U.K. Plain-packaging Support Bruises Tobacco Firms

Source from:  MarketWatch 05/08/2013

Tobacco is having a rough ride Wednesday, as the U.K. reportedly moved closer to imposing a plain packaging law, banning tobacco producers from using branding on their packets. According to the Guardian, the U.K. could soon follow Australia, where cigarettes must be sold brand-free and with graphic health warnings.

Imperial Tobacco Group PLC, which is one of the major players in the U.K. market, lost 2.4% in Wednesday's trade, while peer firm British American Tobacco PLC gave up 1%. In comparison, the FTSE 100 index gained 0.4% to 6,457.13.
 
In the U.S., shares of Reynolds American Inc. fell 0.6% and Philip Morris International Inc. shed 0.5%.
 
"The news is likely to be an immediate negative for IMT, but we think much of the impact is in the price. Either way, this feels like 'high noon', and we expect a strong legal challenge," said Martin Deboo, analyst at Investec Securities in a note.
 
"It's hard to present this as anything other than a negative for IMT. However they are well positioned in what we would expect to be the relative growth segments of value and roll your own/make your own cigarettes. But we expect competition to strengthen," he added.
 
The plain-packaging law will be announced in the Queen's speech in May along with a ban against smoking in cars carrying anyone under the age of 16, the Guardian said.
 
A law banning branding on tobacco products in Australia, the pioneering country, came into effect on December 1 last year and the idea has also gained support in other countries such as Norway, New Zealand, France and Canada. Enditem