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France and UK Unveil Selected Security for Tobacco – But UK Disappoints

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Big Tobacco is losing the fight to stop plain packaging of cigarettes

Dr Enrico Bonadio, a Senior Lecturer in the City Law School, says the tobacco industry’s bid to avoid plain packaging by relying on legal arguments around trade and intellectual property rights, is being systematically dismissed by courts around the world.

https://www.city.ac.uk/news/2017/may/big-tobacco-is-losing-the-fight-to-stop-plain-packaging-of-cigarettes

You may already have seen the tobacco packs currently sold in the UK: a dark, murky green colour with large graphic health-warning images and scary messages aimed at informing current and potential smokers about the devastating consequences of tobacco consumption. They have no colourful logos, with the brand name just displayed in small characters in a standard font.

These packs are now required by new regulations which entered into force in May 2016. There has been a one-year transitional period for the sell-through of old stock – and from May 20 2017 all tobacco products on sale in the UK must comply with the new rules.

The legislative move has been recommended to all countries by the World Health Organisation to reduce the attractiveness of smoking and eventually reduce consumption. Australia was the first country to introduce such strict packaging requirements in December 2012. France and, of course, the UK have since followed suit.

It follows significant research that shows these new standardised cigarette packs are much less appealing to consumers – and young people especially.
The industry’s legal defeats

No wonder tobacco companies have challenged the measure in the courts. They have argued that it is useless, too harsh – and is an infringement of their fundamental and intellectual property rights, especially trademarks. Yet, their claims are based on weak arguments and have been rejected by both the High Court of England and Wales and the Court of Appeal.

The tobacco industry has faced numerous courtroom defeats of late. Last year Uruguay won a landmark case against the Swiss giant Philip Morris International. The company had sued the Latin American state after it introduced two measures affecting tobacco packaging and trademarks. These were mandatory graphic health warnings covering 80% of cigarette packets (a measure very close to plain packaging) and the obligation for tobacco companies to adopt a single presentation for their brands, dropping for example the “gold” and “blue” descriptors, that could lead smokers to believe one variant was safer than another.

The fact that the courts sided with Uruguay would have been encouraging to other countries aiming to introduce controls on tobacco packaging. And even greater encouragement came recently from a World Trade Organisation ruling which deemed that the plain packaging requirements introduced by Australia as compliant with international trade and intellectual property rules – and are therefore a legitimate public health measure.

The decision has not been officially announced, but a confidential draft of the interim ruling was leaked to the media and the final decision is expected later this year. The Australian measure had been challenged at the WTO tribunal by Cuba, Dominican Republic, Indonesia and Honduras, countries whose economies strongly rely on the tobacco industry.

A domino effect

This is a blow to the industry. The short-term consequences of the WTO ruling – Imperial Tobacco’s shares fell more than 2% after the decision was leaked – reflects the longer-term danger that this ruling poses. It will likely convince other states to introduce plain packaging legislation without fear of violating international trade and intellectual property laws. It basically gives them a green light by removing the regulatory chilling effect that such legal action has produced on countries that wanted to follow Australia’s example.

After all, more and more countries seem interested in adopting standardised packaging. As well as France and the UK, Ireland and Norway will introduce packaging restrictions later in 2017, and Hungary in 2018. Many other states are debating similar measures, including New Zealand, Canada, Belgium, Slovenia, Belgium, Singapore and Thailand.

So, a legislative trend has started which aims to restrict the ability of tobacco manufacturers to make their products appealing to consumers by using eye-catching words, logos or ornamental features on the pack. And attempts by Big Tobacco to stop it by relying on legal arguments around trade and intellectual property rights are being systematically dismissed by courts around the world.

Ultimately, the industry needs to accept the fact that its ability to use fancy brands, especially on packaging, may be reduced by governments for public health reasons. Also that a company’s property rights are not absolute or untouchable. Not only does it not have enough legal basis – as has now been confirmed by several courts and tribunals – but it also disregards legitimate policies adopted by democratically elected governments.

TOBACCO INDUSTRY INTERFERENCE IN HEALTH POLICY

Tobacco stocks have traditionally performed strongly as defensive equity assets, but some big investors are now starting to divest from the industry.

