The Tobacco Industry in Spain January 2013
MAS Consulting Group A global public affairs firm
Table of contents 1. Features of the Tobacco Industry in Spain ................................................................................. a. Tobacco crops .................................................................................................................... b. Industry (processing and manufacturing) ....................................................................... c. Distribution ....................................................................................................................... d. Sales ...................................................................................................................................
3 3 3 3 4
2. Current situation of the Tobacco Industry in Spain ................................................................... a. Consumption trend. Analysis of supply and demand ...................................................... b. Analysis of the Spanish and European regulations ..........................................................
5 5 5
3. Economic contribution ............................................................................................................... a. Contribution to the economy ........................................................................................... b. Contribution to the regional economies .........................................................................
7 7 8
4. EC Directive 2001/37 ................................................................................................................... a. Background ....................................................................................................................... b. Current situation and implementation of the development process ............................. c. Changes made ................................................................................................................... d. Milestones of the review process ..................................................................................... e. Main milestones of the review process in Spain ..............................................................
10 10 10 11 11 12
5. The perception of tobacco at Spanish institutions ..................................................................... a. Government of Spain ........................................................................................................ b. Autonomous Communities .............................................................................................. c. Political parties and leaders ...............................................................................................
13 13 13 14
6. The perception of tobacco in Spanish civil society .................................................................... a. Anti-smoking groups. Messages, strategies, leaders and prominent actions .................. b. Tobacco advocacy groups. Messages, strategies, leaders and prominent actions .......... c. Opinion Leaders in Spain ................................................................................................. d. Stance of the Spanish media ............................................................................................. e. Tobacco surveys ................................................................................................................. f. Prevention and damage reduction policies in Spain ........................................................
15 15 15 16 16 16 17
7. Main Conclussions ...................................................................................................................... 18 Anex ................................................................................................................................................. 19
2
The Tobacco Industry in Spain - January 2013
1
FEATURES OF THE TOBACCO INDUSTRY IN SPAIN
a) Tobacco crops in Spain Spain is one of the major EU tobacco producers. In the European Union, tobacco crops are grown in 13 countries, although it is particularly representative in Italy, Bulgaria, Poland, Greece and Spain. Although tobacco production represents a fairly small part of agriculture as a whole, the sector has a series of features that make it particularly relevant in economic terms. Fundamentally, there are two features: Its contribution to State revenue and its prominent socio-economic role in the development of certain regions. One of the major features of tobacco crops is the importance of manpower. Although the tobacco crop cycle –harvesting, drying and curing- has become more machine intensive in recent years, it still requires 2,200 hours of work per hectare, far exceeding the amount required by any other kind of farm activity.
Moreover, tobacco growing in Spain helps to maintain the rural fabric and generates an industrial and economic activity that contributes to the survival of territories threatened by the rural exodus. In Spain, tobacco is grown almost exclusively in Extremadura, Andalusia, Castilla-León and Castilla-La Mancha, although there are smaller plantations in Navarre, the Basque Country and the region of Valencia. There are around 10,631 hectares devoted to growing tobacco in Spain, with production of some 32,100 tonnes, according to figures for 2010. Extremadura alone accounts for 92.5% of tobacco production in Spain, followed in second place by Andalusia with 6.5%. For Extremadura, growing tobacco -on around 2,000 farms- is crucial, both because of its economic value as well as for its role in generating jobs. Unsurprisingly, it represents the second source of revenue for this Autonomous Community after hunting.
b) The tobacco manufacturing industry The manufacturing industry is in charge of processing tobacco after it has been fermented, processed, mixed and made suitable for end consumption. According to the Central Business Directory, there are 48 companies in Spain than engage in the tobacco sector. In recent years, this figure has decreased steadily. Evidence of this can be seen in the reduction from 77 companies in 2005 to 48 companies in 2011. According to the 2011 industrial survey, the tobacco industry generated operating revenue of around 974
million euros. By the same token, employment in the tobacco manufacturing industry rose to 4,500 persons. Just as important as the direct effects of the sector are the indirect effects on the economy as a whole. And this is because, in addition to agriculture and the tobacco industry itself, sectors such as land transportation, the paper industry, other business activities, real estate activities, other food industries, the activities involved with transportation, construction, production and distribution of energy and the chemical industry, inter alia, benefit as a consequence of the tobacco industry.
c) Distribution In Spain, tobacco distribution is conducted through tobacconists, known as ‘estancos’, which are administratively licensed by the State. The rights and obligations of the tobacconists are included in that licence. There are currently 13,601 tobacconists in Spain, 300 of which are facing difficulties in surviving. Until 2012, tobacconists were licensed through a public bidding procedure to natural persons qualified to work in this trade, of EU nationality and for a 25-year period. However, the Government of Spain has recently amended the award of these tobacconists, and from 2013 onwards this will be conducted through an auction. The Tobacco Industry in Spain - January 2013
Maintaining the state-owned monopoly of retail trade helps the State keep control of a product such as tobacco, with an appreciable health, tax and excise repercussion.
The Tobacco industry generated operating revenue of around 974 million euros 3
1
d) Sales As retail distribution of tobacco is conducted through tobacconists, it is possible to carry out reliable and updated monitoring of legal sales of tobacco. Thus, the Tobacco Market Commission (the organisation that holds regulatory and supervisory terms of reference) publishes data every month and every year (www. cmtabacos.es) on tobacco sales to tobacconists. Furthermore, in Spain, in addition to the tobacconists, tobacco can also be sold at authorised establishments. This sale is subject to a surcharge. Following the latest legal amendments (Royal Decree 1676/2011,
4
of 18 November) these sales can only be carried out through cigarette or cigar vending machines or manually at authorised hostelry establishments (bars, restaurants and other enclosed hostelry establishments), hotels, hostels and the like, newspaper kiosks on the public thoroughfare or in premises whose main activity is the sale of press items with direct access to the public thoroughfare, convenience stores at service stations or those that can substantiate this status, and events rooms, gaming premises or those for the use of the public at large.
