The tobacco industry has been facing the brunt of worldwide
anti-tobacco campaigns which are prompting governments to impose
restrictions on the sale of tobacco products. The industry was
hit hard again when 'The New Tobacco Products Directive' endorsed
by the European Parliament in Feb 2014 received a green signal
from the Council of European Union (EU) on March 14, 2014.
The Directive is a revised version of the original Tobacco
Products Directive issued in 2001. The revision was made in order
to make tobacco products less attractive to young smokers in the
region. The new directive imposes stricter rules on the sale of
tobacco products in the EU region.
The new rule bans the sale of flavored cigarettes and
roll-your-own-tobacco in EU regions. However, member states have
the option to exempt products like 'Other Tobacco Products' like
cigars and cigarillos from the ban.
Moreover, the directive requires the tobacco companies to
include both pictorial and text warnings on the cigarette packs
to dissuade smokers. The law also requires the warning to cover
more than 65% of both the front and back covers. The new rule
also bans any misleading labeling containing words like 'natural'
and 'organic' on the packages.
Member states have also been allowed the authority to ban
online sales of tobacco products in their respective regions.
Moreover, the new rule states that e-cigarettes, with nicotine
strength of more than 20 milligrams per milliliter, would need
authorization as a medicine. Furthermore, curative or preventive
qualities of these products need to be proved. E-cigarettes below
this level will face the same regulations as conventional tobacco
products if their usage as a medicinal product cannot be
The Directive is expected to be enforced in May, 20 days after
its publication in the Official Journal of EU. Member states are
required to incorporate the new directive into their national
laws within two years and apply them from the end of the
These rules will pose a problem for the tobacco majors like
Philip Morris International Inc.
Reynolds American Inc.
British American Tobacco plc.
Altria Group Inc.
). The worldwide anti-smoking campaigns are increasingly forcing
these companies to rely on packaging to build brand loyalty and
grab consumer attention, especially after the government curbed
advertising in magazines, billboards and TV. These efforts may
fall apart once the above mentioned stricter regulations come
Philip Morris, which carries a Zacks Rank #4 (Sell), opines
that the new rule will disrupt the tobacco market and encourage
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