Tobacco maker Philip Morris International (PM - Analyst Report) has commented on the directive passed by the European Union (EU) banning tobacco products in the European market.
As per media reports, in Oct 2013, the European Union Assembly decided that they will not interfere with electronic cigarette sales. However, they have accepted the legislation drafted by the European Union health ministers that requires the tobacco companies to include both pictorial and text alerts on the cigarette packs to dissuade smokers. Moreover, the law requires the warning to cover more than 65% of both the front and back covers of the packs.
The 28-nation strong European Union authority aims to ban the sale of menthol and other characterizing variations of cigarettes and roll-your-own tobacco products.
These rules will pose a problem for the tobacco biggies who are facing challenges from the strict anti-smoking campaigns launched by governments around the world. Tobacco companies are increasingly relying on packaging to build brand loyalty and grab consumer attention, especially after the government curbed advertising in magazines, billboards and on TV.
Tobacco biggies like Philip Morris, Reynolds American Inc. (RAI - Analyst Report), Lorillard Inc. (LO - Analyst Report) and Altria Group Inc.’s (MO - Analyst Report) subsidiary PM USA are not happy with the decision of the EU assembly. PM, which carries a Zacks Rank #3 (Hold), opines that though the decision has brought partial relief, with electronic cigarette decision, it fails to meet the tobacco industry’s expectation. They have pointed out that the government is imposing strict rules on the legal market, without taking any measures to curb the illicit cigarette trade which, in turn, is raising the smoking rate.
We now await the Food and Drug Administration’s (FDA) decision on the e-cigarette. The anti-smoking activists have requested the FDA to impose restrictions on e-cigarettes. FDA has passed a rule compelling tobacco companies to print thought-provoking images on cigarette packs inducing smokers to refrain from smoking. Also, governments of Australia and New Zealand have made plain packaging mandatory for cigarette packs.