The Tobacco Industry in Spain - January 2013
2
CURRENT SITUATION OF THE TOBACCO INDUSTRY IN SPAIN
a) Constumption trend. Analysis of stupply and demand in recent years, illicit sales of smuggled tobacco have risen from 2% to 6% in 2011. It is estimated that 2012 will close with illicit sales of tobacco of around 10%, meaning that the Spanish state will fail to receive around one billion euros in revenue.
The increase in the final price of tobacco in recent years, caused by tax hikes, has led to a significant decrease in sales. Consequently, between 2008 and 2010, the sale of legal cigarettes fell 20%. By way of example, the 3.62 billion cigarette packs sold in 2010 represents a decrease of more than 446 million with regard to 2009 and almost 893 when compared with 2008. This trend was exacerbated in 2011 when sales fell by 17%, accounting for almost 570 million fewer packs.
A further consequence has been lower tax revenues from tobacco works due to less consumption as a result of higher prices. So, in 2011 the Spanish Government raised 338 million euros less revenue from tobacco taxes than in 2010. For the first time in 25 years, tax revenue from tobacco fell in Spain.
Since 2009, the average price of the cigarette pack in Spain has increased one euro, representing a 9% increase in the price of the pack.
Among other things, this phenomenon is because some consumers of cigarettes started to consume rolling tobacco, which is cheaper. This has led to lower tax revenue for the State.
One consequence that the tax increases have had on tobacco products has been a rise in smuggling and the marketing of counterfeit tobacco in Spain. Thus,
Evolution of Tobacco Consumption in Spain 5000 4500
- 10%
4000
- 11%
3500
- 17%
3000 2500 2000 1500 1000 500
2011
2010
2009
2008
2007
2006
0
b) Analysis of the Spanish and European regulations Tax regulations
In addition, the price of cigarettes contains:
Taxation of cigarettes in Spain is influenced by EU regulations that lay down a common structure and minimum levels of tax. This regulation lays down that all cigarettes must be subject to the following taxation levels:
• Value-added Tax ( VAT) For Spain this is 21%.
• A specific tax. This is a fixed amount added to the producer’s price. This tax is currently 12.79 euros for every 1,000 cigarettes (0.254 euros for each pack of 20). • Ad valorem tax. This involves a percentage of the recommended retail price. This is currently 57%. The Tobacco Industry in Spain - January 2013
• Additional VAT: this is a VAT-associated tax, targeted at preventing tax collection falling on the retailer. • Commission for retailers: In Spain, this is currently set at 8.5% of the RRP for cigarettes and cut tobacco, and 9% for cigars and small cigars. General and health regulations in Spain Since January 2011, and as a consequence of Law 42/2010, of 30 December 2010, smoking in Spain is
5
2
banned in any establishment open to the public and which is not outdoors. Smoking is also banned at workplaces, at health centres and their enclosures. Similarly, all media are forbidden from broadcasting programmes or images in which the presenters, collaborators or guests appear smoking and mention or display, either directly or indirectly, brands, trade names, logos or other identifying signs or signs that are associated to tobacco products. Infringement of any of the articles laid down in this law could lead to a fine of up to 600,000 euros. At a European level, the current regulation is enshrined in Directive 2001/07, currently under
6
review and which we will discuss in later chapters. Despite the current legislation in Directive 2001/07, each Member State has its own legislation. In this regard, we can draw a distinction between those countries with more restrictive laws, such as Ireland, where it has been forbidden to smoke in the workplace or public spaces since 2004, United Kingdom since 2007, and Cyprus since 2010. Another group would comprise those states that have softer legislation and where smoking is allowed in restricted areas of public premises providing certain technical requirements are met. Countries in the latter group includes Sweden, Finland, Italy, Netherlands and several countries from the east.
The Tobacco Industry in Spain - January 2013
3 economic contribution a) Contribution to the economy The value chain of the tobacco sector contributes more than 2.7 billion euros to the Spanish economy, representing almost 0.3% of all the Spanish economy’s value-added, according to information from the Industrial and Trade Survey and the Ministry of Agriculture. In 2009 -the last year for which information is available- the tobacco industry sector generated value-added of 465 million, which accounts for 37 less than the previous year. This is a consequence of the crisis and ever more restrictive legislation governing tobacco consumption. The tobacco industry activity has an appreciable impact on other sectors of the economy. To this end, in addition to the 465 million euros generated by the tobacco industry, we need to add a further 635 million euros indirectly generated. As a result, the industry’s activity, combining direct and indirect effects, generates 1.1 billion euros of value-added. Elsewhere, in 2009 the retail of tobacco products generated value-added of almost 690 million euros
directly, and a further 362 million indirectly. Jointly, retail trade contributed 1.05 billion euros. Wholesale trade also carries weight in the economy, although to a more moderate extent than in previous years. Thus in 2009 it generated GVA of 291.5 million euros, to which a further 206.7 million needs to be added as a consequence of indirect generation. Overall, the contribution totalled almost 500 million euros. Lastly, tobacco growing produced value-added of almost 29 million euros directly, and a further 22 million indirectly, representing an annual amount of 51 million euros. Yet in addition to the gross value, the tobacco sector’s activity has a notable impact on job creation. The employment generated in the tobacco sector in Spain comes from farming (during the crop growing stage), from industry (during processing), and from services (during the distribution stage).
Employment in the Tobacco sector
Crop growing
Processing
Manufacturing
Distribution and sales
Crop growing: 10,000 direct and indirect jobs. Farms in Extremadura (92.5%), Castilla y León, Castilla-La Mancha and Andalusia.
Processing: CETARSA is the only processing industry in Spain.
Manufacturing: 48 companies and 18,000 direct and indirect jobs.
