Profits, death and disease: big tobacco’s business model

Tobacco companies cajole, convince, and promote their deadly products to billions across the globe. Nikolai Vassiliev, CC BY-NC-SA

Lung cancer, a leg amputation, or gasping for air as a result of emphysema are not fun ways of ending one’s life. All are common outcomes of smoking, and if current global patterns of smoking continue – 50% of young men and 10% of young women becoming smokers – one billion people are estimated to die this century. And they will be mainly from low- and middle-income countries.

In Australia, it is perhaps hard to fathom that three out every five men smoked in the 1950s, yet levels like this are the norm in countries such as Indonesia, China, Russia and Egypt.

There is one, and only one, major driver of this global epidemic – the tobacco industry. The industry is dominated by six big firms: China National Tobacco Corporation, Philip Morris International, British American Tobacco, Japan Tobacco International, Imperial Tobacco and the Altria Group/Philip Morris USA.

These companies are not shrinking away. In fact, they have rapidly shifted their attention to the developing world by implanting themselves firmly in local economies, where they can operate with little regulation or controls. Tobacco retail sales have had an average annual growth of 2% in low- and middle-income countries compared to 0.1% in high income countries in the 12 years to 2009.

Take Philip Morris International in Indonesia, where 40% of 13- to 15-year-old boys smoke. It bought local company Sampoerna and is positioning Indonesia as the centre of the Marlboro brand production to cater for demands in the Asia-Pacific region. As Sampoerna President Director Paul Janelle said last year:

We have invested more than $390 million in Karawang since 2006 […] PMID and Sampoerna are committed to long-term business in Indonesia.

China has a major problem with 300 million people smoking, 75% of its adults do not have a comprehensive understanding of the health hazards of smoking. The tobacco industry is a government-owned monopoly, and the ministry that oversees the tobacco monopoly also controls key aspects of tobacco control policy, including prices and warning labels. It is hard to imagine a greater conflict of interest.

China’s tobacco industry is a government-owned monopoly. EPA/Michael Reynolds

Tobacco is one of the great commercial successes of our time. They have a very simple model, which needs little innovation or R&D – simply because the product sells itself through addiction. Their aim is to get young people to take it up, so they will continue for life and can then ensure their children smoke (children of smokers are twice as likely to smoke as non-smokers). The fact that half of their clients will die, on average, 12 years prematurely is of no concern to them.

They have built the perfect model of intergenerational addiction and early death. Their stocks, yields and margins are, unlike their products, very healthy. It is estimated that A$8.5 billion of Australia’s super funds are invested in tobacco companies, with very few Australians aware they might be supporting the tobacco industry. So despite the fact that the tobacco industry ranks the lowest in the reputation index, they still manage to generate enormous profits.

As they have done in countries such as Australia and the United States, tobacco companies in the developing world use intimidatory, highly unethical tactics to pursue their sales. They bias research findings, co-opt policy makers and health professionals, they donate to and lobby politicians and public officials to oppose public regulation and try to influence voters to oppose public health regulation.

In Africa, tobacco companies are threatening to sue countries claiming their laws violate international legal obligations. It is worth recalling that these countries have virtually no capacity to defend themselves in court and the transnational companies have far bigger bank reserves than the countries themselves.

Tobacco sales have grown around 2% a year in low- and middle-income countries. Crispin Semmens/Flickr, CC BY-SA

The world has responded with the establishment of the World Health Organization’s Framework Convention of Tobacco Control in 2005. It was developed in response to the globalisation of the tobacco epidemic, and does represent a major advance for tobacco control.

But the majority of countries are yet to implement the policies that work (taxation, advertising bans, smoke-free environments, health warnings and media campaigns). This is because many national governments, the international development community, and philanthropic groups (with the admirable exception of Bloomberg and the Gates foundations) have simply not woken up to the huge preventable death and disability toll related to tobacco.

According to the Institute for Health Metrics and Evaluation, health funding for tobacco control totalled US$68 million in 2011, less than 1/100th the amount spent on HIV/AIDS, and of course a tiny amount compared to the US$1.7 trillion spent on arms in the same year.

The fact that the tobacco industry can continue to get away with causing such devastating levels of premature death and illness is because they have become “part of the furniture” in so many countries. It is only over the last few decades that smoking has become much less normal or “cool” in wealthier countries.

But the battle continues and this has been clearly shown by the recent front page story in The Australian claiming that plain packaging has failed. Fuelled by data from the tobacco industry only, the obvious reason for such a banner headline was so that it could be reproduced by the Murdoch press in the UK and Europe where the Irish, UK and French governments have made it clear they want to pursue plain packaging.

Plain packs aim to stop young people taking up smoking. AAP Image/Lukas Coch

It is no coincidence that Rupert Murdoch was on the board of Phillip Morris for 12 years, and in turn News Corporation have had a succession of Phillip Morris executives on their board (Hamish Maxwell, Geoffrey Bible and Peter Barnes). Phillip Morris’ own documents show how they used their “clout” with the media such as News Corporation – even to the point of funding columnists to attack the science of tobacco control on FoxNews.com.

Ask any executive in a tobacco company if they’d like their children to smoke and you can be sure of the answer – it will be a resounding no! Because they’ve understood the science of tobacco and they know it is addictive and it kills prematurely. But they are still happy to cajole, convince, and promote their deadly products to billions across the globe. To me that simply stinks.