June 10, 2009 - Fitch Ratings, an international credit rating agency, on Wednesday, June 10th said legislation pending in the U.S. Senate that will place regulation of the tobacco industry in the hands of the U.S. Food and Drug Administration will likely benefit the big established brands.
Compliance costs will hurt smaller players, while planned changes to tobacco advertising will cement the market position of bigger companies, the agency said in a statement. "Looking further ahead as more restrictive advertising limits are imposed on all tobacco products, not just cigarettes, the brands with larger market share will maintain those shares," it said.
The Senate bill passed a procedural vote on Wednesday clearing the way for final passage. A final vote could come as soon as Thursday. The Senators will than have to work out differences with a similar bill passed in the U.S. House of Representatives before forwarding it to President Barack Obama for signature.
The new legislation may speed up the launch of lower-risk tobacco products, although these will face resistance from existing smokers, said the agency. Companies will also find it hard to market reduced-risk tobacco products as current advertising and sale restrictions will remain in place and may even be expanded by the FDA.
Still, "creating a regulatory framework particularly for the introduction of new products may revitalize the U.S. tobacco industry, where the consumption of its primary product, cigarettes, has been declining for over a decade," said analyst and senior director Wesley Moultrie.
If companies succeed in bringing modified products to the marketplace, "sizeable shifts in the tobacco industry are possible," he said. For more, see [ID:nWNA6398]. (Reporting by Ciara Linnane; Editing by Theodore d'Afflisio)
Reference: FDA oversight of tobacco to benefit big brands-Fitch, Reuters, 6/10/2009.
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