Distribution and sales: 27,000 direct and indirect jobs
TOTAL VALUE CHAIN: 2.7 billion euros and 56,000 jobs
The Tobacco Industry in Spain - January 2013
7
3
In Spain, the tobacco sector provides 56,000 jobs, representing 0.3% of overall employment in Spain. Of these 56,000 jobs, almost 34,000 depend on the sector directly, and 22,000 indirectly.
In addition to its importance to the Spanish economy, the tobacco sector fills the public purse with 9.6 billion euros through indirect taxes. This figure accounts for 5.7% of all tax revenue.
Broken down by sectors associated to tobacco, tobacco growing provides jobs for 6,987 persons, which represents 1% of all jobs in farming and livestock in Spain. This sector also has an impact on other activities, indirectly creating a further 3,356 jobs.
To highlight the importance that this sum of almost 10 billion euros has for the Spanish Government, we can make a series of comparisons with different items of expenditure included in the State General Budgets. So, for example, that 10 billion represents one third of spending on unemployment (30,474) or 45% more than the defence budget (which totals 6.9 billion).
As far as the processing industry is concerned, this provides jobs in Spain for 4,500 individuals. We should point out that the processing industry has an appreciable impact on creating indirect jobs. 13,755 jobs indirectly depend on this industry. This means that for each job in the industry a further three jobs are indirectly created. With regard to wholesale distribution, this provides jobs for 2,117 persons, most of them earning salaries. In addition, almost 90% of employees have a permanent contract, which reflects the job stability in this branch of the activity. In addition to these 2,100+ jobs, we need to add a further 1,440 that indirectly depend on wholesale distribution. Lastly, the tobacconists provide most jobs to the tobacco sector. According to the Annual Business Survey, a total of 19,796 persons were working at tobacconists in 2011. Moreover, distribution through tobacconists indirectly generates 3,410 jobs.
In Spain the Tobacco sector provides 56,000 jobs
In absolute terms, Spain was the fourth country in terms of revenue collection from tobacco in 2009, behind Germany, Italy, France and the United Kingdom. The underground economy In recent years, the tobacco sector in Spain has been affected by an appreciable increase in illegal activities involving smuggling and counterfeiting of cigarettes. Sector sources have been warning the Spanish authorities and the Government about the situation. As mentioned previously, illegal sales of tobacco in 2011 represented 6% of the total, and this is scheduled to reach 10% in 2012. This means that in this year alone the Spanish Government will fail to collect one billion euros. There are two types of illicit or illegal tobacco trafficking in Spain: -Smuggling of the authentic product that is acquired legally or illegally in other countries where taxation is lower, and then sold in destination countries with higher taxation and a higher price. Smuggling non-declared local product. This is an authentic product produced locally or which is not declared. These products are sold on the sly without paying taxes.
b) Contribution to the regional economies Extremadura, the Canary Islands and Navarre Activities linked to the tobacco sector have special relevance on the economy of these three regions. Tobacco is therefore of essential importance for the economy of Extremadura. With over 9,300 hectares divided among some 2,000 farms, Extremadura produces an annual quantity of 29,000 tonnes, 93% of which is collected from all over Spain, providing jobs for around 10,000 persons. This is an leading international sector, with high standards of quality and innovation, and the
The Tobacco sector fills the public purse with 9.6 billion euros
8
source of stable revenue for Extremadura, representing 35% of agricultural crop production in the province of Cáceres. But as well as growing the tobacco, the first processing of tobacco represents an important source of wealth and employment for the region. Extremadura is home to CETARSA (Compañía Española de Tabaco en Rama S.A.), 80% held by the Spanish State, and which is the only tobacco processing company in Spain. The growing and processing of tobacco is of vital importance for Extremadura, and not just because of its economic value and job creation, but also in maintaining the rural fabric in depopulated areas where there are scant possibilities of finding other sources of income. In addition, there is no economically feasible agricultural alternative for this product, which is grown on poor soils that are unsuitable for other crops. The Tobacco Industry in Spain - January 2013
With regard to the Canary Islands, the tobacco sector accounts for 14% of industrial GDP, without including energy. This represents production worth 250 million euros, along with purchases from other sectors worth 162.5 million euros and jobs for more than 3,700 persons. Finally, and also connected to the tobacco sector, there are the manufacturers of vending machines, which are located in Navarre. The Navarre-based com-
panies that manufacture tobacco vending machines (Azkoyen, Jofemar and GM Vending) employ almost 2,000 persons in the region (split between direct and indirect jobs). These companies are national and European leaders in the manufacture and export of these machines, with over 400,000 units installed worldwide. Not surprisingly, 90% of vending machines in Europe are manufactured in Spain.
3
The tobacco sector in Spain, in figures 48 companies 10,000 farmers 13,601 tobacconists 185,000 vending machines
56,000 direct and indirect jobs
6% of overall tax revenue for the State (2011)
9.6 billion in taxes for the Spanish State (2011)
2.7 billion euros of value-added for the Spanish economy
Large increase of smuggling in Spain; around 10%
The Tobacco Industry in Spain - January 2013
9
4 EC DICRECTIVE 2001/37 a) Background EC Directive 2001/37, currently under review, regulates the manufacture, presentation and sale of tobacco products in EU Member States. More specifically, it deals with the warnings on packs, banning terms such as “mild” or “light”, lays down the maximum nicotine, tar and carbon monoxide levels of cigarettes, and it bans the use of tobacco for oral use. The directive lays down maximum nicotine, tar and carbon dioxide contents. The maximum content of tar is 10 mg per cigarette, whilst this is 1 mg for nicotine and 10 mg for carbon dioxide. As far as labelling is concerned, the directive lays down the following obligations: Maximum contents: information about maximum contents of cigarettes must cover at least 10% of the pack surface area. Warnings: There are two types of compulsory warnings. A general warning (“smoking kills/can kill”) or “Smoking seriously damages your health and the health of those around you”), which must cover at least 30% of
EC Directive 2001/37, currently under review, regulates the manufacture, presentation and sale of Tobacco products in EU
the corresponding surface area. There is an additional warning that must cover at least 40% of the outside part of the corresponding surface area. Ingredients: the Directive lays down that each year Member States must be provided with a list of all ingredients, as well as the amounts used in manufacture and toxicological data concerning the effects on health and the possibility of addiction. This list must be accompanied by a declaration on the reasons for its use, and must be made public and notified every year to the Commission. The current Directive dates back to 2001, and since then there have been a series of scientific advances and changes in the international situation which, according to the European Commission (EC), means a review is necessary. According to the EC, there is new scientific evidence on the flavourings used in tobacco products and about the effectiveness of health warnings. Moreover, at an international level, the EU and all its Member States have ratified the Framework Agreement of the World Health Organisation which came into force in 2005, meaning that some of the measures included in the current Directive are outdated. Lastly, Member States have also adopted laws that clash with the Directive. The review also comes at the request of the European Parliament, the Council of Ministers and the report from the Commission of November 2007, concerning application of the Directive on tobacco products, which highlighted some aspects that could be improved.