The French national pension reserve fund, Fonds de Réserve pour les Retraites (FRR), announced in December 2016 that it was going to exclude investments in the equities and bonds of tobacco-producing companies.

There is growing pressure on institutional investors and others to divest from tobacco, based on strong scientific evidence of the harm caused by smoking. In particular, the efforts of Tobacco Free Portfolios, a campaigning initiative set up by Dr. Bronwyn King, an Australian cancer specialist, have raised awareness of the issue. FRR executive director Olivier Rousseau admits it struck a chord with him: “Morally, it’s a very clear-cut situation; it is indefensible. This is only a harm-producing industry, so from a moral perspective, it was easy to say that we don’t want tobacco in the portfolio.”

But whereas there is a strong rationale for excluding tobacco stocks on moral grounds, applying hard-headed investment logic to it can be sobering for investors. “The returns for tobacco have been absolutely outstanding. Between June 2004 and September 2016, the MSCI World Tobacco index grew by a whopping 632 percent,” Rousseau says. “Whereas the MSCI World index went up 122 percent.” And according to the Credit Suisse Global Investment Returns Yearbook 2015, from the Credit Suisse Research Institute, the tobacco sector was, together with beverages, the star performer since 1900 with an annualized gain of 14.6 percent [see chart below]. We’ve all heard comments from CalPERS, which said that not having had tobacco in the portfolio over the last 15 years has cost it around $3 billion. Similarly the Norwegian GPFG [Government Pension Fund Global] says its tobacco exclusion, which started ten years ago, has cost it some $2 billion. The results may vary depending on the methodology used. If one compares total returns, the difference is bigger than if one assumes, as is the case in real-life portfolios, that the dividends of high-yielding sectors, such as tobacco, are actually pooled with all dividends and reinvested in all sectors pro rata to their index weightings. Anyhow, yes, it is a bad industry, but there is no denying that it has been a very profitable investment.”

However, tobacco may not be such a good investment in the future. One reason to expect lower future returns is tougher public health legislation on smoking. “Many countries have made a commitment to act against smoking, and France is party to a 2005 international agreement on this, which basically says that public institutions should not have tobacco investments,” Rousseau says. “You can argue about its enforceability, but it is clearly a commitment taken seriously by the countries that have signed it.”

“There is a significant probability that more developed countries will take more measures against tobacco in the future. France is the second country, after the U.K., to remove branding from packaging for tobacco since January 1 this year,” Rousseau says. “Taxes are always being increased on tobacco, and regulations are increasingly restricting smoking in public spaces. Just as we can see a shift away from using carbon-emitting energy sources, so there is a similar regulatory move away from tobacco consumption.”

As part of the food and beverage sector, tobacco has performed strongly as a lowvolatility, high-dividend and stable growth sector since the start of the global financial crisis in 2007. As such, tobacco stocks have been valued at high multiples, as one of the darlings of the low-volatility trend in portfolio management, but Rousseau says this is now changing. “There has been a formidable run for the low-volatility, stable-growth types of companies, but it is coming to an end. From last July, after the first few weeks of Brexit scares,” he says, “value stocks have come back with a vengeance. Since then the stablegrowth, ‘low vol’ companies, carrying high multiples, have done poorly relative to the overall market. This tendency has started, and we believe there is more to go, and this could be the case for some time to come.”

FRR’s executive board had to present the case for excluding tobacco to the supervisory board. “There was a good debate, because it was easy to see the moral argument against tobacco stocks,” Rousseau says. “And of course concerns about returns were expressed, so that argument was also discussed. We cannot promise the supervisory board that excluding tobacco companies will pay out in future, but we simply believe that the formidable returns of the past are not going to be repeated in the same fashion. In our view, that would be a very low probability scenario.”

Although many investors engage with companies in an effort to improve their ESG rating and see divestment as a last resort, Rousseau says that this approach is not possible with tobacco producers. “It is typically the only thing that they do, so you would be asking them to stop their activities altogether,” he says. “You either invest, or you divest. The middle-of-the-road approach would be to reduce your weighting, but that is ducking the issue, really. We understand that there is an element of risk to us, but the next decade will most probably not see the same performance as in the past.”

