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Archive for May, 2013

Tobacco Industry Opposes Britain’s Plan to Introduce Plain Packaging

Friday, May 24th, 2013

Cigarettes pack British authorities are still thinking about prohibiting company logos on cigarette packages despite the fact that it disregarded recommendations from its legislative schedule presented in parliament several days ago, Prime Minister David Cameron mentioned.

Britain is planning to become the first European country to demand cigarette manufacturers to introduce plain packaging, an action toughly opposed by the tobacco industry, which views it as damaging their revenue. Cameron stated the parliament that the government was still looking at the matter.

The Department of Health conducted more than 4 months of discussions in 2012 to collect facts on whether standard cigarette packaging would dissuade young smokers and support present smokers quit the habit. “This is a crucial decision and we are carefully looking at what is going on all over the world,” a department representative stated. A year ago, Australia applied a legislation stating cigarettes should be sold in green packages using graphic health warnings.

Cuba, whose luxurious cigars are well known all over the world and feature distinct packages, released a challenge against the Australian law at the World Trade Organization last week. Regardless of its shortage from the government’s strategies, the chief of the opposition Labour Party proposed to assist pass through any offered legislation. “If he prefers the bill on cigarette packaging, we will support him get it through,” Ed Miliband mentioned. “It is the proper issue to take care of public health and it is the right thing for the country.”

Miliband also put in doubt the position of government advisor Lynton Crosby in the conclusion, stating his consultancy firm had worked with cigarette companies. A representative for David Cameron explained Crosby had no effect over the details of the Queen’s speech.

Campaign groups expressed their dissatisfaction regarding the inaction of the plan from the government’s programme. “The inability to bring forward legal guidelines greatly disrupts the Government’s reliability on public health challenges,” according to the Smokefree Action Coalition.

Companies like Philip Morris and British American Tobacco worry that plain packaging would promote the worldwide black market in tobacco.
Imperial Tobacco shares have increased partially since studies published in the British media declared that Cameron had dropped the initiative.

New York City Plans to Keep Tobacco Products Out of Sight

Monday, May 20th, 2013

New York City Enter any retail outlet or gas station in the country, and probabilities are the cigarettes will be in approximately the same place: at eye level, directly behind the cash register.

That is no coincidence. Cigarette manufacturers have worked tough, and paid enough, to make sure that cigarette displays take up the best spot. For instance in 2010 solely, the tobacco industry spend $370 million in payments to merchants to help secure the prime shelving area, in accordance to a survey presented by the Federal Trade Commission. It has also spent an extra $107 million on in-store marketing. “Every consumer product goods producer in the country would like to be there,” stated Kurt M. Ribisl, a lecturer at the University of North Carolina who analyses tobacco marketing. “Companies producing chips and Pepsi, all of them want that best space. But the tobacco industry is the winner.” Currently, that supremacy could be at risk in one of the country’s largest cigarette markets.

New York City Mayor Michael Bloomberg suggested a bill recently that would induce retailers to retain cigarettes out of sight until a customer asks for a package. The given law would efficiently demand retailers to hold smoking products in closed cupboards or boxes, rather than on the vibrant displays, called “power walls,” that are recognizable nearly almost everywhere in the US. A second bill would monitor the process of discounts and offers that producers have used to seek after customers and always keep retailers satisfied. It would suspend discount coupons and any of buy-one-get-one-free special offers for smoking products and get rid of strong discounts by assuring a price floor for each package. It is too earlier to ascertain whether or not one of these measures will come through the legislative procedure. Cigarette manufacturers and convenience store proprietors have attacked both suggestions claiming that they are unfair and perhaps unconstitutional. An industry legal action pushed the New York village of Haverstraw to rapidly cancel an identical ban passed last April. It is more uncertain is whether the policy would really end up in fewer people lighting up.

Many nations, such as Ireland, Canada and Australia, have restrained retail tobacco displays, however most specialists state that the guidelines haven’t been ready long enough to understand whether they have had a solid effect. Opponents of the law state it will only bother smokers unnecessarily and make things more complicated for small scale businesses.