b) Current situation and implementation of the development process On 19 December 2012, the European Commission submitted its proposal for a review of the Directive to the European Council and to Parliament, which are the organisations in charge of European legislation. This proposal was made after a period of public consultation with interested parties and which generated 85,000 responses, an unprecedented figure in the European Union and one which reveals the interest stirred up among European citizens. Most of the responses came from citizens who took part on an individual basis. Participants in the consultation were invited to give their opinion about the obligatory presence of health warnings on packs; the use of generic packaging; legislation governing harmful and attractive substances, and the restriction or ban on selling products online or through vending machines.
10
Furthermore, during preparation of the survey there was an assessment of the overall impact which analysed the economic, social and health effects, and a series of outsourced studies were commissioned. The proposal has now been submitted by the European Commission, and the next step will be the debate on the proposal in the European Parliament and the Council of Ministers. The European Commission expects the proposal to be adopted in 2014 and to come into force during the 2015-2016 period. This initial stage in the process of reviewing the Directive has been marked by the forced resignation of the former Commissioner for Health and Consumption, John Dalli, who became embroiled in an alleged case of corruption. The European Anti-fraud Office (OLAF) accused John Dalli of allowing a business friend of his to act on his behalf to modify the bill to toughen up anti-smoking legThe Tobacco Industry in Spain - January 2013
islation. Everything came to light following an accusation from a Swedish tobacco merchant who claimed that a Maltese businessman had made contact and had asked for a certain amount of money in exchange for influencing the content of the Directive and allowing oral tobacco -known as snuff, and which is currently banned- to be sold in the
European Union, using his relationship with John Dalli. Since last November, Dalli’s replacement has been the Maltese Tonio Borg, Malta’s former Foreign Minister. Despite this setback, the European Commission has complied with the objective to submit the Directive review proposal before the end of 2012.
4
c) Changes made The proposal adopted by the European Commission introduces notable changes with regard to the current Directive. Among the measures proposed, are the following: • Labelling and packaging. All cigarette packs and tobacco pouches must feature a picture and text health warning that covers 75% of both sides of the package, and they cannot feature any promotional elements. The current information on tar, nicotine and carbon dioxide is considered to be misleading, and will be replaced by a warning on the side of the pack that states that tobacco smoke contains more than 70 substances that cause cancer. Moreover, Member States will be able to introduce neutral packaging in duly justified cases. • Ingredients: There will be a ban on the sale of cigarettes and rolling tobacco that include “strong characteristic aromas”, such as menthol or vanilla, and the sale of products with greater toxicity and the danger of addiction. There will also be an introduction of an electronic notification format for ingredients and emissions. • Smokeless tobacco. The ban on selling tobacco for oral use or chewing –called snuff- remains in force, with the exception of Sweden. All smokeless tobacco products must carry health warnings on the packages, and products with characteristic aromas cannot be sold. • The sale of products that contain nicotine (for example electronic cigarettes) below a certain threshold will be allowed, but they must carry health warnings. Above this threshold they may only be sold if they are authorised as medication.
• Remote sales: The proposal lays down notification for retailers by Internet, as well as an age verification mechanism to ensure tobacco is not sold to minors. • Illegal trading. In its proposal for review, the European Commission includes a monitoring and tracking system, as well as security measures (holograms, for example), so that only products that comply with the provisions laid down in the Directive can be sold in the European Union. In Spain, according to the companies that operate in the tobacco sector, some of the measures included in the proposal for the Directive put forward by the European Commission carry serious risks for the sector and for the Spanish economy. They say that 56,000 jobs are at risk, as well as a reduction of 9.6 billion euros a year in tax revenue. And the Directive could lead to a serious increase of tobacco smuggling by criminal gangs, reducing State revenue, jeopardising the safety of consumers, and causing huge damage to the entire value chain of the sector. One of the consequences that would come about through standardisation of taste, format and packaging proposed by the European Commission is an increase of smuggling. A further serious consequence would be that price will be the only distinguishing element between products, and therefore the only instrument with which competition would be possible. This would lead to an impoverishment of the entire value chain of the sector, causing huge damages to all of its component, from the crop growers through to the State.
d) Milestones of the review process Next steps of the process of the Directive revision Report to the commission
SEPT
Interconsultation period
Joint decision procedure
2013
Approval by the Commission and notification together with the Impact Report
European Parliament and Council
Implementation
2014
Second reading?
As stated earlier, the three main milestones of the review process have been the period of public consultation that led to the largest ever response from citizens in the history of the European Union, with 85,000 responses; the adoption of the proposal on 19 DecemThe Tobacco Industry in Spain - January 2013
2016
AGREEMENT?
ber 2012 by the College of Commissioners and, finally, debating the issue in the European Parliament and the Council of Ministers, which will take place throughout 2013 in order to adopt the proposal in 2014 and bring it into force during the 2015-2016 period.