As a result of its decision to exclude tobacco stocks, FRR has joined CalPERS and CalSTRS, in addition to Norway’s GPFG, the Netherlands’ PGGM, a handful of Australian and New Zealand pension funds, AXA insurance group, and, most recently, Sweden’s AP4, in going tobacco-free. “As we understand it, there are still very few investors that have done this so far, and I think the return argument is something that has been very powerful,” Rousseau says.

At the same time as it announced its tobacco divestment, FRR said it will now also exclude companies in which thermal coal extraction, or coal-fired power generation, accounts for more than 20 percent of turnover. Rousseau added that FRR is shortly to reveal the three successful managers it has hired for a €5 billion ($5.34 billion) passive equity mandate with an ESG approach, expressed notably through a smart beta, low-carbon theme and, of course, tobacco exclusion. This mandate will make up 40 percent of FRR’s developed-market equities.

France votes for plain cigarette packaging from 2016

Cigar ettes will be sold in logo-fr ee packaging fr om May 2016, despite objections from the conser vative opposition and tobacconists

Cigarettes in France will be sold in plain packaging under a law that was finally passed in parliament on Thursday despite objections from the conservative opposition.

Starting in May 2016, the brand name will appear but in a small, uniform typeface and packets will be shorn of logos.

With backing from the ruling Socialists and the Greens, the text finally came into law after mainly conservative senators added amendments to the draft that was first voted in April, which would allow the brand name to appear in small letters.

The senate had initially demanded that the neutral packaging clause be removed from the draft legislation.

Around a quarter of French adults indulge in the hazardous habit, according to the World Health Organisation, and one third of teenagers also smoke.

Nine years ago, France controversially banned smoking in enclosed public spaces, including bars and restaurants.

And only last month, Paris authorities doubled fines for dropping cigarette butts to 68 euros (£50/$75) in a city where some 350 tonnes of them are collected annually.

Last year, health minister Marisol Touraine estimated some 13 million people still light up in France and that smoking accounts for around 78,000 deaths, the leading cause of premature death in the country.

All cigarettes will from May next year have to be sold in neutral packaging of uniform size and colour in a move that is notably similar to legislation adopted in Australia three years ago.

The United Kingdom and Ireland have since followed suit.

French pension reserve fund turns its back on tobacco, coal

Fonds de reserve pour les retraites (FRR), France’s €37.2bn pension reserve fund, will no longer invest in the tobacco industry or certain coal companies.

https://www.ipe.com/news/esg/french-pension-reserve-fund-turns-its-back-on-tobacco-coal/10016717.fullarticle

Further, next year, it will launch €5bn of ESG-based passive equity mandates as part of the implementation of the new strategies.

The exclusion strategy will be applied to the fund’s existing bond mandates, so that, by the end of 2017, it will have been applied to almost 95% of the “overall scope” of FRR’s assets, according to the fund.

It yesterday announced that it decided to exclude, from its equity and bond portfolio, investments in tobacco-producing companies and companies for which more than 20% of turnover is derived from thermal coal extraction or coal-fired power generation.

The strategy was proposed by the executive board and approved by the supervisory board on 1 December.

In a statement, FRR said efforts by the World Health Organisation, governments and civil society to deal with the “scourge” of tobacco consumption could eventually weigh on the performance of tobacco companies.

It also believes engaging with companies will not lead to progress “because the whole purpose of engagement would be to demand that they should stop their activities altogether”.

“For this reason, FRR has decided to exclude the tobacco industry from its portfolio,” it said.

On its decision on coal companies, the reserve fund said it had already reduced its exposure to high-carbon sectors, especially those exposed to coal, which is accountable for more greenhouse gas emissions than any other fossil energy source.

FRR said that, after the international agreement on climate change reached at the UN Conference of Parties (COP21) in Paris last December, “governments, and also investors, are increasingly calling coal into question as being incompatible with the objective of limiting global warming to 2°”.

FRR will still invest in companies that generate more than 20% of their turnover – or their electricity, steam or heat production – from coal if they employ carbon capture and storage processes or “have formally announced their commitment and have begun to take action in this direction”.

The fund said the two exclusion strategies would be rolled out in 2017.

The coal exclusion decision contributes to portfolio decarbonisation efforts that have been underway at FRR over at least the past two years.

Individual and institutional investors representing more than $5trn (€4.7trn) of assets under management have committed to divesting from fossil fuels, according to a recent report.

