U.S. Markets closed

Britain Joins Plain Packaging Drive

Zacks Equity Research

After Australia, U.S., and Canada, this time Britain raised its voice for the cause of a ‘Healthy Heart’.

British Heart Foundation (:BHF) urged the British government to force the tobacco biggies to use plain packaging and ban all attractive marketing campaign that lures smokers to puff cigarettes.

BHF, a charity organization in Britain, funds research, education, care and awareness campaigns that are aimed to prevent heart diseases in humans. BHF conducted a survey in Britain among youngsters, who admitted that they realize the harmful effects of a cigarette based on the pictures shown on the packs.

The organization surveyed more than more than 2,700 smokers and non-smokers, belonging to age group of 16 to 25. Among them, 75% of those who responded were of the opinion that plain packaging would encourage smokers to smoke less or quit completely.

The survey comes at a time when the British Government is due to start a public consultation from early 2012. The consultation is regarding whether the nation should follow Australia in banning all eye-catching packaging of cigarette packets.

However, there are many groups who do not support the imposition of plain packaging on tobacco companies. The lobby group Forest, Freedom Organization for the Right to Enjoy Smoking Tobacco, argued that the plain packs will have little impact on the number of young people who start smoking.

Britain hails the measure taken by the Australian Federal government, which is forcing cigarette manufacturers to sell their products in plain packages with warning labels occupying at least three fourth of the front side, as against the prevalent norm of allocating 30% of the front space. The law is to take effect in December 2012. The bill passed the houses of Parliament last month.

Tobacco companies are increasingly relying on their packaging to build brand loyalty and grab consumers. Packaging is one of the few advertising venues, which the tobacco firms can use, after the government curbed their presence in magazines, billboards and TV.

As against this, the tobacco industry backed by Imperial Tobacco Australia Ltd. is showing TV advertisements against the plain packaging laws, asking Australians whether they want to live in a "nanny state."

British American Tobacco Plc. (AMEX:BTI - News), whose brands include Winfield, Dunhill and Benson & Hedges, has announced the government's plans would infringe upon international trademark and intellectual property laws and has also raised the possibility of pursuing legal action. The market leader in Australia filed its lawsuit in the nation’s High Court, arguing that the legislation is unconstitutional and violates intellectual property rights within two weeks after Aussie parliament passed the bill.

Philip Morris International Inc. (NYSE:PM - News) also believe that plain packaging would hurt the companies in the emerging markets and going forward, could lead to takeovers in the industry to cut costs. It also filed a lawsuit with the country's High Court in December 2011.

Separately, the tobacco honchos in America have appealed to U.S. District Judge Gladys Kessler to delay her verdict regarding an old lawsuit against tobacco industry, and wait until the other cases against tobacco regulations are sorted.

A federal judge blocked the rule that mandated tobacco warning labels on the cigarette packets. The images and texts or the health warnings, which were designed by the Food and Drug Administration (:FDA), were considered to violate these companies’ right of free speech and have been blocked by U.S. District Judge Richard Leon in Washington.

However, while British American Tobacco holds a Zacks #4 rank implying a short term ‘Sell’ rating, investors are more confident about Philip Morris and it holds a Zacks #2 rank implying a short term ‘Buy’ rating.

Zacks Investment Research

More From Zacks.com