ITC’s profit during the quarter that ended on December 31, at Rs26.35 billion, fell slightly short of analysts’ estimates of Rs26.92 billion as higher taxes on cigarettes and a government push to discourage tobacco consumption throughout India hurt sales, according to a Reuters story.
ITC, which accounts four out of every five cigarettes sold in India and which derives most of its revenue from cigarettes, is nearly 25 percent owned by British American Tobacco.
The impact of high taxes and duties was “exerting unprecedented pressure on legal (tobacco) industry sales volumes,” ITC was quoted as saying in a statement.
Prime Minister Narendra Modi’s government, which took office last year, has been adopting measures to curb India’s tobacco consumption.
It has increased taxes on tobacco products, ordered companies to place health warnings across 85 percent of the surface of cigarette packs and is considering banning the sale of single cigarettes, which make up about 70 percent of cigarette sales in the country.
Vapor products seem to have hit a rocky patch in the US and it is possible that only well thought out regulation will help smooth the way ahead.
Bonnie Herzog, the managing director of Beverage, Tobacco & Convenience Store Research at Wells Fargo Securities, says that a survey her group had conducted among about 20,000 tobacco retailer and wholesaler contacts had thrown up a few ‘calls to action’.
They wanted the Food and Drug Administration to take the lead in better informing the public about the relative risks of vaping and smoking. They wanted the industry to work together to push for vapor products to be granted modified risk status so that the public perception of these products did not deteriorate further. And they wanted vape shops to be regulated more closely so that they did not undermine the industry’s reputation.
The survey uncovered also that retailers have been ‘somewhat underwhelmed’ by the larger devices that are coming on to the market and that are meant to bridge the gap between traditional electronic cigarettes and VTMs. Retailers believe that about 75 percent of the sales of these products will cannibalize existing sales rather than generate incremental sales.
Nevertheless, Herzog said she remained cautiously optimistic by technological innovation in the vapour-products category.
And she remains bullish long term, believing that the consumption of vapor and other non-combustibles, such as heat-not-burn products, could surpass consumption of combustible cigarettes by 2023. ‘We continue to believe that technological innovation is crucial and that Big Tobacco will be pivotal in shaping the non-combustible nicotine industry,’ she wrote.
Her bullish stance is not altogether surprising. Herzog reported that vapor category growth in c-stores remained robust: at 17 percent in the fourth quarter of last year, though down on the 21 percent the third quarter. Repeat vapor product purchases are said to have accelerated to 60 percent in the fourth quarter from 57 percent in the third quarter.
Legislation aimed at imposing in the UK standardized packaging for cigarettes and fine-cut tobacco is due to be put before parliament during the current session, which is scheduled to end on March 30.
Many observers had assumed that the legislation would not be introduced until after May 7, when the UK is due to go to the polls in a general election.
Imperial Tobacco said in a note posted on its website that it was ‘surprised and disappointed by the government’s decision to rush ahead with plain packaging legislation’.
‘After two years of the failed experiment in Australia there remains no credible evidence that plain packaging is having any impact on tobacco consumption rates,’ the note said.
‘Illicit trade, however, has increased significantly.
‘It is regrettable that this issue has been caught up in knee-jerk electioneering at the expense of evidence-based policy making.
‘As we’ve always said, we have a fundamental right to differentiate our brands from those of competitors. Legal action is always a last resort but when legislation is published we will be considering our options.’
If the legislation is passed, it is likely to come into force in May 2016, along with the provisions of the revised EU Tobacco Products Directive, which does not call for standardized packaging.
A British American Tobacco spokesperson described the proposal as “a serious error of judgment given the clear evidence from Australia that plain packaging has not achieved any of its public health objectives and has increased illicit trade to its highest level in seven years”.
“It is also inappropriate for the UK government to pre-empt the findings of its own public consultation by rushing this announcement out.”
Japan Tobacco International has rejected a trade union plan to save 500 jobs at the Gallaher cigarette factory site in Northern Ireland, according to a story by Henry McDonald for The Guardian.
Unite, the union representing most workers at the plant, confirmed on Wednesday that the owners planned to end production there by 2017.
Overall 800 jobs are due to go at the factory even though the unions had proposed new working conditions and up to 300 voluntary redundancies.
Jimmy Kelly, Unite’s regional secretary, described JTI’s attitude to the rescue plan as “contemptuous”.
And Jim Nicholson, the Ulster Unionist MEP, said he was dismayed by JTI’s rejection of the union proposal.
“This is a huge blow to the factory workers, for the Ballymena area, for the Northern Ireland economy as a whole and for all those who have worked so hard to try and secure a future for the plant, he said.”
The story is at: http://www.theguardian.com/business/2015/jan/21/gallaher-cigarette-factory-union-northern-ireland.
The health minister of Canada’s Quebec province, Gaétan Barrette, has come out in favour of using electronic cigarettes as a way to quit smoking, according to a story by Geoffrey Vendeville for the Montreal Gazette.
“Electronic cigarettes are a means to quit smoking that is clearly extraordinarily efficient,” he told reporters after a legislative committee meeting on Tuesday, on the occasion of the Quebec Tobacco-free Week (January 18 to 24).
Quebec was expected soon to clear up the legislative “grey zone” covering e-cigarettes, he said, but a spokesperson for the minister assigned to public health, Lucie Charlebois, couldn’t say when a bill would be tabled.
Meanwhile, the borough of Montreal North and the Société de Transport de Montréal have gone their own way.
Those who vape in municipal buildings in Montreal North are liable to be fined $50 for a first offence and $100 the next time.
“I’m not against e-cigarettes as a way to quit smoking,” said borough mayor Gilles Deguire. “In that sense, I say go for it.
“But I don’t see why anyone has to puff in a municipal office building, library, community center or arena.”
Imperial Tobacco is due to hold its Annual General Meeting on January 28.
And, following the conclusion of the AGM, a general meeting will be held to seek shareholder approval for the proposed acquisition of assets in the US.
The presentation transcripts and slides from both meetings will be available on the company’s website following these events.