Investors See A Silver Lining In Europe's Plain Packaging Laws

Big tobacco companies are threatening to challenge new plain-packaging laws in the UK and Ireland saying that forcing all manufacturers to sell their cigarettes without any branding whatsoever is unlawful. This month, both nations followed in Australia's footsteps in passing a law that requires all tobacco products to be sold in unmarked packages displaying only health warnings. However while tobacco execs work to fight against the new legislation and stop other European governments from passing similar laws, shareholders are keeping their cool. Questionable Effectiveness Many believe that the legislation in the UK and Ireland will open the door for other European nations to pass similar laws banning tobacco companies from branding their products. Currently, Australia is the only other country in the world with a plain packaging law; and tobacco companies say it has done little to curb the nation's smoking habits. However, supporters say the absence of bright, shiny packaging keeps children from becoming interested in tobacco and the graphic health warnings make the habit much less desirable. Too Much Government Influence British American Tobacco BTI has threatened to sue the UK government, saying that the new laws violate intellectual property rights. Many worry that such legislation will lead to further government intervention in other sectors where public health and safety are a concern like food and drink. Shareholders Keep Calm And Carry On While the plain packaging rules are certainly a blow to big name tobacco companies like BAT and Philip Morris International Inc. PM, shareholders appear unfazed by the changes. Tobacco companies are constantly facing regulation in the name of public health, but have continued to remain profitable. Some say that the new regulations are actually a positive as they make it nearly impossible for any new entrants to build brand awareness in the market.