Last month, I wrote that Australia’s plain-packaging law was one of the worst setbacks for Big Tobacco in decades because it attacked the companies’ single most valuable asset: their brands.
Big Tobacco has strong enough moats to survive high taxes, punishing lawsuits and an aging and declining customer base intact. But plain packaging threatens the industry at its very core, and this is something underappreciated by investors in the sector.
Longtime chain smokers light up for one very obvious reason: They are addicted to the nicotine. But for casual smokers — those who light up while drinking, for example — the experience matters, too.
I call it the “Rebel without a Cause effect” … the devil-may-care image that goes along with smoking is part of what makes it pleasurable.
There is a certain appeal to Altria’s (MO) familiar Marlboro logo. But there is most certainly no romance in a plain white box with a picture of a diseased lung on the flip-side.
If you think I’m making this up, consider the recent grumbles coming out of Australia. Following the implementation of the plain packaging law at the beginning of this year, Aussie smokers have complained that their cigarettes taste different.
The Australian health minister, quoted by The New York Times, insisted that there had been no change to the cigarettes themselves, but that “people being confronted with the ugly packaging made the psychological leap to disgusting taste.”
I’m not a cigarette smoker, though I do enjoy the occasional cigar. And I would insist that a cigar does indeed taste better when the smoker is wearing a suit and sitting in a comfortable leather chair surrounded by wall-to-wall shelves of old books. The very same cigar smoked in a plastic lawn chair while wearing Crocs just isn’t the same (and shame on any grown man for wearing Crocs outside of the pool, but I digress).
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