What Effect Will The Plain Packaging Ruling In Canada Have On Philip Morris?

Following in Australia’s footsteps, Canada will make plain packaging of cigarettes compulsory in order to cut down on the rate of smoking. While large graphic warning labels already exist on cigarette packs,  Canadian Health Minister, Jane Philpott, stated the existing packaging allowed companies to build brand loyalty with children. However, such a move is being criticized by a number of tobacco manufacturers. As these products are already hidden from view, with 75% of the packet covered with health warnings, it seems highly improbable that the packaging influences a consumer’s smoking habits. But even if that may be the case, such a move will not have much of an impact on Philip Morris International’s (NYSE:PM) revenue. During FY 2015, Canada had 10.8% share in the shipment volume of the company’s Latin America and Canada region. Assuming the same share in the revenue from the region, we can assume PM’s revenue from Canada in FY 2016 was $1,021 million. This implies Canada contributed to 1.4% of Philip Morris’ revenue last year.

In such a case, if we consider three scenarios, wherein the effect of plain packaging reduces revenue from Canada by 10%, 30%, and 50%, which may be a stretch, the resulting impact on the company’s revenue is insignificant. Even in the most extreme scenario, the revenue will be negatively affected by 0.7%.

Have more questions on Philip Morris? See the links below:

• What Effect Will A Tobacco Tax Hike Have In New Zealand?
• How Will Philip Morris Perform In 2016?
• Why Has Philip Morris’ Price Risen ~17% This Year Despite An Earnings Miss?
• How Did The Market Share For Philip Morris Change in Q1 2016 In EU And Its Key Markets, As Compared To Q1 2015?
• How Did The Revenue And Operating Companies Income In Each Region Change In Q1 2016, As Compared To Q1 2015?
• Philip Morris Misses Q1 Revenue And EPS Estimates
• Will Philip Morris Beat Expectations This Earnings Season?
• How Did Philip Morris Perform In The European Union, And Its Key Markets There, In 2015?
• How Did Philip Morris Perform In Russia, Given The Currency Headwinds And Excise Tax Rise?
• How Has Philip Morris Fared In Comparison To Its Peers?
• How Has Philip Morris’ Shipment Volume, By Brand, Changed Over The Past 3 Years?
• How Has Philip Morris’ Revenue And EBITDA Composition Changed In The Last 5 Years?
• How Will Philip Morris’ Revenue And EBITDA Change In The Next 3 Years?
• Philip Morris: Year 2015 In Review
• By What Percentage Did Philip Morris’ Revenue & EBITDA Change In The Last 5 Years?
• What is Philip Morris’ Fundamental Value Based On Expected 2016 Results?
• What is Philip Morris’ Revenue And EBITDA Breakdown?

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