian arm of the International Tobacco Control Policy Evaluation Study. Most popular pack size selected within each brand. Marlboro and JPS were equal tenth most popular in 2010.

Table TA13.3.2

Reported prices paid per stick ($) for the ten most popular* cigarette brands by smokers from Australian arm of the International Tobacco Control Policy Evaluation Study, 2002 to 2018 (selected years)

Source: International Tobacco Control Policy Evaluation Study, unpublished data provided by Partos T, 2012; Yong H, 2016; Le Grande M, 2019. Recommended retail prices: NSW Retail Traders’ Association. Price lists—Cigarettes. The Retail Tobacconist of NSW. 2002–2018: 62 to 107 (August editions).

Note: In current dollars, no adjustment has been made for inflation. Data not available for 2012, 2015 and 2017.

* Brands most commonly nominated as smokers' regular brand in the Australian arm of the International Tobacco Control Policy Evaluation Study. Most popular pack size selected within each brand. Marlboro and JPS were equal tenth most popular in 2010.

Table TA13.3.3

Percentage by which reported price paid for the ten most popular* Australian cigarette brands is different to RRP (unweighted), 2002 to 2014

Source: International Tobacco Control Policy Evaluation Study, unpublished data provided by Partos T, 2012; Yong H, 2016; Le Grande M, 2019. Recommended retail prices: NSW Retail Traders’ Association. Price lists—Cigarettes. The Retail Tobacconist of NSW. 2002–2018: 62 to 107 (August editions).

Note: In current dollars, no adjustment has been made for inflation. Data not available for 2012, 2015 and 2017.

* Brands most commonly nominated as smokers' regular brand in the Australian arm of the International Tobacco Control Policy Evaluation Study. Most popular pack size selected within each brand. Marlboro and JPS were equal tenth most popular in 2010.