California moved to join Massachusetts on Friday, and is perhaps only days away from becoming the second state to ban the sale of flavored tobacco products, most notably menthol-flavored cigarettes such as British American Tobacco's (NYSE: BTI) Newport brand.
On Friday, the California State Senate voted 34-0 to pass a law banning the sale of flavored tobacco products, including e-cigarettes, just days after the California State Assembly approved the measure, 54-0.
Image source: Getty Images.
British America Tobacco's Reynolds American subsidiary had lobbied against the measure, saying it would disproportionately affect "communities of color." (Data from the California Department of Public Health shows that 70% of Black smokers in the state prefer menthol cigarettes.) But the bill appears almost certain to be signed into law given the support it's received in the legislature and from Gov. Gavin Newsom.
The governor has until Sept. 30 to change his mind and veto the bill, otherwise it will become law on Jan. 1, 2021.
The law is likely to affect British American Tobacco more than other tobacco companies. Menthol cigarettes represent 55% of Reynolds' annual sales by volume. In contrast, only about 18% of Altria Group's (NYSE: MO) sales are menthol cigarettes.
The hit won't be huge right away. According to The Wall Street Journal, although 12% of the U.S. population resides in California, only 7% of all cigarette sales occur within the state.
But if Massachusetts and California are the start of a trend, the sales of all cigarette companies could eventually be at greater risk.
10 stocks we like better than British American Tobacco
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and British American Tobacco wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of August 1, 2020
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