FRR’s announcement comes a day after the local authority pension fund for the borough of Southwark in London pledged to sell its investments in fossil fuels.

‘World’s ugliest colour’ used on cigarette packets to put smokers off

The shade, described as a “drab dark brown”, was found through a process of seven studies involving 1000 smokers

http://www.independent.co.uk/news/world/australasia/worlds-ugliest-colour-revealed-pantone-448c-a7076446.html

New plain cigarette packaging in the UK, Ireland and France will bear a colour deemed the ugliest in the world by researchers in Australia.

Pantone 448 C, also known as ‘opaque couché’, is the shade chosen as most likely to put smokers off, a group of academics and market researchers decided after three months of research.

Marketing agency GfK Bluemoon, who headed the project, conducted seven studies with more than 1000 smokers to design the most unappealing packaging possible, according to the Sydney Morning Herald.

The ugly brown colour has been associated with dirt, tar, and even death, without any positive adjectives, say the researchers, who were commissioned back in 2012.

“It had as its aim the antithesis of what is our usual objective,’’ said market researcher Victoria Parr.

‘‘We didn’t want to create attractive, aspirational packaging designed to win customers […] Instead our role was to help our client reduce demand, with the ultimate aim to minimise use of the product,” she added.

Pantone 448 C, also known as 'opaque couché'

Pantone 448 C, also known as ‘opaque couché’

The new packets, in Pantone 448 C with off-putting photographs, were rolled out in the UK on 20 May.

France and Ireland have also adopted the decision to end attractively-branded cigarette packets, which was pioneered by Australia in 2012.

The PM, his pro-smoking aide, and a dirty war over cigarette packaging

The sale of the plain packets is set to become compulsory in the UK from May 2017.

One in five adults is said to smoke in the UK and according to the British Medical Association, smoking costs the NHS £2.7 billion each year.

Disgraceful effort to privilege tobacco business interests over public health has rightly failed utterly – other countries to follow UK lead

http://www.asiantribune.com/node/88979

The High Court challenge to the Regulations on Standardized Plain tobacco packaging by the tobacco industry met with a humiliating defeat on Thursday, 19th of May 2016.

Thus the landmark judgment in the case will help other countries looking forward to introduce Plain Packaging. France and the Republic of Ireland have already passed legislations and other countries including Canada, Hungary, Norway and Solvenia, are expected to follow soon.

It is learnt that tobacco industry has spent millions of pounds on some of the most expensive lawyers in the country with the hope of blocking the policy. This landmark judgment is a severe defeat for the tobacco industry and it fully justifies the determination of the government to go ahead with the introduction of standardized packaging.

The standardized packaging regulations would come into effect in the UK on Friday, the 20th May 2016. All cigarettes manufactured for sale in the UK after this date must comply with standardized packaging regulations. Cigarettes and hand rolling tobacco will be sold in drab brown packages which have had all the attractive features and colours removed.

The judgment by the Justice Green rejects every argument the industry put forward in court. It is highly critical of the industry’s use of expert evidence it commissioned to back its case and its failure to disclose any internal assessments on how packaging design works for children and young people what the effect on standardized packaging on sales is likely to be. The judgment also notes that the great mass of the expert evidence put to the court by the tobacco industry was neither peer reviewed nor published in an appropriate scientific of technical journal.

At present two thirds of current smokers started when they were children and research shows that dull standardized packs are less attractive to young people. The tobacco industry is now considering whether or not to appeal.

Source of Information: Action on Smoking & Health ASH – UK

– Asian Tribune –

Plain cigarette packaging has arrived, but will it reduce smoking?

UK legislation introduced today bans the tobacco industry from using branding on their cigarette packaging. But will it change the number of smokers?

https://www.theguardian.com/science/sifting-the-evidence/2016/may/20/plain-standardised-cigarette-packaging-has-arrived-but-will-it-reduce-smoking

From today, brightly coloured branding will be stripped from tobacco packs when standardised (or ‘plain’) cigarette packaging legislation comes in to effect.

Cigarette packs will now be a single colour – ‘Pantone 448 C opaque couché’ (according to market research the ‘world’s ugliest colour’), and the brand name will be written in a standard font, size and location. New health warnings covering 60% of the pack will also be introduced. All cigarette packs and tobacco pouches manufactured for sale in the UK from now on will have to comply with these regulations, and within a year there should be no branded packs on shelves at all. Ireland and France are also introducing this legislation today.

