of a health risk than cigarettes do, are better controlled and tracked as they travel through the supply chain, than a pack of cigarettes is? How can Toyota track the more than 30 000 individual parts in one of their showroom vehicles back to its original supplier,19 but big tobacco does not know where its cigarettes go?
A quick look at some other fast-moving consumable goods put big tobacco’s supposed inability to track its products through the supply chain in perspective:
ThisFish20 lets you trace your fish fillet back to the particular fisherman who caught it on the other side of the world, giving consumers a fish-to-fork view of their purchases.
How is it that a fisherman out at sea somewhere off the coast of Java, armed only with a smartphone, can set in motion the ability to trace a single fish fillet from a London supermarket all the way back to his boat – but the tobacco industry says it has no control over where its packs of cigarettes end up?
Harvest Mark21 lets you trace your punnet of tomatoes back to one of its 3 000 farms.
How is it that Indonesian teak farmers on a remote family-owned plantation can achieve traceability down to the individual tree stump, across a complex supply chain that includes mills and kilns and furniture factories, all the way to a salesroom in Europe22 – but the tobacco industry cannot track where its cigarettes end up?
It is nothing short of preposterous. Fish only rarely kill people; tobacco does so routinely.
Having a better chain of custody, with better traceability, for a salmon fillet or a bag of grapes than we do for tobacco is nothing less than astonishing.
But there is more to it than fish fillets or bags of grapes. There are arguably very few companies in the world that are quite as vilified as big tobacco. Monsanto – which has many characteristics in common with big tobacco from a supply chain perspective – is perhaps one of them.
Monsanto is interesting because it has adopted a very progressive supply chain security framework, fully digitising their entire supply chain from product development in the laboratory, to a farmer on a combine harvester, to its customers.23
But most importantly, for our purposes, they simply do not do business with anybody who does not secure their own supply chains.
If Monsanto can enforce supply chain security protocols on the people it does business with, surely it is possible for the tobacco industry to do the same?
An even more complex example lies in Procter & Gamble’s supply chain and distribution network24 (the company manufactures some of the world’s leading consumer brands including Tide, Crest, Pringles, Pampers, Clairol and 300 or so other products). It somewhat echoes the tobacco industry’s distribution network, selling to 5 billion consumers in 140 countries the world over.
P&G cut out the middle-man and now directly distribute their products to major accounts themselves; they ended their direct relationships with smaller accounts; and they focus on the use of a real-time instrumented supply chain, making it possible for them to literally track a bottle of shampoo anywhere around the world.
If it is possible for a company with multiple different product categories, diverse supply chains and a complex global distribution network to connect actual sales with their supply chain management process, and to cut out sales to middle-men, for a tube of toothpaste, it is entirely possible for the tobacco industry – with what is a largely homogenous product – to do the same.
Of course, it’s not just private companies that have sought to benefit from more robust supply chain security practices. A number of government agencies and international instruments (like the ones for authorised economic operators and the customs trade partnership against terrorism),25 are increasingly developing good practice principles that are as applicable to cigarettes as they are to other commodities: requiring traders to know and screen the customers they do business with; including supply chain management as a strategic objective at a corporate level; integrating risk analysis of the supply chain into business practices; screening and monitoring customers; and the use of traceability solutions. Big tobacco does not and should not qualify as a ‘trusted trader’ under these programmes because its supply chain inherently lacks integrity – and yet it does.
Other industries adopt these recommended practices – most often voluntarily – because they view supply chain management as a strategic asset, that is used to increase their profit margins (like Procter & Gamble) and reduce their reputational risk (as De Beers does to guard against conflict diamonds).26
The tobacco industry has simply not adopted these practices. Why? Most likely because it chooses not to.
This is not an industry fighting for its life. It’s a thriving industry simply not being held to account for its products and its supply chains, unlike other industries that are held to account for their products and supply chains.
Want to significantly curtail the illicit trade in cigarettes? Manage the cigarette supply chain better, by stopping indiscriminate sales of cigarettes, and by creating the ability to track and trace cigarettes through the supply chain, back to their point of manufacture. Mark cigarette packs with secure, unique identifiers, so that they can be traced back to their point of manufacture. Introduce know-your-customer requirements, only allowing sales to customers who have their own strict chain of custody and supply chain management protocols; and introduce legitimate demand conditions on all sales. Stop ex-factory sales, only allowing for sales to larger retailers directly.
Philip Morris itself said it best in one of its vintage ads (at the time promoting their cigarettes as a healthier option): an ounce of prevention is worth a pound of cure.27
Secure the supply chain and watch contraband dry up. The reason it’s not happening? Because the tobacco industry has developed a playbook for profit that has left it virtually untouchable, and that allows it to operate with impunity, everywhere.
Vintage big tobacco ad from the Stanford University catalogue
Date: 1943
Brand: Philip Morris
Manufacturer: Philip Morris
Campaign: Johnny Calls for Philip Morris
Theme: For your Throat
Quote: An ounce of prevention is worth a pound of cure!
Comment: Johnny Roventini (1910–1998), the famous Philip Morris spokesperson, is shown calling ‘An ounce of prevention is worth a pound of cure’, presenting the brand as the healthiest cigarette option. The ad capitalises on public fears over smoking-related health conditions.28
9. A playbook for profit
With the rise of competitors, and more stringent regulation about what it can sell to whom, where and how, big tobacco has had to change its tactics. And as big tobacco has faced more pressure, both from regulators and other competitors, so too, in my view, would the nature and sophistication of its evasion and illegal activities probably have had to change.
What may have once been pure smuggling has become increasingly complex aggressive tax avoidance with mounting evidence pointing to the use of convoluted constructs like thin capitalisation, transfer pricing, money laundering and fictitious revenue schemes.1
It’s the very story that sits at the heart of this book: The industry may
