As Australian government is getting closer to approving its Tobacco Plain Packaging Law, Philip Morris International is getting more and more concerned about the law, since it could damage its market position in Australia, and establish a dangerous precedent for other counties to pass similar measures. PMI is the number one international tobacco group in the world (excepting USA and China), holding nearly 28% worldwide market share. The company owns eight out of 15 best-selling cigarette brands across the world, including Marlboro cigarettes, the world’s top cigarette. Its main rivals are British American Tobacco, Japan Tobacco International and Imperial Tobacco.

The Aussie Plain Package Move

In an attempt to cut smoking rates, Australia is set to become the first nation to require tobacco products to be packed in plain packages. The House approved the Plain Packaging Bill several weeks ago, and passed the bill to the Senate. Under the ban, logos, mascots and colors on cigarette packs will be banned, while tobacco products will be selling in plain green packs with large health warnings and names of brands written in uniform type from 2012. The law will get Australia to the top of the rankings of countries with the strictest anti-smoking lows.

Market Share in Jeopardy

With this crucial mishap, the leading tobacco companies such as Philip Morris International and British American Tobacco intend to initiate legal action against the introduced tobacco law on grounds of violation of commercial property rights and expropriation of trademarks belonging to legal companies.

If considering a scenario where generic packaging will reduce tobacco companies’ brand identification and could result in a reduction in market share, it could also result in growing sales of contraband and counterfeit product, while putting tax pressure on legal products. Pricing factor is a crucial driver of revenues for cigarette makers and its absence would have adverse effect on the tobacco industry which is already struggling with sinking sale volumes, especially in the western markets.

A Controversial Precedent for Other Countries

The bill if approved and implemented would establish a very dangerous precedent for other developed markets, as the governments in many countries, including the United Kingdom, European Union member-states, Canada and the U.S. have also been discussing the odds of similar measure and could follow Australia’s steps. There is as well the risk of generic packaging spreading to major developing markets such as Russia, Brazil and Indonesia.

Falling Tobacco Use

The volumes of sales of cigarettes and other tobacco products have already been falling due to the increasing health concerns about the severe health complications related to smoking. Authorities have also been discouraging smoking and tobacco use by means of rising excise taxes ( almost 70% in European Union) and introducing anti-smoking laws, such as bans on smoking in public places and restrictions on promotion and advertising of tobacco smoking as well as mandatory health warning.

By Steve Shepherd, Staff Writer. Copyright © 2011 Cigarette-Store.org. All rights reserved.