13.3 The price of tobacco products in Australia

Last updated: July 2019

Suggested citation: Scollo, M, Bayly, M. 13.3 The price of tobacco products in Australia. In Scollo, MM and Winstanley, MH [editors]. Tobacco in Australia: Facts and issues. Melbourne: Cancer Council Victoria; 2019. 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

Since 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.

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 2015 ii —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, the Australian brand with highest market share between the late 1970s and 2015—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, 1980–2015, 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).

* 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 from 2014.

† Cork Tip 20s available to February 2004, 20s pack equivalent price calculated from RRP of 25s for 2005 onward.


Figure 13.3.1 plots the price per stick of Craven A 20s and Winfield 25s in $2012 from 1940 to 2015.

Figure 13.3.1
Recommended retail price per stick (in $2012) of Craven A 20s* and Winfield 25s, Australia, 1940­–2015

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).

* Using Cork Tip 20s to February 2004, then 20s stick price equivalent price calculated from RRP of 25s for 2005 onward; equivalent prices in dollars converted from shillings and pence for 1940 to 1965.

# Prices for the month of February for 1940-2013, then for the month of March from 2014.

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 real terms the stick price of Craven A in 2015 was almost five times higher than in 1940–reaching $1.14 per stick in 2015. Between 1980 and 2015, the stick price of both Craven A and Winfield increased more than five-fold in real terms.

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 2019, 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 12.5% annual scheduled increases to customs duty and excise have occurred 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 almost 7 times higher in 2019.

Figure 13.3.2
Recommended retail price of the most popular cigarettes in Australia, 1940–2019

Sources: NSW Retail Traders’ Association. Price lists—Cigarettes. The Retail Tobacconist of NSW. 1940–2013: 9 to 87 (February editions); 2014–2019: 90 to 108 (March editions).

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

Note: Prices expressed in 2012 dollars.

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 13.3.3 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. 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 and Figure 13.3.3 show the pack price for Horizon and Holiday 50s rising above $30 in February 2013, and then both exceeding $40 in March 2016. In March 2017, it cost $20 more to buy a pack of Horizon 50s than a pack of Winfield 25s. Over time, there has been a dramatic widening of the difference between the highest and lowest priced packs. 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 2017 the purchase price of a pack of Winfield 25s was 60% of a pack of Horizon 50s. As of 2017, Holiday 50s were no longer included in price lists (all Holiday products have been delisted), while Horizon 50s were priced just under $50. 

Table 13.3.2
Retail prices of leading brands, Australia , 1989 to 2019: recommended retail price and price differential between largest pack and leading brand

Sources: NSW Retail Traders’ Association. Price lists—Cigarettes. The Retail Tobacconist of NSW. 1989–2013: 50 to 87 (February editions); 2014–2019: 90 to 108 (March editions).

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

~ No Holiday products listed in 2017.

Note: Price at February of each year for 1989-2013, then at March of each year for 2014 onward.

Figure 13.3.3
Recommended retail price of six top selling brands of cigarettes, Australia, 1989 to 2019*

Sources: NSW Retail Traders’ Association. Price lists—Cigarettes. The Retail Tobacconist of NSW. 1989–2013: 50 to 87 (February editions); 2014–2019: 90 to 108 (March editions).

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

~ No Holiday products listed in 2017.

Note: Price at February of each year for 1989-2013, then at March of each year for 2014 onward.

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. As of 2019, large packs in Australia include 30s, 35s, 40s, 43sand 50s, as well as a range of smaller packs in 20s, 21s, 22, 23s, 25s, and 26s. These unusual pack sizes are not limited to FM cigarettes: pouches of 27 and 55 grams of RYO tobacco are also 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.

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 13.3.4.

Figure 13.3.4 
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 Guerin N 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. (2018).  Melbourne, Australia: Centre for Behavioural Research in Cancer, Cancer Council Victoria. 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 do not always equal 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 one-third 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 (larger packs) or a low upfront purchase price (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 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 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, assuming 0.7 grams of tobacco per RYO cigarette from 2001 onward are shown in Figure 13.3.5.

 

Figure 13.3.5
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 grams per stick), Australia, 2001–2019*

Sources: NSW Retail Traders’ Association. Price lists—Cigarettes. The Retail Tobacconist of NSW. 2001–2013: 61 to 87 (February editions); 2014–2019: 90 to 108 (March editions).

Note: 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 13.3.5 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. At March 2019, a 15 gram pouch of RYO tobacco cost only $1.05 more than the lowest-priced pack of 20 cigarettes, but would yield around 1.5 more cigarettes if rolled at 0.7 grams, or almost 13 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 substantially 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 minimum RYO pouch prices in later years, but remains higher than the cost of the lowest-priced FM pack.

Second, Figure 13.3.5 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 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 at $0.30. A smoker could afford 1.5 RYO cigarettes for the price of the cheapest FM cigarette. However, at 2019 this gap had halved to $0.14, and the ratio of cheapest RYO cigarettes to cheapest FM was 1.1.

