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

+17.98%
Upside
91.62
Market
108
Trefis
PM: Philip Morris logo
PM
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%.

 Philip Morris Canada

Philip Morris Canada Plain Packaging

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

Relevant Articles
  1. Should You Pick Philip Morris Stock After 7% Fall This Year And Q4 Miss?
  2. Will Philip Morris Stock Rebound After A 10% Fall This Year?
  3. After 8% Drop This Year, Pricing Growth To Bolster Philip Morris’ Q3
  4. Pricing Gains To Drive Philip Morris’ Q2?
  5. Does Philip Morris Stock Have Upside Potential To Its Pre-Inflation Peak?
  6. Here’s What To Expect From Philip Morris’ Q1

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Philip Morris International.
View Interactive Institutional Research (Powered by Trefis):
Global Large CapU.S. Mid & Small CapEuropean Large & Mid Cap
More Trefis Research