BAT ... Sep12

The local tobacco sector received a double blow over the past couple of weeks, with changes in regulations locally and abroad. While the announcement of a floor price for 20 stick packs of cigarettes had been expected, the decision by the Australian court to ban logos on individual packets could lead to other unintended consequences.

However, the question is whether it will eventually be adopted here. Industry observers do not rule out that happening, but it would not be so soon. This is only the beginning of a long drawn out process. The tobacco players are unlikely to take the matter lying down and will ask for additional clarification on the matter.

If Australia were to successfully adopt the measure come Dec 1 2012 as planned, there is a high likelihood that New Zealand will follow suit. In the UK , the Health Department had sought public feedback on standardized tobacco packaging. The consultation period ended on Aug 10, 2012.

BAT’s MD said that the company is disappointed with the decision of the Australian High Court. Tobacco is not only bad law, but is one that will have many unintended consequences for years to come.

However, other governments around the world are already holding up the Australian Court ruling as how cigarettes and other tobacco products are to be sold in generic live green packets with graphic health warnings.

The ban in Australia is to stop the packets from being mobile billboards for the tobacco companies. It will take a while however for emerging markets to catch up. A better indicator for us would be Singapore . However tobacco companies are unlikely to have a contingency plan on how to deal with this plain packaging issue.

The biggest argument on the tobacco players’ side is that having plain packaging would make it easier to produce counterfeits, and that it would lead to a rise in illegal cigarettes.