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–60 FM cigarette and 26 RYO tobacco brands in Australia as of January 2019 (see Chapter 10.7) –from many different outlets; there were more than 35,000 outlets in Australia in 2004. 14, 15  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. iii 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 Chaloupka 28 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.17 Figure 13.3.6 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 13.3.6
The Consumer Price Index, 1973–2019 (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, Table 7, CPI: Group, Sub-group and Expenditure Class, Weighted Average of Eight Capital Cities. Canberra: ABS, 2019. Viewed 20 June 2019. Available from: http://www.abs.gov.au/AUSSTATS/abs@.nsf/allprimarymainfeatures/938DA570A34A8EDACA2568A900139350?opendocument.

Note: CPI and Cigarettes and Tobacco Sub-group averaged for each year; figure for March 2019 is average of the three quarters published at June 2019.

It is evident from Figure 13.3.6 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, scheduled to finish in 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. 18

An in-shop study undertaken through the period May 1997 to February 2001 by the Centre for Behavioural Research in Cancer (CBRC) 19  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. 20 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. 21  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. 22  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. 23    

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. 24 Figure 13.3.7 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 13.3.7 
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 13.3.8 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 13.3.8
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.

13.3.3 International comparisons of the price of tobacco products

To accurately assess the prices v  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 brand variant selected and the sorts of retail outlets from which data are collected.

13.3.3.1 International comparisons of average cigarette prices

Average cigarette prices are collected annually as part of the Economist Intelligence Unit's Worldwide Cost of Living survey. Figure 13.3.9 shows the price (expressed in US dollars) of a typical pack of cigarettes sold in a sample of supermarkets, mid-priced stores and speciality retailers for the ten cities with the highest cost of living in the world in 2018. Sydney was ranked tenth most expensive city, although had by far the most expensive average cigarette prices. Average cigarette prices in Sydney were 2.5 times higher than in the world’s most expensive city, Singapore, and 1.7 times higher than the city with the next most expensive cigarette prices. Compared to 2008, cigarette prices in Sydney had increased more than three-fold.

Figure 13.3.9
Average price in $US for pack of 20 cigarettes in the 10 most expensive cities in the world as of 2018

Sources: The Economist Intelligence Unit. Worldwide Cost of Living 2018: Which global cities have the highest cost of living? London: The Economist Intelligence Unit Limited. 2018. Available from: http://www.eiu.com/public/thankyou_download.aspx?activity=download&campaignid=wcol2018.

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

13.3.3.2 International comparisons

The World Health Organization provides detailed comparative information on tobacco pricing across all WHO member states. 25, 26 Figure 13.3.10 presents tobacco pricing data for Australia and a range of other countries for the top-selling brand within each country (in international dollars), and the price of the top-selling brand, the cheapest brand available, and for the brand Marlboro (all in US dollars), from 2016. In international dollars, the price of a pack of 20s of the top-selling brand in Australia was high relative to most selected countries other than Singapore. When converted to US dollars, the price of the top selling brand was highest in Australia compared all other selected countries.  The price of Marlboro 20s and the cheapest brand (both in US dollars) was higher than in all other selected countries other than New Zealand.

 

Figure 13.3.10
Comparative prices of packs of 20s in international and US dollars, selected countries, 2016

Source: World Health Organization. WHO report on the global tobacco epidemic, 2017. Monitoring tobacco use and prevention policies Geneva: WHO, 2017. Available from: http://apps.who.int/iris/bitstream/10665/255874/1/9789241512824-eng.pdf?ua=1.

Note: Data on price of Marlboro and cheapest brand not available for United States and Canada. The price is a sales-weighted average of prices in all states in the US. Sales vary widely between Canadian provinces. The price shown is a sales-weighted average of the price in Canada for the most sold brand.

 

 

i A small number of brands (such as Deal and Harvest) 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 In the US, tobacco companies publish detailed information on the average price of each brand based on sales data.

iv 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.

v 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.

Relevant news and research

For recent news items and research on this topic, click  here ( Last updated September 2019)

 

References

1. NSW Retail Tobacco Traders' Association. Official price lists--cigarettes. The Retail Tobacconist, 1940; 1(2):x-x.

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.

5. Australian Council on Smoking and Health, Australian Cancer Society, National Heart Foundation of Australia, and Anti-Cancer Council of Victoria  et al. Tobacco Taxes: a case for action. A submission to the Australian Federal Government. Perth: ACOSH, 1992.

6. Australian Council on Smoking and Health, Australian Cancer Society, National Heart Foundation of Australia, and Anti-Cancer Council of Victoria et al. Tobacco excise duties. Submission to the Australian Federal Government. Perth: ACOSH, 1994.

