Tobacco has an interesting history in the U.S. The country was basically founded on the stuff, giving Americans (and the world) a high opinion of the plant for centuries. But in the modern world, tobacco has lost much of its luster as the harmful side effects of smoking have been revealed. Yet Big Tobacco has survived and thrived in spite of the growing public opinion against smoking. Now, however, the FDA has just thrown a massive punch against the industry by announcing plans to cut nicotine levels to non-addictive levels.
Is this a Death Blow for Big Tobacco?
According to the CDC, every year there are more than 480,000 cigarette smoking related deaths in the U.S. And that includes more than 41,000 deaths from secondhand smoke. So it’s no surprise that the FDA and CDC would love to combat tobacco, or at least increase regulations on smoking. And now they’re doing exactly that as the FDA proposed on Friday a plan to cut nicotine levels in cigarettes to “non-addictive” levels.
That’s huge news for the tobacco industry — and not in a good way.
Big Tobacco has already been struggling after coming under fire in the UK after regulators issued stricter packaging rules. Those regulations stated that all cigarettes must be sold in standardised green packaging with graphic warnings of the dangers of smoking included on all labels.
That move shifted Big Tobacco’s focus more towards the U.S., where marketing could still be a major differentiator for a company. But that’s not such a sure thing anymore. With the FDA’s Friday announcement, tobacco companies should be worried.
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The tobacco industry is a lot like the casino industry. People line up to give the company money, then come back and do it over and over again. With casinos, people leave once they run out of money. With tobacco, though, people don’t leave. Nicotine is extremely addictive, which is why cigarette companies are always willing to spend so much to acquire a customer. The lifetime value of a smoker can be measured in the millions.
By lowering the amount of nicotine allowed in cigarettes, the FDA is making it easier for smokers to quit smoking And that means tobacco companies are about to lose a big chunk of their loyal client base. The regulations are meant to drive smokers to vaping and ecigs, widely regarded as healthier alternatives for smokers.
Watch the video from The National regarding FDA’s new nicotine level plan:
After the proposal was announced, tobacco companies such as Altria Group (MO), British American Tobacco (BTI), and Philip Morris International (PM) all tumbled down, with only PM closing positive. Expect shares of all tobacco companies to drop from the news, and plunge once the regulations go into effect.
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