Up in smoke: Cigarettes may have to go for plain packaging

Cigarette companies in India have come in for a nasty shock. With an Australian Court upholding the Australian government's rule for uniform and plain packaging of cigarettes, they worry that India will also adopt a similar rule, reports CNBC-TV18's Dimple Daswani and Supraja Srinivasan.

These colourful and unique cigarette packets may vanish from shelves, if the Indian government takes a leaf from Australia's book. In a move that could trigger what people are calling an olive revolution, the Australian government has won court permission to implement laws for plain packaging of tobacco.

So from December 2012, tobacco products will be sold in plain olive green packages without any design or brand logo. It also must contain a graphic and textual warning about the dangers of smoking.

Aimed at dissuading people from smoking, there is talk that Britain, Canada, New Zealand, China, France, India, South Africa, Norway and Uruguay could now consider similar measures.

And while there is no clarity on whether India will follow suit, an off-the-cuff remark endorsing the law by an Indian health ministry official caused the ITC stock to fall over 3%.

Edelweiss Capital says such a move could become a regulatory headache for cigarette companies by:

Allowing easier copying of packages that will benefit counterfeiting.
Reducing recruitment of new consumers due to unglamorous packaging and prominent display of antismoking images.

While the Australian court has seen things differently, tobacco companies maintain that such a law is unconstitutional, as it does not allow the use of intellectual property like trademarks and brands.

But some analysts feel that Indian tobacco companies may not take much of a hit. This is because cigarettes account for only 15% of the entire tobacco market, while bidis, kahini, chewing tobacco and gutka make up the majority 85%.