EU Restrains E-Cigarettes - Analyst Blog

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The tobacco industry in Europe received another blow as the Presidency of the Council of the European Union (EU) and the Members of European parliament reached a settlement on draft legislation which could curb the growth of e-cigarettes industry.

After months of negotiations Council of EU and the European parliament, both sides agreed yesterday that the e-cigarettes, with nicotine strength of more than 20 milligrams per milliliter, would need authorization as a medicine if they can be proven to have some form of curative or preventive action. E-cigarettes below this level will face the same regulations as conventional tobacco products if they cant be proved as a medicinal product.

The Council of EU and the health ministers have long been demanding nationwide ban on e-cigarettes. However, the European parliament, under pressure from tobacco biggies, held that e-cigarettes helped in curbing tobacco smoking and deserved a lighter regulatory touch. The current decision follows hard-fought negotiations between the EU governments and the European legislators.

E-cigarettes are becoming increasingly popular especially among youngsters. These battery-powered devices turn a nicotine-based liquid into vapor. They were considered less harmful than tobacco products and therefore the major tobacco players capitalized on them.

Altria Company 's ( MO ) subsidiary, Nu Mark LLC, introduced its first e-cigarette brand - MarkTen e-cigarettes - in Indiana in August. Reynolds American Inc. 's ( RAI ) subsidiary, R.J. Reynolds Vapor Company, is expanding the distribution network of its tailor-made e-cigarette - Vuse. Lorillard Inc . ( LO ) captured a leading position in the electronic cigarette industry in the U.S. after it acquired e-cigarette brand Blu e-Cigs in Apr 2012. Also, in November, Philip Morris International ( PM ) announced its plans to foray into the e-cigarette business.

The parliament also drafted a new legislation on tobacco products. The new regulations on packaging and warnings, stay unaltered. In October, the parliament accepted the legislation drafted by the EU 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 covers of the packs. As part of the plan to ban the sale of cigarettes and roll-your-own tobacco with characterizing flavors, it has been decided that menthol cigarettes will be banned totally by 2020.

We now await the Food and Drug Administration's (FDA) decision on the e-cigarette. The anti-smoking activists have requested the FDA to impose restrictions on e-cigarettes. The FDA has passed a rule compelling tobacco companies to print thought-provoking images on cigarette packs inducing smokers to refrain from smoking. Also, the governments of Australia and New Zealand have made plain packaging mandatory for cigarette packs.



LORILLARD CO (LO): Free Stock Analysis Report

ALTRIA GROUP (MO): Free Stock Analysis Report

PHILIP MORRIS (PM): Free Stock Analysis Report

REYNOLDS AMER (RAI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: EU , LO , MO , PM , RAI

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