Christian Ouellet
Tobacco companies may need to reset some of their strategies if UK Prime Minister Rishi Sunak’s proposed legislation to gradually raise the legal age for consuming cigarettes is passed. Sunak’s plan would have the effect of eventually banning smoking through a progression of one-year raises in the age requirement to buy cigarettes, without taking away the right to smoke from someone who currently does. Sunak is expected to formally present the plan to Parliament next year before the general election.
“If implemented, it would likely lead investors to ask whether this type of restriction could spread to other European countries, and we think it important for nicotine producers to have a solid smoke-free strategy in place,” noted Bank of America analyst Lisa Lewandowski. Other tobacco industry analysts have noted that several Western European nations could take a similar course of action in light of rising healthcare costs. Earlier in the year, health and environmental campaigners called for a broad European ban on cigarette filters in order to fight pollution and discourage people from smoking.
Philip Morris International (NYSE:PM) and other major producers have already boosted their smoke-free portfolios to offer alternatives such as heated tobacco and tobacco-free oral nicotine pouches, but the UK development could reset those timelines.
Imperial Brands PLC (OTCQX:IMBBY) is the cigarette market share leader in the UK by pounds, while Japan Tobacco Inc. (OTCPK:JAPAF) ranks a close second due to its purchase of Gallagher – which owns the Benson & Hedges and Camel Brands. British American Tobacco (BTI) trails those two by a large margin for third place, while Philip Morris International (PM) is fourth in UK cigarette market share. Bank of America estimated that revenue from the UK is at most only 1% to 2% of Philip Morris’ (PM) total sales.
The UK is also considering tightening vaping laws. Measures that are being evaluated include restricting flavors and descriptions of vaping products to discourage youth usage, regulating point of sale displays in stores, and regulating vapor packing and product presentation.
The Tobacco Manufacturers Association has pushed back against the UK smoking and vaping proposals, saying they represent a disproportionate attack on adults’ rights and would fuel black market trade.
Tobacco stocks have drifted lower over the last week as news of the UK proposal drifted out.