Cigarette Pricing to Compensate Declining Volumes

Friday, May 10th, 2013

Marlboro Cigarettes Price increase. It is a word that any retailer wants to hear when it comes to tobacco products, particularly with Obama advising 94 cents per package boost to the Federal Excise Tax (FET) in his latest budget.

Bonnie Herzog views minimal price boosts in different ways. “Pricing power has been essential and important to this industry,” she stated during the press conference she attended at the 2013 NATO Show in Las Vegas a few weeks ago. “When it comes to the main thing, one point of pricing gives three times the leverage in comparison to one point of volume.” Indeed, cigarette sales are decreasing, but Herzog-chief manager of tobacco and consumer research for the Wells Fargo Securities LLC mentioned that more than 20% of the population still consumes tobacco products and, more than likely a modest boost will not discourage the vast majority of them. “Mid single digit price boosts more than compensate cigarette volume drops, forcing top-line increase and greater margins for some,” stated Herzog.

Herzog predicts that such price increases will keep on taking place in 2013 according to latest earnings calls by key tobacco companies. During the time of the session, Lorillard and Reynolds had revealed their 1Q 2013 revenue, with Altria soon to present its own results. “I have expected that pricing will speed up by four points this year,” Mrs. Herzog mentioned.

While cigarette pricing will for sure increase in 2013 and 2014, 2015 provides an exciting chance for cigarette producers, shareholders and merchants as well: 4Q 2014 signifies the end of the Federal Tobacco Buyout Fee. “This 10-year, $10.1 billion program costs around 0.06 cents per package,” Herzog stated. “This must lead to substantial great potential to revenue increase in 2015 for all three of the top tobacco manufacturers in the U.S. Thus, in merely a few years, we foresee that cigarette operating margins will be re-based higher by around 250 to 300 basis points,” she added.

It may be too soon to estimate precisely how producers could utilize these cost savings, but Herzog stated they would not apply it to lower cigarette prices that smokers have already become used to. Some ways on how the funds could be utilized consist of financing internal growth projects, compensating possible federal and state excise tax boosts, financing higher advertisements to generate volume or purchasing or investing in a growth business.

Japan Tobacco Advertisements are Deceptive

Friday, May 3rd, 2013

Japan Tobacco
A range of advertisements from Japan Tobacco International (JTI) made promises that are not able to be well-founded and cracked the UK advertising code based on the Advertising Standards Authority (ASA). The ASA has declared that the advertisements in a number of nationwide magazines in September 2012 were deceptive and that JTI is unable to state that “the illicit market in tobacco is growing”.

The most current conclusion is in reaction to issues produced by Cancer Research UK and follows an earlier ruling in March about prior adverts, when the ASA informed JTI it could not declare that the Government had totally “declined” the policy of plain packaging for cigarettes in 2008. JTI started a £2 million advertising campaign in July 2012 disagree the strategy of placing all smoking products in plain packages of standard size, shape and design. JTI’s most recent advertising campaign utilizes a 2011 letter between civil servants in the UK and Australia in one more attempt to disrepute plain, standardized packages as being without facts.

Australia launched standard packages in December 2012.
The continuing use of this kind of advertising budget to attempt to prevent this measure highlights the industry’s worry of how efficient this step will be in decreasing the appeal of their products.
The judgment mentioned that JTI had themselves recognized that the questionable trade in smoking products has apparently been a decreasing trend in the last ten years.

JTI was also advised it could not state that the UK had experienced “£3 billion lost in unpaid duty in 2012”. The ASA also mentioned that because the advertisement included an image of a cigarette package, it was not evident that the figure was meant to link to a matched total for both cigarettes and hand-rolled tobacco.
Sarah Woolnough, Cancer Research UK’s representative stated:  “This demonstrates that more of Japan Tobacco’s statements are deceiving. The tobacco industry has concentrated its opposition to plain packages on a claim the black trade would boost. Independent experts have frequently mentioned these statements do not have any sense. As JTI launched its newest round of national advertisements, this choice comes as an opportune reminder about an industry that just cannot be dependable on public health policy.