11
4
e) Main milestones of the review process in Spain Although the process to review the Directive has been in progress for almost two years, it was in 2012 that the Spanish Government and public institutions such as the tobacco industry began to undertake initiatives in defence of the sector. So, in the first quarter of 2012, a group was created in Spain that brings together the entire value chain of the sector, in order to have a single voice in the review process. This group, called the Mesa del Tabaco (Tobacco Bureau) and about which we shall speak in a subsequent chapter, has been extremely active in the last weeks of December 2012, following approval of the Directive proposal by the European Commission. One month later, the Spanish government created an interministerial commission from which the Span-
ish Government will reveal its position with regard to the Directive. Finally, in the last quarter of 2012, three parliaments from three autonomous communities in which the tobacco sector is of extreme importance for their economies (Extremadura, Navarre and the Canary Islands) approved different institutional declarations in defence of the industry. By the same token, midway through December 2012 there was a Non-legislative Proposal in the Lower House of the Spanish Parliament, urging the Government to defend jobs in the sector. In Spain, the process of reviewing the Directive has been largely ignored by the media. In fact, both on the day on which the proposal was approved and the following day (19-20 December 2002), the media included the news but failed to give it much relevance.
Milestones of the process of the Directive revision in Spain
12
March
April
Sept / Oct / Nov
December
Constitution of the Mesa del Tabaco (Tobacco Bureau)
Creation of the Interministerial Commission
Institutional declarations in Navarre, Extremadura and the Canary Islands
Submission of the Non-legislative Proposal of the PSOE and PP (Socialist party and People’s party) in the Lower House of the Spanish parliament
The Tobacco Industry in Spain - January 2013
5
THE PERCEPTION OF TOBACCO AT SPANISH INSTITUTIONS
a) Government of Spain Unlike the government of José Luis Rodríguez Zapatero, the government headed by Mariano Rajoy has a more tolerant attitude towards tobacco. Although in 2010 the People’s Party (Partido Popular) voted in favour of amending the law, which among other items prevented smoking in hostelry establishments, the Spanish Government is not currently debating whether or not there is any need to modify the law. This debate broke out following the decision of the US magnate, Sheldon Adelson, to open a mega-casino in Madrid, called “Euro Vegas”. One of the conditions he has requested in order to invest in Madrid is modification of the anti-smoking law, so that smoking will be allowed inside this mega-complex. Although no decision has been taken on a possible modification of this law, the issue has been debated internally by the Spanish Government, with two opposing stances. On the one hand, there is the stance of the Ministry of Economy and Competitiveness in favour of a possible modification, and on the other, the stance of the Ministry of Health, which is totally against reviewing the law. One of the regional governments most in favour of this modification is Comunidad de Madrid, which has repeatedly called for a review. In fact, Comunidad de Madrid has belligerently challenged subsequent anti-smoking laws that have been approved, and has even amended it within its territory to make it more permissive. This more tolerant attitude towards tobacco by the Spanish Government could also lead to a position whereby it defends the tobacco sector in the review process of EC Directive 2001/37. Although the government headed by Mariano Rajoy has not publicly spoken about the content of the Directive, and Miguel Arias Cañete, the Minister for Agriculture, has opted for prudence with regard to his position, their attitude
has been receptive with the different agents that represent the value chain of the tobacco sector. In fact, the Spanish Government has held several meetings with representatives from the tobacco sector in Spain. Last April, as we mentioned in the previous section, the Government created a Interministerial Commission to coordinate the Spanish Government’s stance with regard to the review of EC Directive 2001/37. The Secretary of State for the European Union, attached to the Ministry of Foreign Affairs and Cooperation, is in charge of this Interministerial Commission created to define the Spain’s common position with regard to the review of the Directive. The commission comprises the Ministry of Agriculture, the Ministry of Health and the Ministry of Industry, the Spanish Patents and Trademark Office, and the Tobacco Market Commission, an organisation that is playing an essential role. In coming months, other ministries such as the Ministry of Employment, Ministry of Finance and Ministry of the Interior are expected to join this commission. The stance that Spain finally takes with the European institutions will take into consideration all commission members to make sure that it includes an analysis from all affected ministries. This will ensure that the Spanish Government’s position does not consider only the Ministry of Health’s opinion but also other affected ministries. Other countries, such as France and Holland, have already asked for more scientific evidence in the European Commission’s arguments. By the same token, Sweden and Denmark have already clearly opposed the review of the Directive as mentioned previously. The remaining countries of the European Union have not yet given a clear indication with regard to the review of the Directive.
b) Autonomous Communities In those regions where the tobacco sector is of specific importance, their governments have already come out in defence against some of the measures included in the Directive. In this regard, one of the most belligerent regional governments challenging the proposed measures is the Government of Extremadura, which has already warned on several occasions about the employment consequences that some of the measures included in the Directive would have. The governments of the Canary Islands and Navarre have also come out in defence of the The Tobacco Industry in Spain - January 2013
sector. With the support of all political parties, the parliaments in these three regions have approved different institutional declarations in defence of the tobacco sector of their respective territories. A further institutional declaration is currently being processed in La Rioja Parliament. In all these communities, the activities linked to the tobacco sector have a special relevance for their economies. Hence the reason why their governments have come out in defence of the sector.
