Philip Morris Has Hard Time Struggling Australian Plain Packaging Bill

Published on October 7th, 2011 10:27

Currently Philip Morris International (PMI) has hard time as Australian government plans to implement its Plain Packaging Bill for all tobacco products, which will significantly hurt PMI market share and will lead to negative precedent for its other major markets.


Philip Morris International is the world’s largest international tobacco company, with the market share constituting 27%. It owns eight of the world’s top 15 cigarette brands as Marlboro, which is the number one in the world of tobacco industry. Philip Morris International has a few rivals as British American Tobacco, Japan Tobacco and Imperial Tobacco Group with whom it competes in various geographical regions. Experts estimated a $72.60 price determination for Philip Morris, which is just somewhat ahead of the market price.

In order to reduce smoking, Australia wants to become the first country to mandate all tobacco products to be sold only in plain packaging. The Lower House has recently adopted the Plain Packaging Bill which will soon reach the Senate. It should prohibit logos and color diversities on cigarette packages and implement a unique logo-free olive green cigarette pack with graphic health warnings on all branded cigarettes starting from January 2012.

The cigarette package will carry the brand name and the style of cigarette printed on the front in white typeface. The given reform will introduce in Australia the most restrictive anti-smoking laws. With this significant drop, the biggest tobacco companies as Philip Morris International and British American Tobacco want to bring before a court the proposed law as it infringes the tobacco company’s property rights.

The introduction of plain packaging will decrease its brand identification and may bring to a drop in its market share; it may also increase sales on counterfeit smoking products and lead to weaker tendency on the prices of the branded smokes. Pricing power is the main driver of profits for tobacco companies and its negative profit would prove quite unfavorable for the industry already fighting with the falling sales volumes, mostly in the growing markets.

If the given bill will be passed it would set an unpleasant precedent for other leading tobacco markets as governments in countries like Canada, New Zealand and U.K. have also been thinking about similar laws and may follow the Australia example. Also there is a great risk of plain packaging spreading to developing markets as Brazil, Indonesia and Russia.

The volume of cigarette sales has already been dropping because of the growing awareness about the smoking consequences. Governments have also been discouraging people from smoking by means of high excise duties, for instance in Europe it constituted 70% and also by various legislative controls like bans on public smoking and tough restrictions on the advertising and marketing of tobacco products.

By Joanna Johnson, Staff Writer. Copyright © 2011 All rights reserved.

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