UK to Allow Only Plain Packaging for Cigarettes from 2016 - Analyst Blog
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 after the U.K. Public Health Minister, Jane Ellison, announced on Jan 21 that the British government supports the ban on brand packaging on cigarette packs. The government also announced its intention to start the implementation of the standardized packaging effective May 2016.
The standardized packaging rule requires tobacco companies to include both pictorial and text warnings on cigarette packs to dissuade smokers. Per the law, the warning should cover more than 65% of both the front and back covers. Further, colors like dull brown on the outside and white for the inside can be used for retail packaging.
It may be noted that the European Union also intends to implement the ‘The New Tobacco Products Directive’ fully around the same time. The Directive — endorsed by the European Parliament in Feb 2014 — received a green signal from the Council of European Union (EU) on Mar 14. This is a revised version of the original Tobacco Products Directive issued in 2001 and 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 the region. However, member states may exempt products like ‘Other Tobacco Products’ such as cigars and cigarillos from the ban. The revision was made in order to make tobacco products less attractive to young smokers.
These rules will pose a problem for the tobacco majors like Philip Morris International Inc. (PM), Reynolds American Inc. (RAI), Lorillard Inc. (LO) and Altria Group Inc. (MO) that are already being affected by the anti-smoking campaigns worldwide. Governments around the world are imposing restrictions on tobacco companies which, in turn, are lowering cigarette consumption and affecting margins. The U.S. Food and Drug Administration (FDA) has made it mandatory for tobacco companies to use precautionary labels on cigarette packets to discourage smokers.
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