By Kieran Rooney, Alicia Bolton

Australian tobacco companies say they would have to halve the price of their cigarettes to remain competitive if the Government’s plain packaging proposal goes ahead.

The Federal Government wants all cigarettes to appear in plain packaging in stores from the start of next year.

British American Tobacco spokesperson Scott McIntyre said a price war may be the industry’s only remaining marketing tool.

Smoking: Source: Justin Shearer on Flickr

“Unfortunately if we see a situation where the Government pushes ahead with its plain packaging proposal, we’ll have no area except to compete on price. They take away our brand and our trademarks, it’ll be the only place left,” Mr McIntyre said.

Drugs and Alcohol Research Australia director Paul Dylan said the comments are a sign the tobacco industry is running out of ideas. He said the tobacco companies cannot win this battle against the Government.

“The Health Minister has made it very clear that they want this to go through. It will be a big positive for everyone in the community,” Mr Dylan said.

University of Sydney public health expert Professor Simon Chapman said the tobacco giants would be shooting themselves in the foot if they lowered their prices.

“If they foolishly were to reduce their prices by 70 per cent the government could quite easily counter that within 24 hours by adjusting the excise tax,” Professor Chapman said.

But National Retailers Association executive director Gary Black said a price drop could help small businesses increase their profits.

“The revenue streams generated by the sale of tobacco products, particularly by smaller retailers, are a very significant part of their net profitability. So if you take them away you will risk undermining the viability of some of these small businesses,” Mr Black said.

“If the cut in the retail price of cigarettes is fully funded by tobacco manufacturers then retailers will not be negatively impacted. In fact they may be beneficially impacted because price cutting may attract consumers.”

RELATED LINK: National Drug and Alcohol Research Centre

RELATED VIDEO: Cigarette plain packaging moves closer, from ABC’s Lateline.