13
5
c) Political parties and leaders The proposal to modify EC Directive 2001/37 has brought together the People’s Party and the Socialist Party to come out in defence of the tobacco sector. So, on Friday, 21 December 2012, both parties, with the support of the Unión del Pueblo Navarro (Union of the People of Navarre) and the Coalición Canaria (Canary Islands Coalition), lodged at Non-legislative Proposal in the Lower House of the Spanish Parliament. The purpose of this was to urge the Government to seek the necessary alliances with other countries so that the reforms are carried out in consensus with all economic and social agents so as not to affect the 60,000 or so jobs that are dependent on the sector in Spain. The People’s Party has also submitted a motion to the Senate asking the Government to maintain a common position with the European Union to prevent the review of EC Directive 2001/37, on tobacco products, being so restrictive and damaging for the economic and employment interests of the tobacco sector in Spain. Coupled with these initiatives adopted by both parties are the aforementioned initiatives carried out by the different regional parliaments. In the case of
Extremadura, the Izquierda Unida (United Left), the third Spanish political party, also supported the declarations of support to the sector. In this process to review the Directive, the Spanish politician who most opposes this is the President of Extremadura, José Antonio Monago, who has already commented several times. One of the most compelling statements was given on 8 October: “Tobacco kills, but so does the Rhin industry”. Leaving to one side the review of the Directive, the PSOE and PP hold conflicting views with regard to tobacco. The Socialist Party has always been in favour of any law targeted at regulating the tobacco market and the consumption of this. In fact, it was under the Socialist government that the two laws, known in Spain as anti-smoking laws, were approved in 2005 and 2010. The People’s Party, although it voted in favour of the most recent anti-smoking law, has always held a position contrary to the regulation, not only with regard to tobacco but also other industries such as food and spirits.
Political support to the sector in the review process Navarre Parliament
Regional Government of Extremadura Extremadura Parliament
Ministry of Employment Ministry of Industry Ministry of Economy PSOE (Socialist Party) PP (People’s Party) UPN (Union of the People of Navarre)
Canary Islands Parliament
14
The Tobacco Industry in Spain - January 2013
6
THE PERCEPTION OF TOBACCO IN SPANISH CIVIL SOCIETY
a) Anti-smoking entities and groups There are several anti-smoking groups and entities in Spain. First you have the scientific societies comprising medicine professionals, such as CNPT, SEMERGEN, SEPAR and the professional associations of doctors. And then there are those associations that have come out in favour of different anti-smoking laws approved in Spain:
• Associations of parents of students. • Associations of the elderly. • Students associations: Consejo Estatal de Estudiantes de Medicina (State Board of Medicine Students).
• Consumers associations (OCU, FACUA, ASGECO).
• Groups created in the wake of non-smoking laws, such as nofumadores.org, non-smokers’ parties, public action for health, etc.
• Patients’ associations, such as the Asociación Española contra el Cáncer (Spanish Association Against Cancer), associations of asthmatics, foro Español de Pacientes (Spanish Patients’ Forum) and the Fundación de Ayuda contra la Drogadicción (Foundation Against Drug Addiction).
All these groups or entities have been particularly belligerent in recent years against the tobacco sector, and have favoured the no smoking laws. However, during the process to review the Directive, and especially since presentation of the European Council proposal, no type of public declaration had been made.
• UGT and CCOO unions.
b) Tobacco sector advocacy groups Entities in favour and against Tobacco in Spain
groups in favour
• ADELTA • MESA DEL TABACO (TOBACCO BUREAU) • FUMADORES POR LA TOLERANCE (SMOKERS FOR TOLERANCE)
In Spain, there are mainly three tobacco sector advocacy groups (ADELTA, La Mesa del Tabaco (Tobacco Bureau) and Fumadores por la Tolerancia (Smokers for Tolerance)). • The Asociación Empresarial del Tabaco (ADELTA) is a non-profit making organisation founded in 1989, which represents the common objectives of companies that manufacture and market cigarettes, cigars and other tobacco-based operations with the public authorities, corporations, and public and private organisations and entities. If forms part of the Confederación Española de Organizaciones Empresariales (CEOE), of the Asociación Española de Normalización y Certificación (AENOR) and of the Asociación de Autocontrol de la The Tobacco Industry in Spain - January 2013
groups against • SCIENTIFIC SOCIETIES • PATIENTS’ ASSOCIATIONS • UNIONS • CONSUMER ASSOCIATIONS • ASSOCIATIONS THAT PROVIDE SUPPORT AGAINST DRUG ADDICTION
Publicidad (AAP). ADELTA comprises most tobacco manufacturing companies that operate in Spain and which currently represent around 97% of the domestic market. • The Mesa del Tabaco is a group set up in the first quarter of 2012 and incorporates the entire value chain of this sector in Spain (crop growing, processing, manufacturing, distribution and sales), as well as the CEOE.
In Spain there are mainly three Tobacco sector advocacy groups 15
6
The purpose of this group is to represent the positions of the sector in light of the review of EC Directive 37/2001 and to warn of the serious impact it would have on the Spanish economy, both in terms of jobs as well as the loss of tax revenue. The Mesa del Tabaco comprises representatives of crop growers, processors, manufacturers, importers, brand owners, wholesalers, retailers, manufacturers of tobacco vending machines and the Confederación Española de Organizaciones Empresariales (CEOE). The main objective of the Mesa del Tabaco is to make a joint presentation of the position and concerns of its members with regard to the measures that may be implemented during review of EC Directive 2001/37. This is a pioneering initiative in Europe, as it is the first time that all of the agents involved in the tobacco sector value chain have joined forces in order to have a single voice. Following presentation by the European Commission of the proposed Directive, they warned of the con-
sequences it would have on the economy and on jobs and they have managed to debate the issue of the review in economic rather than health terms. Their spokesman is Juan Páramo, who in turn is CEO of ADELTA. • Smokers for tolerance. This is a non-profit-making organisation founded in 1985 and which has 100,000 members. It represents the voice of the tobacco consumer and for the media represents one of the main liaison points for defending the rights of tobacco consumers. They are very active in the media and have staged several campaigns to raise awareness of smokers, giving away ecological ashtrays in mountain and beach resorts. They have also carried out street marketing, such as giving away earplugs to draw the attention of city councils with regard to the problem of night-time noise as a consequence of the anti-smoking law. Their spokesman is Javier Blanco Urgoiti.
