Issue link: http://read.dmtmag.com/i/622093
12 tobaccoasia FRONT PAGE NEWS 卷首新闻 WHO SAID WHAT? "The DoH is desperate to prove the success of this policy but all of the evidence – their own evidence – points to failure. The government should own up to this failure, and the PIR is an opportunity to do that." - Michiel Reerink, JTI's regulatory strategy vice president commenting on the unusual delay in the Australian government's final report on the effectiveness of the plain packaging initiative there. Japan New Bid to Hike Tax A group of Japanese lawmakers from the Liberal Democratic Party plans to submit a joint proposal with Komeito, its coalition partner, to raise the levy, which now stands at 64.4% per pack. According to informed sources, the move is aimed at reducing smoking ahead of the 2020 Tokyo Olympics. In 2010, the International Olympic Committee and the World Health Organization agreed that the next olympics should be tobacco-free. The IOC urges host cities to strengthen regulations against smoking. The politicians hope the proposal will be reflected in the fiscal 2016 tax reforms the ruling camp is set to release as early as Dec. 10. The LDP has said it will consider a tobacco tax hike over the long term. After a similar hike in October 2010, cigarette sales in Japan fell by 12.7 billion pieces in fiscal 2011, ending in March. This led LDP and Komeito to seek another hike, supposedly to promote public health and curb secondhand smoking risks. Australia Gov't Can't Hide Ban Failure On the third anniversary of Australia's controversial plain packaging legislation for tobacco products, the government is still refusing to admit its failure. This would explain why the department of health (DoH) is pushing back the publication of its post-implementation review (PIR). Since the introduction of the branding ban in December 2012, the government's own data has shown no change to the pre-existing decline in smoking rates. Minutes of a senate debate held in October 2015 highlight the uneasiness surrounding the PIR and the difficulty that the DoH is having in producing a report which complies with government guidelines. It illustrates fears that the review may be sub-standard by not measuring the Tobacco Plain Packaging Act against its original objectives. "Anti-tobacco lobbyists have misrepre- sented the data to hide the fact that the ban on brands has failed", says Michiel Reerink, JTI's regulatory strategy vice president. "Australia – the only country where the measure has been introduced – cannot be held up as a model for other countries to follow," he adds. Official guidelines state that PIRs on major policies, such as the plain packaging law, should be conducted within two years of the policy being introduced, and completed within six months. They require PIRs to measure the success of the policy against the original objectives of the legislation. "The DoH is desperate to prove the success of this policy but all of the evidence – their own evidence – points to failure. The government should own up to this failure, and the PIR is an opportunity to do that. If this review is not completed and published soon, and if it is not compliant with the govern- ment's own standards, other countries will be misled," concludes Reerink. US/EU Moody's Sees Growth in 2016 According to Moody's Investors Service, the US and European tobacco industry will see a rise in operating profits in 2016. The rating agency's outlook on the industry is stable. "Operating profit is set to grow 4-5% for both the US and European industries during 2016, but cigarette sales volumes are also set to fall by about 4% in the US and Western Europe," said Nancy Meadows, a Moody's vice president - senior analyst. "Moreover, the expected fall in sales volume could accelerate in the US if e-cigarette sales see stronger-than-expected growth, whereas in Europe, the pricing environ- ment remains supportive, reflecting stable macroeconomic conditions." Within the US industry, profitability is still at the higher end of the consumer products spectrum due to strong pricing flexibility given the low price elasticity of the tobacco category, according to "Tobacco – US and Europe: 2016 Outlook – Stable on Steady Operating Profit Growth." On the other hand, margins are also flat to slightly down because of increased investments in marketing, promotion and innovation. At the same time, the impact of investments in new products will be offset by cost cutting and the elimination of excess capacity following the completion of the Reynolds Ameri- can-Lorillard merger. Moody's notes that the US tobacco industry's exposure to litigation risk will continue to moderate as the number of class-action cases keeps falling. Mean- while, regulatory pressures have eased, though a degree of uncertainty remains. For the European industry, strong pricing in Western Europe will con- tinue in 2016, although sales volumes will stay under pressure due to price increases. Cash flow will remain strong, and negative foreign-exchange impacts on earnings, after peaking at around 15% in 2015, will ease in 2016, reflect- ing a moderation in the pace of the appreciation of the US dollar and the British pound. Moody's further notes that the European tobacco industry will face an increase in regulatory pressures with the implementation of the EU Tobacco Products Directive, which includes a rise in pictorial health warnings and a ban on sales of 10-packs to deter young consumers from buying smaller, more affordable packs.