| LONDON, April 19
LONDON, April 19 The world's top tobacco groups
fear if new rules on plain packaging take hold in Australia and
Britain they may spread to higher growth and potentially more
lucrative emerging markets and put a curb on their future
Health campaigners are pushing for tobacco companies to
package their cigarettes in plain packs displaying the product
name in a standard typeface and with graphic health warnings as
a way of discouraging youngsters from taking up smoking.
Australia aims to become the first nation in the world to
force tobacco groups to sell cigarettes in these plain,
brand-free packets by December this year, while Britain this
week launched a three-month consultation over the
"It seems inevitable that should Australia succeed in easily
implementing plain packs, that other regulators will explore the
potential to do likewise," said analyst Chris Wickham at brokers
Analysts say that if Australia adopts these plans then the
next battlegrounds are likely to be Britain, Canada and New
Zealand, and will cause concern to tobacco companies which have
seen their shares performed strongly so far in 2012.
"With tobacco stocks back on high relative valuations and
fears of a plain packaging contagion spreading from Australia,
we see a risk that the sentimental climate on tobacco once again
becomes more questioning and sceptical," said analyst Martin
Deboo at brokers Investec Securities.
Analysts say the real risk from plain packaging to industry
profits would be if it spreads to emerging markets such as
Brazil, Russia and Indonesia and so slow the process of smokers
moving to more pricey and profitable cigarette brands.
Emerging market smokers aspire to westerns brand such as
Marlboro, Lucky Strike and Camel, which confer status on the
individual, and these mean bigger margins to the cigarette
makers than the local brands that smokers are abandoning.
Smokers in mature markets like Western Europe and North
America are more fixed in their habits and reluctant to change
brands and so changes to packaging are likely to have a
relatively low impact on smoker's choices, analysts added.
With falling smoking levels in these mature markets the
world's big four tobacco groups Philip Morris, British
American Tobacco, Japan Tobacco and Imperial
Tobacco have offset this by looking to fast-growing
emerging markets to drive overall growth.
This growth has been helped by tobacco groups introducing
innovative packaging to attract consumers, and if this avenue is
closed by plain packaging rules, the cigarette companies will
find it harder to push smokers towards more expensive products.
The industry is fighting against the proposed plain
packaging legislation in Australia taking its battle to the high
court and have been giving evidence over the last three days as
analysts say tobacco groups are fearful that many other
governments are looking to Australia as a test case.
Australia has some of the toughest anti-smoking rules in the
world banning tobacco advertising, smoking in public places and
the public display of cigarettes in shops, while in some states
it is illegal to smoke in a car with children present.
Under these tough Australian rules only around 15 percent of
adults smoke compared with 23 percent a decade ago, while in
Britain the current figure is around 22 percent, analysts said.
The British market is in slow decline like many other mature
ones but Britons still smoke around 56 billion cigarettes a
year, which the government says is responsible for over 100,000
deaths a year and puts pressure on the public health system.
This is why Health Secretary Andrew Lansley announced his
consultation process to run for 12 weeks up to July 10, and
Lansley has insisted that he is keeping an open mind.