c) Smokers’ Clubs Since the anti-smoking law came into force in Spain, banning smoking in public areas such as bars and restaurants, a number of smokers’ clubs have opened in the quest to find a ruse to get around the law. One example is the Royal Smoking Club in Madrid, which works as an non- profit-making association and has
400 members. Members are allowed to smoke on these premises and, given that it connected to a pub, have a drink while they smoke. To comply with the law, the two areas -club and pub- have a different legal personality and each has its own entrance and manager, although they are connected inside.
d) Opinion Leaders in Spain Political ideology is what marks the positioning of opinion leaders with regard to the tobacco sector and legislation in Spain. So, for example, those leaders with a liberal ideology are against any interventionist legislation such as the one now put forward
by the European Commission and those laws that have been approved in recent years in Spain. In contrary, those opinion leaders that favour leftist ideology have come out in favour of any law that can help reduce tobacco consumption.
e) Stance of the Spanish media Successive legislation on tobacco brought into force by the previous government has highlighted the editorial lines of the media with regard to the topic. During the processing, approval and coming into force of these laws, the leftist media have favoured these interventionist regulations, while the more liberal or conservative media have been harshly critical of such extreme interventionism.
Among the media that support those anti-smoking laws is EL PAÍS, the most influential Spanish newspaper in Spain and Latin America, and Cadena SER, the most listened to radio station in Spain. Elsewhere, the more liberal or conservative media such as the El Mundo and ABC newspapers, the most widely read after EL PAÍS, were particularly critical.
f) Tobacco surveys • Sociological Research Centre Smoking or anti-smoking laws are not issues that particularly concern Spaniards, and this has been shown through different studies conducted by the Sociological Research Centre, a Government of Spain institution. In fact, Spaniards rate this problem among the least important in their daily lives. Following the coming into force of the new anti-smoking law in Spain in 2011, the Sociological Research Centre conducted a survey asking about these new regulations. The study showed that this law only af-
16
fected 6% of Spaniards personally, and only 2% were concerned about its content. • Eurobarometer Although tobacco is not among their main concerns, the EU 2012 Eurobarometer reveals that Spaniards, just like the rest of Europe, are mainly in favour of the different anti-smoking measures: for example, 74% are in favour of “putting pictures with health warnings on all tobacco products”. However, The Tobacco Industry in Spain - January 2013
6
most of the Spaniards interviewed (65%) do not believe that the inclusion of health warnings on packets prevents young people from starting to smoke. • 2011 health barometer In line with the EU Eurobarometer, the 2011 health barometer conducted by the Ministry of Health and made public in September 2012 (and which features the opinion of Spaniards with regard to the current anti-smoking law), shows that Spaniards agree (7.05 out of 10) with the new tobacco rules.
Smoking or anti-smoking laws are not issues that particularly concern Spaniards
g) Prevention and damage reduction policies in Spain Both the Spanish Government and regional governments have different programmes to stop smoking. The first recommendation of these programmes is for the smoker to stop smoking from day one, and this is also recommended by the Spanish Ministry of Health in its stop smoking programme. In this regard, it does not consider the possibility of providing the smoker with substitute products, such as smokeless tobacco, which does not exist in Spain, or safer cigarettes. In its “Stop smoking guide, the keys to success”, the Ministry of Health recommends the following (and we quote): “If you have decided to stop smoking, it is best that you smoke nothing. Nicotine is a highly addictive substance and, as with other drug addictions, does not permit “controlled” consumption. If you have developed nicotine dependence and you have a certain pattern of consumption (i.e. you smoke 20 cigarettes a day) it will be very difficult for you to get by on five or 10 cigarettes a day. That reduction last a few days, but before you know it you go back to the original consumption. You probably know some smokers who, having stop smoking for some time, even years, find
The Tobacco Industry in Spain - January 2013
themselves at a party one day (New Year’s Eve, a wedding, a meal), and they smoke one cigarette and then swiftly go back to being smokers. This is due to the addictive power of nicotine, and it is the same as other drug addictions such as heroin or cocaine: Consumption of these substances cannot be controlled by the individual, as it is the substance, in this case nicotine, which “controls” the individual. Unlike what has happened with heroin, there are no programmes in Spain to reduce damage through substitute products. Up until one year ago, the Government of Comunidad de Madrid had a care centre for drug addicts known as narcosala. The purpose of these premises is to allow drug addicts to have a place where they can get their doses of drugs to inject themselves in reasonably hygienic conditions or where they can access a heroin substitute such as methadone. There are currently more than 60 of these premises in countries like Holland, Switzerland, Germany, Australia, Canada and Spain. There are plans to introduce these premises in France, Denmark and Portugal.
17
7 main conclussions The main conclusions drawn from this study are the following: In Spain, the tobacco sector provides 56,000 jobs, representing 0.3% of overall employment in Spain.
1
18
2
Every year, Spain raises 9.6 billion euros through indirect taxes. This figure accounts for 5.7% of all tax revenue.
3
2013 will see commencement of the debate in the European Parliament and the European Council on review of EC Directive 2001/37, which proposes that all cigarette packs and rolling tobacco pouches have a picture and text health warning that covers 75% and which bans the sale of cigarettes and rolling tobacco with “strong characteristic aromas” such as menthol or vanilla, and the marketing of oral or chewing tobacco, called snuff.
4
In Spain, some of the measures featured in the Directive proposal put forward by the European Commission could jeopardise 56,000 jobs and annual tax revenue of 9.6 billion euros.
5
The Spanish Government has yet to rule on the Directive’s proposal, although the government’s stance is receptive to the tobacco sector players.
6
Three regional governments -Extremadura, Navarre and the Canary Islands- have come out in defence of the sector, and their parliaments have approved different institutional declarations of support.
7
Both the Socialist Party and the People’s Party have urged the Government of Mariano Rajoy to defend employment in the sector during the process to review the directive through an initiative in the Lower House of the Spanish Parliament.
