New Zealand for Plain Cigarette Pack - Analyst Blog

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After Australia, the U.S., Canada and Great Britain, New Zealand has now raised its voice against smoking.

New Zealand has announced that it will pass a law regarding the use of plain packaging of cigarettes by tobacco companies. However, the government will delay the implementation of the law until it sees the verdict in the Australian case.

In 2011, the Australian government proposed a ban on attractive cigarette-packaging.

Under the proposed laws of Australia there is a restriction on logos, branding, colors and promotional text on tobacco packets. Further, the packing was to carry health warnings and pictures of diseased body parts, with the company's logos and the cigarette brand names relegated to the bottom of the packages in smaller print and against a dull background.

After facing much opposition within Australia, the bill was passed in December 2012, and cigarette packets in the country now include warnings and photos of a gangrenous limb and a cancer victim. However, the law is being challenged at the World Trade Organization and the legal proceedings are underway.

The New Zealand ruling will also see opposition. According to The New Zealand Association of Convenience Stores, in a public consultation process that ended Oct. 5, 2012, the majority of participants opposed the idea of plain packaging.

The ruling was inspired by The World Health Organization which had pleaded that countries consider the plain packaging norm.

The move was vehemently opposed by tobacco sellers like Philip Morris International Inc. ( PM ), Lorillard Company ( LO ) and British American Tobacco Plc. ( BTI ), as 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.

Philip Morris, with a 37% market share in Australia for its brands including Marlboro and Alpine, chose to challenge the Aussie legislation with a lawsuit at the country's High Court. The ruling also supposedly violates an investment treaty with Hong Kong, which holds the government responsible for protecting Hong Kong investments in Australia.

British American Tobacco whose brands include Winfield, Dunhill and Benson & Hedges, has announced that government plans would infringe upon international trademark and intellectual property laws and has also raised the possibility of pursuing legal action.

Tobacco companies are resorting to cigarette alternatives that espouse reduction of the harmful effects of tobacco. In May 2011, Philip Morris bought the patent and global rights to an aerosol nicotine-delivery system for delivery of nicotine to lungs without cigarette smoking.

British American Tobacco also created a subsidiary called Nicoventures, which focused on nicotine alternatives. In 2009, Reynolds American Inc. ( RAI ) purchased Swedish company Niconovum, whose nicotine gum, pouches and spray help people give up smoking.

While Philip Morris and Reynolds American currently carry a Zacks Rank #3 (Hold), British American Tobacco holds a Zacks Rank #4 (Sell).



BRITISH AM TOB (BTI): Free Stock Analysis Report

LORILLARD CO (LO): 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: BTI , LO , PM , RAI

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