But what impact will this new legislation have? After the numerous public consultations, government reports and legal battles (in both the highest European, UK and Australian courts), the government, tobacco industry, and the general public will be keen to know whether standardised packaging will actually reduce the prevalence of smoking.

It’s fair to say that nobody expects standardised packaging to be a silver bullet, and any effects of standardised packaging are likely to develop slowly. However, a large number of experiments, surveys and focus groups (many of which are summarised in two systematic reviews published in 2012 and 2013, and which Suzi Gage has blogged about before) have found that standardised packaging changes attitudes and beliefs around smoking, including reducing the appeal of smoking, increasing the noticeability of the health warnings, and preventing people from being misled about the relative health risks of different brands (people incorrectly assume that packs in lighter colours – i.e. “low tar” – are less harmful than darker coloured – i.e. “high tar” – packs).

The evidence that standardised packaging will change actual smoking behaviour is less clear, as this kind of research is difficult to do, but it is expected that as a result of these changes in attitudes and beliefs, standardised packaging will encourage some smokers to think twice about their smoking behaviour and, crucially, discourage some of the 200,000 children who start smoking every year from taking up the habit.

Quantifying the expected impact of standardised packaging on actual behaviour when implemented in the real world is difficult. Australia was the first (and, until today, the only) country in the world to introduce standardised packaging, back in December 2012. In 2015, 14 Open Access studies were published reporting the effects of standardised packaging there, finding that standardised packaging reduced the appeal of smoking and of cigarettes themselves, encouraged smoking cessation and made the health warnings more prominent. These findings support those observed in the laboratory studies and surveys conducted prior to the implementation of standardised packaging, adding weight to this previous body of literature. In addition, Australian research found no evidence for an increase in the illicit trade of cigarettes, which has been one of the tobacco industry’s main criticisms of standardised packaging policy.

But did standardised packaging change the actual numbers of smokers in Australia? Although the prevalence of smoking has been in decline in Australia for some time, an Australian government report shows that this decline has accelerated since the introduction of standardised packaging. It is estimated that standardised packaging is directly responsible (after taking into account other factors such as tax increases) for 25% of the 2.2% drop in smoking prevalence observed in the 36 months after the introduction of standardised packaging as compared with the 36 months before. This may not sound like a lot, but this is equivalent to 118,000 fewer Australians smoking as a direct result of standardised packaging. Given that two thirds of smokers are expected to die from diseases caused by tobacco use, this is a clinically meaningful decline.

This estimate is by no means perfect – short of interviewing every person in Australia, we can never know the exact number of smokers who have stopped as a direct result of this legislation or the number of teenagers who don’t start. As for the UK, we might expect to see a greater reduction in the number of smokers as compared with Australia due to our higher smoking prevalence (approximately 21% as compared with 13%) and our larger population (65.5 million as compared with 23.5 million). In the UK, the Office for National Statistics reports annual smoking prevalence, so like Australia we will be able to see whether there is a decline in prevalence in the next few years. In addition, a number of UK surveys are planned, including an online survey of 6,000 adult smokers (the Adult Tobacco Policy Survey), an in-home survey of 1,000 children (the Youth Tobacco Policy Survey) and a telephone survey of adult smokers (the Smoking Toolkit Study). Each of these will investigate differences in perceptions and experiences of smoking and cigarette packaging before and after the introduction of standardised packaging.

Standardised packaging is part of the UK’s comprehensive tobacco control strategy which includes tax increases, point of sale display bans, smoking bans and other advertising bans. Together, these strategies are expected to reduce the prevalence of smoking, and ultimately reduce the burden of disease caused by tobacco. It may not be a silver bullet, but it may be one more nail in the coffin.

Olivia Maynard is a Senior Research Associate at the University of Bristol. During her PhD she used cognitive neuroscience techniques to investigate the effectiveness of standardised packaging of cigarettes. Find her on Twitter @OliviaMaynard17.

Plain cigarette packs become law in UK, France

http://www.business-standard.com/article/pti-stories/plain-cigarette-packs-become-law-in-uk-france-116052001213_1.html

The days of branded cigarette packets in Britain and France are over as new plain packaging laws came into effect today, hailed by campaigners despite resistance from tobacco firms.