7. Bayly M, Scollo MM, and Wakefield MA. Who uses rollies? Trends in product offerings, price and use of roll-your-own tobacco in Australia. Tob Control, 2019; 28(3):317-324. Available from: https://www.ncbi.nlm.nih.gov/pubmed/30030409

8.  Branston JR, McNeill A, Gilmore AB, Hiscock R, and Partos TR. Keeping smoking affordable in higher tax environments via smoking thinner roll-your-own cigarettes: Findings from the International Tobacco Control Four Country Survey 2006-15. Drug Alcohol Depend, 2018; 193:110-116. Available from: https://www.ncbi.nlm.nih.gov/pubmed/30352334

9. Morrison S and Cormann M. Budget 2017-18. Budget paper no. 2.Part 1. Revenue measures. Canberra: Treasury, 2017. Available from: http://www.budget.gov.au/2017-18/content/bp1/html/.

10. Customs Tariff Amendment (Tobacco Duty Harmonisation) Bill 2017, 2017. Available from: http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillhome%2Fr5892%22;src1=sm1.

11. Excise Tariff Amendment (Tobacco Duty Harmonisation) Bill 2017, 2017. Available from: http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r5893.

12. Customs Tariff Amendment (Tobacco Duty Harmonisation) Bill 2017, Explanatory Memorandum, 2017. Available from: http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillhome%2Fr5892%22;src1=sm1.

13. Excise Tariff Amendment (Tobacco Duty Harmonisation) Bill 2017, Explanatory Memorandum, 2017. Available from: http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r5893.

14. PricewaterhouseCoopers. Sales of cigarettes and tobacco products by type of retail business.  An analysis of sales of cigarettes and tobacco products to tobacco retailers in Australia.    Document tabled as part of a formal submission (no. 46) made by British American Tobacco Australia in relation to the Inquiry into Tobacco Smoking in New South Wales in 2006., Sydney: PricewaterhouseCoopers, 2005. Available from: http://www.parliament.nsw.gov.au/prod/parlment/committee.nsf/0/2b14b998dda58536ca2571620017ecd2/$FILE/Sub%2046%20BATA%20-%20Attachment%202.pdf.

15.  Economic Studies and Strategies Unit. The significance of cigarettes and tobacco products to retailers. Sydney: PricewaterhouseCoopers, 1999. Available from: http://www.parliament.nsw.gov.au/prod/PARLMENT/Committee.nsf/0/2b14b998dda58536ca2571620017ecd2/$FILE/Sub%2046%20BATA%20-%20Attachment%202.pdf.

16. Ross H and Chaloupka F. The effect of cigarette prices on youth smoking. Health Economics, 2003; 12(3):217–30. Available from: http://econpapers.repec.org/article/wlyhlthec/v_3A12_3Ay_3A2003_3Ai_3A3_3Ap_3A217-230.htm

17. Australian Bureau of Statistics. 6461.0 Australian Consumer Price Index: Concepts, Sources and Methods, 14th Series. Canberra: ABS, 2005. Available from: http://www.ausstats.abs.gov.au/ausstats/free.nsf/0/78A8F9FCA2B2BA62CA256D580005314D/$File/64610_2003.pdf.

18. Prices Surveillance Authority. Report no. 52: inquiry into cigarettes declaration. Matter no: PI/94/1. Melbourne, Australia: PSA, 1994.

19. Scollo M, Owen T, and Boulter J. Price discounting of cigarettes during the National Tobacco Campaign, in Australia's National Tobacco Campaign: evaluation report vol. 2.  Hassard K, Editor Canberra: Commonwealth Department of Health and Aged Care; 2000. p 155-200 Available from: http://www.health.gov.au/internet/main/publishing.nsf/Content/7E318B2BCB5DAE26CA256F190004524F/$File/tobccamp_2-ch5.pdf.

20. Scollo M, Bayly M, and Wakefield M. The advertised price of cigarette packs in retail outlets across Australia before and after the implementation of plain packaging: a repeated measures observational study. Tobacco Control, 2015; 24:ii82-ii89. Available from: http://tobaccocontrol.bmj.com/content/24/Suppl_2/ii82.full

21. Hyland A, Higbee C, Li Q, Bauer J, Giovino G, et al. Access to low-taxed cigarettes deters smoking cessation attempts. American Journal of Public Health, 2005; 95(6):994–5. Available from: http://www.ajph.org/cgi/reprint/95/6/994

22. 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: http://www.springerlink.com/content/q852738qk5761088/

23. Scollo M, Younie S, Wakefield M, Freeman J, and Icasiano F. Impact of tobacco tax reforms on tobacco prices and tobacco use in Australia. Tobacco Control, 2003; 12(suppl. 2):ii59–66. Available from: http://tc.bmjjournals.com/cgi/content/abstract/12/suppl_2/ii59

24. 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.

25. World Health Organization. WHO report on the global tobacco epidemic, 2015. Raising taxes on tobacco Geneva: WHO, 2015. Available from: http://www.who.int/tobacco/global_report/2015/en/index.html.

26. World Health Organization. WHO report on the global tobacco epidemic, 2017. Monitoring tobacco use and prevention policies Geneva: WHO, 2017. Available from: http://apps.who.int/iris/bitstream/10665/255874/1/9789241512824-eng.pdf?ua=1.

 

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 TA13.3.1.1
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 TA13.3.1.2
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 TA13.3.1.3
Percentage by which reported average weighted price is different to recommended price (unweighted)

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.