According to media reports, the European Union has passed
stricter rules for the tobacco biggies as part of the anti
tobacco campaign going all over the world. The worldwide campaign
aims to save people from the health hazards due to cigarette
The government has approved the legislation drafted by the
European Union health ministers that requires the tobacco
companies to include both pictorial and text alerts on the
cigarette packs to dissuade smokers. Moreover, the law requires
the warning to cover more than 65% of both the front and back of
This rule is a revision of a 2001 EU law and requires that the
cigar packs will hold a message declaring the presence of more
than 70 carcinogenic substances in the tobacco products.
The 27-nation strong European Union authority aims to ban the
sale of menthol and other characterizing variations of cigarettes
and roll-your-own tobacco products. Moreover, The European
Commission, which is the regulatory body of the 27-nation bloc,
plans to impose stricter rules on sale of nicotine-containing
products like electronic cigarettes.
These stricter rules will pose a problem for the tobacco
biggies who are facing pressure as governments around the world
are embarking on stricter anti smoking campaigns. Tobacco
companies are increasingly relying on their packaging to build
brand loyalty and grab consumer attention. Packaging was the last
resort for tobacco advertising after the government curbed
advertising in magazines, billboards and TV.
While the Food and Drug Administration (FDA) has passed a rule
compelling tobacco companies to print thought-provoking images on
cigarette packs inducing smokers to refrain from smoking,
governments of Australia and New Zealand have made plain
packaging mandatory for cigarette packs.
Moreover, tobacco industry is facing high excise tax imposed
by government around the world. The scenario has improved
slightly due to mass protests against proposals imposing tax
burdens on smokers. The compound tax growth rate has slowed down
a little in the past two years, following the protests.
In spite of this, the cigarette industry continues to carry a
heavy tax burden. The industry has been seeing a decline in
shipment volume for the past several years due to unfavorable
excise taxes and growing awareness worldwide.
Tobacco companies are resorting to cigarette alternatives,
trying to reduce the harmful effects of tobacco. In May 2011,
Philip Morris International
) bought the patent and global rights to an aerosol
nicotine-delivery system for the delivery of nicotine to lungs
without cigarette smoking.
British American Tobacco plc.
) also created a subsidiary called Nicoventures focused on
nicotine alternatives. In 2009,
Reynolds American Inc.
) purchased Swedish company, Niconovum, whose nicotine gum,
pouches and spray help people give up smoking. Tobacco giant
Altria Group Inc.
) is launching its first electronic cigarette under the MarkTen
While Reynolds currently holds a Zacks Rank #2 (Buy), Philip
Morris and Altria carry a Zacks Rank #3 (Hold). However British
American Tobacco currently holds a Zacks Rank #4 (Sell).
BRITISH AM TOB (BTI): Free Stock Analysis
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