8
During the review procedure of the Directive, the entire sector has clustered around an enterprise called the Mesa del Tabaco (Tobacco Bureau), to warn about the consequences the Directive would have on the economy and on jobs. This is the first time the entire industry has united to defend the sector.
9
The debate surrounding the process to review the Directive in Spain is currently focused on the economic sphere, leaving to one side the health aspect, given that the anti-smoking groups have yet to speak on the issue.
10
In Spain, the process to review the Directive is not having a major impact on the media.
The Tobacco Industry in Spain - January 2013
8 ANNEX Scope
Policy Area
1
Current situation
Proposal
Smokeless tobacco products (STP)
Oral tobacco prohibited (derogation for Sweden). All STP must carry health warnings and undergo ingredients reporting
Oral tobacco prohibited (derogation for Sweden remains). All STP must carry health warnings on the two most visible surfaces of the pack. STP with characterising flavours are prohibited (including for oral tobacco in Sweden)
Nicotine containing products (NCPs)
NCPs not covered by Tobacco Products Directive (TPD). Different regulation in MS, with about half of Member States (MS) reporting that they consider at least some NCP as medicinal products by function1
NCPs above a certain nicotine threshold are only allowed if authorised as medicinal products. NCP below the threshold must carry health warnings
Novel tobacco products
Novel tobacco products (typically heated/ non-combusted products allegedly causing less harm) are covered by the general provisions of the TPD
Manufacturers must notify MS before placing novel tobacco products on the EU market. Commission report after 5 years. TPD provisions apply for novel products placed on the market
Herbal products for smoking
Herbal products for smoking (e.g. herbal cigarettes) not covered by the TPD and subject to different national legislations
Herbal cigarettes must carry health warnings
AT, BE, DE, DK, EE, FI, FR, HU, LU, NL, PT, RO, SE, SK .
Text warnings of 30-35% on one side and 40%-50% plus border on the other side required on all tobacco products except STP. MS may introduce combined (picture + text) warnings on the back of the packaging2. Tar, Nicotine and Carbon Monoxide (TNCO) levels are displayed on packages
Mandatory combined health warnings required on 75% of the front and back of cigarette and Roll Your Own (RYO) packages. TNCO levels replaced by information message on the side of the pack that tobacco smoke contains more than 70 substances causing cancer. Information on cessation services displayed on the pack as part of health warning
Promotional and misleading elements
Products descriptors suggesting that a tobacco product is less harmful than others, such as ‘light’ and ‘mild’, are prohibited3
Promotional and misleading elements (such as “natural”, “organic”, references to flavours and misleading colours) on tobacco packages or the product itself prohibited. Slim cigarettes ( < 7.5 mm in diameter) are considered misleading
Pack shape and size
No requirement in the current TPD but 14 MS require a minimum pack size of 20 cigarettes4 and 4 a minimum pack size of 19 cigarettes5 plus specific provisions in some other MS6. Some MS also have requirements for RYO tobacco7
Cigarette packages must have a cuboid shape and contain at least 20 cigarettes. RYO tobacco may not be sold in pouches with less than 40g. Minimum height, width and depth of cigarette packages to ensure full visibility of health warnings
Plain packaging
No provision in current TPD, but recommended by Framework Convention on Tobacco Control guidelines and under discussion in some Member States8
MS may introduce standardised packaging provided it is compatible with the Treaty and notified under Directive 98/34
Packaging and Labelling Scope
Health warnings and messages
2 3 4 5 6 7 8
BE, DK, ES, FR, LT, MT, RO, UK; IE, HU from 2013. FR bans use of promotional elements on packs. AT, CZ, DK, EE, EL, FI, FR, IE, LU, LT, PL, PT, RO, ES. DE, HU, NL, SE. UK has minimum pack size of 10, IT requires pack size of 10 or 20, LV, SI prohibit sale of single cigarettes. FR; DE, IT. BE, FI, FR, UK.
The Tobacco Industry in Spain - January 2013
19
8
Tracking and tracing
Sales arrangements
Ingredients
Health warnings and messages
Reporting is mandatory but no harmonised EU reporting format exists
Mandatory reporting remains but now in a common electronic format to facilitate comparison and enforcement
Promotional and misleading elements
Addictive and toxic additives must be reported. MS prohibit and/or permit additives at their discretion (negative and positive list for additives)9
Cigarettes, RYO and STP with characterising flavours are prohibited.. Additives which create a misleading impression (e.g. vitamins) and flavours in components of tobacco products (e.g. filters, papers) are prohibited. Products with increased toxicity or addictiveness are prohibited
Pack shape and size
Regulation left to MS, nine MS prohibit internet sales of tobacco10
Retailers that wish to sell tobacco products cross-border must notify the country of origin and destination to facilitate enforcement. They must also ensure the age of the purchaser is verified at sale
Plain packaging
Tobacco product shall be marked to enable the place and time of manufacture to be determined. Technical rules to, be adopted by comitology, but such decision has not yet been taken
Common EU tracking and tracing system is introduced. Tobacco products must be scanned and movements recorded as they move through the supply chain (except retail). Tobacco products other than cigarettes and RYO are granted a transitional period of five years
Not foreseen in the current TPD
Security features (e.g. holograms or other marks) are placed on products so that consumers can identify their authenticity. Tobacco products other than cigarettes and RYO are granted a transitional period of five years
Security Features
9
e.g. positive lists in BE, FR, RO, UK, negative list in LT, combination in BG, CZ, DE, HU, SK; other provisions in FI, FR, ES, PL, SE. BE bans ingredient capable of coloring the smoke blue, DE bans use of flavored capsules. 10 AT, BG, ES, FR, HU, IT, LT, LV, SK
20
The Tobacco Industry in Spain - January 2013
MAS Consulting Group A global public affairs firm
C/ SERRANO, 81 â&#x20AC;&#x201C; 28006 MADRID +34 91 702 47 65 info@masconsulting.es www.masconsulting.es