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Australia recently implemented “plain packaging” laws that drastically alter and regulate cigarette packaging. Similar motions have been raised — and denied — in the United States, while countries such as New Zealand and the United Kingdom have expressed interest in the legislation. China, the world’s largest cigarette market, openly aims to completely ban cigarette advertising and raise tobacco taxes. In a matter of weeks, Russia, the world’s second largest cigarette market, could initiate a crackdown on tobacco as well, which could spell trouble for top manufacturers.
The World Health Organization calculates that 39 percent of Russia’s 143 million population are habitual smokers. A pack of Marlboro cigarettes — produced by Philip Morris International (NYSE:PM) — costs about $2 in the country. Russian health regulators have suggested increasing the tax per 1,000 cigarettes from 510 rubles ($16.43) in 2012, to 4,000 rubles ($128.87) by the end of 2015. Berenberg Bank analyst Erik Bloomquist estimates that the tax increase alone could cut Russian cigarette consumption by 20 percent.
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Manufacturers have understandably attacked the proposed legislation. British American Tobacco (AMEX:BTI) along with Philip Morris generate about a third of their global sales in the eastern Europe, Africa, and Middle East block. Japan Tobacco relies on the former Soviet region for 46 percent of its global sales volume. The amount of money tobacco companies are spending on lobbyists is concerning those who are trying to push the bill through. “Russia is the second largest tobacco market after China despite the huge difference in their populations. So it’s no wonder that manufacturers so forcefully attack the new draft bill,” says Dmitry Yanin, head of the Confederation of Consumer Societies.
Other American cigarette manufacturers like Lorillard (NYSE:LO) and Altria Group (NYSE:MO) would not necessarily be hit as hard. The companies focus more on the American market than Philip Morris and British American Tobacco. But mounting resistance to cigarette smoking abroad could add fuel to a continuously raging debate in the United States.
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