The world is watching as Australia goes into battle with big tobacco over making cigarette packets plainer, uglier, and uncool.

Later this year, the Federal Government is hoping to force all cigarettes to be sold in plain packaging.

The latest tobacco products directive in the European Union is now being revised, and researcher Dr Crawford Moodie from Scotland's Stirling University says if plain packaging is successful in Australia, other countries will follow.

"Really, the eyes of the world will be on what happens in Australia," he said.

Once plain packaging takes effect, colours, brands, logos and promotional text on cigarette packets will all be banned.

The packet will be covered by a graphic health warning and it will probably be coloured brown.

Public health experts believe it will make cigarettes less appealing to young people and curb smoking rates, which currently stand at 17 per cent.

The latest Citigroup research suggests on present trends smoking will die out in Australia by 2030, only two years before Sweden, and a whole decade ahead of the UK.

Public health Professor Mike Daube says he hopes the commercial sale of cigarettes will come to an end in the next decade.

"I think we're going to see a time where cigarettes can only be obtained from certain sales outlets, and possibly over time only with some kind of sign off that these people are registered smokers," he said.

Big tobacco fight

Big tobacco will vigorously fight against this move.

A large-scale campaign by the cigarette companies is already underway.

The director of corporate and regulatory affairs for British American Tobacco Australia, Mark Connell, says it will end in the courts.

"We will defend to the end. It means unfortunately an argument in the courts to defend our rights to keep our brands and trademarks," he said.

British American Tobacco has 45 per cent of the cigarette market in Australia.

Mr Connell says plain packaging will diminish their ability to compete against other brands.

"We want our consumer that decides to smoke, knowing the risks, when they purchase the product, we want them to purchase our product," he said.

He says he does not believe smoking should be eliminated.

"At the end of the day we are a legal company, we're selling a legal product."

Political support

Labor stopped accepting political donations from the cigarette companies in 2004.

Coalition parties last year received nearly $300,000 from the tobacco industry.

It is something that sits uncomfortably with previous Opposition leader Brendan Nelson.

He says during his time in politics, plain packaging was never on the agenda, but he is a passionate supporter of the policy and has been advocating for it since the 1990s.

Background Briefing reveals Dr Nelson was reprimanded by senior Liberal Party figures after calling on his colleagues to refuse tobacco sponsorship of the Liberal Party's annual conference in 1998.

Peter Wilkinson, director of PR agency the Wilkinson Group, used to be a 60 Minutes reporter and says Dr Nelson told him in a private conversation that he was put in the "naughty corner" because of his stand.

"[He] was told very firmly told not to misbehave by speaking out of turn," he said.

Dr Nelson does not deny Wilkinson's recollections, but says commenting now on whether he was reprimanded would compromise his current position as a diplomat.

Dr Nelson says tobacco's most frustrating tactic was the use of third-party endorsers.

"I wasn't debating the chairman of Philip Morris, or the CEO of the tobacco institute. I'd have the debate with the chairman of the rugby league or the coach of the under-nines," he said.

He says he expects retailers to take up the fight on behalf of the cigarette companies.

Last year during the federal election, the Alliance of Australian Retailers (AAR) launched a campaign against plain packaging.

But it came to an abrupt end when leaked documents revealed big tobacco was funding the alliance and a PR group was pulling the strings behind the scenes.

Retail revolt

Background Briefing reveals the AAR has reformed and will launch its second round of anti-plain packaging campaigning within a matter of days.

AAR spokesperson Craig Glasby says the policy must be stopped.

"It's an ongoing campaign and we're committed to continuing until the policy is overturned," he said.

Mr Glasby says they are about to publish advertisements in regional papers and release a research paper to prove that small businesses will be damaged if plain packaging is introduced.

He also hopes to meet with Federal Health Minister Nicola Roxon and the Prime Minister to discuss his concerns.

The campaign this year will focus on the tensions between small retailers and the big supermarkets such as Coles and Woolworths.

Mr Glasby hopes local communities will find it easier to sympathise with hard-working small businesses rather than the two big giants.

"This is actually not a fight against anybody but Coles and Woollies. They're our real enemy because they don't fight fair," he said.

Woolworths emailed Background Briefing a statement in response, saying the AAR is a front group for big tobacco and its concerns should be disregarded.

"Obviously the alliance is a thinly veiled front for BATA (British American Tobacco Australia) with all their resourcing and funding behind it," he said.

British American Tobacco has confirmed they will fund the AAR's campaign this year.

"I don't have figures, we will be supporting them substantially."

- Ugly Cigarette Packs airs on Radio National's Background Briefing on Sunday, February 20 at 9am AEDT.