The logos and distinctive colours on new cigarette packets will be replaced with neutral packaging, a move hailed by health campaigners as a major step in reducing demand for a “deadly and addictive product”.

The new packs will be introduced in both countries over the coming months following similar legislation in Australia credited with helping to cut down on smoking rates, especially among young people.

British retailers will have a year to sell existing stock and those in France have until January 1, at which point branded packets will become a thing of the past.

“For too long glitzy, cleverly designed packaging has lured young people into smoking,” British Lung Foundation chief executive Penny Woods said.

“Australia introduced plain packaging in 2012 and has already seen a decline in smoking rates.

“If just a fraction of the 200,000 children in the UK who start smoking a year are discouraged, thousands of lives will be saved.”

French Health Minister Marisol Touraine said: “Plain packaging is ugly and intentionally so. The aim is to destroy the attractiveness of many cigarette packs”.

The packs in Britain and France will all have to be a drab green colour and, as in the rest of the European Union, 65 percent of the pack will be taken up by health warnings.

Tobacco giants Philip Morris International, British American Tobacco, Imperial Tobacco and Japan Tobacco International (JTI) failed in a last-ditch legal challenge against the British legislation on Thursday.

JTI has said it intends to appeal.

“The fact remains that our branding has been eradicated and we maintain that this is unlawful,” said Daniel Sciamma, JTI’s UK managing director.

Simon Clark, director of the British smokers’ group Forest, said the packaging rules “treat adults like children and teenagers like idiots”, adding that “no-one starts because of the packaging”.

There were also sceptical reactions on the streets of London.

With cigarette in hand, passerby Faheem Malik said: “When you’re addicted to smoking, you’ll ignore it. I already ignore the warning on the packs”.

“Kids look at the toy, not at the packaging,” he added.

To curb smoking, France adopts ‘neutral’ packaging

http://www.marketplace.org/2016/05/19/world/curb-smoking-france-adopts-non-branded-packaging

A French cigarette package. - Emma Jacobs

A French cigarette package. – Emma Jacobs

It’s practically the American stereotype of France — a Parisian sitting at a round sidewalk table out in front of a bar with a drink and, of course, a cigarette.

In this case, the Parisian is Ibrahim Kalic, a 26-year-old student, whose shiny blue box of Camels plastered with health advisories will soon become an ugly beige, along with every other carton for sale in France.

While practically synonymous in the American imagination with smoking at sidewalk cafes, France rolls out its latest effort on Friday to reduce its high smoking rates with what’s called “neutral” packaging.

While not a fan, Kalic said he does not expect the change to affect his dozen-a-day habit.

“It’s not the packet that influences people. It’s the friends smoking next to you. Once the cigarette is out of the pack, that’s what you see; you don’t see the packet,” he said.

From this point forward, manufacturers must produce only these plain cartons with even more prominent health warnings. Companies may deliver their existing stocks to retailers until November, but only the plain packaging will be allowed in stores by the end of the year.

Kalic said he’s more impacted by price. France has also been raising taxes to cut smoking rates, so cigarettes now cost on average about 6.50 euros a pack, or a little over $7.

“I feel a little, how would you say, oppressed in the sense that it’s also a right to be able to smoke. If they’d only leave us alone,” he said. “It’s more that.”

But Stephen Lequet, who led the lobbying efforts for the plain packaging law on behalf of France’s anti-smoking organizations, said Kalic is wrong about packaging having no impact.

In fact, he said, there’s growing scientific consensus that neutral cartons alone can cut consumption by reducing brands’ appeal and making the health warnings really pop.

“It puts off some nonsmokers and especially young people from starting to smoke,” Lequet said. He added that this is a particular concern for France, which has high youth smoking rates relative to other countries. About 40 percent of French 17-year-olds smoke he said, versus 32 percent of the general public.

Plain packing has already been implemented in Australia, which introduced it in 2012.

When the European Union ordered all member nations to put health warnings on cigarette cartons back in 2014, they allowed each country to make its own decision on neutral packaging. But the measure now seems poised to sweep Europe. France is acting simultaneously with the United Kingdom and Ireland. And other countries across the continent have announced plans to follow their lead, despite the objections of manufacturers and store owners.